£14m setback for Redhall as group pulls contract

The Wakefield-based group revealed Vivergo Fuels has abruptly ended its contract building a biofuels site at Saltend near Hull.

The move leaves 400 workers in limbo after Redhall claimed the project workers have transferred by law to Vivergo, but Vivergo denied they are its responsibility.

Redhall said it is “vigorously” trying to recover £14m of the contract’s costs which it said remain unpaid, plus damages, and warned trading profits will be hit by more than £1.7m.

However, Vivergo said the contract was halted over “unacceptable” performance, adding it does not believe there are grounds for a claim.

Shares in Redhall dived 29.5p to close at 106.5p yesterday.

Redhall won the £18m contract to build a bio-ethanol site for oil giant BP and partners British Sugar and Du Pont in April last year. The site, neighbouring the existing BP Chemicals Saltend plant, is 78 per cent complete, said the group.

Redhall insisted it has sufficient headroom on its facilities and banking covenants to pursue legal action over the contract, as well as fund its working capital needs.

“This situation is a one-off and there are reasons for it but I remain confident in the future of the business,” said executive chairman David Jackson.

A Vivergo spokeswoman said: “This was due to the performance level delivered under the contract which was not acceptable to us.

“This was the only way to protect our business and deliver our business targets. We had been working with them to try to improve the situation.

“The reality is that by this time the work should have been totally completed whereas the mechanical and piping work under this contract stands at about 69 per cent.

“It’s a huge disappointment and we’ve not taken the decision lightly.”

She added that Vivergo will not be taking on the 400 staff. “The workers are employed by Redhall and they maintain that management responsibility for them,” she said.

When complete the Vivergo site will be one of the largest bioethanol sites in Europe, producing around 420 million litres a year.

The dispute is also likely to push back the opening date of the facility, said Vivergo. It had been due to open in the summer, employing around 70 staff.

Brewin Dolphin analyst Michael Parkinson said: “It’s their biggest contract. It’s not one they would have chosen to end in this way.

“They’re going to have to knuckle down to move through this.”

Last month Redhall announced chief executive Simon Foster was resigning for “family reasons”.

It also lost a battle to buy York-based Mount Engineering in October when it was outbid by US manufacturing giant Cooper Industries.