The fallout from RCR…

The postmortem of RCR Tomlinson entering administration iswell underway with media and commentators all contributing to the debate. Ultimately,
it appears that a combination of aggressive expansion, commercial
risk management and an increasing regulatory system all combined to result in
the company’s failure.

The history of gold-rushes is littered with tales of those
who risked it all to be the biggest and the best – the renewables gold-rush is
no different. RCR has been a well-regarded company with a strong management
team, stirring interest with its $78m 2013 acquisition of Norfolk Group
(including the ODG companies). More recently, it has aggressively targeted
solar projects, positioning itself as the market leader in the space.
Ultimately, it appears that this aggression has come at a cost.

Many will be asking “how did it come to this”? This is a
company that reported in February it has an order book of $1.2Bn plus preferred
contractor status of $2Bn. Just 3 months ago it tapped the market for $100m in
a capital raising – would $200m have made a difference?

Apart from some very smug (losing) Bid-Directors with “I told you so” on the tip of their tongues, there is a very real human cost to this situation as an estimated 3400 project engineers now seeking some certainty and stability on the eve of the Christmas period. 

The most obvious beneficiaries of the demise of RCR are its key competitors Downer and UGL, both are expected to be circling the half-finished projects and abandoned project pipeline now up for grabs. Neither is likely to be a ‘white knight’ if it means accepting the commercial contracts that exist. However, the implications and repercussions are far broader than picking up the scraps. If we are to accept that the commercial terms linking payments to grid connection are to blame for most of the company’s woes, this will both be a key negotiation point in future contracts but also strengthen the position of contractors in negotiating with project sponsors going forward.