David Blackman looks at energy projects whose futures are uncertain following the highly-publicised collapse of construction company Carillion.

“Consistent and successful” is how Carillion describes its strategy on the section of the website that houses the company’s annual reports.

The now defunct construction giant’s performance took a nosedive over the past year since it published its 2016 annual report. A profit before taxes of £236 million in 2016 turned into a £1.15 billion loss for the first half of last year as the company was forced to write down the value of three projects to the tune of £845 million due to cost over-runs and delays.

Work has ground to a halt on a host of building projects, including new hospitals and roads, across the UK. So far utilities appear to have escaped lightly from the collapse of what was until recently, the UK’s second biggest construction company. EDF, Eon and SSE have all told Utility Week that they had no projects with Carillion when the company went bust last week.

The last major energy project with a utility trumpeted by Carillion was the laying of a 26km long cable for Eon to plug the Rampion windfarm – which can be seen from the Brighton seafront – into the National Grid at Bolney. But this project was completed in late 2016.

National Grid

The main headaches are at National Grid, which had three outstanding projects with Carillion when it entered liquidation.

These include a £38 million contract to build a new overhead line to hook the new Nemo interconnector, which straddles the English Channel between Belgium and north Kent, up with the National Grid.

The 20km-long line between the Canterbury North substation and a new 400kV substation at Richborough in Kent, where the interconnector lands, involves the construction of 60 new steel lattice towers together with associated fittings and conductors.

The project was awarded to Carillion’s joint venture with Scandanavia’s Eltel Networks in August 2016 before the firm’s financial problems came to light. Work began last year, and is due to be completed in 2020. Eltel did not respond to a request for comment by Utility Week about the future of the project.

Carillion was also replacing a transformer at West Weybridge in Surrey and relocating a cable at Wylfa to support the development of for Horizon Nuclear Power’s new station at the Isle of Anglesey site.

A National Grid spokesperson says that there are contingency plans in place for all its projects with Carillion, using alternative suppliers if necessary, which will keep any disruption “to a minimum”.

Carillion was lead contractor on a project by West Sussex council to deliver energy efficiency and renewable energy projects across the county. The latest of these was a solar farm project at Westhampnett, which is due to be completed in February.

Following the liquidation announcement on Monday 15 January, West Sussex council put out a statement that the project will be completed in line with the official receiver’s priority to ensure continuity of public services.

Energy services

However, Carillion had long branched out from its construction roots into services, including energy.
In 2011, the construction company had set up Carillion Energy Services following its acquisition of north-east based Eaga.

Carillion had hoped to become, via the acquisition, the biggest player in a sector that looked for rapid expansion on the back of supportive coalition government policies, notably the Green Deal.

However, the Green Deal famously proved a flop. Carillion’s biggest initiative in the energy services field was a partnership with Birmingham council, which aimed to harness the Green Deal to retrofit the city’s leaky pre-First World war terraced homes and poorly insulated post-war council housing.

Just over two years ago though, Britain’s biggest council pulled the plug on Birmingham Energy Services.

Carillion Energy Services, which retained its head office in Newcastle, remained in business, installing renewable technologies and domestic heating services.

The company also had a dedicated centre based in Manchester, which monitors its clients’ energy use round the clock.

In addition, Carillion had a joint venture with Breathe, offering what it described as a multi-disciplinary “total energy management” solution. There was no response from Breathe to a request for comment on the future of the joint venture this week.

Carillion Energy Services’ clients included the Northern Ireland Housing Executive. The company had a share of a £336 million contract, signed last November, to replace heating systems across the 86,500-homes of the executive, which is the biggest social housing landlord in Northern Ireland.

However, energy services proved to be far from the pot of gold that Carillion had hoped when it bought Eaga.

In its accounts for 2016, the last that it submitted to Companies House, Carillion Energy Services recorded a £16 million loss on a turnover of £42.8 million. This was up sharply on the £342,000 loss on £52.5 million worth of turnover recorded in 2015.

The company blamed the dip in turnover on a fall in project wins, adding that it was operating in difficult markets where activity had not grown as the government had expected.

In the grander scheme of things, Carillion’s energy services losses were dwarfed by those that the company suffered in its hardcore construction business.

However, for Carillion, energy didn’t prove the hoped-for get out of jail card for reducing its reliance on such risky projects.