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Balfour Beatty closes wind power deal



Balfour Beatty has completed its acquisition of a £352m Welsh offshore transmission project, just one day after its new chief executive outlined early turnround efforts for the troubled UK construction group to boost profitability.

Leo Quinn said late on Tuesday that the British infrastructure group would strip out layers from its leadership team and merge some operations and squeeze more savings from suppliers as part of its efforts to transform the business after several profit warnings.

"The group's recent trading makes it imperative to gain early momentum in our transformation plans," said Mr Quinn, adding: "While further challenges remain, there are clear opportunities to achieve improvements in cash generation and profitability in the near term."

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The transformation strategy -- dubbed Build to Last -- comes just weeks after Balfour was forced to take a £70m hit to the profits of its UK construction business following a review of its books by the accountancy firm KPMG.

Six profit warnings in two years, coupled with boardroom turmoil and managerial changes, have weighed heavily on the UK's biggest listed construction group by sales, with shares losing a quarter of their value in the past 12 months.

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Mr Quinn, who joined the group in January from defence research company Qinetiq, said the programme will focus on four areas, including the strengthening of financial control and the introduction of a more disciplined approach to project bidding and risk review processes.

Balfour said on Wednesday that it had entered into joint ownership of the Gwynt y Môr project with infrastructure investor Equitix. The deal, in which Balfour has invested £28m of equity, representing 60 per cent of the equity required, will be its third sea-to-land power system.

The Gwynt y Môr project is a high-voltage electricity transmission system connecting a wind farm off the North Wales coastline to the onshore transmission grid. The £2bn wind farm is expected to be able to generate enough electricity for around 400,000 homes each year.

The assets acquired by Balfour Beatty and Equitix include three substations -- two offshore and one onshore -- and more than 80km of subsea cables. Balfour Beatty's services division will be responsible for the assets' operations and maintenance under a licence granted by Ofgem with a 20-year revenue stream.

"The offshore transmission market has a future pipeline to 2020 of up to £10bn, which represents a sizeable growth opportunity for our investments business," said Mr Quinn.

He said the transformation programme would also focus on employee retention and subcontractors by increased training investment, and the prioritisation of safety.

Balfour Beatty has already begun implementing the programme in both the US and UK. Further details of the programme will be outlined when it announces its preliminary financial results on March 26.

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