Interserve shares drop after energy-from-waste exit costs expand

Shares in UK-based construction firm Interserve have fallen by a third after the board announced that the costs of quitting the energy-from-waste (EfW) business are more than double those originally expected.

The construction firm announced in August that it was leaving the EfW field after issues arose with its six contracts in the sector, noting that the ‘unique challenges’ of the market had led it to take the decision to quit the industry.

Interserve said that the provisions it was making for entering and now rather rapidly exiting the market for EfW have reached £160 million (€189m). That compares with the £70m cost that it highlighted in May, 2016, a number that the chief executive said in August would get “no bigger, no uglier”.

“Continuing challenges in the supply chain” meant that the firm’s main project, constructing the gasification plants for Viridor’s planned Glasgow Recycling and Renewable Energy Centre (GRREC), suffered overruns and delays in early 2016, and in May the company confirmed that issues with the design, procurement and installation of the project had led to the deterioration of the contract.

Interserve served notice of termination to the GRREC project in November and the firm’s update explains that the board has “considered the implications of this development with its legal advisers and expect a lengthy period of litigation to ensue”.