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Asked whether the final cost will surpass $3 billion,Transport Minister Andrew Constance conceded that there would be further expenses to complete the line.

But he said he did not want to"speculate"on the final bill because as"part of the additional costs there is a significant contingency which mightn't need to be used". The final cost would not be known until passenger services began,he said.

"Everybody has skin in the game and everybody has lost skin as a result of this project,"he said.

The line was originally due to be opened in March but construction has been slow.Credit:Louise Kennerley

The $576 million settlement includes up to $129 million that will be paid only if ALTRAC meets construction milestones,including the start of passenger services between Circular Quay and Randwick by December,and between Circular Quay and Kingsford by March next year.

As part of the settlement struck at 2am on Saturday,the ALTRAC consortium's 15-year contract to operate and maintain light rail services will be extended by two years to 2036,meaning it stands to collect revenue from the government for a longer period than originally planned.

Acciona also stands to recoup more because it will boost its equity stake in the operation from about 6 per cent to an undisclosed level.

The cost to the government of paying the private consortium to operate the line for 15 years had previously been put at almost $938 million. It is separate to the capital cost – now at least $2.7 billion – of building the line and buying the trams that will run on it.

A tram being tested at a stop on High Street at Randwick.Credit:Janie Barrett

Labor's acting leader,Penny Sharpe,said taxpayers and businesses affected by construction of the line were paying the price of a disastrous project now costing upwards of $3 billion.

"This project is upwards of $3 billion and likely to be more – this is not what the people of NSW were promised. This project has been a disaster from start to finish,"she said.

"Let's also remember the Premier and her minister said all along there was no case to answer;that there was no money to be handed over;that they were going to win the court case."

The settlement package includes the resolution of more than $1.5 billion of legal claims under the public private partnership with ALTRAC.

Mr Constance said:"We have got rid of a lot of risk that was sitting with the taxpayer. We are not willing to tie the taxpayer in court costs for years and years to come."

In April last year Acciona filed a claim in the Supreme Court againstthe government for $1.1 billion for allegedly failing to reveal that it had not secured the agreement of power company Ausgrid on how crucial cables should be handled.

The project has been a political headache for the Berejiklian government for years now. Apart from the cost blowouts,it has been marred byrepeated delays,the legal battles,and prolongeddisruption to businesses and residents along the route of the line.

A$400 million class action from retailers disrupted by construction of the light rail line remains afoot in the NSW Supreme Court.

However,Transport for NSW has agreed to withdraw cross claims against ALTRAC and Acciona,which the government said would"assist in simplifying the proceedings and to obtain a quicker resolution".

The government had originally planned to open the line in March,just before the state election. But Accionawarned late last yearthat it could be delayed to as late as May next year.

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