The cost of Wellington's Transmission Gully roading project has blown out by another $191 million.
The Transport Agency said it had settled a dispute with the joint venture builder by agreeing to pay the extra sum and avoid costly and lengthy legal action.
It said the cost blowout was because of delays and the need for extra earthworks.
The 27km four-lane motorway north of Wellington will be a major new arterial route into the capital.
It was expected to cost $850m.
It's the first Private Public Partnership in New Zealand for a state highway, which means it is being financed, designed, constructed and maintained by the private sector on behalf of the public sector.
Transport Agency interim chief executive Mark Ratcliffe said the financial settlement would ensure Transmission Gully was completed to a high standard.
"Progress has been slower than anticipated due to a number of issues encountered during construction including the Kaikoura earthquake in 2016, which diverted resources and materials," he said.
The Agency said the money had come from the National Land Transport Fund and would not affect any other projects.
Transmission Gully is now expected to be finished by Christmas, months later than expected.