AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000302618
SHARE CODE: AEG
("Aveng" or "the Group")


UPDATE ON PERFORMANCE OF MCCONNELL DOWELL

In February 2023, Aveng reported the underperforming Batangas LNG terminal project (“BLNG project”) in the
Southeast Asia business unit of McConnell Dowell. The BLNG project is loss making and resulted in the
Southeast Asia business unit reporting a loss for the six months to 31 December 2022. The project commenced
during the COVID-19 global pandemic. It has been the subject of significant delay and disruption caused by the
pandemic, including related supply chain disruptions and the inability to mobilise people to the requisite locations
to efficiently execute work. International and domestic Australian border closures made travel impossible over
an extended period of the project’s life, to the Batangas site in the Philippines and other locations where
equipment was being manufactured. Later supply chain disruptions were further exacerbated by the Russia-
Ukraine war.
It is now evident that the BLNG project has suffered further delay and is expected to be completed later this
calendar year. Negotiations are continuing with the client to take into account the impact of COVID-19, the
Russia-Ukraine war and the resolution of certain contract claims, including claims for extension of time.
The BLNG project losses, together with work in progress, have been funded to date from internal resources.
Despite this and our continued efforts to ensure that the project is delivered safely to the appropriate level of
quality and in the shortest timeframe, the client, FGEN LNG Corporation has elected to call on the project
guarantees, without notification, in the amount of R528,9 million (AUD43 million). FGEN LNG Corporation
(“FGEN”) is a subsidiary of First Gen Corporation, which is jointly constructing, operating and maintaining the
Interim Offshore LNG Terminal at Batangas in the Philippines with Tokyo Gas Co Limited under a Joint
Cooperation Agreement. These guarantees have been settled by our bankers in Australia and in turn, McConnell
Dowell settled an amount of R123 million (AUD 10 million) to our Australian bankers with a further R123 million
(AUD10 million) expected to be settled by 30 June 2023. These same bankers are supportive and we are
currently agreeing repayment terms for the remaining balance. After partially settling this amount, McConnell
Dowell reported cash on hand of AUD168 million and together with these extended repayment terms, the
immediate impact on liquidity is minimised and our working capital requirements remain fully supported.
As at 22 March 2023, we received practical completion of the Offshore & Onshore Civil / Structural Facilities.
Final Electrical & Instrumentation and commissioning work is continuing in order to achieve Gas in Readiness
and final facility completion. McConnell Dowell continues to work with FGEN to seek the best outcome for both
parties, including minimising the time and cost to complete the project, resolving contractual claims and
recovering outstanding certifications due to us under the contract.
McConnell Dowell believes that it is prudent to provide for the anticipated additional costs associated with the
extended time to complete the project, together with an allowance for possible liquidated damages associated
with delayed completion, given that the client has not yet granted an extension of time. As a result, the loss
provision associated with the BLNG project has increased and McConnell Dowell is, therefore, expected to report
an operating loss for the year ending 30 June 2023.
The Australian and New Zealand & Pacific business units continue to perform well. McConnell Dowell has high
levels of work in hand, representing 92% of planned revenue for the next financial year which provides a strong
platform for continued profit generation in Australia, New Zealand & Pacific and Built Environs business units
and will support the recovery of McConnell Dowell in the near term following this disappointing setback.
Following from the above, it is expected that Aveng is likely to report an operating loss for the year ending 30
June 2023. The Aveng balance sheet and liquidity will be further supported by the disposal of Trident Steel which
remains on track for completion in the current financial year. This will result in all South African legacy debt being
extinguished whilst leaving surplus available cash.
Aveng remains confident in the management team at McConnell Dowell and their ability to build a sustainable,
profitable business.
The above information has not been reviewed or reported on by the company’s external auditors.


13 April 2023

Melrose Arch


JSE Sponsor
Investec Bank Limited

Itumeleng Lepere
Manager Investor Relations
Tel: 011 779 2800
Email: investor.relations@avenggroup.com