Subcontractor in retentions row with Costain

Waste specialist TEG has suspended trading in its shares in part because Costain is withholding £2.8m of retentions payments from 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 on Tuesday, TEG said it had suspended trading in its shares on the AIM market, due to concerns over its funding arrangements, amid a dispute with Costain over retentions payments.

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

TEG said it had been “undertaking remedial works for Costain as part of a programme of works to manage the conclusion of the contract”, but while some of its costs had been covered by insurers it had had to bear some of its own costs as well.

It said it had “proposed options” for it to exit the contract but was informed on 27 October 2014 that it “will be unable to negotiate such an exit”.

It added: “The board believe that there is no prospect of the release of any of the retentions owed to TEG in the near future which will impact significantly on working capital requirements.”

The firm said the board had requested that trading in its shares be stopped until it had certainty over its funding arrangements.

It added: “The group remains in discussions with its existing providers of finance regarding the on-going provision of facilities, will maintain a dialogue with Costain and will separately continue to explore all financing and strategic options open to it, including the potential sale of certain parts of the business.”

In August Costain said it had withdrawn from the waste market after problems in Manchester led its natural resources division to report a £2.6m loss in the first half of 2014.

The firm said there had been “design faults” at four of the sites.