Announcement of the QCLNG arbitration award, update on corporate actions, renewal & withdrawal of cautionary
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
SHARE CODE: AEG
("Aveng", "the Company" or “the Group”)
ANNOUNCEMENT OF THE QCLNG ARBITRATION AWARD, UPDATE ON CORPORATE
ACTIONS, RENEWAL AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS AND
In Aveng's Interim Results announcement of 20 February 2017, the Group highlighted the expected
resolution of the long-outstanding QCLNG matter and the associated balance sheet risk in its outlook.
Furthermore, in the SENS announcement of 17 May 2017, Aveng reported that it was re-evaluating
certain long-outstanding uncertified revenue. Aveng wishes to provide the following update:
• The resolution of disputed claims pertaining to the Queensland Curtis Liquefied Natural Gas
(“QCLNG”) pipeline project, which was completed in 2014 by a joint venture that included
McConnell Dowell (a subsidiary of Aveng), and the financial effect thereof;
• Termination of the Aveng Steel disposal process;
• The Aveng Grinaker-LTA empowerment transaction; and
• Renewal and withdrawal of cautionary announcements.
McConnell Dowell (a 100% subsidiary of Aveng), together with its joint venture partner, was
responsible for the execution of the QCLNG project in Australia over a four-year period that started in
2010. Following various contractual disputes and a protracted arbitration process, the QCLNG award
provides that McConnell Dowell is entitled to receive compensation in the amount of AUD50.5 million
(R508 million) (including interest), being 50% of the total award to the joint venture.
Salient features of the award include:
• AUD50.5 million (R508 million) to be settled forthwith;
• Each party is accountable for its legal expenses; adequate provision has been made for
McConnell Dowell’s legal fees; and
• The QCLNG award is binding and final, with only very limited appeal rights.
Kobus Verster, Aveng Chief Executive Officer, commented, “The QCLNG arbitration award marks an
important milestone and brings an end to this protracted legal process. This award, allows us to
remove substantial risk and uncertainty from the company. I would like to thank our core bankers and
other financial institutions for their continued support during this prolonged process.”
Given that the QCLNG award is less than the amount recognised within uncertified revenue and
claims, the Group will record a non-cash write-down of AUD234 million (R2,4 billion) in relation to the
QCLNG award in its reported results for the year ended 30 June 2017. This charge will reduce both
earnings per share and headline earnings per share each by 595 cents.
The proceeds from the QCLNG award will improve the Group’s net cash position by R508 million. At
30 June 2017, the Group’s net debt position is R1 070 million (31 December 2016: R937 million). On
settlement of the QCLNG award post year end, the Group will significantly reduce its net debt
OTHER LONG-OUTSTANDING UNCERTIFIED REVENUE
As stated in the trading statement and cautionary announcement of 17 May 2017 and the subsequent
renewal, Aveng continuously assesses its recognised uncertified revenue. Following the QCLNG
award and previously reported awards in South Africa, which resulted in significant write-downs,
management is conducting a detailed review of previously recognised uncertified revenue and project
performance. This exercise is progressing well and the results thereof will be communicated in due
STEEL DISPOSAL UPDATE
Shareholders are referred to the cautionary announcement dated 3 July 2017, in relation to the sale of
Aveng Trident Steel by Aveng Africa (Pty) Ltd.
Shareholders are advised that negotiations relating to the disposal of Aveng Trident Steel have been
terminated due to the inability to reach agreement on an acceptable value. No other negotiations are
currently in progress.
Over recent months, the Company has continued with various interventions that have resulted in the
business being able to generate positive cash flow and reach an EBITDA break-even position for the
year, notwithstanding challenging market conditions.
With the termination of negotiations, it is management’s intention to implement further optimisation
initiatives within Aveng Trident Steel. This includes capitalising on its leading position within the
AVENG GRINAKER-LTA EMPOWERMENT TRANSACTION UPDATE
Following overwhelming shareholder support at the extraordinary meeting held on 29 March 2017,
Aveng is pleased to report that the Aveng Grinaker-LTA empowerment transaction, which will result in
the sale of 51% beneficial interest in the business to Kutana Construction, has advanced. Aveng has
received unconditional approval from both the South African Competition Commission and
competition authorities in Namibia and Botswana. Approval is awaited from the Swaziland authorities.
RENEWAL OF CAUTIONARY – UNCERTIFIED REVENUE
The cautionary announcement dated 3 July 2017 is hereby renewed and shareholders are advised to
exercise caution in respect of this matter when dealing in Aveng securities.
WITHDRAWAL OF CAUTIONARY – STEEL DISPOSAL
The cautionary announcement dated 3 July 2017 is hereby withdrawn and shareholders are no longer
required to exercise caution in respect of this matter when dealing in Aveng securities.
In terms of paragraph 3.4 (b) of the JSE Limited Listings Requirements, a listed company is required
to publish a trading statement as soon as a reasonable degree of certainty exists that the financial
results for the upcoming reporting period will differ by more than 20% from those of the previous
The Company released a trading statement on 17 May 2017 stating that the Group expects basic
earnings per share (“EPS”) and headline earnings per share (“HEPS”) for the year ended 30 June
2017 to be substantially more than 20% lower than the basic EPS loss of (25.4) cents and basic
HEPS loss of (75.2) cents reported for the previous comparative period.
Shareholders are advised that a further trading statement will be released as soon as there is a
reasonable degree of certainty as to the likely range by which the Group’s EPS and HEPS are
expected to decrease.
The above information has not been reviewed or reported on by the Company's external auditors.
31 July 2017
JSE Sponsor: UBS South Africa Proprietary Limited
Group Executive: Strategy & Investor Relations
Tel: 011 779 2979
This announcement includes forward-looking statements that reflect the current views and
expectations of the Board with respect to future events and financial and operational performance. All
statements, other than statements of historical fact are, or may be deemed to be, forward-looking
statements, including, without limitation, those concerning the Group’s strategy; the economic outlook
for the industry; and the Group’s liquidity and capital resources and expenditure.
These forward-looking statements speak only as of the date of this announcement and are not based
on historical facts, but rather reflect the Group’s current expectations concerning future results and
events. The Group undertakes no obligation to update publicly or release any revisions to these
forward-looking statements to reflect events or circumstances after the date of this announcement.
Date: 31/07/2017 10:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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