RCR hit by cost overruns on 200 MW of Aussie solar projects
Solar farm. Author: Alan Levine.
Australian engineering firm RCR Tomlinson Ltd (ASX:RCR) today posted a loss for the financial year through June due to cost overruns on a solar contract.
The company booked write-downs of AUD 57 million (USD 41.9m/EUR 35.8m) on the solar project -- the 150-MW Daydream and 50-MW Hayman solar parks in Queensland. RCR won a contract worth AUD 315 million to build and operate the solar parks in August last year. The projects are currently substantially complete and have started the process of energisation and commissioning.
The company explained that the significant cost overruns result from issues such as external delays, materially worse sub-surface ground conditions than were allowed for in the tender estimate, as well as adverse weather conditions. The efforts to mitigate delays have led to increases in subcontractor costs and logistics cost overruns, it added.
RCR also announced an entitlement offer to raise AUD 100 million to beef up its balance sheet and tackle the solar cost overruns.
Interim chief executive Bruce James said in the near term the company will focus on achieving a more acceptable risk profile, in particular by "shifting the project portfolio towards 'alliance style' contracting models, which typically provide a higher degree of margin predictability relative to fixed price EPC [engineering, procurement and construction] contracts."
RCR recorded annual underlying EBIT (earnings before interest and tax) loss of AUD 4.2 million and a statutory net loss of AUD 16.1 million. Revenue from continuing operations rose 58.2% to AUD 2 billion.
The Daydream and Hayman solar parks have been developed by Australian firm Edify Energy. A year ago a private fund managed by BlackRock Real Assets took a 90% stake in them.