Group Five pins hope on hefty counter claim against Ghanaian client
The struggling construction firm says its counter claim against Cenpower will be completed by year-end
Group Five said on Wednesday that its multi-million-dollar counter claims in relation to the aborted Kpone power project in Ghana would be completed by year-end.
If successful, the claims against former client Cenpower Generation, will massively boost Group Five’s fortunes as costs associated with the Kpone project as well as Cenpower’s subsequent claims have sunk the loss-making company. In the 2018 financial year, losses on the Kpone project were R1.3bn.
After more than a year’s delay in the completion of the gas- and oil-fired combined cycle power plant project, in November Cenpower terminated the engineering, procurement and construction contract with Group Five. The JSE-listed contractor had earlier paid Cenpower $43.8m in delay damages after its bid to interdict the Ghanaian firm at the South Gauteng High Court failed.
Following the termination of the contract, Cenpower slapped Group Five with a $60.5m fine for the costs incurred to complete the works and the recoupment of the estimated losses and damages.
Group Five has, however, consistently disputed the payments to Cenpower, which amount to $106.5m. “Payment was made on the basis of the legal requirement of on-demand bonds, which state that bonds must be separated from the contract and their related contractual claims and disputes, and therefore not on the merits of the contractual claims presented by [Cenpower],” Group Five said on Wednesday.
The company said it has taken steps to recover the money paid to Cenpower. This included the claims in relation to the project’s delay. Group Five has previously said it was not to blame for the delay. It attributed the failure to commission the project to contaminated fuel Cenpower provided.
“The group expects to finalise the majority of these counter claims over the next three to four months. After this, these claims will be submitted to the International Chamber of Commerce in Paris for the resolution of the disputes through expert proceedings,” Group Five said. It said a ruling on the matter is to be made by end of 2019.
Recovering some or all of the money from Cenpower is a ray of hope for the troubled company, which recently announced the sale of non-core manufacturers Everite and Sky Sands to a consortium comprising of private equity companies Trinitas Private Equity and Agile Capital for R480m. This was part of the company’s restructuring and disposal of non-core assets.
Group Five’s shares soared 51.52% to close at R1.