Group Five still has its creditors’ support, it says
The troubled construction company's creditors will stick to the ‘standstill agreement’
Construction company Group Five says it still has the support of its financial partners and lenders, following the $43.8m pay out from its retention and performance bonds as a result of the late completion of Ghana's Kpone power station.
The continued support of its creditors came as some relief for the troubled company. Group Five incurred a net loss of R1.3bn for the year to end-June and its current liabilities exceeded its current assets by R1bn. The bulk of its losses were caused by problems it experienced at the $410m Kpone power station.
In May it got R650m in bridging loans and secured a “standstill agreement,” which imposed limitations on the “enforcement action” its creditors could take against it, for a 12-month period.
The construction company is in a difficult position, as despite getting support from its creditors, the group still faces an uphill fight. Its auditors, PwC, said in its latest annual report that there was “significant doubt on the group’s ability to continue as a going concern”.
Group Five in part blamed “dirty fuel,” provided by its client Cenpower Generation for the delay in the commissioning of the plant, which is powered by diesel and crude oil.
Cenpower, a special purpose vehicle created to develop the Kpone independent power plant, said in a statement at the end of November that the plant, which should have been completed on September 13 2017, was over a year behind schedule.
Cenpower CEO Theophilus Sackey said at the time that Group Five had been given enough time to complete the project but because of the delays, it had decided to cancel its contract with it.
“Given the continued delays to completion, it has been concluded that it is in the best interests of the project and its stakeholders to terminate the engineering, procurement and construction contract.”
The plant is essentially complete but not yet commissioned as it still had to undergo testing.
At the beginning of the month, the Johannesburg high court dismissed Group Five’s interdict application to stop the payment of the detention and performance bonds.
Group Five then said it was taking its dispute with Cenpower to the International Chamber of Commerce (ICC) in Paris. It chose to take it to the ICC because its dispute-resolution processes were quicker than arbitration.
The group expects the first disputes to be resolved early in 2019.