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Subbie faces sell-off after Costain retentions row

November 26th, 2014

A specialist contractor is looking to sell-off parts of its business after failing to resolve a £2.8m retentions row with Costain.

Preston waste engineering specialist TEG has been in talks for more than two years with Costain in a bid to release a retention held on its Greater Manchester waste contract.

TEG suspended trading in its shares on AIM last month.

Now it is looking to sell off parts of the business which is now starved of funds.

TEG said: “Given the ongoing costs associated with managing the conclusion of the contract and the associated remediation costs, in the absence of capital from the retentions the board believes that the provision of equity financing for the group is extremely unlikely.

“The board is exploring the sale of certain parts of the group, principally the disposal of its operating division as a going concern.

“The board continues to explore all financing and strategic options for the group but it does not believe that further funding will be secured to allow for the future working capital needs of the group.

“Regrettably, under the likely structures that can be achieved, the board believes that there may be little or no value remaining in the equity of the group.”

TEG won a £38m contract back in 2009 to provide four specialist composting facilities by 2011 as part of Europe’s largest waste PFI.

But alleged design faults have delayed completion of the facilities which are due to handle 175,000 tonnes per annum of green and food waste.

TEG has carried out remedial works for Costain in a programme of works to finish the contract.

In August, Costain revealed it had decided to exit the waste sector after it suffered losses from extra costs on the complex job.

Costain’s Natural Resources division suffered a £5m loss due to provisions to complete the legacy Greater Manchester Waste PFI contract awarded in 2007.

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