Shares of Aecon Group were down more than 17% Tuesday following news that the infrastructure company has reached a settlement in its ongoing dispute with Coastal GasLink.
Aecon – which was one of the main contractors on the Coastal GasLink pipeline project – announced after markets closed Friday that it expects to take a one-time charge of $127 million related to the construction of two sections of the pipeline.
“The Coastal GasLink settlement allows Aecon to close the chapter on one of the most technically and financially challenging projects in its history,” said CEO Jean-Louis Servranckx in a statement. “We are proud of our team and thank them for delivering this project safely and with incredible resilience to completion.”
The 670-kilometre Coastal GasLink pipeline, which runs from Dawson Creek, B.C., to the LNG processing and export facility currently under construction in Kitimat, was completed last fall after five years of construction.
TC Energy, the company behind the project, had previously said it was seeking potential recoveries from contractors after the project’s budget ballooned from an initial $6.2 billion to $11.2 billion and then again to $14.5 billion during construction.
At the time, TC Energy attributed these cost increases to a variety of factors, including labour costs, a shortage of skilled labour and “underperforming contractors.” The pipeline project also faced challenges related to drought conditions and erosion and sediment control.
TC Energy did not respond to a request for comment on the settlement agreement.
Aecon said Friday that the settlement agreement with Coastal GasLink is not expected to result in a cash impact. Aecon added that the settlement does not constitute an admission of liability by either party.
The settlement was “amicable” and “mutually acceptable,” Aecon said, and both parties waived their respective claims so that the dispute could be considered “fully and finally resolved.”
Aecon also said Friday that it expects additional costs of about $110 million related to three other major projects it is currently involved in and that are nearing completion.
The company said it will provide details as part of its second-quarter financial results to be released on July 24.