Harland & Wolff agrees termination of Saipem contract

17th Feb 2023 16:35

(Sharecast News) - Infrastructure project and asset management specialist Harland & Wolff has concluded negotiations with Saipem over the termination of the Saipem project, it announced on Friday.

The AIM-traded firm said the contract value was finalised at £16m, representing 70% of the original contract value, with the full amount paid in settlement of the contract.

As a result of additional contract wins and workload emerging in the Belfast facility's fabrication halls, some of the fabrication work for the Cory Barges contract would now be moved across to Methil.

The company said it was planning to balance work and skill sets between the yards, and would start fabrication on four barges in Methil within the next two weeks, subject to client approval.

Following the settlement of the Saipem contract, Harland & Wolff said it would undertake a process of rationalising the Methil facility's workforce to around 115 core personnel.

The board said that was aimed at aligning its resources and cost base with the level of work being undertaken at the site, while protecting its margins.

It said it was aiming to ensure that the workforce was appropriately positioned to execute on near-term requirements in the renewables and defence sectors, which typically involve longer-term contracts.

Looking ahead to 2024 and beyond, Harland & Wolff said it expected the UK renewables market to require more local fabrication capacity than currently available.

The firm said it had already submitted a number of tenders for additional work at Methil over the mid-to longer term, as it believed the lead time to secure contracts in the renewables space would be around 12 to 36 months.

In the meantime, it said it was advancing on a pipeline of smaller projects it expected to undertake over the coming months.

"The Saipem project was the first project to arrive in Methil after our acquisition of the facility," said chief executive officer John Wood.

"With the previously announced delays and the changed economic position of this project, it was in the company's best interests to draw the project to a mutually acceptable close.

"The project has been a helpful learning curve for the business in this environment and we will take the lessons learnt forward into our next major project."

Wood said that in the meantime, the teams were focusing on constructing barges while contract discussions and negotiations advanced for another large project.

"In the interim, the company is focused on progressing the company's pipeline of opportunities across its different sites and markets and remains steadfast in its approach to executing on contracts which maintain strong and attractive margins."

At 1615 GMT, shares in Harland & Wolff Group Holdings were down 1.18% at 14.65p.

Reporting by Josh White for Sharecast.com.