French group Bouygues has warned that its construction unit would see a drop in operating profit of around €140m in the first nine months of 2018 compared to the same period last year, due to problem contracts.
Two biomass plants in the UK have hit snags, and a terminated data centre project in Ireland has "entered a new phase of litigation".
On top of that, Colas Rail in France will see a €25m drop in expected profits thanks to strikes and other issues, the company said, leading to an overall hit of €165m.
In its first-half 2018 results the group identified problems with three energy and services projects at Bouygues Construction, and in Colas’ specialised activities, particularly in the French rail business.
"This situation worsened during third-quarter 2018," Bouygues said yesterday.
Two biomass power plants in the UK had trouble during testing and commissioning phases, relating to "malfunctions on certain equipment, leading to delays, additional costs and compensation paid to customers", Bouygues said. It did not name the projects.
In February 2015 Bouygues won a €110m contract to build and operate for 10 years a 10MWe biomass gasification plant in Hoddesdon, Hertfordshire, by AssetGen Partners.
Later that year, in December, the group won a €202m contract to engineer, build and operate for 17 years a waste-to-energy gasification plant in Belfast, Northern Ireland, by the Full Circle Generation investment fund (with developer RiverRidge Energy).
Both plants were due to be finished in 2017.
Also contributing to the loss was a data centre in Ireland that was terminated by the client. It "entered a new phase of litigation following the request by the client for payment of the maximum amount of compensation", according to the group.
Colas Rail in France, meanwhile, is facing "a tough situation, which worsened in the second and third quarters", with its operating profit expected to be down by €25m in the first nine months of 2018 versus the first nine months of 2017.
Bouygues blamed strikes at French rail operator SNCF for disrupting rail works and the freight business, "resulting in a sharp decline in activity in a business with a high level of fixed costs".
At pipe-laying project in south-west France Bouygues was hit by adverse weather conditions in the first quarter of 2018, and catching up proved costly.
In contrast, the building and civil works activities of Bouygues Construction and Roads Mainland France at Colas will post good results in the first nine months of 2018.
"The Group is therefore confident in the strengths and the good positioning of its construction businesses in a market exhibiting strong worldwide demand over the long term, as outlined during the Capital Markets Day of 2 October," Bouygues said.
Image: In December 2015 Bouygues won a €202m contract to build and operate for 17 years a waste-to-energy gasification plant in Belfast, Northern Ireland (Bouygues)