6th May 2016 14:49
LONDON (Alliance News) - Petrofac Ltd Friday said it will book a GBP70.0 million charge in the first half of its current financial year which will primarily cover liquidated damages it must pay to one of its customers.
Petrofac said it has agreed a final commercial settlement with its client, French firm Total SA, on the Laggan-Tormore gas plant in the Shetland Isles, and Petrofac said the charge will be principally made up of those damages.
"Whilst it is clearly disappointing that a portion of liquidated damages has been applied, Petrofac is nevertheless satisfied that this brings to an end the project, which has been operating successfully and exporting gas since February this year," said Petrofac on Friday.
Liquidated damages are compensation for a specific breach of contract whose amount is agreed at the time the contract is signed.
Petrofac booked a huge charge of around USD431.0 million against the Laggan-Tormore project in 2015, which severely hampered its results by pushing its net profit for the year down to only USD9.0 million compared to a USD581.0 million profit a year earlier.
Although Petrofac seems to have got through the problems with Laggan-Tormore, the total amount of losses being booked against the project contrast starkly to the value of the contract, which was originally only worth around USD800.0 million.
Petrofac shares were down 1.2% to 814.50 pence per share on Friday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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