Stanwell re-signs Downer with $600m Meandu contract

Downer EDI has won a five-year contract for mining services at the Meandu coal mine in Queensland valued at around $600 million.

Under the contract, Downer will complete full mining services, including operating the coal handling and preparation plant at the mine, which is owned by Stanwell Corporation in the South Burnett region.

This contract is an extension of Downer’s current operations at the mine, which started in 2013 and will expire in June. The new contract will commence in July.

Stanwell chief executive Richard Van Breda said between now and July, the two companies would work together to build on lessons learned between them from the past seven and a half years.

“Downer’s reappointment supports the long-term future of Meandu mine and the Tarong power stations,” Van Breda said.

“Over the next five years, significant changes will occur within the national electricity market and it is important we are in a position to respond to these changes.

“The cost of coal is a significant portion to the total cost of running the Tarong power stations, it is therefore important for us to undertake these market reviews to ensure we are operating as cost-effectively as possible.

“The transformation process will be a critical step in effecting real change in the way we do business together.”

Downer chief executive Grant Fenn was also pleased to be continuing the long standing relationship between the two companies.

“Downer has worked closely with Stanwell since 2013 and we look forward to continuing to provide safe and productive services at Meandu mine,” Fenn said.

The contract renewal comes as Downer has revised its net profit after tax and amortisation (NPATA) down to $300 million for the 2020 financial year.

This reflects delayed project commencement in mining, project underperformance, lower revenue and unbudgeted restructure costs in engineering, construction and maintenance (EC&M).

Following customer advice, Downer has adjusted its start dates for two mining projects, impacting its forecast pre-tax earnings of $12 million in the second half of the financial year.

Despite this, the mining sector is still a steady earner for Downer, with its expected earnings before interest, taxes, depreciation and amortisation (EBITDA) set at between $90 and $100 million for the 2020 financial year.

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