Aecon Group Inc. has suffered significant losses from work performed on Suncor’s Firebag III Central Plant Facilities, as a result of change order negotiations.
“Notwithstanding the unsatisfactory financial results achieved on the project, we continue to have a solid working relationship with Suncor, and continue to work on a number of Suncor sites including the Firebag IV cogeneration project and the Millennium Naphtha Unit,” said John M. Beck, Aecon’s chairman and CEO. “We remain as committed and optimistic as ever for Aecon’s ongoing success in the oilsands.”
Even though negotiations have not yet concluded, Aecon recently reported that total operating losses on the project will be in the $56-$59 million range ($40-$42 million after tax).
This has created an operating loss for the company in the industrial segment for the year ended Dec. 31, 2010.
Aecon turned over the Firebag III Central Plant Facilities project to Suncor at 2010 year end, and assisted Suncor with transitioning from completing construction to pre-commissioning mode.
As such, the impact of project losses is limited to the 2010 fiscal year, and will not affect Aecon’s financial results in 2011.
Aecon’s results for the fourth quarter of 2010 are generally in line with management expectations, despite the final settlement of these change orders.
The resumption of work at the Firebag 3 oilsands facility in 2010 was one of the most important signs that there was an upturn in the construction industry in the Fort McMurray region.
In November 2009, Suncor’s Energy Board approved a $5.5 billion capital spending plan for 2010.
About $1.5 billion was directed toward growth project funding, primarily at the Firebag Stage 3 in-situ oil sands expansion project, which was 50 per cent complete before being deferred in early 2009.
A few days after Suncor decided to restart work on its Firebag 3 facility several new contracts were awarded.
Lockerbie & Hole Industrial, a division of Aecon Lockerbie Industrial, was awarded a contract to complete field construction on the oilsands project.
This contract was one of the largest in the history of the industrial group and was a signal to Aecon that work in the oilsands was beginning to ramp-up.
At this time, Aecon did not disclose the size of the contract, but said the project will have a maximum workforce of 600 and includes certain lump sum elements like the completion of piping, electrical and insulation work.
Suncor predicted the project would create up to 3000 construction jobs, with production scheduled for completion in the second quarter of 2011. The facility will eventually produce about 68,000 barrels per day (bpd) of bitumen.
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