New claim for Group Five
Shares dip by more than 26% on news offurtherdemand of $60.5m over the Kpone power plant contract in Ghana
SHARES in Group Five slumped by a further 26.47 percent on the JSE yesterday after the listed construction and engineering group reported that Cenpower, the client for the $410 million (R5.66 billion) Kpone power plant in Ghana, had issued a new claim for a further $60.5m.
Cenpower has already been paid $62.7m in delay damages by Group Five’s bank guarantee providers related to the Kpone contract.
Group Five previously disclosed it had a performance bond of $62.3m, a retention bond of $41.5m and an advance payment bond of $2.6m in place on Kpone.
It said that the current remaining value of on-demand bonds in issue from financial institutions to the client amounted to $43.8m, for which Cenpower had demanded payment earlier yesterday.
Group Five’s share price closed yesterday at 25 cents.
The group’s share price nosedived by 30 percent on November 16 to close at 70c from the previous day’s 100c closing price after the High Court in Johannesburg dismissed its urgent interdict application to stop Cenpower from demanding the $62.7m in delay damages from its bank guarantee providers on the project.
Group Five said yesterday that the new claim followed Cenpower’s “purported notice of termination” of the Kpone contract and was Cenpower’s evaluation of the cost to be incurred to complete the works on the contract and recoup estimated losses and damages that Cenpower believed it had incurred.
The group confirmed its bank guarantee providers had received a written demand requesting that $43.8m of the $60.5m be paid to Cenpower.
Group Five said it was in discussions with its legal advisers, senior counsel and bank guarantee providers, about the claim and demand and was “considering the available legal action”.
It stressed that, in terms of the contract, any amount that the group would be held liable for either had to be agreed between the parties or determined through a dispute resolution mechanism in the contract prior to the payment of any such amounts.
Group Five said this demand had not been determined independently and it also did not reflect the counter-claims that the group was “legally entitled to and is pursuing”.
The group said it strongly disputed the new amount being claimed by Cenpower and the demand for its payment, stressing that Cenpower had itself confirmed that the construction of the plant was complete, with only testing and commissioning to be performed.
“As (previously) communicated, the provision of the fuel was the client’s (Cenpower’s) responsibility and the group was unable to complete the testing and commissioning of the plant as the fuel provided by the client was contaminated and (was therefore) unfit for its purpose.
“The contamination of the fuel remained unresolved at the date of termination,” it said.
Cenpower claimed earlier this week that the $62.7m in delay damages it received from Group Five’s bank guarantee providers did “not come close” to the losses it had suffered.
Group Five denied last week that Cenpower was entitled to terminate the contract and believed that it constituted a repudiation of the contract and had therefore notified Cenpower that it had accepted its repudiation of the contract and issued a notice of termination with immediate effect to Cenpower.
It said the termination of the contract would, among other things, enable the group to proceed to dispute the resolution, in accordance with the contract, for the payment of all amounts due and owing to the group under the contract.