DOW
16/09/2015 12:02
GENERAL
NOT PRICE SENSITIVE
REL: 1202 HRS Downer EDI Limited
GENERAL: DOW: Downer terminates contract
16 September 2015
DOWNER TERMINATES CONTRACT
Downer EDI Limited (Downer) today announced it has terminated a contract with
Tecnicas Reunidas S.A.
Tecnicas Reunidas S.A. (TR) is the head contractor with responsibility for
the engineering, procurement and construction of a Technical Ammonium Nitrate
plant located on the Burrup Peninsula, near Karratha in Western Australia.
Downer's contract, awarded in March 2014, was for structural, mechanical,
electrical and instrumentation works, which involved the installation of
pre-fabricated modules supplied by TR. The original contract value was $72
million.
Downer's decision to terminate the contract followed a failure by TR to
remedy a substantial breach of the contract. Downer has not taken this
decision lightly but considers it has no alternative given TR's conduct.
Downer is in the process of demobilising from the site and will work with TR
to ensure the safe and orderly hand-over of the work as required by the
contract. To date, Downer has been paid approximately $89m by TR, which is
inclusive of scope work performed under the contract and in accordance with a
separate settlement agreement.
Downer also intends to refer claims totalling more than $60m to arbitration
for resolution. The claims include costs for the growth in the contract
quantities and re-work required as a result of non-conforming free-issue
modules as well as costs incurred as a result of extensive delays and
disruption. It is expected this process will take approximately 18 months to
conclude.
Downer does not believe that there will be any impact to its guidance of
around $190 million net profit after tax for the year ending 30 June 2016
resulting from the above events.
About Downer
Downer EDI Limited (Downer) is a leading provider of services to customers in
markets including: Transport Services; Technology and Communications
Services; Utilities Services; Engineering, Construction and Maintenance
(EC&M); Mining; and Rail. Downer employs about 19,000 people, mostly in
Australia and New Zealand but also in the Asia-Pacific region, South America
and Southern Africa.
For further information please contact:
Michael Sharp, Group Head of Corporate Affairs and Investor Relations +61
439 470 145
End CA:00270239 For:DOW Type:GENERAL Time:2015-09-16 12:02:08