Ichthys delays hammer UGL

UGL shares have misplaced a 3rd of their fee after the engineering firm stated it is able to face a $2 hundred million provision due to delays at the huge Ichthys LNG venture near Darwin.

UGL stated on Monday that purchaser-related delays were disrupting its construction work at the onshore facilities for the Ichthys challenge.

therefore, UGL said, it could need to make a $200 million provision if negotiations with JKC Australia LNG - the fundamental contractor for Ichthys's onshore LNG plant - are unsuccessful and the claims go to formal dispute decision.

UGL, at the side of its joint assignment partners, is in dispute with JKC over  fundamental contracts for components of Ichthys - a $740m structural, mechanical and piping (SMP) bundle and a $550m deal for creation of a mixed cycle strength plant (CCPP).

"Delays retain throughout the Ichthys project commonly," UGL chief government Ross Taylor said.

"The assignment team has been and is still impacted with the aid of full-size patron delays and disruption.

"these encompass get entry to delays, cloth supply delays and plenty of scope changes and versions."

The $2 hundred million in potential provisions is kind of break up one third at the SMP assignment and two thirds on the energy challenge.

UGL has announced it's going to not comprehend any earnings from the SMP assignment even as commercial negotiations keep, and, due to the protracted negotiations at the SMP mission, it is no longer confident of a well timed decision of the CCPP claims.

UGL has already made a $a hundred seventy five million provision for the CCPP assignment, introduced in February, 2015.

"To the quantity negotiations can not be satisfactorily concluded on SMP and CCPP and recuperation of claims is pursued thru formal dispute tactics, this could give upward thrust to settlement loss provisions of up to $two hundred million throughout the SMP and CCPP initiatives, all or a portion of which can be recoverable from JKC," UGL stated.

"If required, this will be in addition to the $a hundred seventy five million provision previously raised in opposition to the CCPP mission."

UGL stocks were down 33 per cent at $2.30 on Monday - their lowest degree in view that February.

The enterprise said it'd tell the market if a provision were to be made.

UGL stated JKC had counseled that it turned into not able to meet its obligations on the CCPP project as scheduled and as a result the CCPP task had incurred value will increase.

UGL and its companions have submitted a massive claim for the delays.

UGL now says it'll document on the Ichthys CCPP and SMP initiatives one by one from the opposite UGL agencies.

with the exception of its Ichthys work, UGL stated it maintains to carry out consistent with prior guidance and is on course to deliver income margins of three in step with cent on around $2 billion of revenue for the 2016 monetary year.