Petrofac is teetering on the brink of collapse after its biggest client cancelled a multibillion-pound contract, scuppering a hard-fought restructuring plan.
The heavily indebted oil and energy services group said that TenneT, the electricity grid operator for the Netherlands and much of Germany, had terminated its multi-year contract to build offshore platforms and onshore converter stations for six offshore wind farms.
“Having carefully assessed the impact of TenneT’s decision, the board has determined that the restructuring, which had last week reached an advanced stage, is no longer deliverable in its current form,” Petrofac said.
The proposed restructuring, which had taken more than a year to thrash out, would have wiped out shareholders through a debt-for-equity swap but saved the company from collapse.
Petrofac, which employs about 8,000 people including about 2,000 in the UK, said it was “in close and constant dialogue with its key creditors and other stakeholders as it actively pursues alternative options for the group”.
Petrofac designs, constructs and operates infrastructure for oil and gas companies and other energy companies. It was listed in London in 2005 and grew to be a £6 billion company and a FTSE 100 constituent at its peak in 2012, before being hit by successive oil price crashes and a Serious Fraud Office inquiry. The fraud investigation deterred would-be customers and culminated in a conviction for failing to prevent bribery and the payment of $104 million in penalties in 2021.
Petrofac also struggled with construction delays caused by the pandemic. As a cashflow crunch worsened it was unable to pay interest on its debt and entered restructuring talks last year. Its valuation had dropped to just over £20 million by May this year when its shares were suspended as it was unable to publish accounts pending the restructuring.
The TenneT contract was awarded jointly to Petrofac and Hitachi in 2023 with a value of about €13 billion thought to be split fairly evenly between the two companies. At the time Petrofac said the agreement was “the largest in Petrofac’s history”.
TenneT said: “Since 2024 Petrofac has been working on a financial restructuring of its business. In the past period, TenneT has worked extensively with the Petrofac/Hitachi Energy consortium on mitigation measures. Since Petrofac has not been able to meet its contractual obligations, TenneT has exercised its right to partial termination of the contract related to the Petrofac scope.”
A Petrofac spokesman said: “We reject the grounds for TenneT’s termination of Petrofac’s role on the 2GW programme, which we believe is without basis.”