Petrofac, the oil industry infrastructure operator, is facing further uncertainty after its biggest client cancelled a multibillion-pound contract.
The company said that TenneT, which operates the electricity grid for the Netherlands and much of Germany, had terminated a contract to build offshore platforms and onshore converter stations for six offshore wind farms.
The contract was awarded jointly to Petrofac and Hitachi in 2023 with a value of about €13 billion thought to be split fairly evenly between the two companies. At the time Petrofac said the agreement was “the largest in Petrofac’s history”.
The decision to cancel comes after heavily-indebted Petrofac had made progress on its restructuring which has taken more than a year to work out.
Shareholders would have been wiped out through a debt-for-equity swap but it would have saved the company.
However, this is now in doubt and in a statement the company said: “Having carefully assessed the impact of TenneT’s decision, the board has determined that the restructuring, which had last week reached an advanced stage, is no longer deliverable in its current form.
“The group is in close and constant dialogue with its key creditors and other stakeholders as it actively pursues alternative options for the group. In the meantime, Petrofac remains focused on serving its clients and maintaining operational capability and delivery of services across its businesses.”
TenneT said: “Since 2024 Petrofac has been working on a financial restructuring of its business. In the past period, TenneT has worked extensively with the Petrofac/Hitachi Energy consortium on mitigation measures.
“Since Petrofac has not been able to meet its contractual obligations, TenneT has exercised its right to partial termination of the contract related to the Petrofac scope.”
A Petrofac spokesman said: “We reject the grounds for TenneT’s termination of Petrofac’s role on the 2GW programme, which we believe is without basis.”
Petrofac, which employs about 8,000 people including about 2,000 in the UK, said it was “in close and constant dialogue with its key creditors and other stakeholders as it actively pursues alternative options for the group”.
It was listed in London in 2005 and grew to be a £6 billion company and a FTSE 100 constituent at its peak in 2012, before being hit by successive oil price crashes and a Serious Fraud Office inquiry. The fraud investigation deterred would-be customers and culminated in a conviction for failing to prevent bribery and the payment of $104 million in penalties in 2021.
Petrofac was also hit by construction delays caused by the pandemic and as cashflow worsened it was unable to pay interest on its debt.
Its market valuation dropped to just over £20 million by May this year when its shares were suspended as it was unable to publish accounts pending the restructuring.
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