Group Five misses Ghana contract deadline
An oil and gas project in Ghana, which has racked up losses of R1.3bn, is set to heap more woes on what was once one of SA’s iconic construction companies.
On Tuesday Group Five revealed it had missed the October deadline for the Kpone project in Ghana.
News of the missed comple- tion deadline briefly pushed the company’s securities down 22.4% to 90c on Tuesday morning before it recovered to close 0.86% weaker at R1.15.
The construction company is a shadow of its former self when its share traded at more than R70 in 2007.
Group Five now has a market capitalisation of about R129.1m. It has lost 97.43% of its value in the past five years.
This is symptomatic of the difficulties facing the SA construction industry, which has experienced a slump since the boom ahead of the 2010 Soccer World Cup.
Fellow construction companies Basil Read and Aveng have also seen their respective share prices and market capitalisation crash in the past decade.
Losses relating to the $410m independent gas and oil-fired combined cycle power plant in Ghana have been a drain on Group Five. Instead of easing its financial problems, the lossmaking project has been burdensome for the group, which in the year ended June 30 reported that its liabilities exceeded assets by R1bn.
As at June 30 this year, Group Five’s overall order book stood at R11.2bn.
The company on Tuesday said the commissioning of the plant could not be completed mainly because of contamination of the fuel that Group Five’s client in the project, Cenpower Generation, had provided.
“The provision of fuel is the client’s responsibility,” Group Five said. “The completion and handover date will therefore be delayed, as it is dependent on the resolution of the fuel contamination,” it added.
In its results statement for the year to end-June, Group Five said the maximum penalty it faced for missing the original deadline for completing Kpone was capped at $62.5m.
In 2014, Cenpower awarded Group Five the contract to design and construct the 350MW plant being built in the Tema industrial zone close to the
capital Accra. Group Five and Cenpower are embroiled in a court battle over the Ghananian company’s claim of $62.7m from Group Five for project delays.
Group Five has approached the Johannesburg High Court to interdict Cenpower’s demands.
The construction company said the contract with Cenpower made provision for claims from both firms.
“The client has, however, now approached the banks prematurely for the payment of the bond extended to the group for the contract due to disputes between the client and the group on various aspects of the contract, as outlined before,” Group Five said.
Judgment on the matter is scheduled for Wednesday.
Group Five has said it had instituted its own claims in relation to the contract but has not divulged their value.
The company made a submission to the International Chamber of Commerce (ICC) in Paris in October regarding its claims against Cenpower.
The ICC said that its legal representatives had considered various claims that the company deemed it was entitled to “and confirmed that these claims have merit”.