Costain is pursuing National Grid to recover costs from work on the upgrade of gas compressor stations in Peterborough and Huntingdon.
The contractor agreed to exit the contracts in June after disputes over changes to the schemes’ design and scope.
In a trading update Costain said the termination agreement included a legal process to agree “up to £80 million of identified compensation events, recover costs to date and eliminate a potential liability to National Grid for completing the works”.
At the point the contracts were cancelled, Costain claims it was owed £42 million, which will increase to £49.3 million at the end of its works.
The group said it continues to believe that it has “a strong entitlement to recover this sum which is subject to successful pursuit through adjudication and potentially litigation”.
Costain has postponed its interim results as it awaits the outcome of this and a separate arbitration around a road contract.
The company has also taken actions to address risk arising from similar contracts, including no longer pursuing Energy EPC contracts and focusing on long-term investment programmes as opposed to one-off capital projects.
In response to Costain’s comments, National Grid reiterated its statement from June: “Following detailed discussions between National Grid and Costain regarding the delivery of improvement works to the Peterborough and Huntingdon Compressors, both parties have mutually agreed to exit the contract and release Costain from its contractual obligations to complete the works. This decision is in the best interests of both parties and the consumer. National Grid remains committed to delivering this vital work to improve environmental emissions.”