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Murray & Roberts reaches an agreement in principle to sell Cisco

Source: IOL Date: 04 July 2012

Murray & Roberts (M&R) has reached an agreement in principle with a prospective buyer for its Western Cape steel operations, Cape Town Iron and Steel Works, trading as Cisco.

The listed construction and engineering group said that it had also made good progress with the resolution of several challenges it had faced over the past two years.

These included the Gautrain rapid rail link, the Gorgon Pioneer Materials Offloading Facility in Australia and the Medupi power station civil contract in Limpopo.

Mr Henry Laas CEO of M&R said that it had an in principle agreement with a prospective buyer for Cisco while an agreement was being drafted.

Mr Laas said that the Bombela Concession Company had commenced with the full operation of the Gautrain system on June 7th 2012 with the opening of the final link between Rosebank and Park station.

However, he said Bombela was still in dispute with the Gauteng provincial government on the interpretation of the tunnel water specification in terms of its contract for water ingress in the tunnel.

Arbitration to settle this dispute should commence in September 2012 but Mr Laas admitted the outcome was uncertain and further costs might have to be incurred in the Rosebank section of the project. It was not possible to quantify what this cost exposure might be.

The delay and disruption claim on the Gautrain project was part of the ZAR 2.2 billion in uncertified revenue on the group’s balance sheet but Laas could not disclose the specific value of this claim.

The arbitration claim on the Gautrain project would commence in the second half of next year but final resolution was only expected in 2014.

Mr Laas said M&R Australia had applied for a competition certificate for the Gorgon Pioneer project. He added that “This project has been the major cash drain on M&R in the current financial year but is now complete and the cash drain has stopped. The commercial process for the resolution of all claims on this project is in progress.”

Mr Laas added that agreement in principle had also been reached with Eskom on the settlement of all historical claims related to the Medupi power station civil works contract and the definition and value of the remaining project scope.

This agreement was going through Eskom’s governance structures for final approval and the parties were working to ensure completion of the project in an agreed time frame.

Mr Laas said that more than ZAR 3 billion in remaining work on this project had been de risked. Previously this represented a huge risk to the company. He added that M&R was involved in a process with the competition authorities that would hopefully result in agreement on the settlement of all the group’s competition issues.

The group had previously received an indication from the competition authorities on a potential penalty range and had made provision for that in its June 2011 accounts.

Murray & Roberts (M&R) has reached an agreement in principle with a prospective buyer for its Western Cape steel operations, Cape Town Iron and Steel Works, trading as Cisco.

The listed construction and engineering group said that it had also made good progress with the resolution of several challenges it had faced over the past two years.

These included the Gautrain rapid rail link, the Gorgon Pioneer Materials Offloading Facility in Australia and the Medupi power station civil contract in Limpopo.

Mr Henry Laas CEO of M&R said that it had an in principle agreement with a prospective buyer for Cisco while an agreement was being drafted.

Mr Laas said that the Bombela Concession Company had commenced with the full operation of the Gautrain system on June 7th 2012 with the opening of the final link between Rosebank and Park station.

However, he said Bombela was still in dispute with the Gauteng provincial government on the interpretation of the tunnel water specification in terms of its contract for water ingress in the tunnel.

Arbitration to settle this dispute should commence in September 2012 but Mr Laas admitted the outcome was uncertain and further costs might have to be incurred in the Rosebank section of the project. It was not possible to quantify what this cost exposure might be.

The delay and disruption claim on the Gautrain project was part of the ZAR 2.2 billion in uncertified revenue on the group’s balance sheet but Laas could not disclose the specific value of this claim.

The arbitration claim on the Gautrain project would commence in the second half of next year but final resolution was only expected in 2014.

Mr Laas said M&R Australia had applied for a competition certificate for the Gorgon Pioneer project. He added that “This project has been the major cash drain on M&R in the current financial year but is now complete and the cash drain has stopped. The commercial process for the resolution of all claims on this project is in progress.”

Mr Laas added that agreement in principle had also been reached with Eskom on the settlement of all historical claims related to the Medupi power station civil works contract and the definition and value of the remaining project scope.

This agreement was going through Eskom’s governance structures for final approval and the parties were working to ensure completion of the project in an agreed time frame.

Mr Laas said that more than ZAR 3 billion in remaining work on this project had been de risked. Previously this represented a huge risk to the company. He added that M&R was involved in a process with the competition authorities that would hopefully result in agreement on the settlement of all the group’s competition issues.

The group had previously received an indication from the competition authorities on a potential penalty range and had made provision for that in its June 2011 accounts.

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