03/05/2013 - 16:00

ERM Power hit by WA dispute

03/05/2013 - 16:00


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Energy company ERM Power has disclosed the mounting cost of its dispute over the construction of the Neerabup power station, with arbitration expenses alone hitting $4.5 million.

The Brisbane-based company today revised its earnings outlook, disclosing that up to $12 million was at stake in the dispute over construction of the power station, located north of Wanneroo.

The matter is being handled through an arbitration process, which is normally meant to be quicker and cheaper than going through the courts.

“Our estimate of the net proceeds (gross proceeds less costs) from the arbitration ranges from $7 million to $12 million positive,” managing director Philip St Baker said.

He said the arbitration process has taken longer than anticipated.

“Although we expect a positive determination, it may be delayed beyond 30 June 2013,” he said.

“If a determination is not received in FY2013, the estimated arbitration expenses of $4.5 million in FY2013 will not be recovered this financial year.”

As a result, the company’s forecast for underlying profits has been revised to a range of $69 million to $85 million.

Previously it had forecast a range of $80 million to $85 million.

The gas-fired power station, originally budgeted to cost $75 million, was built by a joint venture between German group Bilfinger Berger Services and its Australian arm Baulderstone.

BB Services later changed its name to Conneq Infrastructure Services, and was subsequently bought by Lend Lease as part of its acquisition of the wider Bilfinger Berger group.

In August 2010, Conneq served a notice of dispute saying it was not liable to pay $12 million levied against it by ERM.

In the notice, Conneq also claimed it was owed $8.77 million.






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