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Interserve facing £69m client claim for terminated EfW

EfW operator Pennon expects to receive £68.7m from Interserve to cover additional costs on its Glasgow energy-from-waste scheme.

In its financial accounts for the year to 31 March 2018, Pennon revealed the Glasgow scheme had cost £238m up to the end of March, compared with an original budget of £155m.

It is now seeking to recover some of this additional expenditure from Interserve, with discussions over the final settlement “ongoing”, according to a statement in Pennon’s financial accounts.

Speaking to analysts following the presentation of the firm’s 2017 results, Pennon chief financial officer Susan Davy said: “There is a legal process and obviously we have a very strong contract in place with the original contractor [Interserve].

“We have recognised a £69m receivable in the accounts from Interserve.”

Construction News understands the value has not been agreed by Interserve.

The contractor won the contract to build the EfW plant in 2012, but this was terminated by Viridor in December 2016 after it said Interserve had “continually and repeatedly failed to meet delivery milestones”.

Doosan Babcock was brought in to finish the job in February 2017.

In its 2017 accounts, Interserve revealed it had successfully lodged more than £20m in professional indemnity insurance claims relating to “failures by the key subcontractors” on the Glasgow job.

“These failures gave rise to additional costs and delays and were the greatest cause of both the losses recorded on this project and the termination of the contract by the client,” the company said.

The Glasgow contract is one of six EfW contracts Interserve is closing out as it exits the sector.

Interserve chief executive Debbie White has said the company hoped to draw a line under its EfW works by the end of 2018.

Problems on EfW jobs have resulted in £216.6m of losses for the contractor between 2015 and 2017.

Pennon has said the final cost of the plant is expected to be £250m – £95m more than the original budget.

Last week Pennon chief executive Chris Loughlin told investors that the Glasgow facility would be online in the first half of 2019 – around three years later than the original March 2016 completion date.

“We’re on schedule for what we set ourselves when we stepped in and took [away the contract] from Interserve,” he said.

“We’ve had a few hiccups because of bad weather, which has knocked us back a few weeks because of the snow and so forth, but we’re pretty much on schedule.”

Last month Interserve’s partner on three EfW jobs, Babcock & Wilcox, secured £182.1m in a share offering to raise capital as it battles with financial problems stemming from losses on renewable energy projects.

An Interserve spokesperson said: “It is not our place to comment on how much it will cost or how long it will take Viridor to complete the facility compared with our own reasonable expectations.”

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