As suspected, losses incurred in the construction of tricky waste-to-energy plants has been cited as a key cause of Clugston's financial difficulties 鈥� another one burned by incinerators.
James Clark and Howard Smith from KPMG鈥檚 restructuring practice have been appointed joint administrators to Clugston Group Limited and Clugston Construction Limited.
In addition James Clark and Chris Pole, also KPMG, have been appointed joint administrators to Clugston Services Limited.
KPMG said that Clugston鈥檚 businesses had 鈥渟uffered as a result of losses on a number of large and complex energy from waste contracts, accentuated by the insolvency of a key subcontractor鈥�.
The administrators said: 鈥淒espite negotiations with key stakeholders to resolve issues caused by the losses, mounting pressures on the business have caused the directors to seek the appointment of administrators.鈥�
Clugston鈥檚 recent waste-to-energy projects include Sembcorp鈥檚 拢250m plant at Wilton on Teesside and a 拢340m waste-fuelled combined heat & power plant for Wheelabrator Technologies at Kemsley in Kent, working in joint venture with French process engineer Constructions Industrielles de la M茅diterran茅e (CNIM).
The Clugston CNIM JV is currently building聽a 拢252m energy recovery facility for Viridor in Avonmouth and a聽拢180m plant for Wheelabrator on the Deeside Industrial Park in North Wales. It March 2019 the Clugston CNIM JV was named main contractor for the 拢210m Earls Gate Energy Centre at Grangemouth in Scotland.
On 30th August, CNIM reported an 鈧�80m half-year loss and blamed it in large part on its UK operations. It said: 鈥淚n the UK, the problems were due mainly to penalties for delay caused by civil engineering service providers failing to fulfil their contractual obligations. This had a significant impact on two major contracts.鈥�
The Clugston administrators will continue to trade certain divisions and are seeking to sell contracts, with 262 members of staff retained to assist with this.
James Clark, associate partner at KPMG and joint administrator, said: 鈥淭he directors of the business have worked tirelessly trying to rescue the group and have pursued discussions with a key stakeholder about a potential rescue deal. Unfortunately, it has not been possible to obtain the funding required, and as a result, the directors concluded they needed to appoint administrators to protect the value of business.
鈥淥ur focus over the coming days will be to seek buyers for the contracts and divisions, and to liaise with those employees who have been made redundant, ensuring they are provided with the support and information they need to claim their statutory entitlements from the Redundancy Payments Office.鈥�
Clugston Distribution Services Limited and Clugston Estates Limited are standalone entities and are not affected by the administration process. They are continuing to trade under the control of their directors.
Building waste-to-energy plants is a complicated聽business and one that has burned bigger construction contractors than Clugston in recent years. Costain, Sir Robert McAlpine and Interserve have all incurred heavy losses from projects in the sector before withdrawing. Interserve is still embroiled in a legal dispute over its Glasgow Recycling & Renewable Energy incinerator project.
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