Mixed news for Leighton Holdings yesterday with a loss in the Persian Gulf and a win in Western Australia.
Reports yesterday said the company and a developer of tourism-related buildings in Abu Dhabi had abandoned a venture that was expected to generate revenue of at least $1.5 billion within five years.
Leighton and the Tourism development & Investment Co has agreed to set up the venture in December 2007. TDIC is the development arm of Abu Dhabi’s Government tourism authority.
“After a strategic review of TDIC’s business model and due to the changing economic climate, it became more commercially viable for TDIC to retain the flexibility to work with different contractors,” Lee Tabler, TDIC’s chief executive officer, said in a story on Bloomberg yesterday.
“Therefore the joint venture was never progressed.” There was no comment from Leighton yesterday.
It would be the third venture in the Gulf to fall over this year. Its joint project to build a $1 billion plus building called Trump Tower in Dubai has been put on hold indefinitely and a contract at expand part of the Dubai airport has also been junked. That was a $US1.3 billion project to expand the concourse at the airport.
Developers in Dubai and Abu Dhabi and the other parts of the United Arab Emirates have had cancel or delay construction projects.
Leighton scrapped a $US1.3 billion venture to build an additional concourse at Dubai airport in April after failing to reach an agreement with Dubai’s Department of Civil Aviation.
Leighton last month cut its June 20 full-year profit forecast by 10% because of the slump in the industry and in contract mining businesses in Australia and Asia.
But it is winning more local construction projects, and has picked up a number of new contracts to build schools and additions in the Federal Government’s schools program.
That saw its Thiess subsidiary announce a new contract, to design and construct a construction village on Barrow Island for Chevron Australia for the huge Gordon LNG project.
Working with two other companies, the project is worth around $500 million.
"The work is expected to commence on the island after receipt of all necessary government approvals and following a final investment decision on the Chevron operated Gorgon Project from the Gorgon Joint Venture partners, expected in the second half of 2009," a statement from Leighton said yesterday.
Thiess Managing Director David Saxelby said in the statement that the facility was expected to accommodate as many as 3,300 construction workers.
Thiess will provide project management, local procurement and construction services for civil works and buildings.
Another company, Decmil will provide project management, local procurement and construction services, while a third, Kentz is providing the overall construction village engineering and design and the supply of all offshore procurement.
Thiess’ Western Australia General Manager Ric Buratto said materials for the project will be shipped to the remote island from Dampier aboard landing craft transport.
The Gorgon Project is a joint venture between the Australian subsidiaries of Chevron (Operator), ExxonMobil and Shell, to develop the Greater Gorgon gas fields, located between 130km and 200km off the north-west coast of Western Australia. The Greater Gorgon gas fields contain resources of about 40 trillion cubic feet of gas, Australia’s largest-known gas resource.
Leighton shares fell 4%, or nearly $1 to $22.09.
The decline of once-high flying investment bank Babcock and Brown Ltd finally ended yesterday when the company was delisted from the Australian stock exchange.
A statement from the ASX said Babcock and Brown Ltd would be delisted, at the request of the company, at the close of trading that day.
The delisting comes a week after Babcock and Brown’s administrators said there was no likelihood of shareholders receiving any further distributions from their holdings.
No tears were shed.
Better news though for Santos’s Gladstone liquefied natural gas (GLNG) project in Queensland which announced its first supply contract yesterday.
Santos said it had reached a binding heads of agreement to sell two million tonnes of LNG to Malaysia-based Petronas for 20 years, beginning in 2014.
Petronas owns 40% of the project, will also buy a further one million tonnes of LNG each year should the joint venture elect to supply it.
The agreement is conditional only on the GLNG project reaching a final investment decision, Santos said in a statement to the ASX.
"While the commercial terms and price are confidential, they are in line with recent industry practice for long term contracts," Santos said in a statement.
The proposed LNG project involves the extraction of coal seam gas from the Surat and Bowen basins in south-west Queensland and piping it to Gladstone on the state’s central coast.
It would be the world’s first operation to convert coal seam gas to LNG.
An environmental impact statement into the project is expected to be advertised for public release by the Queensland Coordinator General next week on Saturday.
And agribusiness and car parts group, Elders (formerly Futuris) says it has reached in-principle agreement with its financiers to extend for three months its short term debt facilities due to mature at the end of this month.
The company told the ASX yesterday that it had also reached agreement to consent to waive its financial covenants under its bank facilities and US private placement notes.
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