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Waste firm TEG suspends shares as Manchester PFI retentions dispute continues

Lancashire-based green waste specialist TEG has suspended trading its shares on the AIM market amid a £2.8m retentions row with Costain.

TEG requested the suspension of trading its shares on 28 October, in part due to Costain withholding £2.8m of retentions under the Greater Manchester Waste Contract.

Among its other projects is a £21m renewable energy and recycling plant in Dagenham at the site of a former coal yard, which was opened by business secretary Vince Cable in April.

In an update to the City, TEG said it remained in discussions with Costain over £2.8m of retentions held under the contract, which it had been working to release “for over two years”.

TEG reached financial close on a £38m contract with Costain to provide composting facilities in April 2009.

The deal was part of the £3bn Greater Manchester Waste Disposal Authority PFI contract, on which Costain was appointed to manage construction projects.

TEG said it had held discussions with Costain about its financial position and ability to continue providing remedial work.

It said it had “proposed options to exit the contract”, but was informed on 27 October it would be “unable to negotiate such an exit”.

The statement added: “Furthermore, the board believe there is no prospect of the release of any of the retentions owed to TEG in the near future, which will impact significantly on working capital requirements.”

In August, Costain pulled out of the waste sector after a £2.6m loss in its natural resources division, which it attributed to the PFI contract awarded in 2007 for the Greater Manchester Waste Disposal Authority.

It said design faults had been identified at four out of 46 sites, including one incomplete site where testing will complete later this year, and that it was holding talks with contract counterparties and the group’s insurers over the problems identified on the deal.

TEG said it was “continuing to explore funding options until some form of resolution can ultimately be reached”.

The firm said it would “maintain a dialogue with Costain” as well as exploring other financing options.

Costain declined to comment.

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