Aveng - QCLNG arbitration award and cautionary


In Aveng's Interim Results announcement of 20 February 2017, the Group highlighted the expected resolution of the long-outstanding QCLNG matter and the associated balance sheet risk in its outlook. Furthermore, in the SENS announcement of 17 May 2017, Aveng reported that it was re-evaluating certain long-outstanding uncertified revenue. Aveng wishes to provide the following update:

*The resolution of disputed claims pertaining to the Queensland Curtis Liquefied Natural Gas (“QCLNG”) pipeline project, which was completed in 2014 by a joint venture that included McConnell Dowell (a subsidiary of Aveng), and the financial effect thereof;

*Termination of the Aveng Steel disposal process;

*The Aveng Grinaker-LTA empowerment transaction; and

*Renewal and withdrawal of cautionary announcements.

QCLNG award

McConnell Dowell (a 100% subsidiary of Aveng), together with its joint venture partner, was responsible for the execution of the QCLNG project in Australia over a four-year period that started in 2010. Following various contractual disputes and a protracted arbitration process, the QCLNG award provides that McConnell Dowell is entitled to receive compensation in the amount of AUD50.5 million (R508 million) (including interest), being 50% of the total award to the joint venture.

Salient features of the award include:

*AUD50.5 million (R508 million) to be settled forthwith;

* Each party is accountable for its legal expenses; adequate provision has been made for McConnell Dowell's legal fees; and

*The QCLNG award is binding and final, with only very limited appeal rights.

Given that the QCLNG award is less than the amount recognised within uncertified revenue and claims, the Group will record a non-cash write-down of AUD234 million (R2,4 billion) in relation to the QCLNG award in its reported results for the year ended 30 June 2017. This charge will reduce both earnings per share and headline earnings per share each by 595 cents.

Steel disposal update

Shareholders are referred to the cautionary announcement dated 3 July 2017, in relation to the sale of Aveng Trident Steel by Aveng Africa (Pty) Ltd. Shareholders are advised that negotiations relating to the disposal of Aveng Trident Steel have been terminated due to the inability to reach agreement on an acceptable value. No other negotiations are currently in progress. Over recent months, the Company has continued with various interventions that have resulted in the business being able to generate positive cash flow and reach an EBITDA break-even position for the year, notwithstanding challenging market conditions. With the termination of negotiations, it is management's intention to implement further optimisation initiatives within Aveng Trident Steel. This includes capitalising on its leading position within the automotive sector.

Aveng Grinaker- LTA Empowerment transaction update

Following overwhelming shareholder support at the extraordinary meeting held on 29 March 2017, Aveng is pleased to report that the Aveng Grinaker-LTA empowerment transaction, which will result in the sale of 51% beneficial interest in the business to Kutana Construction, has advanced. Aveng has received unconditional approval from both the South African Competition Commission and competition authorities in Namibia and Botswana. Approval is awaited from the Swaziland authorities.

Renewal of cautionary- uncertified revenue

The cautionary announcement dated 3 July 2017 is hereby renewed and shareholders are advised to exercise caution in respect of this matter when dealing in Aveng securities.

Withdrawal of cautionary- steel disposal

The cautionary announcement dated 3 July 2017 is hereby withdrawn and shareholders are no longer required to exercise caution in respect of this matter when dealing in Aveng securities.

Trading statement

In terms of paragraph 3.4 (b) of the JSE Limited Listings Requirements, a listed company is required to publish a trading statement as soon as a reasonable degree of certainty exists that the financial results for the upcoming reporting period will differ by more than 20% from those of the previous corresponding period.

The Company released a trading statement on 17 May 2017 stating that the Group expects basic earnings per share (“EPS”) and headline earnings per share (“HEPS”) for the year ended 30 June 2017 to be substantially more than 20% lower than the basic EPS loss of (25.4) cents and basic HEPS loss of (75.2) cents reported for the previous comparative period.

Shareholders are advised that a further trading statement will be released as soon as there is a reasonable degree of certainty as to the likely range by which the Group's EPS and HEPS are expected to decrease. The above information has not been reviewed or reported on by the Company's external auditors.