A Transurban Group-led joint venture has signed an in principle agreement with the government of New South Wales in Australia to carry out a $400m upgrade to the M5 South West motorway in Sydney.

The project will add an extra lane in each direction over 22km from Camden Valley highway at the western end to King Georges road in the east, as well as building 22 new electronic signs at intersections to give motorists traffic information.

Transurban’s chief executive officer Chris Lynch said: "This is a great outcome for commuters in the south west of Sydney, and better connects Australia’s largest airport, Australia’s second largest port and some of the fastest growing industrial, commercial and residential centres in the country.

"We now look forward to working with the NSW Government to move this in-principle agreement to the final contract stage and getting moving on this important road network improvement for Sydney."

After the in-principle agreement, Interlink and the NSW Government are expected to finalise detailed project documentation with construction expected to start in mid-2012.

From the total cost, $50m will be provided by the NSW government, while the Interlink share will be sourced from 40% of shareholder contributions worth $140m and 60% non-recourse debt at the M5 asset worth $210m.

Transurban has a 50% stake in Interlink Roads, which operates the M5, while the remaining half is owned by pension funds as well as interests associated with Hastings Funds Management and AMP Infrastructure Equity Fund.

New South Wales has also extended the concession term by a period of 3.3 years which will also extend the concession date from August 2023 to December 2026.