Australia engineering firm UGL finalises sale of DTZ property arm

Australian engineering firm UGL ended one fraught chapter and started another yesterday as it finalised the years-long US$1.1 billion sale of its DTZ property arm and revealed delays and cost overruns at a power station project.

UGL's shares fell up to 13 per cent after it said construction of the power station for a liquefied natural gas plant in northern Australia was delayed by project changes and "events in the design and procurement phase", leading to a cost provision of US$170 million for the project.

The Sydney-listed company, which is in a joint venture with General Electric and US engineering firm CH2M HILL for the project, could not yet reliably estimate the impact on its own costs, it added.

The setback will increase the challenge UGL faces to win back confidence just as it closes off the long-awaited sale of its property arm to US private equity giant TPG Capital Management.

The company put DTZ on the market in early 2013 in a bid to cut debt and focus on its core engineering business. In June it said it would sell the unit to US private equity giant TPG in a deal then expected to settle in September.

But the deal came under scrutiny after media revealed Hong Kong Chief Executive Leung Chun-ying received more than US$6.4 million in payments from UGL relating to its purchase of DTZ, where Leung had worked.