Gautrain case victory lifts M&R shares

A decision by the arbitration tribunal nudged Murray & Roberts’ share price significantly higher on Friday.

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Johannesburg - The Bombela Concession Company (BCC), whose shareholders include Murray & Roberts (M&R), has been awarded a provisional amount of R354 million by the arbitration tribunal for its claim against the Gauteng provincial government related to the Gautrain Sandton station cavern.

The award nudged M&R’s share price significantly higher on Friday following the announcement; it rose by 12 percent to close at R10.83.

Sibonginkosi Nyanga, an analyst at Imara SP Reid, said the provisional award and progress with this claim was positive for M&R although the finalisation of the escalated amount could take several months given the slow progress by M&R with its claims over the past few years.

The station cavern claim on its merits was ruled in favour of the BCC in October 2013 and the arbitration tribunal announced the provisional quantum award last week.

However, on Friday M&R said the amount due by the Gauteng provincial government should be finalised by escalating the value of the award from the date on which the costs were incurred to the date on which the award was issued, based on its constituent parts of rands and euros.

Construction costs

Ed Jardim, the group communications executive at M&R, said the costs of constructing the station were incurred between 2006 and 2010.

The provisional quantum award was issued on March 2.

M&R said the Gauteng government was also liable for all arbitration costs related to this claim and had to pay interest at the prime overdraft rate plus 2 percent from the date of finalisation of the amount due.

The station cavern claim was lodged against the province by the BCC, which operates the Gautrain system under a concession agreement, on behalf of the Bombela Civil Joint Venture (BCJV).

The joint venture was responsible for the design and construction of the entire Gautrain system, including the cavern.

M&R had a 45 percent shareholding in BCJV. Other shareholders in the joint venture were Bouygues with 45 percent and empowerment group SPG with 10 percent.

M&R chief executive Henry Laas said last month that the Sandton Station contract was intended to be “a cut and cover” design, which involved excavating and building the station and covering it up afterwards.

But Laas said the Gauteng government decided to adopt a different methodology that was more expensive than the methodology provided for in M&R’s tender.

M&R said on Friday that it was satisfied with the outcome of the arbitration proceedings, which further strengthened the group’s confidence in its entitlement in regard to other unresolved claims on the Gautrain project that were due for resolution.

The biggest outstanding claim is a delay and disruption claim, which relates to the handover by the provincial government of land parcels for the project more than two years later than called for in the project programme.

More claims

A second component of this claim relates to two cantilever bridges over the highway in Centurion.

Laas said last month that an award on the Centurion bridges claim was expected by the end of this calendar year and by the end of next year to the delay and disruption claim.

An arbitration award in November 2013 against the joint venture for a water ingress problem between the Park and Rosebank stations was in favour of the Gauteng government.

This resulted in M&R having to make a R300m provision in its 2014 financial year for its share of the potential construction costs to be incurred by the joint venture to rectify the problem.

However, Laas said last month that there were many things in this arbitration award that were unclear and this matter would go to court in June this year for a decision on how to take it forward.

BUSINESS REPORT