Group Five expects material earnings impact as Kpone drags
Owing to a number of delays at construction company Group Five’s $410-million independent gas- and oil-fired combined cycle power plant Kpone project in Ghana, the company expects to report an impact on its group earnings and cash in the first half of 2018.
The company was contracted to design, engineer, procure, construct, commission and test a 350 MW facility in the Kpone municipality with Group Five noting that it would now need additional funding.
“The contract is now expected to reflect an overall life-to-date loss,” Group Five stated.
Design delays, together with the late arrival of procured items on site following a change in Ghanaian law during the Kpone contract, were two key factors which impacted the original contractual completion date of September 13.
The contract was further impacted by seawater tunnelling delays, which were resolved by the time of the group’s yearly results release. The group reported that the completion of the steam pipe system, as well as the on-shore and off-shore seawater intake chamber system, were, at that time, on the critical path to completion.
The Kpone contract is now 97% complete, with the only major remaining component, namely commissioning, nearing completion. Unfortunately, further delays have been encountered, including ongoing unknown marine conditions and poor weather on the seawater intake section.
Further, the company expects possible delay penalties owing to the later completion date. “Delay penalties are quantified at $310 000/d, up to a maximum cap of $62.5-million. Against these possible delay penalties the group is progressing its own entitlement to contractual claims,” the company stated.
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