The company announced on Tuesday morning that it had reached contractual close with the Victorian state government on the $5.5 billion project.

Transurban will tip in $4 billion to build the road, which it started construction on over the weekend, is due for competition in 2022 and which it will operate tolls on until 2045.

Premier Daniel Andrews said on Tuesday that the projected cost of the road had blown out to $6.7 billion.

The equity raising will consist of a fully underwritten, pro rata accelerated renounceable 3 for 37 entitlement offer made to eligible shareholders at a price of $11.40 per new share.

That offer price is a 5 per cent discount to Monday's dividend adjusted closing price of $12.

Transurban chief executive Scott Charlton said construction on the new road was underway and that the first tunnel boring machines would be ordered soon.

"West Gate Tunnel will help address congestion along Melbourne's critical M1 corridor and provide an iconic addition to the city's transport network," he said.

The tunnel is also being funded through a 10-year extension to its CityLink tolls to 2045, the introduction of higher tolls for trucks and trailers, and a city access toll during some periods.

Transurban said that while the tunnel project did not need the state parliment's approval, it would need to legislation passed to approve changes to its existing CityLink concession that will support the project.

The Victorian Labor government has confirmed it would back the CityLink changes and Transurban said it had struck a deal where the state would cover the funding shortfall should it not get the legislation through parliament.

These "completion/substitution payments" would cover project construction and financing costs, as well as expected financial returns.

Both the Liberal state opposition and the Greens have threatened to block the road, with opposition leader Matthew Guy on Tuesday saying the agreement was "one of the worst contractual deals signed by a government in living memory".

Transurban said the new securities it issues to fund the road will not be entitled to its first-half dividend of 28 cents, and reaffirmed financial 2018 dividend guidance of 56 cents per share.

An institutional entitlement opened on Tuesday and will close at 11am Wednesday.

Retail shareholders can apply to take part in the issue by 5pm next Wednesday to be allotted new shares at the same time as institutional investors.

Retail investors have up to January 24 to apply to purchase a pro rata amount of new shares.

The company entered a trading halt on Tuesday and will remain in a halt until Friday.