Retentions row with Costain prompts subcontractor sell-off

Waste specialist TEG is looking to sell its operating arm after failing to resolve a retention dispute with main contractor Costain.

Last month TEG suspended trading in its shares in part because Costain was withholding £2.8m of retentions payments to the firm.

TEG was working for Costain on its £397m contract to build 46 different waste processing facilities across the Greater Manchester Area.

But in an announcement to the City in October, TEG said it had suspended trading in its shares due to concerns over its funding arrangements.

TEG said it had been “working with Costain” to get £2.8m of retentions released for “over two years”.

In an announcement to the City today, it said it had been “unable to negotiate an exit” from its contract with Costain and had been “unable to secure the release of any retentions owed to TEG”. 

It said: “Given the ongoing costs associated with managing the conclusion of the contract and the associated remediation costs, in the absence of capital from the retentions the board believes that the provision of equity financing for the group is extremely unlikely.”

But it added: “The board is exploring the sale of certain parts of the group, principally the disposal of its operating division as a going concern.” 

It said the operating division continued to operate “satisfactorily” but that it “did not believe that further funding would be secured to allow for the future working capital needs of the group”.

It added: “Regrettably, under the likely structures that can be achieved, the board believes that there may be little or no value remaining in the equity of the group.”

But it said it was continuing to “pursue options to preserve the value of the group” by negotiation with its current finance providers.

Costain has been contacted for comment.