The consortium behind construction of Victoria’s desalination plant has indicated it may seek compensation for damage caused by the floods in the state earlier this year.
The cost estimates for the project have already blown out by billions of dollars.
The plant was commissioned by the former state Labor government at the peak of the drought when Melbourne’s water storages dipped to a historic low of 25 per cent in June 2009.
Cost estimations of the project over the term of the 28-year contract have blown out from about $3 billion to upwards of $20 billion, depending on how much water is drawn from the facility.
And now those costs could be about to spiral further.
AquaSure, the consortium creating the plant, has given notice to the Victorian Government that it may make a claim for flood damage to part of its construction works.
It is a force majeure claim, which is a kind of exceptional circumstances claim pertaining to events beyond the control of the government or the contractor.
A spokesman for the consortium, John Riddley, told ABC Radio’s The World Today the notice does not mean it is suing the Government.
“There is no litigation underway or pending. All parties are working together for the delivery of this project,” he said.
“AquaSure has made an application under the contract with the state for possible relief on the basis of a force majeure event due to the flooding in the Koo Wee Rup area earlier in February.”
However, it does pave the way for a claim which could be compensation, an extension of time or an insurance claim.
Water Minister Peter Walsh says the Government is of the opinion there are no grounds for a claim and that it would pertain only to the timing of the completion of the project.
“I don’t believe there is any case for litigation at all between AquaSure and their consortium builders and the Victorian Government,” he said.
“There is an issue around force majeure as far as the time of delivery of the project because of weather events. That is an issue of time of delivery, not an issue of any form of compensation.”
The plant is due to be finished by December, but that is looking increasingly unlikely.
Mr Walsh says the company remains on track to deliver water by June 30, 2012.
He said the consortium could still face financial penalties if it was unable to meet the December deadline.
“There are very detailed clauses in the contract about performance and timelines and we believe those timelines should be met,” he said.
“If they’re not met, there are penalties in the contract and we expect those to be paid.”
Farmers in the Koo Wee Rup area, where floods damaged construction works, are also seeking compensation.
They claim the construction company building pipelines for the desalination plant altered flood levees and did not repair them, exposing producers to flood damage during the heavy rains earlier this year.
