'SEVERAL sub-contractors to Forge Group's troubled Diamantina power station project in Queensland are said to be going unpaid as concerns continue to mount about Forge's financial position.
A source close to the Diamantina project told The Australian that a number of smaller contractors had not been paid for recent work on the power station. The unpaid groups are said to include KSK Engineering, Silva Care and Procton, with the source saying all were "bleeding" as a result of the payment delays.
Cost overruns and delays at Diamantina, combined with similar issues at the West Angelas power station contract in Western Australia, pushed Forge to the brink of collapse when they were discovered by the company in November.
Forge was forced to take a $127 million writedown on Diamantina and West Angelas -- later extended to $150m-$155m -- after those problems were identified. The company also had to negotiate an extension of its debt facilities with its financier, ANZ, in order to ensure it had enough capital to complete the troubled projects.
Forge has been working on the 242 megawatt Diamantina power station near Mount Isa for AGL Energy and APA Group since mid-2012.
The contract to build the project was won by contractor CTEC just before it was acquired by Forge in early 2012.
Forge entered a trading halt on Friday "pending an announcement of an update on the forecast underlying earnings" for last year. The announcement, which is expected to see Forge again cut its earnings guidance, is scheduled to be released tomorrow morning.
The latest guidance from Forge, released in November along with news of its power station contract issues, was for a loss before interest, taxation, depreciation and amortisation of $85m-$90m. Excluding one-offs, Forge was guiding for EBITDA of $45m-$50m.
Forge is yet to provide any detail of its financial position since its November writedown. At the end of October the group had $44m in cash and net debt of $25m, but at least $45m has since been spent on work at Diamantina and West Angelas.
Earlier this month Forge said it still needed to spend another $14m-$19m to complete West Angelas, with the extra cost to be funded from its existing cash and debt facilities, but no update on the cash and debt positions was released. Forge has previously said ANZ remains "fully supportive" of the group.
Cost-cutting since the November downgrade has carved out $10m in savings, with Forge setting a target for another $5m in cuts before the end of this financial year.
The engineering and construction company has already ruled out paying any dividends this year.
Shares in Forge last traded at 90c before the trading halt was called. They had reached as high as $6.98 last year before plunging to as low as 28.5c after the company revealed the issues with Diamantina and West Angelas.'
