holding up ok-up .02cents despite negativity

Clough lays blame on Origin



CATHY BOLT


















Engineering and construction group Clough yesterday launched an extraordinary public attack on one of its major clients, Origin Energy, after revealing its profit this year would be wiped out by a further $20 million cost blowout on the $400 million BassGas project in Victoria.

At its annual meeting in Perth, Clough managing director David Singleton accused Origin and its BassGas partners of misleading the market over the bitter dispute that has erupted over who is to blame for delays to the project.

"From the word go, the client has pursued what I consider to be a very aggressive contractual stance which will inevitably lead to a significant adversarial relationship," Mr Singleton said.

"We have found it of particular concern that our client has made public statements which we believe to be misleading and do not therefore fully represent the situation."

Clough said further cost increases of $20 million on the BassGas project, originally due for start-up in June, would plunge it to an $18 million loss for the six months to December 31.

That would drag down its expected full year earnings to near break-even from $16.1 million last financial year, stalling the financial turnaround under way at the struggling company.

Mr Singleton said Clough had made $25 million in cost claims against the joint venture partners but they had consistently refused to treat its cost issues seriously and instead referred them to arbitration.

"We take the costs now and they put off settlement for many years," he said. "They have had schedule difficulties and they blame it all on us, requiring us to complete but refusing to pay monies that are due and owing."

The BassGas dispute overshadowed overwhelming shareholder support yesterday for a historic ownership restructure which will see the Clough family cede control within four years to South African group Murray & Roberts.

The transaction includes the immediate acquisition by Murray & Roberts of 120 million shares at 68¢ each to lift its stake in Clough from 4.9 per cent to 29.3 per cent.

Half the increase will come from new shares, giving Clough a $40.1 million cash injection, and the other half from the Clough family's 53.85 per cent stake.

Clough also announced a letter of intent with British Gas for the $180 million construction of its Panna field development project in India, further rebuilding its depleted order book to $578 million.

The latest cost blowouts on BassGas do not take into account the liquidated damages of $200,000 a day Origin is seeking from Clough.

Mr Singleton said Clough was resolute it would not have to pay damages for several reasons, including delays by the client in completing the offshore wells that will feed gas into the project.

He maintained the only information it had received indicated the gas composition did not meet contractual specifications, including containing mercury in concentrations greater than the "traces" stated by Origin, which the plant could not handle.

"Origin has said publicly it has been ready to tie-in the Yolla well since August 10," he said. "In actual fact in every case until late in October when we have attempted to carry out the tie-in work they've instructed us to stop."

Origin's investor relations manager, Angus Guthrie, said it did not want to play out the dispute in the media. It had made its public statements through the Australian Stock Exchange and had an absolute obligation not to mislead.

Clough chairman Jock Clough said Mr Singleton had volunteered to defer the $300,000 bonus due for last financial year, as had other members of the executive committee.

Clough fell 3¢ yesterday to 54¢, down from 80¢ a year ago.