The matters are before Queensland’s Supreme Court with WICET seeking $130 million from joint venture MMM (50:50 Monadelphous and Malaysia’s Muhibbah Construction) relating to cost blowouts over the WICET terminal construction.
MMM is counter suing for $200 million to recover costs due to “changes in scope and nature of the works required to be completed, and the value of bank guarantees drawn down” according to Monadelphous.
On how it could play out, JPM believed that some of WICET’s claims will be difficult to dispute.
The broker, which has an underweight stock rating on Monadelphous, took note of the engineering company’s view that the case will not have a material impact on its overall earnings in this nearly over financial year.
“Management do not believe that these proceedings will materially affect FY15 earnings, which would infer that they do not believe WICET’s claim is likely to succeed,” JPM said.
“We would however highlight the risk to FY16 earnings from ongoing legal costs, and a likely push by WICET to settle out of court at a discount.”
The WICET project was originally expected to be completed in the first quarter of 2014 but only made its first shipment of 73,000 tonnes of coal in April.
The JV says it has not certified final completion of the offshore plant and infrastructure, so MMM has ongoing obligations under both contracts to rectify any defects encountered by WICET during the defects liability periods.
WICET comprises of Glencore, New Hope Corporation, Aquila Resources, Wesfarmers, Caledon Coal, Cockatoo Coal and Yancoal.
