04/12/2008 - 09:35

GRD to offload waste treatment facility

04/12/2008 - 09:35

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Engineering and infrastructure firm GRD will be hit by a significant one-off charge after agreeing to sell its loss-making Australian waste treatment facility in a bid to boost its financial position.

GRD to offload waste treatment facility

Engineering and infrastructure firm GRD will be hit by a significant one-off charge after agreeing to sell its loss-making Australian waste treatment facility in a bid to boost its financial position.

The Perth-based firm has signed agreements for the sale of its Global Renewables Eastern Creek Facility in Sydney to interests associated with Emergent Capital, a venture capital provider and consultancy focused on developing emerging technology enterprises.

Under the deal, Emergent's interests will acquire the companies owned and operated by the Eastern Creek Facility, along with the project's finance debt. The purchase prices has not been disclosed.

The facility processes some 175,000 tonnes of Sydney's municipal solid waste each year, and operates under contract to Waste Services NSW.

In its half yearly report, GRD had flagged that it was continuing discussions with equity partners for the Global Renewables division, which also includes the Lancashire waste project in the United Kingdom. The company today said it will retain the Lancashire project.

The division reported a loss of $9 million before interest and tax, down from the previous corresponding period's $1.6 million profit.

GRD chief executive Cliff Lawrenson today said while the Eastern Creek facility is operating above design capacity, it will require further investment to reduce operating costs manage improvements to revenue.

"The decision by the Board to sell Eastern Creek has come after careful consideration and has been taken to maximise the opportunities for the GRD group of companies going forward," Mr Lawrenson said.

"This sale allows GRD to concentrate its efforts on our engineering and project delivery business, GRD Minproc, and the development of the Lancashire Waste Project.

"The Lancashire Project is a very different commercial proposition to Eastern Creek."

He added that construction of the Lancashire Project is on target, with the project is around 50 per cent complete. The project is being developed in alliance with Lend Lease Corporation.

The sale of Eastern Creek is expected to improve GRD's net profit and cash flow for 2009 onward, but would involve the company recording a significant once-off accounting loss in 2008.

The transaction will initially be cash flow negative for GRD, with the company expecting to recoup the cash outlay from savings attained within the first half of 2009.

Mr Lawrenson said he expected it will be business as usual at the Eastern Creek Facility, and did not foresee any disruption for the employees or customers.

The company reported a half year net loss of $438,000, a sharp fall from the previous corresponding period's net profit of $6.5 million.

The sale, subject to approvals from the GRD's financiers and the NSW government, is expected to be completed by the end of this month.

 

The announcement is pasted below:

 

GRD Limited (ASX:GRD) today announced the signing of agreements for the sale of its Global Renewables Eastern Creek UR-3R™ Facility in Sydney to interests associated with Emergent Capital.

Under the agreement, the effective date for the sale will be 31 December 2008 and will see the buyer take 100 per cent equity in the companies owning and operating the Eastern Creek Facility, along with assuming the project finance debt.

The sale is conditional on approvals by GRD's financiers and NSW Government regulatory authorities. GRD is hopeful the required approvals will be gained in a timely manner.

GRD Limited Chief Executive Cliff Lawrenson said the sale is expected to substantially improve the net profit and cash flow of the GRD group for 2009 onward, but would involve the company recording a significant once-off accounting loss in 2008. The transaction will initially be cash flow negative for GRD, with the company expecting to recoup the cash outlay from savings attained within the first half of 2009.

"Continued funding of operating losses and debt servicing at Eastern Creek is untenable for the GRD Group, and this agreement will have a positive impact on cash and profit for 2009 and beyond," Mr Lawrenson said.

GRD will provide further details on the transaction once the sale is finalised. The Eastern Creek Facility is an advanced waste treatment plant that annually processes around 175,000 tonnes of Sydney's municipal solid waste. Eastern Creek operates under contract to Waste Services NSW (WSN).

"The Facility is now consistently operating above design capacity, but will require further investment to reduce operating costs and manage improvements to revenue. GRD believes that this is best done under new ownership," Mr Lawrenson said.

"The decision by the Board to sell Eastern Creek has come after careful consideration and has been taken to maximise the opportunities for the GRD group of companies going forward. This sale allows GRD to concentrate its efforts on our engineering and project delivery business, GRD Minproc, and the development of the Lancashire Waste Project.

"The Lancashire Project is a very different commercial proposition to Eastern Creek."

Mr Lawrenson said key differences in the Lancashire Project included;
-Higher processing fees
-More realistic and achievable targets for diversion of waste away from landfill
-Better opportunities for revenue from sale of recycled materials.

Construction of the Lancashire Project is on target, and currently the project is approximately 50 per cent complete. The Project is being developed by Global Renewables in alliance with Lend Lease Corporation.

Mr Lawrenson said he expected it will be business as usual at the Eastern Creek Facility, and did not foresee any disruption for the employees or customers of the Facility.

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