Southern Cross Electrical Engineering and Leighton Contractors have gone their separate ways after failing to negotiate mutually acceptable terms for a major contract on the Gorgon liquefied natural gas (LNG) project.
Southern Cross Electrical Engineering and Leighton Contractors have gone their separate ways after failing to negotiate mutually acceptable terms for a major contract on the Gorgon liquefied natural gas (LNG) project.
Southern Cross Electrical Engineering and Leighton Contractors have gone their separate ways after failing to negotiate mutually acceptable terms for a major contract on the Gorgon liquefied natural gas (LNG) project.
Southern Cross announced to the stock exchange this week it had failed to complete negotiations for a major contract at Gorgon.
This followed on from an announcement last September, when Southern Cross said it was in “advanced negotiations” with Leighton Contractors to perform electrical and instrumentation services on the Gorgon project.
This was part of a larger $800 million civil and underground works package awarded to Leighton.
Southern Cross said the negotiations had continued since September in good faith “and have concluded with both parties unable to reach agreement”.
“Whilst we are clearly disappointed that a mutually acceptable contract could not be reached, we understand and respect Leighton’s decision,” Southern Cross chief executive Simon High said in a statement.
“We would love to do work on Barrow Island but it has to be the right contract at the right margins,” Mr High said.
This week’s news followed the announcement in February that Southern Cross had lost $2.6 million on Woodside’s Pluto LNG project; combined with lower margins on other projects, the group reported a loss of $4.8 million for the half-year to December 2010.
Mr High said at the time of the half-year results that restoring profit margins was a major focus for the group.
He said this week the long-term outlook for the company was still positive.
“With a tender pipeline of approximately $900 million, I remain very confident that SXE will achieve substantial growth over the coming three years,” he said.
A spokesperson for Leighton played down suggestions the company would handle the electrical and instrumentation work itself. The spokesperson said the contract was under review and no decision had been taken.
Southern Cross’ share price slumped 10 cents on Tuesday to close at 85 cents, following lodgement of the announcement with the ASX late on Monday.
The stock’s high point over the past 12 months was $1.20, reached in September.
This week’s announcement followed a $30 million capital raising in mid-April at a price of 90 cents share, via a placement through broker Euroz Securities.
The company subsequently raised a further $2.9 million through a share purchase plan offered to its existing shareholders.