Construction firm Interserve has set aside £70 million to address the ‘deterioration’ of its contract to build Viridor’s Glasgow gasification plant, caused by technical issues with the plant.
According to the construction firm, issues at the site relate to the “design, procurement and installation” of the gasification plant which are expected to result in further delays for the project.
Construction of the Glasgow Recycling and Renewable Energy Centre (GRREC) began in 2013 with the site originally due to start operations early this year. Technology for the gasification plant is being provided by gasification specialist Energos.
The 200,000 tonnes per-year capacity facility is being built at Glasgow city council’s long established waste treatment plant at Polmadie, and is the cornerstone of a waste treatment contract worth £254 million between Viridor and the local authority.
As well as the gasification plant, the site will also house a materials recycling facility (MRF), a mechanical biological treatment plant and an anaerobic digestion facility.
In a trading update today (6 May 2016), the construction firm stated: “Our expectations for the UK construction division as a whole have been significantly adversely impacted by a further deterioration in our Glasgow energy from waste contract. The issues relate to the design, procurement and installation of the gasification plant, together with continuing challenges with the supply chain that will result in further cost overruns and delays.
“As a result the Board anticipates a £70m exceptional contract provision to be taken in the first half of 2016, resulting in a similar level of cash outflow spread across 2016 and 2017. We will be pursuing every opportunity to mitigate this situation.”
Despite delays, construction work on the plant is progressing, with odour ducting and pipework to one of the gasifiers having been installed in recent weeks.
However, work on the facility has also been dogged by industrial action from construction workers, with 70 scaffolders and labourers having taken part in a two day strike last month (25 April) in a dispute over pay parity.
As well as building the Glasgow waste facility, Interserve has also been contracted to build Viridor’s Dunbar energy from waste plant at East Lothian, on which constrution began in July 2015 (see letsrecycle.com story).