The total cost of abandoning failed energy contracts has more than doubled to £160m, construction contractor Interserve has revealed
Exiting failed energy contracts has hit the financial purse of Interserve to the tune of £160m, it has emerged.
The firm revealed the cost of its failed energy from waste (EfW) projects yesterday, which have now far surpassed the £70m provision put aside in May 2016 for a delayed waste to energy contract in Glasgow for Viridor.
Interserve was also served a notice of termination on another project with waste gasification specialist Energos after the firm went into administration in July.
After problems with contracts pushed Interserve into a £34m half-year lost it then announced it would quit the EfW sector.
But costs associated with exiting contracts has hit the firm for an additional £90m, taking total costs to £160m.
In a statement, Interserve said: “Alongside this exercise we have continued to undertake a detailed review of operational developments on the other contracts in our exited EfW business, including the impact of the entering into administration by our principal gasification subcontractor, Energos, together with the likelihood and timing of potential recoveries and claims from third parties.
“In the light of these developments and of the continuing uncertainties in relation to the final conclusion of our EfW contracts, the Board has concluded that the exceptional provision of £70m announced in May 2016 is no longer adequate to reflect the incurred and anticipated losses associated with this business.
“Consequently the Board has determined that it is appropriate to increase the exceptional provision for exiting this market and the associated contracts to £160m.
“We expect to complete substantially the construction and commissioning of the projects during 2017, although our contractual obligations in respect of warranties, and the resolution of claims will continue for a period thereafter.
“Further cash outflows of c£60m are expected during 2017 as the income statement charge is utilised.”