Analysts say possible losses on disputes in Copenhagen, Derby and Cork may make it difficult to split company.
Civil engineering claims totalling £100m are casting a shadow over Tarmac's demerger of its construction and materials businesses.

The claims, confirmed by client sources, are £50m on the A50 Derby Southern Bypass, £30m on the Copenhagen Metro and more than £20m on Cork's Lee Tunnel.

City analysts fear that any major losses on civils projects may make it difficult to split the company.

This is because the construction business might need more money than expected from the aggregates business to make the demerger viable. There is also a fear in the City that onerous bonds issued against the contracts will be left with the aggregates arm.

The contractor is next week due to give further details on its demerger.

Part of the territory

This week, Tarmac civil engineering managing director Roger Robinson said: "As far as I am concerned, when you are in the civils business you get into big claims situations, and these are perfectly within the scope of our trading.

"At Derby, the project is finished and we are negotiating over the final account. At Cork, they've got a very high-quality job and we are also talking to the client about the final account.

"In Copenhagen, the project is at an earlier stage and there are difficulties because of its complexity, but relationships are good. There are delays and we are discussing liability.

"I am personally involved with all these negotiations, but I am not going to speculate on figures. They are commercially confidential." In all three cases, clients have told Tarmac they will fight the contractor's claims.

Three key claims

The Highways Agency declined to comment on the A50, but client sources said Tarmac had been paid £109m, plus an extra £20m for its work. However, the firm is now asking for another £50m, and there is a chance the dispute could go to arbitration.

In Copenhagen, where Tarmac is lead partner in the international joint venture building the £330m city Metro, a new project director has recently joined. Peter Jeffries is the latest in a series of directors to take charge of the job, which is running nine months late.

Danish government sources say Tarmac is claiming extra money for unforeseen circumstances on the project. It started in October 1997 and is due to open in 2001.

The £67m Cork Lee Tunnel, which Tarmac has built in a joint venture with Irish firm PJ Walls, is due to open in May. It started under a design-and-construct contract that was priced for 40 months' work in January 1995. Client sources say Tarmac now wants an extra £20m for the project.

Cork Corporation liaison engineer Finbarr Long declined to discuss figures, but said: "There are some contractual issues to be resolved.

The contractor's programme was ambitious at the very beginning.

"The project hasn't gone as well as they would have liked, or as well as we would have liked." Analysts believe giant Swedish contractor Skanska may be the answer to Tarmac's problems. It could step in to buy the firm's construction business, taking over the liabilities that would otherwise be left with the aggregates arm.

Details of a demerger timetable are expected to be given next week, with September seen as the most likely date for a final split.

The aggregates business is expected to keep the Tarmac name, with a new title given to the construction business.