Embattled Leighton Bags $766 Million Rail Project

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Friday, October 11th, 2013
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Embattled construction giant Leighton Holdings has delivered some positive news in a week of turmoil after one of its subsidiaries bagged a contract to build a rail loop for a controversial coal mine project in New South Wales.

Embattled construction giant Leighton Holdings has delivered some positive news in a week of turmoil after one of its subsidiaries bagged a contract to build a rail loop for a controversial coal mine project in New South Wales.

Whitehaven Coal yesterday announced it had engaged Leighton Contractors Pty Ltd to build the rail loop for the Maules Creek Coal Project in the Gunnedah Basin approximately 360 kilometers north-west of Newcastle.

The loop with connect the mine – an open cut development which is expected to produce up to 13 megatons (MT) of thermal and coking coal each year over a 30 year lifespan – to the Mungindi Railway Line sixteen kilometers away, and will allow up to 12.4 MT of product to be transported to the Port of Newcastle annually.

The win comes at an important time for Leighton, which has been besieged over the past week over media reports of a culture which rewarded widespread corruption or incompetence.

Yesterday, former Leighton Chief Financial Officer Scott Charlton weighed in on the debate, questioning the governance model revolving around the company and its relationship with controlling shareholder Hochtief, the full concern about which was thrown into the spotlight earlier this year when independent board members staged a walkout alleging interference in Leighton’s governance affairs.

“It is an interesting corporate governance model with a major shareholder who says they are not really controlling but they are controlling” Hochtief was quoted in The Australian as saying yesterday at the Transurban annual general meeting where he now serves as Chief Executive.

“You could go look at management textbooks and they would suggest that is probably not the best corporate governance model.”

The contract award also comes amid ongoing controversy about the Maules Creek Project itself, which environmental groups claim will destroy forests as well as wildlife habitats and will negatively impact surrounding water resources

Last month, the Northern Inland Council for the Environment filed an application in the Federal Court to overturn an approval of the mine granted by former federal environment minister Tony Burke earlier this year, claiming the decision to grant the application had been made in haste following the leaking of sensitive documents and was made on the basis of potentially false or misleading information.

In a statement, Whitehaven CEO described the awarding of the contract as a ‘very important milestone’ for the project, saying the rail loop was a key part of the mine infrastructure and had the longest lead time item for the development.

The mine is expected to begin production in the first quarter of 2015, and will involve around 340 full-time equivalent employees and contractors during construction.

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