The next generation of Sydney commuter trains will not start operating until late May or early June after the company assembling them unveiled a catalogue of production delays today.
Downer EDI told the sharemarket this morning it would take a hit of $250 million on the Waratah train contract, which comes on top of a $190 million provision booked in June last year.
Downer shares slumped as much as 25 per cent on the news to a low of $3.40 - erasing about $380 million in market value - and last traded down 21 per cent at $3.58.
BusinessDay reported this week that Downer’s finances were also likely to be affected by the outcome of talks with credit rating agency Fitch over a possible downgrade.
As recently as December 8, Downer said it should be able to hand the first Waratah trains to RailCorp by late December or early January.
But Downer said this morning it had found bugs in the train’s electronics, it needed to recruit more senior staff with experience in train-building and it would have to make large changes to its production schedule.
“Downer is continuing to work closely with RailCorp to deliver 78 high quality, safe and reliable trains for the people of NSW,” the company’s chief executive, Grant Fenn, said.
“While the train build is difficult and challenging, the measures we have outlined today will ensure the program can be delivered in the shortest possible time,’’ Mr Fenn said.
Downer is assembling the train as the lead contractor for a public-private partnership, Reliance Rail.
Downer’s latest deadline for delivering the trains to RailCorp will put it 14 months behind schedule.
The company said this morning that its initial timetable for delivering the trains had been too aggressive.
A review of the production process, completed on Monday, ‘‘highlighted the need for more extensive changes to engineering and production processes in order to facilitate the high-volume, assembly-line build that is required for this large and complex project’’, the company said.
It has appointed a former RailCorp consultant, Ross Spicer, to oversee the project.
