Tempo Australia has emerged from a one-and-a-half month trading halt to announce it has agreed terms in-principle with Enel Energy that will potentially prevent a cost blowout at a major solar contract.
Tempo Australia has emerged from a one-and-a-half month trading halt to announce it has agreed terms in-principle with Enel Energy that will potentially prevent a cost blowout at a major solar contract.
On April 24, Tempo went into a trading halt while it negotiated with an undisclosed client in regards to a financial overrun at an unnamed major project.
Business News previously reported the major project in question was Tempo's $15.3 million, 12-month contract at the Cohuna solar farm project in Victoria.
It secured the contract for the engineering and construction of a 34-megawatt solar farm on February 27.
Today in a statement to the ASX, Tempo confirmed Cohuna was the project in question.
“A review of the project by the company on April 23 highlighted that contractually there was a significant risk of the project requiring a significant amount of additional working capital that would stress our existing working capital facilities,” it said.
“The project also has a risk for potential claims over delays and variations that would have potential to increase costs that would have been material for Tempo and deleterious for the project and the client.”
It said the board determined that, if the risk were realised, it would place the company in an untenable position.
Tempo said that, following ongoing discussions since the trading halt, new amendments to the contract have been agreed in-principle.
These key changes include converting the contracting model to a target cost estimate model, which it said removed the potential for unresolved claims. Tempo also said it would assume a cash neutral position, which it claimed would remove the requirement of having to utilise additional working capital to fund the work.
"The board believes that these changes to the management of the contract is an acceptable and good outcome for all parties," Tempo said.
"The changes mean that if the agreed target cost is achieved the company will maintain its initial profit from the contract."
Tempo also said it has made good progess identifying a new chief executive and chief financial officer.
The company is currently led by executive chairman Guido Belgiorno-Nettis, after managing director Ian Lynass resigned on April 29.
The following day, Business News revealed some shareholders at the company's annual general meeting posed questions around why a $125,000 cash bonus was paid to Mr Lynas in March amid the Cohuna situation and the company’s weak share price.
Shares in Tempo surged 10.3 per cent to trade at 7.5 cents each at 11.25am AEST.
