ICBC contributes to a $300 million AUD syndicated loan for the Western Roads Upgrade Project (Linked to Record ID#95107)

Project narrative

On December 19, 2017, financial close was reached on a deal in which a four-bank syndicate — consisting the Bank of China (BOC), the Industrial and Commercial Bank of China (ICBC), Mizuho Bank, and Westpac Banking Corporation — entered into an approximately $300 million AUD syndicated loan agreement with Netflow OSARs (Western) Partnership — a special purpose vehicle (SPV) consisting of Netflow OSARS (Western) Pty Ltd as trustee for Netflow OSARS (Western) Unit Trust and Cintra OSARS (Western) Pty Ltd as trustee for Cintra OSARS (Western) Unit Trust; Netflow being a vehicle for Australia's Plenary Group (50% equity stake) and Cintra a vehicle for Cintra, S.A., a wholly owned subsidiary of Spain's Ferrovial, S.A. (50% equity stake) — for the Western Roads Upgrade (WRU) Project. This loan carried a maturity period of four years. Record ID#95107 captures BOC's contribution. Record ID#95108 captures ICBC's contribution. The WRU Project had a total cost of $1.8 billion AUD ($1.38 billion USD; €1.15 billion EUR); in addition to the $300 million AUD in bank debt, the project was refinanced by $400 million AUD ($305.9 million USD) in 24-year bonds with bondholders TIAA, Manulife, Hastings, Dongbu Insurance, and IFM Investors. Additionally, Plenary Group and Cintra each made a 50:50 equity investment in the project. On December 11, 2017 Netflow OSARs (Western) Partnership entered into a Public Private Partnership (PPP) agreement with the State Government of Victoria for the WRU Project. Under the PPP, the project was procured and delivered as an availability-based PPP. Under the agreement, Netflow OSARs (Western) Partnership was responsible for the delivery of eight capital road upgrade projects and initial rehabilitation works to lift road network's performance, and then a 20-year maintenance phase over the WRU Project. The purpose of the WRU Project was to construct new road infrastructure works and rehabilitation works in Melbourne’s western outer suburban arterial road network, covering over 260 kilometers of roads. Specifically, it involved the design, construction, and financing of eight arterial road upgrades, consisting of the duplication of Dunnings Road between Point Cook Road and Palmers Road and the duplication of Palmers Road between Dunnings Road and Overton Road; the duplication of Palmers Road between Overton Road and Boundary Road and Robinsons Road between Boundary Road and the Western Freeway including the realignment of Palmers Road across Sayers Road; the duplication of Derrimut Road between Sayers Road and Dohertys Road; the duplication of Leakes Road between Fitzgerald Road and Derrimut Road; the duplication of Dohertys Road between Fitzgerald Road and Grieve Parade; the duplication of Dohertys Road between Foundation Road and Palmers Road; the duplication of Forsyth Road between Old Geelong Road and Wallace Avenue, including the re-alignment of Forsyth Road and Old Geelong Road; and the replacement of the existing Duncans Road Bridge over the Princes Freeway West and the addition of westerly (or Geelong) orientated ramps. The road upgrades included widenings, intersection improvements, nearly 30 kilometers of road. WBHO Infrastructure Pty Ltd. was the design and construct (D&C) contractor responsible for project implementation of the eight arterial road upgrades and the initial rehabilitation works. WBHO subcontracted work on the road upgrades to Ace Infrastructure Pty Ltd, Civilex Victoria Pty Ltd, and Winslow Constructors Pty Ltd. An unincorporated joint venture between Broadspectrum (Australia) Pty Limited and Amey Consulting Australia Pty Ltd. served as the services contractor and maintenance services contractor. The State Government and Netflow OSARs (Western) Partnership jointly appointed AECOM Australia Pty Ltd to oversee the design and construction of the project in accordance with the Independent Reviewer Deed of Appointment. VicRoads was the delivery agency for the State Government of Victoria to oversee the implementation and maintenance of the project. Fortunato Group, Negri Contractors, and FerrovialServices were also involved in project implementation. Civilink acted a subcontractor to Civilink, and its suppliers included Boral, STA TRaffic, and Image Linemarking. Work was scheduled to begin in the first half of 2018. The originally contracted acceptance date was December 30, 2020. Construction began in 2018. Construction was completed in March 2021. The Western Roads Upgrade Project was fully opened to traffic in November 2021. There were difficulties during project implementation, namely that Civilink, one of WBHO's subcontractors, abandoned the project in August 2020; it then went into liquidation, owing its creditor at least $13 million AUD. Civilink, which had apparently no track record of managing major infrastructure projects, was on a government database of contractors approved on public projects licenses for up to $2 million AUD; it received $48 million AUD of contracts for WRU. Civilink stopped paying its supplies in June 2020, leading to those companies to cease work in protect or fire staff, stalling work on the project. Suppliers including Boral, STA Traffic, and Image Linemarking files claims against Civilink for losses; WBHO also filed a counter-claim of $21 million AUD against Civilink in response to a Civilink claim of $3.9 million AUD against WBHO. Furthermore, WBHO, the main contractor, suffered a reported $133 million AUD in losses, with its executive chairman calling WRU WBHO's "biggest error in 50 years"; WBHO admitted to under-bidding the tender to win the contract. The State Government of Victoria paid WBHO substantial amounts of funds to bail out the project and gave it a time extension. In return for paying upfront costs and carrying major risks, Netflow will be paid $2.1 billion (nominal) over two decades to maintain 260 kilometres of road, while also retaining the right to explore other commercial opportunities on the roads it manages.