Lamprell to Note Down USD 80 Million in EA1 Losses
Lamprell, the company in charge of fabrication of 60 jacket foundations and their accompanying piles for the East Anglia ONE offshore wind farm, will book approximately USD 80 million (approx. EUR 64 million) in losses related to project in its 2017 financial results, to be released in March.
As reported in November, the company said the learning curve for the project had proved to be steeper than anticipated, and Lamprell had faced startup costs and inefficiencies that will make for a significant loss in its 2017 balance sheets.
On Wednesday, 24 January 2018, Lamprell said the additional costs related to EA1 have been caused by a number of variable factors including investment in further, unplanned staffing and equipment requirements, as well as significant additional shipping and subcontractor costs.
Although the project had shown to be challenging and affected Lamprell's finance, the company said it is confident on meeting the delivery schedule requirements.
The first partly-assembled jacket foundations for ScottishPower Renewables' UK offshore wind farm have been recently sent to Belfast, where they will be fully assembled by Harland & Wolff, and the first fully-assembled jackets are about to take off from Lamprell's Jebel Ali site to Vlissingen in the Netherlands.
The company expects its revenue for 2017 to be at the lower end of the guidance range of USD 370-390 million, and a year-end net cash position of around USD 255 million, subject to audit, which is after taking account of approx. USD 50 million of negative cash flow from the EA1 project in 2017.
Lamprell said this puts it in a strong position to minimise the effect of ongoing market challenges and to invest in its strategic initiative in Saudi Arabia. The net cash position is planned to trend downwards during the course of 2018 as a result of the investment in the Saudi Maritime Yard, payment for inventory and the cash impact of the remaining losses on the EA1 Project which are expected to total USD 30 million.
"We anticipated a challenging 2017 given the weakness of our end markets, and this was compounded by the significant issues we have experienced on the EA1 Project. This is a disappointing outcome for the Company. We have taken the lessons from that project and the Group's financial position remains robust," Christopher McDonald, Lamprell CEO, said. "We expect the market to remain challenging in 2018. However, the increased activity in our bid pipeline and the progress with the Maritime Yard in Saudi Arabia provide us with optimism and a path to support long-term, sustainable growth."
In its pre-close trading update, Lamprell stated that it focuses on developing its presence in Saudi Arabia and in the renewable energy sector, whilst also being ready for the recovery in oil-related markets.