Galfar to take arbitration route; share trading to resume on Wednesday

10/06/2015 01:14 AST

Share trading of Galfar Engineering and Contracting Company, Oman's biggest contracting firm, will resume on the Muscat bourse on Wednesday even as the management is trying to take arbitration route to recover OMR45 million fund (which is recognised as revenues in books) from Muscat Municipality.

The Muscat Municipality has offered only OMR29.9 million as final settlement, against OMR47.4 million receivables in the company's books.

This is against the company's original claim of OMR100 million for apparent additional cost incurred for building Muscat Expressway and Central Corridor projects for Muscat Municipality few years ago.

Share trading of Galfar was suspended for the last seven days by the stock market regulator due to lack of full details on the company's compensation offer from Muscat Municipality for these two projects and the amount recognised in books.

Galfar said that the company's receivables in the books are OMR47.4 million as of March 2015, which excludes retention withheld of OMR7.1 million. The proposed final settlement of Muscat Municipality, which was rejected by Galfar board last week, is less by OMR16 million than the income recognised.

According to Galfar, the company's board decided not to accept the offer made by Muscat Municipality in the interest of its shareholders. If Galfar accepts the offer, it has to be recognised in the income statement as a loss. Hatim Shanfari, chairman of Galfar's Audit Committee, said that the market regulator has agreed for resuming share trading on Wednesday, after the media briefing on Tuesday.

Galfar hurriedly conducted the media briefing, after market regulator stipulated that the company has to disclose all information related to their claims on these two major projects, which were built for Muscat Municipality.

Shanfari also noted that the arbitration has to be carried out with the consent of its client Muscat Municipality. A settlement by way of an arbitration may take time, probably almost a year.

Galfar chief executive officer Dr. Hans Erlings said the original contract value of Muscat Expressway project, which was awarded in June 2005, was OMR131.7 million, while Central Corridor project was awarded at a value of OMR10.99 million in February 2006.

The Muscat Expressway project was completed in different phases between January, 2009 and April, 2012, while Central Corridor was ready in January, 2008. The expressway project was subject to a number of substantial variations, redesigning and additional works, according to the company.

The Central Corridor project saw significant changes between the design concept in the contract and the final design, which caused additional time and cost.

Accoring to the management, its current projects are on track and it is not facing similar kind of issues in the Batinah Expressway project or in any other projects. Galfar's order book position stands at OMR650 million now.

Times of Oman