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Muskrat Falls contractor Astaldi seeks more cash amid financial problems

Astaldi SpA, the Italian contractor with a C$1.83 billion contract to construct generation facilities at Nalcor Energy Corp.'s giant Muskrat Falls (Lower Churchill Project) hydroelectric project, said the type of creditor protection it has sought in its home country is not bankruptcy and that it is in negotiations with the Newfoundland and Labrador government-owned company over extra costs related to its work.

The Rome-headquartered construction company said its filing for "composition with creditors on a going concern basis" on Sept. 28 was not filing for bankruptcy. The process is aimed at "guaranteeing its customers the regular continuation of the works in all the construction sites where the group is operating, as well as at protecting the creditors and preserving the corporate assets," the company said in an Oct. 3 statement. Astaldi acknowledged that credit rating agencies, including S&P Global Ratings, had dropped the company's standing to "default" as future payments will be subject to court proceedings under Italian Solvency Law.

The company's Canadian unit is financially independent of its parent and not part of the proceeding in Italy, a company representative told the Canadian Broadcasting Corp. on Oct. 4. The government-owned broadcaster, known as the CBC, reported that the company is facing C$34 million in claims for unpaid bills related to the Muskrat Falls project. "The intent is to pay all outstanding amounts to creditors in due course," spokeswoman Giuliana Paoletti told the CBC in an email. "We are also in talks with our client to reach an agreement on extra cost recently incurred during the performance of our works."

Nalcor declined comment on negotiations with Astaldi. The company has seen the estimated cost of the 824-MW Muskrat Falls project surge to more than double original estimates. As work at the project has progressed, a government inquiry has been looking into how the project, which is nearly complete, has been managed and why costs have soared. Paoletti told the CBC that the company remains committed to completion of the project with "the cooperation and assistance" of the Nalcor subsidiary that oversees it. Astaldi's initial contract to construct the intake and powerhouse, spillway and transition dams, with an 824-MW generating station was valued at C$1.1 billion. Astaldi asked for and received an increase to C$1.83 billion two years ago, the CBC reported.

S&P Global Ratings lowered Astaldi's corporate credit rating and the rating on its senior unsecured notes to D from CCC- on Oct. 2. "S&P evaluates Astaldi's current situation in the same way as a default since the application of composition with creditors involves the suspension of the payments emerging from all the previous commitments as of the date of submission of the application for composition, unless as expressly authorized by the court, during the period related to the process of composition with creditors," the Astaldi statement said. "Therefore, the downgrading of the rating to D — default — is not to be understood as a group's bankruptcy state in any way."

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this story can be found here.