Downer EDI faces $45m hit from wind farm partner woes

Downer EDI says problems facing a German partner in a Victorian wind farm are set to cost it $45m.

Downer EDI has defended its delivery of wind farms. Picture: AFP

Downer EDI says the filing of administration proceedings by its commercial partner on a major wind farm is likely to cost the engineering and contracting group $45 million.

Downer partnered with German wind turbine manufacturer Senvion to develop the Murra Warra Wind Farm in Victoria, which is still under construction, with the two companies sharing liability on the project.

Senvion has since filed self-administration proceedings in Germany. Under German insolvency law, companies have the option of restructuring under their own management.

Downer said today it had initiated talks to establish a process for securing delivery of outstanding equipment and completing the project.

It said total losses in relation to its obligation to complete the Murra Warra project were expected to be about $45m before tax and $31.5m after tax, which will be recognised in its full-year results.

That figure included the cost to complete and contingency relating to construction, performance and liquidated damages, the company said.

In May, Downer reaffirmed its previously stated guidance for the 2019 fiscal year of $352m consolidated net profit after tax and before amortisation. The company said today that apart from the wind farm announcement, no other issues will negatively impact that guidance.

Downer chief executive Grant Fenn said touted the company’s experience as one of Australia’s largest and most experienced providers in the renewable energy market.

“Downer has successfully delivered 14 wind farms since 2003 and during July we completed work on the Beryl Solar Power Plant in New South Wales and the Numurkah Solar Farm in Victoria,” Mr Fenn said.

“Importantly, both these solar projects were completed profitably and in line with expectations.

“We have reviewed and adjusted our risk management processes, particularly around joint and several liability following the Murra Warra experience and we remain committed to building on our leading position in renewable energy.”

Downer said its balance of work had been completed on schedule and on budget and that 36 of the 61 wind turbine generators had already been erected.

Thirteen were already generating electricity.

Downer said it had entered into agreements to secure title and possession to all equipment needed to complete the Murra Warra project, and that it had reached agreement with Senvion for assistance in the commissioning of the wind turbine generators.