Fluor disappointed by wind farm ruling

Fluor will book a US$ 400 million pre-tax charge in its fourth-quarter results, following the loss of an arbitration panel claim related to its work on the Greater Gabbard Offshore Wind Farm Project in the UK. The company was seeking compensation for schedule and cost impacts which it said arose from delays, disruption and productivity issues that were attributable to the client and other parties.

Commenting on the ruling, chairman & CEO David Seaton said, “Fluor delivered a quality project, and we are extremely disappointed with this unexpected decision, especially considering recent statements that acknowledge that al 140 turbines are commissioned and exporting electricity, and the overall performance is more than 10% ahead of the client’s expectations.”

Fluor originally won the work in January 2010, when it acquired the rights to develop the 500 MW project located off the coast of Suffolk, England, in partnership with utility company Scottish & Southern Energy (SSE).

Fluor subsequently sold its share of the project to SSE, which brought in another utilities company, RWE, as joint owner of the scheme. Fluor then assumed the role of contractor to the joint venture client.

It has been a troubled project for the company, with a history of losses. In its full-year 2010 results, Fluor announced it was making provisions of US$ 343 related to cost overruns on the project. “Cost overruns reflect the impact of the bankruptcy of a major subcontractor, weather-related delays which worsened during the fourth quarter and low wind turbine and subsea cable installation rates which have added substantial costs for additional maritime assets,” it said in a statement at the time. The bankrupt subcontractor was Subocean, which was responsible for installing subsea cables.

Fluor’s third quarter 2011 results included a further US$ 38 million pre-tax charge for further increased costs on the project.