Monadelphous in $200m contract dispute

For the first time in 25 years, Monadelphous Group plans to institute legal proceedings against a customer after revealing today the scale of its dispute with Queensland customer Wiggins Island Coal Export Terminal.

The engineering and construction contractor says it will be lodging a $200 million counterclaim against the owner of the Queensland coal export terminal, which is making a $130 million (plus damages) claim of its own.

The dispute relates to work awarded by Wicet to a joint venture company called MMM, half-owned by Monadelphous, which had been contracted to build an approach jetty, a ship berth and a shiploader for the coal export terminal in Gladstone.

MMM was awarded a $330 million contract for the construction of the 1.8-kilometre jetty and ship berth in 2011, and was awarded a second contract for the ship loader, for an unspecified amount.

Monadelphous announced it was in a contract dispute with WICET in October last year, and since then had received successful adjudication from the Building and Construction Industry Payment Agency for payments relating to the contracts totalling about $90 million.

“The company expects further claims to be lodged with BCIPA in the near future as it expects that WICET will, as has previously occurred, reject future submitted progress claims,” the company said. 

“Further, it will pursue a counterclaim through MMM in excess of $200 million to recover costs associated with changes in scope and nature of the works required to be completed, and the value of the bank guarantees drawn down.”

The company said that, during the past 25 years, it had never instituted legal proceedings against a customer, nor has any customer previously filed a similar claim against the company.

Managing director Rob Velletri said the company was confident it had met the requirements of its customers.

“Despite our best efforts to resolve the outstanding issues with Wicet, and considering that we have previously received successful adjudication from BCIPA in respect of many of these issues, we believe Wicet’s actions in filing such a claim are unwarranted,” Mr Velletri said.

“This is an unusual and non-preferred situation for Monadelphous, given our traditional partnership approach with clients, but we are confident of our position and we will stand our ground, supported by a strong balance sheet.”

The company said the situation wouldn’t have a material impact on its overall earnings for the year ending June 30.

The joint venture was established in 2011 with Malaysia's Muhibbah Engineering.

Monadelphous shares were 4.7 per cent lower to $10.18 each at 10am.