Clough chief executive Peter Bennett says administration a ‘major shock’

Italy’s Webuild says it will hire staff from collapsed contractor Clough in a bid to ensure Snowy Hydro 2.0 isn’t caught up in the fallout.

Clough chief executive Peter Bennett has emailed staff.

Collapsed contractor Clough embarked on a last-minute scramble to find an alternative suitor on the weekend after Italy’s Webuild pulled out of a takeover, baulking at the huge cash injection required to resuscitate the engineering firm building several of Australia’s most critical energy projects.

Sources said Clough was first told on Friday about Webuild’s decision to ditch the buyout, but the company canvassed alternate buyers including NRW Holdings, first named as a potential acquirer nearly two months ago when the company first put itself up for sale.

The key sticking point both for Webuild and other contractors in the sector was the giant cash needs of the company, which employs 2500 people and was founded over a century ago in 1919 by brothers Jack and Bill Clough.

A capital injection of between $200m and $300m was required to keep the company liquid and operating over the next six months compared with Webuild’s initial pledge for a $30m interim lending facility to allow the company to cover payments to trade creditors should the deal have completed.

Accounts show Clough borrowed more than $167m from Webuild as its woes on the Snowy 2.0 contract deepened, with the company slumping to a $375.3m loss and a $304m working capital deficit for the 12 months to June 30.

Clough’s plunge into voluntary administration on Monday night set off a chain of emergency moves by the federal government, energy companies and a string of subcontractors ensnared in the unfolding crisis with the future of several of the nation’s most important energy projects at stake.

In order to safeguard the future of the federal government’s flagship energy project, the Snowy 2.0 expansion, Webuild is expected to hire up to 150 of Clough’s staff to ensure there are no delays to a scheme seen as key to Australia’s transition from coal to renewables.

It’s understood all blue collar workers on the Snowy project are employed by the Future Generation joint venture and will not be hit by the collapse of Clough.

Energy Minister Chris Bowen has received a briefing from Snowy Hydro’s acting chief executive, Roger Whitby, and was seeking assurances over the status of the South Australian-NSW interconnector and a gas plant in NSW owned by EnergyAustralia, both being built by Clough.

In Western Australia, Clough’s work on the Waitsia project being developed by Mitsui E&P Australia and Beach Energy was expected to involve novation clauses being triggered which ensures the owners receive equipment and suppliers keep getting paid.

Several Waitsia subcontractors held discussions on Tuesday over whether they would keep working on the project given cashflow concerns.

Earlier, Clough chief executive Peter Bennett told staff the engineering company’s collapse into administration had come as a “major shock” and was “unsettling news” for the contractor’s 2500 staff.

“I certainly appreciate that this is unsettling news and comes as a major shock to all of us, but I want to assure you that in the voluntary administration process, employee entitlements are preserved and form priority for the administrators,” Mr Bennett said in an email to staff seen by The Australian.

Clough held a meeting with staff on Tuesday which included a briefing from administrators. Staff asked about their next salary payments and annual leave entitlements and were told there would be updates every two days over a range of issues including pay.

Both Mr Bennett and newly appointed chief financial officer Brent Maas will stay with the business but both executives’ roles as Clough board directors had been suspended, according to the email, with Deloitte appointed as administrators.

“Whilst responsibility for the management of Clough has now passed to the appointed administrators, they will no doubt rely heavily on assistance from the board and management in exploring options for the sale, restructure or recapitalisation of the company,” Mr Bennett said.

Both Snowy 2.0 and the Waitsia project face the prospect of delays and cost hikes, Credit Suisse said.

“Cost increases now appear inevitable for Snowy 2.0 and Waitsia, with risk of delays also rising,” Credit Suisse analyst Saul Kavonic said.

Snowy 2.0 is already running 18 months late, a concern for the government which had been banking on the hydro expansion filling a supply gap in the market by 2026.

Beach, 30 per cent owned by Mr Stokes’ Seven Group, and Mitsui E&P Australia face added hurdles delivering the Waitsia facility. Shares fell 4 per cent or 7.5c to $1.82 on Tuesday.

The collapse of Clough has further damaged progress on the South Australian-NSW electricity interconnector, known as Project Energy Connect, SA Energy Minister Tom Koutsantonis said.

“Project Energy Connect has already brought about the early demise of the Torrens Island Power Station; it’s been blighted by delays, cost blowouts and now one of the firms delivering it has collapsed,” he said.

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