Interserve faces FCA probe
The Financial Conduct Authority (FCA) has started an investigation into the way in which Interserve handled inside information and market disclosures related to its energy from waste business.
In an update to the City this morning Interserve, which last month unveiled a £244m loss, confirmed that it was facing the investigation from the FCA’s enforcement division and promised to “co-operate fully”.
It said it would update the market on the outcome of the probe “in due course”.
Interserve said the FCA investigation is looking at its “market disclosures in relation to its exited energy from waste business during the period from 15 July 2016 to 20 February 2017”.
On 6 May 2016, Interserve announced in a trading update that due to a "further deterioration" in its Glasgow Recycling and Renewable Energy project, relating to the design, procurement and installation of a gasification plant, combined with supply chain challenges that led to cost overruns and delays, it anticipated a £70m exceptional contract provision.
On 14 November 2016, the company said progress on contracts within its exited energy from waste business were “in line with previous guidance”, despite the fact that risks remained.
It added: “The cash profile of work on these contracts has changed during the last few months, as we have sought to minimise overall risks by accelerating certain supply chain payments. This is expected to be offset by working capital management throughout the rest of the Group to maintain year end net debt at the previously guided levels of £300m-£320m.”
The following day, it announced that it had been served notice of termination on the project.
But in a trading update on 20 February 2017, the company said it faced a lengthy period of litigation in relation to its Glasgow project and that in light of the development and continuing uncertainty in relation to the final conclusion of its energy from waste contracts, it had decided the provision of £70m announced in May 2016 was "no longer adequate" and increased the exceptional provision for exiting the energy from waste market and associated contracts to £160m.