The ERG Group today announced that its partly owned subsidiary, OneLink Transit Systems, has reached a $65 million staged settlement with the Victorian Government for all outstanding claims in relatio
Out of the settlement proceeds, $45 million will flow directly to ERG, ERG will also be paid an additional fee of $2.85 million per year over the next five years (totalling $14.25 million) to enable it to meet the higher performance standards which include management of vandalism. In addition, OneLink will pay ERG a fixed fee of $1.9 million per year for management of vandalism over the next five years (totalling $9.5 million). However ERG will be subject to penalties of up to $2 million a year if agreed performance levels are not achieved.
The Settlement is in addition to the existing contractual arrangements under which OneLink is due to receive approximately $250 in payments over the remaining five years of the contract. Over that period, OneLink is also due to repay ERD approximately $35 million for the supply of the equipment and software ERG provided for the AT system.
The claims resulted from the installation of the AT System under the Kennett Government between 1994 and 1998.
Under the terms of the settlement, the Victorian Government, OneLink and the transport operators have agreed to a new regime that will deliver a major improvement in the operations of the AT System. A press release issued by the Victorian Minister for Transport and Major Projects, Mr Peter Batchelor, is attached.
The new agreement between the Victorian Government and OneLink provides for full and final settlement of all outstanding claims between the parties, following the successful completion of a trial period, in consideration of payments totalling $65 million to OneLink. Of this, $25 million will be paid immediately and payment of a further $20 million will be made when the full agreement has been documented (which is expected in the next 30-90 days). Payment of the final part of the settlement proceeds ($20 million) will be deferred until OneLink has demonstrated that it is meeting new customer availability standards.
The agreement also provides for OneLink to receive an additional $3 million (of Which $2.85 million will be paid to ERG) each year over the remaining five years of the contract if it is able to achieve new performance measures that incorporate the management of vandalism. OneLink will also be able to earn bonus payments if revenue collected by the AT System increases and OneLink’ s performance exceeds agreed levels. OneLink will face penalties with a maximum value of $2 million each year if it fails to reach satisfactory performance levels. The Victorian Public Transport Corporation will have expanded rights to terminate the contract if performance levels fall below contractual requirements for an extended period (eight months).
ERG's Chief Executive, Mr Peter Fogarty, welcomed the settlement with the Victorian Government, which followed a complex negotiation process.
"We are extremely pleased that we have reached a solution with the Victorian Government that lays the foundation for a significant improvement in the operations of Victoria's AT System."
"The settlement reflects the willing ness of all the parties involved to work together to ensure that Victorians get an efficient and reliable automated ticketing system."
Late last yea, the Miller Report on Victoria's AT System concluded that vandalism was significantly impairing the system's performance. The report recommended increased cooperation between OneLink, the private transport operators and the Victorian Government (including the Victorian Police). That cooperation has already seen a marked improvement in the AT System performance. A working committee consisting of the three parties, which was set up in the wake of the Miller Report to review the system's performance and to recommend appropriate changes, will continue to operate.
