Thu. Feb 29th, 2024

Coastal GasLink calls for $1.2 billion to contractor due to delays

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Despite strong opposition, construction of the Coastal Gaslink pipeline was completed in October.

Reuters

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Coastal GasLink (CGL), the gas pipeline operated by TC Énergie, is demanding $1.2 billion from one of its main contractors for construction delays. CGL could be held liable for a similar amount if an arbitrator rules against it, according to court documents submitted ahead of a hearing this month.

The $14.5 billion construction of CGL, which TC Energy began planning in 2012, was completed in October on a budget more than twice that planned originally.

The 670-kilometre gas pipeline through British Columbia's Rocky Mountains to the Pacific coast has been delayed by mudslides, a shutdown of six-month work due to the pandemic, sometimes violent protests and steep terrain that forced TC Energy to use ski lifts to transport the pipes.

CGL also terminated contractor Pacific Atlantic Pipeline Construction (PAPC) last year citing poor performance and is seeking $1.2 billion for the cost of finding new contractors, said Vice President Blaine Trout. -president of TC Energy responsible for CGL, in court on November 17.

Both parties have gone to the Alberta courts, with CGL arguing that it is legally entitled to draw on a $117 million letter of credit, issued by HSBC to CGL as a performance guarantee for the PAPC.

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The trial comes before the two sides face off in an International Chamber of Commerce arbitration scheduled for November 2024 to determine whether PAPC breached its contractual obligations or was terminated in an unjustified manner.

On October 19, an Alberta court granted an injunction request from PAPC and its parent company, Italian company Bonatti, forcing CGL to withdraw its appeal of the letter of credit, awaiting hearing on December 19. The letter of credit expires in early 2024.

TC Energy said in a statement that the cost of PAPC's alleged breach exceeds largely the amount of the letter of credit.

Coastal GasLink is committed to enforcing its contractual rights and actively seeks to recover its costs is entitled, said TC Energy.

PAPC claims its work was compromised by thousands of design changes made by CGL during construction and by protests that CGL could not control.

Greg Cano, PAPC's director of operations, told Reuters that TC Energy tried to force PAPC to speed up construction, which would have required the contractor to nearly double its staff and equipment on site, without paying the additional costs.

Mr. Cano, who previously worked for TC Energy, said he had never seen such a dispute in his 45 years of experience building natural gas pipelines.

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Coastal GasLink is seeking $1.2 billion from contractor Pacific Atlantic Pipeline Construction citing poor performance.

If the Alberta judge allows CGL to call the letter of credit, financial losses for PAPC and Bonatti could snowball, the companies told the court.

They may be unable to pay arbitration fees, complete current projects or bid for other projects, which could lead to insolvency of PAPC, Bonatti Chairman and CEO Andrea Colombo said in a sworn statement. billion Canadian dollars as part of its arbitration proceedings.

TC Energy's chief financial officer said in November that CGL would not would probably provide only a small financial return to TC Énergie after the depreciations. TC Energy does not expect current or potential legal proceedings to have a material impact, according to its 2022 annual report.

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