Interserve waste project blackhole doubles to £160m

Interserve this morning revealed the cost of exiting its troubled energy from waste projects has soared from £70m to £160m.

Most of the revised hit comes from the Glasgow Recycling & Renewable Energy project, where its contract was terminated in November after project delays.

The cash outflow on the EfW contracts has had a significant impact on Interserve’s average net debt, which hit £390m last year, and is expected to soar to £450m in 2017.

In a statement this morning the firm said: “We have considered the implications of this development with our legal advisers and expect a lengthy period of litigation to ensue.

“Alongside this exercise we have continued to undertake a detailed review of operational developments on the other contracts in our exited EfW business, including the impact of the entering into administration by our principal gasification subcontractor, Energos, together with the likelihood and timing of potential recoveries and claims from third parties.

“In the light of these developments and of the continuing uncertainties in relation to the final conclusion of our EfW contracts, the board has concluded that the exceptional provision of £70m announced in May 2016 is no longer adequate to reflect the incurred and anticipated losses associated with this business. 

“Consequently the Board has determined that it is appropriate to increase the exceptional provision for exiting this market and the associated contracts to £160m.  

“We expect to complete substantially the construction and commissioning of the projects during 2017, although our contractual obligations in respect of warranties, and the resolution of claims will continue for a period thereafter.

“Further cash outflows of c£60m are expected during 2017 as the income statement charge is utilised.”

The firm added that that it remained focussed on managing the challenges of exiting energy from waste projects and pursuing claims from third parties.

Interserve said it had negotiated new banking facilities with existing and some new lenders for an additional £66m. This gives Interserve a total secured, committed debt facility of £573m, which we consider is adequate to meet all of our existing and anticipated future commitments.

from Construction Enquirer http://www.constructionenquirer.com/2017/02/20/interserve-waste-project-blackhole-doubles-to-160m/

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