Monadelphous in contract dispute

Monadelphous Group has disclosed that its MMM joint venture in Queensland is embroiled in a contractual dispute with major client, Wiggins Island Coal Export Terminal.

The MMM joint venture, established in 2011 with Malaysia’s Muhibbah Engineering, has lodged a number of claims with WICET relating to changes in the scope and nature of works that were required.

WICET has responded by saying it intends to lodge claims for money it believes it is owed “based on a number of backcharges and deductions lodged with MMM”.

“Monadelphous does not consider WICET’s backcharges and deductions to be valid,” the Perth-based engineering contractor said in a statement.

WICET has also drawn down $19.46 million under bank guarantees that had been issued by Monadelphous.

Monadelphous said WICET’s actions were “unwarranted and unusual”.

“Having taken advice, Monadelphous intends to promptly initiate legal proceedings to recover monies called by WICET, and seek appropriate damages,” the company said.

Monadelphous added that WICET’s unilateral action in calling bank guarantees was not expected to have a material impact on its overall earnings.

The dispute relates to two contracts awarded to the MMM joint venture.

In December 2011 it was awarded a $330 million contract for construction of a 1.8-kilometre approach jetty, ship berth and conveyor system at the WICET project in Gladstone.

In early 2012 it was awarded a second contract, for an unspecified amount, for construction and commissioning of a ship loader.

Monadelphous said MMM had substantially completed the works under the contracts, which were originally scheduled to be completed in the first quarter of the 2014 calendar year.

The stock market was unfazed by the news, with Monadelphous shares gaining 63.5 cents to $8.895 at midday Perth time.

It is the second major contractor to disclose a contractual dispute recently.

NRW Holdings announced last month that its earnings were significantly dependent on the outcome of negotiations with Samsung C&T over work undertaken on the Roy Hill iron ore project.