Harland & Wolff (HARL), a UK-based company that focuses on strategic infrastructure projects and asset lifecycle management, has announced the successful conclusion of negotiations with offshore engineer Saipem to descope the contract to supply wind turbine generator jackets for the Neart na Gaoithe windfarm near Fife following contract delays.
The final contract value has been finalised set at £16m, representing approximately 70% of the original £26.5m contract value when announced in April 2022 as part of the descoping from eight jackets to four. The entire amount has been paid in full and final settlement of the contract.
As a result of additional contract wins and workload, Harland & Wolff will move some of the fabrication work for the Cory Barges contract from Belfast to Methil. The company expects Methil to commence fabrication on four barges in the next two weeks, in line with its strategy of operating across multiple facilities and balancing work as well as skill sets between the yards.
The company announced yesterday that the first barge full had been completed and approved by the client, and would be delivered by the end of the first quarter. To align the company's resources and cost base with the level of work being undertaken at Methil, Harland & Wolff will rationalize the facility's workforce to approximately 115 core personnel.
Looking ahead, the company anticipates increased demand from the renewables market in the UK, where fabrication capacity is limited. Harland & Wolff has already submitted tenders for additional work at Methil over the mid-to longer term, and is advancing on a pipeline of nearer-term smaller projects given the long lead time on large projects.
John Wood, Group Chief Executive Officer of Harland & Wolff commented: "The project has been a helpful learning curve for the business in this environment and we will take the lessons learnt forward into our next major project. ..The Company is focused on progressing the Company's pipeline of opportunities across its different sites and markets and remains steadfast in its approach to executing on contracts which maintain strong and attractive margins."
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Although somewhat disappointing to see any contract descoped, closure on the discussions - which have been underway since September - is good news, and the £16m payment will provide an important source of working capital as the group fills up its state-of-the-art yards.
The descoping of the Saipem project has also given Harland an opportunity to rebalance work across its yards to protect margins, important in an industry where project issues can quickly see contracts become lossmaking. Meanwhile, yesterday’s milestone news from the Cory Barges contract is a real demonstration of the group’s ability to deliver projects on time and budget.