Shares of Aecon Group Inc. were down more than 15 per cent as of mid-afternoon Tuesday in the wake of news that the infrastructure company has reached a settlement in its ongoing dispute with Coastal GasLink.
Aecon — which was one of the prime contractors on the Coastal GasLink pipeline construction project — announced after the close of markets Friday that it expects to take a $127 million non-recurring charge related to the construction of two sections of the pipeline.
“The Coastal GasLink settlement allows Aecon to close the chapter on one of the most technically and financially challenging projects in its history," said Aecon CEO Jean-Louis Servranckx in a release.
"We are proud of our team and thank them for delivering this project safely and with incredible resiliency through to completion.”
The 670-kilometre Coastal GasLink pipeline — which runs from Dawson Creek, B.C., to the LNG processing and export facility currently being built in Kitimat, B.C. — was completed last fall after five years of construction.
TC Energy Corp., the company behind the project, had previously said it was pursuing potential recoveries from contractors after the project's budget ballooned from an initial $6.2 billion to $11.2 billion and then increased again to $14.5 billion over the course of construction.
At the time TC Energy blamed these cost increases on a variety of factors, including labour costs and shortages of skilled labour and "contractor underperformance." The pipeline project also ran into challenges related to drought conditions and erosion and sediment control.
TC Energy has not responded to a request for comment on the settlement agreement.
Aecon said Friday the Coastal GasLink settlement agreement is not expected to result in any cash impacts. Aecon added the settlement is not an admission of liability by either party.
The settlement was "amicable" and "mutually agreeable," Aecon said, and both parties have released their respective claims so that the dispute may be considered "fully and finally resolved."
TC Energy has not responded to a request for comment.
Aecon also said Friday it anticipates additional charges of approximately $110 million related to three other large projects it is currently involved with that are nearing completion.
The company said it will provide additional details as part of its second quarter financial results to be released on Wednesday, July 24.
This report by The Canadian Press was first published July 2, 2024.
Companies in this story: (TSX:ARE; TSX:TRP)
Amanda Stephenson, The Canadian Press
