M&R makes progress on claims

INLSA

FILE: Murray & Roberts is making slow but steady progress with its major claims worth in excess of R2 billion and is confident about a positive outcome for the listed construction and engineering group.Picture: Matthews Baloyi

Roy Cokayne

Murray & Roberts (M&R) is making slow but steady progress with its major claims worth in excess of R2 billion on three projects and is confident about a positive outcome.

The claims relate to the Gautrain rapid rail project, the Gorgon Pioneer materials offloading facility in Australia and the Dubai International Airport.

M&R has not provided a breakdown of the value of its claim for each project.

The listed construction and engineering group returned to profitability in the six months to last December after two consecutive years of losses, which among other things resulted from a number of charges and contract completion costs on these projects.

Henry Laas, M&R’s chief executive, said last week that it would take a lot of time to settle the claims because they each involved a complex legal process.

But Laas stressed M&R would not “get soft” in its efforts to resolve the claims because of the time required.

“It’s too important for M&R not to vigorously pursue these claims. We are gaining more and more confidence in our legal position and our chances of success but it is going to take a long time,” he said.

Three separate issues related to the Gautrain project still require resolution: the water ingress in the section of the tunnel from Park station to Rosebank station, a variation in the construction methodology for Sandton station, and a delay and disruption claim because M&R was not given access to certain construction sites at the agreed date.

Laas said the arbitration on the water ingress in the tunnel commenced last September, but was not concluded and would resume this month, with a ruling hopefully by June.

He admitted there was some element of risk of further costs being incurred despite M&R’s belief that it did not have to complete any more work in that section of the tunnel.

Laas said M&R had received a favourable arbitration ruling that the variation on Sandton station was claimable and it now had to work on the value of its claim. The delay and disruption claim involved “not hundreds of millions but billions of rands” and this arbitration hearing would start in May next year.

“If that date is achieved, we hope to have the ruling on the principle by December 2014,” he said.

The Gorgon Pioneer materials offloading facility project had been demobilised, construction was no longer taking place and there was no longer any cash drain on M&R as a consequence of construction work although there were still legal costs.

M&R received a favourable arbitration ruling last year on the principle of the design changes. The next step was to get a ruling on the value of this claim, which was now also in arbitration.

But Laas said an interim arbitration ruling was being appealed in the High Court of Australia, which meant resolution of the value of M&R’s claim would take at least three to six months longer.

“We were hopeful of having it resolved in the current financial year to June. I don’t think that will be possible any longer and it will happen in the following financial year,” he said.

The Dubai International Airport project claim was referred to the United Arab Emirates Supreme Court, which ruled last month that the Dubai government was ultimately the respondent to its claim. M&R was hoping for commercial closure on this claim during its 2014 financial year, Laas said.

M&R’s shares fell 1.24 percent to R24.70 on Friday.