When completed in 2025, it will reduce sewage overflows on the western beaches in central Auckland and waterways on the isthmus by more than 80 per cent.
The pipe has a diameter to 4.5m - the height of a giraffe - and capable of storing 200,000cu m of wastewater and stormwater after downpours.
Watercare chief executive Raveen Jaduram said the tunnel is a vital project for Auckland and part of the council's water company's wider strategy to protect and enhance the natural environment.
"We want everyone to be able to enjoy clean waterways, beaches and estuaries, that's why we're building the Central Interceptor," he said.
The $1.2b contract includes a 2km pipeline extension from Western Springs to Grey Lynn at no extra cost. The Grey Lynn tunnel had been part of a separate western isthmus project being undertaken by Watercare and Auckland Council's stormwater division, Healthy Waters.
"This is an extremely good outcome for Aucklanders because it means a better result for the environment without any extra cost for customers," Jaduram said.
The Central Interceptor will be funded by Watercare through growth charges and water bills, which will rise for the average household by 3 per cent a year until 2028.
None of the money from Mayor Phil Goff's water-quality targeted rate will go towards the Central Interceptor. Some of the targeted rate will go towards the western isthmus project.
Jaduram said after a vigorous tender process involving four contractors, the Ghella Abergeldie joint venture was selected.
The joint venture combines more than 30 years of tunnelling expertise in New Zealand with more than 150 years of Italian and international tunnelling expertise.
New Zealand's Ghella representative Francesco Saibene said the joint venture shared the same dedication and passion as Watercare for the project, "which will leave a long-lasting legacy to Auckland and its residents".
