The Australian:DOWNER EDI's bad run continues, with the...

The Australian:

DOWNER EDI's bad run continues, with the engineering group placing its shares in a trading halt yesterday ahead of an announcement on the troubled NSW Waratah train contract.
The company said it would make the announcement about changed conditions before the opening of the market on Thursday.

Downer EDI has a 49 per cent stake in the Reliance Rail consortium, which has a 40-year contract to build and maintain 78 eight-car trains for Sydney in a public-private partnership with the NSW government.

The group said it had been late in presenting the first train set to RailCorp for "practical completion", and subsequent production had been delayed as a result of asbestos dust being discovered in its Cardiff manufacturing facility in the Hunter Valley.

It will provide an update on manufacturing schedules and project costs in this week's announcement.

The $1.9 billion Waratah train project has long been a problem for the company. Downer could be liable for liquidated damages of $250,000 a month for each delayed train.

Credit Suisse analyst Chris Counihan said recent Railcorp statements suggested the risk of further delays was increasing.

He said further delays would hurt Downer EDI's cashflow, because contract payments depended on RailCorp's acceptance of the train.

Opposition transport spokeswoman Gladys Berejiklian said the update on train delays would put a "serious question mark" over the future of the project.

"They were supposed to all be delivered initially by the end of 2010, then we were told a small number would be delivered by the end of 2010," Ms Berejiklian said. "Then we were told a small number would be delivered some time after April. Now we don't know what is happening."

Downer EDI has also been affected by the Queensland flood crisis.

Analysts expect the company to suffer a 4 per cent drop in earnings on the back of the floods.