A building company has left $10 billion worth of government projects up in the air after it suddenly collapsed.
On Monday, Perth-based Clough Group went into voluntary administration because a crucial $350 million merger deal fell through.
The firm, which had been struggling financially, was slated to be absorbed by Italian building conglomerate WeBuild and had previously been propped up with a $167 million loan.
WeBuild was set to fork out a further $30 million loan but the deal was suddenly axed, triggering Clough’s demise.
Clough builds industrial projects in the energy, resources and infrastructure sector, which has left a number of sites in the lurch including the federal government’s Snowy Hydro 2.0 expansion and other projects in NSW, Western Australia and Papua New Guinea.
In fact, the company’s administration has reportedly left $10 billion worth of government projects that are part of Australia’s energy transition plan in doubt.
Federal Climate Change and Energy Minister Chris Bowen is in crisis meetings to control the blowback, according to The Australian Financial Review.
News.com.au has contacted Mr Bowen’s office for comment.
Clough’s failure is especially causing a headache for the federal government’s Snowy Hydro scheme.
The $5 billion expansion of the country’s biggest hydro scheme has been repeatedly delayed and running out of funds – and that was before Clough collapsed.
Minister Bowen inherited the Snowy Hydro project in June this year from the previous government and said to Reuters at the time: “This is exactly the kind of chaos and mismanagement of the energy portfolio that put Australia in its current mess”.
Clough appears to have been in financial strife for some time with its auditors, PwC, warning in the most recent filing with the Australian Securities and Investments Commission (ASIC) that the firm’s continued survival was dependent on the merger.
The firm’s South African owners, Murray & Roberts, appointed Sal Algeri, Jason Tracy, David Orr and Glen Kanevsky of Deloitte as voluntary administrators.
They are now looking to sell the business in a quick sale, saying in a statement to news.com.au “An accelerated sale and recapitalisation process will also commence.”
In a short statement on Monday evening, WeBuild said the merger had been scrapped as the companies had “jointly determined and agreed that there is no reasonable prospect of that acquisition proceeding through to a successful completion”.
“The parties have therefore unconditionally agreed to terminate the sale and purchase agreement with immediate effect,” WeBuild said.
The firm’s administration has impacted 12 companies under the Clough Group umbrella which had a total of 1250 Australian employees and another 1250 overseas employees in Papua New Guinea, the UK and the US.
Story Credit: news.com.au