Delayed Kpone power project to hobble Group Five results

Group Five said on Tuesday it could not provide any more detail on the delayed Kpone power project in Ghana, but said hold-ups would severely hamper the company’s interim results to December 2017.

The JSE-listed construction group’s first-half results for financial 2018 come out next week. For now, it is in a closed period but based on the assessment of an independent expert the final completion date for the $410m gas- and oil-fired power station will now be in June 2018. To this end, the company expects a 151% leap in headline loss per share for the period from the same period in 2016.

“The Kpone contract, together with the ongoing pressure in the South African construction market — and the further rationalisation of overheads in the construction businesses and the corporate office — continue to place pressure on free cash resources,” Group Five said.

Possible project-delay penalties were capped at $62.5m, assuming the group was responsible for a six-month delay in completion of the contract. “This penalty amount is a gross amount and does not reflect the counter and other claims that the group is legally entitled to. Against these possible penalties, the group continues to progress its own contractual claims,” the firm said.

The headline loss per share of about 779c in the first half included additional resources allocated to the Kpone contract to ensure “focused execution”, and the cost of specialists, advisers and employees who will be on site for longer due to the contract finalisation delay.

“It also includes additional costs … to ensure acceleration of the contract completion to its earliest possible completion date. The increase in the loss also includes unexpected costs, incurred outside of the group’s control, against which the group will be claiming recovery,” Group Five said.

The company said in December 2017 that design delays and late arrival of procured items on site after a change in Ghanaian law during the Kpone contract were two main factors affecting the original completion date of September 2017.

The contract was also affected by seawater tunnelling, but was resolved.