As suspected, losses incurred in the construction of tricky waste-to-energy plants has been cited as a key cause of Clugston's financial difficulties – another one burned by incinerators.
James Clark and Howard Smith from KPMG’s restructuring practice have been appointed joint administrators to Clugston Group Limited and Clugston Construction Limited.
In addition James Clark and Chris Pole, also KPMG, have been appointed joint administrators to Clugston Services Limited.
KPMG said that Clugston’s businesses had “suffered as a result of losses on a number of large and complex energy from waste contracts, accentuated by the insolvency of a key subcontractor”.
The administrators said: “Despite negotiations with key stakeholders to resolve issues caused by the losses, mounting pressures on the business have caused the directors to seek the appointment of administrators.”
Clugston’s recent waste-to-energy projects include Sembcorp’s £250m plant at Wilton on Teesside and a £340m waste-fuelled combined heat & power plant for Wheelabrator Technologies at Kemsley in Kent, working in joint venture with French process engineer Constructions Industrielles de la Méditerranée (CNIM).
The Clugston CNIM JV is currently building a £252m energy recovery facility for Viridor in Avonmouth and a £180m plant for Wheelabrator on the Deeside Industrial Park in North Wales. It March 2019 the Clugston CNIM JV was named main contractor for the £210m Earls Gate Energy Centre at Grangemouth in Scotland.
On 30th August, CNIM reported an €80m half-year loss and blamed it in large part on its UK operations. It said: “In the UK, the problems were due mainly to penalties for delay caused by civil engineering service providers failing to fulfil their contractual obligations. This had a significant impact on two major contracts.”
The Clugston administrators will continue to trade certain divisions and are seeking to sell contracts, with 262 members of staff retained to assist with this.
James Clark, associate partner at KPMG and joint administrator, said: “The directors of the business have worked tirelessly trying to rescue the group and have pursued discussions with a key stakeholder about a potential rescue deal. Unfortunately, it has not been possible to obtain the funding required, and as a result, the directors concluded they needed to appoint administrators to protect the value of business.
“Our focus over the coming days will be to seek buyers for the contracts and divisions, and to liaise with those employees who have been made redundant, ensuring they are provided with the support and information they need to claim their statutory entitlements from the Redundancy Payments Office.”
Clugston Distribution Services Limited and Clugston Estates Limited are standalone entities and are not affected by the administration process. They are continuing to trade under the control of their directors.
Building waste-to-energy plants is a complicated business and one that has burned bigger construction contractors than Clugston in recent years. Costain, Sir Robert McAlpine and Interserve have all incurred heavy losses from projects in the sector before withdrawing. Interserve is still embroiled in a legal dispute over its Glasgow Recycling & Renewable Energy incinerator project.