Australia's UGL finalizes DTZ sale, reveals project cost blowout
Australian engineering firm UGL Ltd (UGL.AX) ended one fraught chapter and started another on Thursday as it finalised the years-long $1.1 billion sale of its DTZ property arm and revealed delays and cost blowouts at a power station project.
UGL's shares fell up to 13 percent after it said construction of the power station for a liquefied natural gas plant in northern Australia was delayed by project changes and "events in the design and procurement phase", leading to a cost provision of $170 million for the project.
The Sydney-listed company, which is in a joint venture with General Electric Co (GE.N) and U.S. engineering firm CH2M HILL for the project, could not yet reliably estimate the impact on its own costs, it added.
Its shares were down 9.42 percent at A$6.25 ($5.36) in mid-session trading.
The setback will amp up the challenge UGL faces to win back investor confidence just as it closes off the long-awaited sale of its property arm to U.S. private equity giant TPG Capital Management LP [TPG.UL].
The company put DTZ on the market in early 2013 in a bid to cut debt and focus on its core engineering business. In June it said it would sell the unit to United States private equity giant TPG in a deal then expected to settle in September.
But the deal came under scrutiny after Australian media revealed Hong Kong Chief Executive Leung Chun-ying received more than $6.4 million in payments from UGL relating to its purchase of DTZ, where Leung had worked.
TPG had sought a full explanation of the payments, sources told Reuters, while UGL maintained the payments were industry standard and largely structured by the vendors of the business. Leung's office also denied wrongdoing.
TPG and Hong Kong-based private equity firm PAG, together with co-investor Ontario Teachers' Pension Plan, teamed up to buy DTZ from UGL.