Perdaman delays $6bn plan for the Burrup urea manufacturing plant thanks to Clough crash

Clough’s collapse has raised fresh uncertainty over the giant Perdaman fertiliser project in WA.

Clough’s collapse has thrown fresh uncertainty over a $6.2bn Pilbara fertiliser project with Perdaman Chemicals boss Vikas Rambal confirming on Thursday he will be forced to delay a final investment decision on the Burrup manufacturing plant.

Mr Rambal told The Australian that Clough’s collapse this week was not a crippling blow to Perdaman Chemical and Fertilisers’ long-running plans to build a urea plant on the Burrup Peninsula, but said he would be forced to delay giving the go-ahead on the $US4.2bn ($6.2bn) project.

Clough was to be a partner with Italy’s Saipem in the design and construction of the giant urea plant, but the sudden fall of the century-old contractor into voluntary administration this week has created a fresh setback for the West Australian project.

Perdaman had previously targeted a final investment decision on the facility by Christmas but Mr Rambal said that timeline would slip into 2023 as it weighed up a rescue plan following Clough’s demise.

“We are not giving up, but we are very realistic that we need a couple of months to resolve alternative solutions for the contractor,” Mr Rambal said.

“We were ready for closure before Christmas and that was our target.”

A “minimum two to three month” delay will now be factored in as Perdaman scrambles to find a solution amid a critical window for the project.

The risk for Perdaman is that if Clough’s partner, Saipem, is not in a position to take up the failed contractor’s share of the venture then the fertiliser producer may be forced to find an alternative partner at a higher price.

If that were to occur Mr Rambal could be forced to return his bankers to find a way to cover additional costs, risking further delays to any start to construction.

Perdaman only repriced the contract with Clough and Saipem in May, citing changes in market conditions and logistics challenges.

Perdaman Chemicals chairman Vikas Rambal.

“Our price factors have taken the worst case now, so the price will not move. We did this intentionally so we don’t get any surprise,” Mr Rambal said.

The Perdaman chief said funding remained in place for the project and he hoped a deal might still arise for Clough as it holds talks with Saipem on finding a solution for the contractual mess.

“All of the stakeholders which are involved remain fully committed to the project. We are now working with Saipem to see what is the alternative solution … with or without Clough,” he said.

It marks the latest upheaval for one of the industry’s big resources players following the demise of Clough. A string of projects which had hired the contractor are now operating under a cloud.

These include the federal government’s Snowy 2.0 hydro expansion, WA’s Waitsia gas project and the 900km Energy Connect power cable linking South Australia and NSW.

Clough’s administrator, Deloitte, is engaged in a scramble to find trade buyers or fresh cash to keep the company’s projects running. Italy’s Webuild pulled out of a pending takeover deal on Monday after running due diligence on the WA firm.

Documents filed with the Australian Securities and Investments Commission show Clough’s local management appears to have been initially cut out of the decision to bring in the insolvency practitioners. Only a director associated with the South Africa parent company held the initial meeting with Deloitte staff.

Deloitte partner Jason Tracy. Picture: Gaye Gerard

Deloitte’s Salvatore Algeri and Jason Tracy were first called in on October 28 by law firm King & Wood Mallesons, 11 days before a deal with Webuild to buy the company was first announced.

But Deloitte initially only met with Ian Henstock – Murray & Roberts’ representative on Clough’s board. A second meeting on November 1 included Mr Henstock, along with Murray & Roberts boss Henry Laas and chief financial officer Daniel Grobler.

Clough chief executive Peter Bennett and finance boss Brent Maas were not included until a meeting on November 11, three days after the deal with Webuild was announced.

Deloitte said in the filings it was formally engaged on November 11 “to assess the financial position of the companies and develop contingency plans in the event they would be required”.

Webuild is believed to have told Clough it was pulling out of the acquisition on Friday December 2, and the Deloitte filings show its team held a series of meetings with senior Clough staff, along with Mr Henstock, over the weekend that followed before Deloitte was formally appointed as Clough’s voluntary administrators on Monday.

Clough chief executive Peter Bennett.

Rival contractor NRW has since held talks over its interest in Clough while Webuild has also returned to the fray, with the company said to be looking to pick out select individual contracts in the fire sale of Clough’s assets and operations.

The Perdaman project is expected to produce more than two million tonnes a year of urea, a fertiliser widely used for food production. In 2018, Perdaman secured a deal that would supply it with gas from Woodside Energy for 20 years.

The massive project is expected to create up to 2000 jobs and will produce fertiliser for the agricultural industry, but opponents say it will require the removal of three rock art sites and will impact other Indigenous sacred sites.

Several ancient pieces of rock art and sacred sites in WA’s Burrup Peninsula will be relocated against the wishes of some traditional owners after federal Environment Minister Tanya Plibersek opted against extending a construction stay in August.