HVDC shock hits Prysmian profits
€37m first quarter charge after issue at Western Link project in UK
Prysmian has posted a €37m first quarter charge due to "technical problems" in the manufacture of HVDC cable for the Western Link transmission project between Scotland and England.
The company said the negative impact on earnings for full-year 2014 was likely to be €70m, eating into expected 2014 EBITDA of up to €650m.
"Results have been adversely affected by technical problems encountered in the manufacture of the submarine cable for the Western HVDC Link project in the UK," said chief executive Valerio Battista.
"Our technicians are obviously already seeking to overcome these difficulties and resume work on this very complex project, the most technologically advanced one ever for a large-scale electrical interconnection project," added the CEO.
Problems with the wire, which will transport power south from mainly onshore wind farms in central and southern Scotland, were encountered during the last few days of April and will be investigated in coming months.
"Directors believe at present that there is no element to suggest that contract costs will exceed contract revenues. This does not preclude that, after further analysis and technical testing in progress, evidence might emerge that will lead to the recognition of additional losses in coming quarters," said Prysmian.
The company said the first quarter was otherwise marked by "the first signs of volumes recovery with positive organic sales growth" after a number of slow periods.
Sales in the first quarter were €1.58bn, up 3.2%, and net profits were €12m, down 79% from the year-ago period.
The £1bn Western Link project is being carried out by Prysmian and Siemens for National Grid and ScottishPower. It is due to be operational between Ayrshire and northwest England in 2015.
Image: Prysmian cables ready to roll (Prysmian)