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CIMIC Group Limited Annual Report 2016 |
Operating and Financial Review
SIGNIFICANT CHANGES
SIGNIFICANT CHANGES DURING FY16
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Since 2015, CPB Contractors together with its consortium partners, Saipem SA and Saipem Portugal Comércio Maritimo LDA,
have been in negotiations with Chevron Australia Pty Ltd (Chevron) in relation to collection of contract debtors from the Gorgon LNG
Jetty and Marine Structures Project (Gorgon Contract). On 9 February 2016 the Consortium formally, issued a Notice of Dispute to
Chevron in connection with the Gorgon Contract. Following a period of prescribed negotiation, the parties have entered a private
arbitration as prescribed by the Gorgon Contract. The 3 arbitrators have been appointed with the Chairman appointed
during December 2016. The First Procedural Conference is currently envisaged for the first quarter of 2017, together with a
potential Barrow Island site visit for the Arbitrators soon thereafter. The procedural timetable for the arbitration should be
determined at the First Procedural Conference. Subject to the relevant timetables, arbitrators availability and completion of the
relevant procedural steps, the hearings should commence in approximately early 2019 with an award thereafter. The above process
is following normal arbitration procedure.
On 20 August 2016, in order to pursue further its entitlement under the contract, CIMIC also commenced proceedings in the United
States against Chevron Corporation Inc and separately against KBR Inc. The commencement of the proceedings has no effect on the
arbitration process under the contract process or CIMIC’s entitlement to the amounts under negotiation/arbitration. In the United
States, each of the matters as against Chevron Corporation and KBR was referred to the Federal Court and is ongoing.
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On 13 April 2016, CIMIC completed its compulsory acquisition of Sedgman, following an off-market takeover offer announced on
13 January 2016.
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Subsidiary Leighton Contractors (Asia) Limited agreed a settlement with its client Wynn Resorts in relation to the Wynn Palace
Macau project, which opened on 22 August 2016.
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On 20 January 2017, CIMIC completed its compulsory acquisition of UGL, following an off-market takeover offer announced on
10 October 2016.
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Changes to management and the CIMIC Board including the appointment of Mr Valderas as CEO on 18 October 2016 and Managing
Director on 27 October 2016, with Mr Fernández Verdes continuing as Executive Chairman.
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On 1 December 2016, CIMIC annouced HLG Contracting’s new shareholder structure. CIMIC’s shareholding in HLG Contracting
remained unchanged at 45%. CIMIC also has a call option to purchase the remaining 55% of shares in HLG Contracting.
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On 5 December 2016, CIMIC completed the divestment of its interest in Nextgen. CIMIC sold its 29% holding to Ontario Teachers’
Pension Plan resulting in a profit before tax gain on sale of $70.1 million.
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On 12 December 2016, CIMIC announced a further on-market share buy-back of up to 10% of its fully paid ordinary shares over a
12 month period starting on 29 December 2016. The previous share buy-back ended on 28 December 2016.
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On 14 December 2016, Standard & Poor’s confirmed its current investment grade rating for CIMIC of ‘BBB-/A-3’ with a stable
outlook, and, on 10 October 2016, Moody’s maintained an investment grade rating for CIMIC of ‘Baa3’ with a stable outlook.
SIGNIFICANT CHANGES SINCE BALANCE DATE
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On 24 January 2017, CIMIC announced an offer to acquire the remaining shares in Macmahon that it does not already own, at a price
of $0.145 per share, made through an unconditional off-market takeover offer.
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On 25 January 2017, CIMIC, through the UGL-CH2M JV-GE Consortium, which includes UGL and its joint venture partner CH2M,
terminated its contract with JKC Australia LNG Pty Ltd for the design, construction and commissioning of the Ichthys Combined Cycle
Power Plant. The termination is adequately covered by provisions, and has not had any material impact on FY17 guidance.
SHAREHOLDERS
The largest shareholder in CIMIC is HOCHTIEF Australia Holdings Limited, a wholly owned subsidiary of HOCHTIEF AG, which owns 72.68%
of CIMIC as at 23 January 2017. HOCHTIEF AG is listed on the Frankfurt Stock Exchange. The largest shareholder in HOCHTIEF AG is
Spanish based company ACS, which held 71.72% of the shares in HOCHTIEF as at 31 December 2016.
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