Costain to pursue National Grid for up to £49m over gas plant contract

Alex Vaughan, chief executive of Costain

Costain is to try to recover up to £49.3m it claims it is owed by the National Grid, after it withdrew from a £113m contract to upgrade gas compressor stations in Peterborough and Huntingdon.

In a trading update, Costain said it had already undertaken £42m worth of work on the contract that had not been paid for as of 30 June 2020, and that this would increase to £49.3m by the end of its works by 31 August.

Costain said it had started a legal process over the next 18 months to agree up to £80m of “identified compensation events”, recover costs, and eliminate a potential liability to National Grid for completing the works.

It said it aimed to recover the money through the resolution process and believed it had “a strong entitlement to recover this sum, which is subject to successful pursuit through adjudication and potentially litigation”.

The news came as part of a trading update in which Costain said it expected its operating profit before the troubled A465 Heads of the Valley road contract and the Peterborough and Huntington contracts to be £5.7m for the first half.

It said the outlook in its core infrastructure markets remained “positive” with over £2bn of contracts and frameworks confirmed and secured in the first half, comprising a greater proportion of consultancy and digital integrated services. Its order book as of 30 June 2020 stood at £4.2bn with over £1bn of work on its frameworks in addition.

Costain has net cash of £140.9m as at 30 June 2020, compared to £40.8m the year before.

Alex Vaughan, chief executive, said: “I am pleased to report that the underlying trading of the Group has been profitable in the first half despite the significant challenges resulting from covid-19. All our activities are now operational, and I would like to pay credit to our team, our partners and clients who have been outstanding in their response during the pandemic.

“We now have a strong balance sheet, over £2bn of contracts and frameworks secured and confirmed in the period and continue to have a growing pipeline of opportunities. I am confident that we are well placed to deliver significant growth in profit in 2021.”

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