Sydney-based shell company led by construction boss Fletcher aims to buy out stakes.
Kvaerner Construction and engineering supremo John Fletcher is leading a group trying to buy the beleaguered conglomerate’s corporate development arm, including its portfolio of private finance initiative equity stakes.

Acting through Pacific Energy, a Sydney-based shell company he chairs and in which he has a 3.9% interest, Fletcher is in talks to buy Kvaerner Corporate Development for A$100m (£42.5m).

It is understood that Pacific is backed by Australian bank Macquarie (7 May, page 9) and is also working with French contractor Bouygues.

There was immediate speculation that Bouygues would take over Kvaerner’s contracting role on some of the 15 projects where the firm’s equity stake is up for sale. These include a £300m headquarters for the Ministry of Defence, a £100m PFI hospital in Greenwich, south-east London, and the Midland Expressway.

Last week, Building revealed industry concern that Kvaerner was to sell its stakes in projects it has yet to build. These fears are twofold: first, that Kvaerner Construction will lose some interest in building the projects if it sells its stakes, and, second, that Pacific will sell them on, making the PFI stakeholder concept a dead letter.

Industry sources also believe that it may be unwise for a small company such as Pacific to control stakes in such sensitive projects. Pacific made a pre-tax profit of A$285 679 (£121 565) in 1998 and a pre-tax loss before abnormal items of A$2.96m (£1.26m) in the 18 months before that.

It does, however, count Kvaerner itself and some large Australian institutions as backers, but it is unclear whether Kvaerner will retain its stake in the company. In this context, there was speculation that the Kvaerner Corporate Development portfolio will be broken up to realise profit from assets such as the Dartford Crossing.

This could lead to stakes in projects – such as the £300m MOD redevelopment – being constantly traded on, possibly at the expense of their success.

Fletcher was abroad and unavailable for comment this week, and Kvaerner declined to comment on the deal.

But industry sources said a statement released by Pacific in Sydney last week referred to its acquisition of Kvaerner Corporate Development. It was the third in a series made since February referring to an undisclosed vendor.

The 6 May statement to the Sydney stock exchange said: “Pacific Energy Limited has made a number of announcements since February regarding an opportunity to acquire a worldwide infrastructure development business.

“Pacific announces that it has entered in a new Exclusivity and Confidentiality Agreement with the vendor. The agreement provides Pacific Energy with exclusive rights until 26 May 1999 to conduct due diligence and finalise a sale and purchase agreement with the vendor.

“The Agreement is essentially an extension of exclusivity periods previously announced, except for the payment of a fee of A$1m (£425 531) to the vendor for granting an exclusivity period.” It continued: “The company expects to make a further announcement regarding this transaction around the end of May.” In earlier statements, Pacific said the deal was worth A$100m (£42.5m) and that discussions with potential investors were well advanced.

When asked if Kvaerner Corporate Development was the subject of the deal, Matthew Fisk, a Sydney-based associate of Fletcher working on the transaction, said: “That is not a rumour I can comment on.

“Realistically, beyond Australian stock exchange announcements there’s not much more we can say. Pacific Energy’s financiers and other partners are bound by the same rules.

“People are really very sensitive about this. Our aim is to trigger an announcement once the deal is completed.” Asked to describe Pacific, he said: “The company was listed in early 1987 and was a gold mining company. But it fell on hard times and it’s fair to say there isn’t a lot to the company other than the board driving it.

“But it also now owns a couple of hydroelectric power stations in Victoria and is a small vehicle for making major investments. It would be fair to say that Pacific Energy’s goal is to grow itself into a major infrastructure development company.”