12/04/2022 - 12:27

Construction giant settles LNG dispute

12/04/2022 - 12:27

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CIMIC Group is set to fork out roughly $492.5 million to settle an arbitration dispute over work at the Ichthys LNG plant in Australia’s North West.

Construction giant settles LNG dispute
The Ichthys LNG project in Darwin.

CIMIC Group will fork out roughly $492.5 million to settle a five- year long arbitration dispute over work at the Ichthys LNG plant in Australia’s North West.  

Arbitration hearings regarding a terminated contract (CCPP) between JKC - a joint venture between Japanese companies JGC and Chiyoda and US giant KBR – and a consortium involving CIMIC subsidiary UGL, were set to start this week.

CIMIC informed the ASX this morning that it had entered a confidential agreement with its consortium partners and JKC, which it said would result in a “full and final settlement of all matters in connection with the CCPP contract”.

The Sydney-based construction giant is set to pay $192.5 million this month and $300 million in March 2023 as its contribution to the settlement amounts.

Despite the large capital outlay, CIMIC has confirmed its $425 million to $460 million guidance for FY22.

The matter concerned a contract (CCPP) issued by JKC to a consortium comprising CIMIC subsidiary UGL, CH2M Hill Australia and General Electric Company in 2012 for design, construction and commissioning at the Ichthys LNG plant.

The project is jointly owned by Japan’s Inpex and France’s Total, and cost about $US45 billion, including commissioning costs to build.

It was marred by multiple delays and cost increases as it was approaching completion, contributing to contract disputes in the years that followed.

At 1:29pm AEST, CIMIC Group shares were trading at $22.01.

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