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Unresolved Claims at S. African Power Plants Cuts Aveng Profit

Nov. 3 (Bloomberg) -- Aveng Ltd., South Africa’s largest construction company by market value, said unresolved claims at two of the country’s power plants are resulting in “bleeding” of the company’s cash flow and profitability.

Outstanding claims and continuing discussions over the steel fabrication contracts for Medupi and Kusile power plants means the Johannesburg-based company is incurring costs without generating income, Financial Director Kobus Verster said in an interview today. Aveng is “hoping to finish discussions this financial year.”

Eskom Holdings SOC Ltd., South Africa’s state-run power utility, awarded a 2.9 billion-rand ($367 million) contract in 2008 to build the Medupi plant to a group including Aveng and Murray & Roberts Holdings. Eskom, which supplies almost all of South Africa’s power, on Oct. 11 said it’s concerned that it won’t be able to start up the first unit of its 4,800 megawatt Medupi coal power plant in the last quarter of 2012 and will release an estimate of the delay on Nov. 23.

Separately, Aveng said in a statement today that its two-year order book rose 18 percent from June to 43.5 billion rand at Sept. 30. A weaker rand to the dollar will boost South African commodity producers, which will raise earnings for Moolmans, Aveng’s contract mining unit.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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