Interserve has said it remains “absolutely committed” to building a major £200m mixed-use development in Edinburgh despite it being hit by a series of delays after problems strengthening tunnels.
The first buildings at the 650,000 sq ft Haymarket Development in the Scottish capital were initially scheduled to be completed early this year.
However, construction work on the scheme, which will include 340,000 sq ft of office space, shops, two hotels and underground parking, is now not expected to start until at least next year following problems below ground on bolstering Victorian railway tunnels, Construction News understands.
An Interserve spokesman told CN that, despite the delays, it remained “absolutely committed to the project” and continued to make progress.
The contractor was rocked earlier this month after issuing a fresh profit warning and admitting it could breach its banking covenants this year.
Accounts from the site’s developer Edinburgh Haymarket Developments (EHD), a joint venture between Interserve and Tiger Developments, also revealed the troubled contractor had to pay off a loan of more than £10m earlier this year to support the scheme.
The accounts reveal that the tunnel-strengthening work was finished in March, later than first scheduled, and these delays led to issues finding further funding.
The accounts said: “Construction continued with further delays to strengthening the tunnels resulting in completion date for contract one of 8 March 2017.
“This has delayed the negotiations with a third party to fund the rest of the project.”
A revised planning application with amendments to the site’s car park, main buildings and landscaping was submitted to the council in February, which was accepted with conditions in June.
It has now emerged that a Planning Advice Note (PAN) was submitted earlier this month, with Interserve saying this includes “material changes” to the site’s office buildings and hotels.
The accounts also showed that in February, Interserve subsidiary Interserve Developments paid off a loan of more than £10m on behalf of the development joint venture.
The loan was part of a deal in 2015 with the Scottish Government and European Regional Development Fund to access funds through its Scottish Partnership for Regeneration in Urban Centres (SPRUCE) initiative.
EHD agreed a £9.6m loan with SPRUCE to be used by the developer to undertake remediation works at the site to prepare it for development.
Despite the loan initially being expected to be paid by 31 December 2015, construction delays led to SPRUCE granting EHD a waiver on the loan until the 31 July 2016.
This deadline was also missed, with SPRUCE granting a further waiver on the loan until 13 February this year.
The accounts revealed that the loan was paid back in full on 13 February by “an injection of subordinated debt” by Interserve Developments.
The firm said it is currently working through the process of the PAN application with Edinburgh Council’s planning committee.
Earlier this month, Interserve revealed that its contracts in the energy-from-waste sector would cost the company a further £35m, on top of the £160m already set aside in 2016.
The company also revealed that it is looking at immediate cost cuts and selling off some of its smaller business units to shore up its balance sheet.