Aecon, Coastal GasLink resolve construction dispute

Officials called it one of the most technically and financially challenging projects in Aecon’s history

Key Takeaways:

  • Aecon and Coastal GasLink settled their dispute over the construction of sections 3 and 4 of the Coastal GasLink pipeline. 
  • Officials noted that the settlement avoids the costs and uncertainties of arbitration. It also doesn’t affect Aecon’s cash flow but does result in a $127 million accounting charge. 
  • This charge reflects the additional costs Aecon incurred building those sections of the pipeline.Aecon expects additional charges of $110 million related to three other large construction projects. 
  • More details of the settlement will be released later this month as part of Aecon’s second quarter 2024 financial results.

The Whole Story:

Aecon Group and Coastal GasLink have reached a settlement over a pipeline construction dispute. 

SA Energy Group, a general partnership of Aecon Construction Group Inc. and Robert B. Somerville Co. Ltd., and Coastal GasLink Pipeline Limited Partnership, by its general partner Coastal GasLink Pipeline Ltd., have reached an amicable and mutually agreeable global settlement to resolve their dispute fully and finally over the construction of Sections 3 and 4 of the Coastal GasLink Pipeline Project in B.C.

“The Coastal GasLink settlement allows Aecon to close the chapter on one of the most technically and financially challenging projects in its history, and represents continued progress in reducing the uncertainty associated with Aecon’s four legacy projects,” said Jean-Louis Servranckx, president and chief executive officer, Aecon Group Inc.  “We are proud of our team and thank them for delivering this project safely and with incredible resiliency through to completion.”

Aecon officials stated that the settlement agreement is not an admission of liability by either party and the parties have mutually released their respective claims in the arbitration, thereby avoiding the expense, burden and uncertainty associated with arbitration.

The terms of the settlement agreement are expected to result in no cash impacts to Aecon. From an accounting perspective, Aecon expects an approximately $127 million, non-recurring charge relating to the construction of Sections 3 and 4 of the Coastal GasLink Pipeline Project to be reflected in Aecon’s financial results for the second quarter of 2024. 

Further, as part of its ongoing review of critical accounting estimates in respect of the remaining three large fixed price legacy projects now nearing completion and being performed by joint ventures in which Aecon is a participant, Aecon currently anticipates additional charges of approximately $110 million in aggregate to be reflected in its second quarter 2024 results. 

Servranckx added the additional impacts from the remaining legacy projects anticipated in the second quarter reflect the ongoing progress towards driving these remaining legacy projects to completion.

Further details respecting the settlement and the review of the remaining three large fixed price legacy projects noted above will be provided as part of Aecon’s second quarter 2024 financial results to be released on Wednesday, July 24 after market close.

The Coastal GasLink Project is a 670-kilometre pipeline designed to transport natural gas from northeastern British Columbia to the LNG Canada facility in Kitimat, B.C. Work began in 2012 and crews achieved mechanical completion in early November of 2023, ahead of its year-end. LNG Canada is entering its startup phase and its owners, a consortium of international fossil fuel companies, expect to start shipping in 2025.


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