John Laing is preparing to exit the 28 MW East Rockingham energy-from-waste (EfW) plant as legal disputes with the builder come to a head, three sources said.

Australia’s second large-scale thermal EfW project, located in Perth’s southern industrial suburbs, has suffered from cost overruns and delays due to the pandemic, like the earlier Kwinana Waste to Energy project, which is now being commissioned.

John Laing has been considering a sale of its 40% stake in the AUD 511m (USD 336m) East Rockingham project since last year, sources told Infralogic early this year, but legal battles delayed those plans.

The project company, East Rockingham RRF Project Co, has sued builder Acciona twice in the past 18 months alleging breach of contract – once for locking out the project owners from the site – and more recently for failing to renew AUD 38m in bank guarantees earlier this year.

The first case was closed by mutual agreement early last month, according to court documents.

In the second case, Acciona responded by alleging that the project company was insolvent and would be unable to pay the balance of the contract by the rescheduled 30 December completion date, a 12 July Federal Court judgement on the project company’s action over the bank guarantees showed.

Acciona claimed it had a right to cancel the contract as a result of the alleged insolvency.

The project company disputed Acciona’s claims and the court agreed, judging that Acciona was in breach of contract and should renew the bank guarantees.

In addition, it said a bank account should be set up in Acciona’s and the project company’s name to disburse funds according to court orders.

Justice Michael Feutrill noted in the judgement there continued to be a “significant dispute about extensions of time, responsibility for delays and damages flowing from delays in completion” of the project. “The subject matter of these proceedings is, in the scheme of things, likely to be a relatively minor skirmish,” he said in the judgement.

The court was taking further submissions last week, including from bank guarantor National Australia Bank on how it will put the court’s orders into effect, from the project company and from Acciona. An interlocutory and case management hearing is set for this Friday, 16 August.

About AUD 356m of debt on the project is due to be refinanced in December, according to Infralogic data. While commissioning should have started by then, the project is unlikely to be operating until about 1Q or 2Q of next year, the sources said. One of the sources said it should be possible to amend and extend the debt.

On the Kwinana facility, on which Acciona is also the builder, the contractor ended up taking over the plant by acquiring both debt and equity after the project company defaulted on its debt, which was due in October last year.

Acton Advisory is a financial adviser on the project, the sources and two additional sources said, but were divided over whether Acton is working for the project company, or for John Laing directly. FTI Consulting is advising the lenders, they added.

The other investors are Masdar allied with Tribe Infrastructure. The technology provider is Hitachi Zosen while Veolia is the operator.

Spokespeople and officials at John Laing, Tribe, Masdar, Acton and FTI either declined to comment or did not respond to requests for comment.