TEG Group has requested suspension of trading of its shares on the AIM market “pending clarity on its financial position”.
In a statement, TEG said that it remained in detailed discussions with construction company Costain in respect to the £2.8 million of retentions held under the Greater Manchester Waste Contract.
TEG has been working with Costain to release these retentions held under the contract for over two years, but its board believes there is no prospect of the release of any of the retentions owed to TEG in the near future. This is likely to impact significantly on working capital requirements.
In a statement, TEG said: “TEG has been undertaking remedial works for Costain as part of a programme of works to manage the conclusion of the contract. As previously announced, while public indemnity insurers have responded in relation to certain remediation costs, the company continues to bear the cost of its own engineering, procurement and construction (EPC) division required to manage the conclusion of the contract.
“TEG has engaged recently in discussions with Costain in relation to the Group’s overall financial position, the release of the retentions monies owed and TEG’s ability to continue to provide the requested remedial work under the contract.
“TEG has proposed options to exit the contract, but unfortunately TEG was informed on 27 October 2014 that it will be unable to negotiate such an exit, though the parties will remain in dialogue over the execution of the contract.”
As TEG was also unable to reach financial close on its proposed project for Gaydon, which was announced at the end of September, and with certain other projects delayed into 2015, TEG said it had no prospect of securing revenues required to sustain its EPC division in the short to medium term.
The board of TEG continues to explore funding options that will allow further funding to be secured for the current and future working capital needs of the group, but in the meantime has needed to suspend trading of its shares until this uncertainty can be removed.
It is also in discussions with existing providers of finance regarding the on-going provision of facilities, and it is maintaining discussion with Costain. It is also looking at the potential sale of certain parts of the business.