Harland and Wolff has confirmed that a contract to deliver a remaining batch of four jackets for the 450MW Neart na Gaoithe wind farm off east Scotland has been terminated.
The fabricator said the move was taken in “mutual agreement” with lead foundations contractor Saipem, confirming a story reported exclusively in the 15 December edition of subscriber-only reNEWS.
Saipem placed an order for eight jackets at H&W’s Methil yard in April 2021. Earlier this year the Italian contractor removed four partially completed bases from the site and will is now making arrangements for the remaining four, according to the UK company.
The news came in a trading update in which the company admitted revenue for 2022 will be between £29m and £31m, “materially below” an original £65m to £75m guidance due to the wind farm contract as well as issues on shipbuilding deals.
On the NNG deal, H&W said it “has encountered numerous issues with payments, delays and defective materials, with resultant cost escalations which the company has determined it will not bear given that it has not been possible to find a mutually acceptable methodology to split these additional costs between the parties”.
“The company has therefore determined that continuing with the project will be sub-economic from a target margin perspective and would, therefore, not be in the best interests of the Group,” it stated in a trading update
“Management has determined that the capacity in Methil could be far better utilised on more economically viable projects, which are expected to come to fruition in H1 2023 onwards.
“Accordingly, the Company and Saipem have commenced the process of negotiating and reaching a mutually acceptable commercial settlement in order to evacuate the materials from Methil and make way for other projects. The estimated revenue for Q4 2022 against this project was c£5m, part of which the Company expects to recover on final settlement during H1 2023.”
H&W said Methil remains suited for jacket fabrication and said it is in discussions with ScotWind lease winners for contracts that would start in 2024 or 2025 but also hopes to bring shipbuilding work there in the meantime.
Group chief executive John Wood said: “Whilst it is disappointing that we have not met our aspirations for FY 2022 due to timing issues, we have made significant progress over the last twelve months, and I am confident that we will see a robust 2023 with deferred revenue from 2022 which will start getting booked during the course of H1 2023.
“Despite the external challenges that we face, I believe that we are now at the cusp of a major transformation of the entire Group and the team is working hard to convert bids into contracts. We have now developed a track record of delivering projects for our clients and are at the stage of reaching that critical volume of work that we need for the Group to acquire stability and accelerate organic growth.”