The consortium building Sydney's eastern suburbs light rail project will receive up to $576 million extra from the NSW government under a settlement deal which takes the total cost to a staggering $2.7 billion.
The light rail linking the CBD to Randwick and Kingsford was originally meant to cost taxpayers $1.6 billion.
The coalition says the package resolves $1.5 billion worth of legal claims under its public-private partnership with ALTRAC and settles a court action brought by subcontractor Acciona which was separately seeking $1.1 billion for being misled over the project's complexity.
"While Transport for NSW's position is that there was never any basis for this claim, the settlement and restructure package avoids significant legal costs to taxpayers and puts the focus of all parties back on delivering the project," a TfNSW spokeswoman said in a statement on Monday.
"The package is expected to reach financial close in the coming days."
The settlement - with ALTRAC, Acciona and other subcontractors Alstom and Transdev - includes an agreement on a new timetable for the start of light rail services.
Up to $129 million will only be paid once milestones are met, including the start of passenger services between Circular Quay and Randwick from December 2019, and between Circular Quay and Kingsford by March 2020.
Transport for NSW has also agreed to withdraw its cross claims against ALTRAC and Acciona after dozens of businesses and landlords filed a class action against the government seeking hundreds of millions in compensation over "poor" planning decisions.
"This will assist in simplifying the proceedings and to obtain a quicker resolution," the TfNSW spokeswoman said.
Transport Minister Andrew Constance says Monday's agreement is fundamentally important.
"It is a reset of the contractual arrangements between all parties designed to ensure that Sydney has its light rail by the end of this year," he told reporters in Sydney.
"It removes the uncertainty of the legal case and the uncertainty of the claims."
But the NSW opposition said the $576 million payout was an admission the government had "botched the project".
"Yet again the wheels are falling off the light rail," interim Labor leader Penny Sharpe said in a statement.
The Berejiklian government says the final cost of the project won't be known until passenger services start and a "completion review" is conducted by Infrastructure NSW.