Channel Tunnel Rail Link extension at King鈥檚 Cross could be part of the disputed contracts

Costain has made a 拢50m writedown after revealing problem contracts in its building, coal and gas divisions.

Costain has refused to name all the disputed contracts, but 黑洞社区 understands that they include the Channel Tunnel Rail Link extension at King鈥檚 Cross. Costain has admitted to cost overruns at a $150m (拢77m) nitrogen rejection plant in Mexico.

Tony Bickerstaff, Costain鈥檚 group finance director, told 黑洞社区: 鈥淲e said we wouldn鈥檛 shy away from the difficult decisions and this announcement is very much that strategy coming into play.鈥�

However industry sources have said that, because of the recent loss of senior staff, the new management team has taken an extremely cautious decision.

I think it is very poor to come out with this so soon after they reviewed the situation earlier this year

City analyst

A senior industry source said: 鈥淐ostain lost a few senior guys, so when the management begins to look at money owed on its existing contracts it will be difficult to say exactly how much it will recoup. But a 拢50m writedown still looks like a very safe figure. It could be a way of being able to demonstrate a much healthier position next year.鈥�

A source close to Costain questioned the cautious accounting approach, and said they were 鈥渜uite amazed鈥� by the statement. The source said that, although it is dangerous to assume that a contractor will retrieve all the claims it has with clients that make changes to the brief, it is 鈥渆qually bad to indulge in over-pessimism, as it will only cause results to leap up and down, providing an unrealistic view of the business鈥� health.鈥�

A city analyst was more open in his criticism. He said: 鈥淢y view is very jaundiced. I think it is very poor to come out with this so soon after they reviewed the situation earlier this year.鈥�

Costain has made a 拢36m writedown against disputes in which it does not expect to get its money back. The contractor has made a 拢5m provision against disputed contracts in its building division, a 拢6m provision for the closure of its international division and 拢3m for the Mexico project.