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Costain CEO: Hinkley hold-up led to £350m contract exit

Delays to the start of construction on the £18bn Hinkley Point C project were behind Costain’s decision to end its £350m marine and tunnelling contract at the site, the company’s boss has confirmed.

Costain chief executive Andrew Wyllie told Construction News that the delay since the deal was signed in 2013 had seen changes in scope, increases in costs and changing risk profiles, which had led to the firm agreeing to end its involvement in the project.

Earlier this week, it was revealed that Costain had pulled out of its four-year deal to construct 7 m-wide tunnels around the Somerset plant, having carried out £40m of work already.

Balfour Beatty has now been chosen by as preferred bidder to complete the project.

Mr Wyllie said the decision was a mutual agreement between EDF and Costain after both parties were unable to agree terms and conditions on the deal.

Costain won the contract back in 2013, more than three years before the government finally gave the project the green light.

Between the contract signing and last year’s final approval of the scheme, the start of construction was repeatedly pushed back due to EDF’s board not being able to agree a final investment decision for the project.

Mr Wyllie said: “The issue is that we bid for the contract in 2012 and were appointed in 2013, many years ago, for reasons that have been well rehearsed, Hinkley was delayed as a programme.

“Because of [the] delay, because of scope changes and stuff [that] has happened in the marketplace since, we were not able to agree with EDF the terms and conditions of this contract.”

Mr Wyllie elaborated that these changes included increases in costs, changes to risk profile and appetite, and Costain looking at other priorities in terms of resource.

Costain will now deliver an extra £20m of work towards the contract up until December, when the project will be handed over to Balfour Beatty.

The marine tunnelling package is one of a handful of contracts Costain has won at Hinkley, with the firm still delivering a number of other construction packages worth around £30m.

These include infrastructure enabling works and the construction of the plant’s temporary jetty.

Mr Wyllie’s comments came as Costain saw pre-tax profit hit £15.7m for the half year ending 30 June 2017, up from £11.3m for the same period last year.

The contractor also saw revenue rise to £874.5m for the half year, up from £791.4m.

The results were boosted by an improved performance in the company’s natural resources arm, which was hit with losses of £1.1m, compared with a £8.4m loss for the same period last year.

This was largely a result of the firm’s loss-making waste PFI contract, with the Greater Manchester Waste Disposal Authority having no further impact on the company’s books.

In May the GMWDA revealed that it would be terminating the 25-year PFI waste with Viridor Laing, of which Costain was a subcontractor.

Costain’s part of the deal required the firm to deliver the £397m design, construction and commission of 46 waste facilities across Greater Manchester.

Losses for Costain on the contract have exceeded £15m, due to problems with the rectification work on a number of facilities across the contract.

Mr Wyllie said that discussions between both parties were “making progress” and further announcements will be made when appropriate.

  • Costain CEO: Hinkley hold-up led to £350m contract exit_Costain chief executive Andrew Wyllie

    Costain CEO: Hinkley hold-up led to £350m contract exit

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