Contractors are mulling legal action against district cooling developer Tabreed for non-payment as the Dubai-listed firm grapples with liquidity issues due to the construction slowdown.
Tabreed, in which Abu Dhabi's state-run investment firm Mubadala has a stake, has withheld payments to some of its leading contractors, seeking discounts for some completed projects.
Some leading contractors working for Tabreed said that the firm has not paid them since the financial crisis began and has even written to them that future payments will be contingent on reaching agreements on the discounts.
"They are looking for backdated discounts on projects built and handed over. This is unprecedented," said an executive of an Abu Dhabi-based contracting firm asking not to be named due to confidentiality reasons.
"We are ready to renegotiate pricing on ongoing or future projects but Tabreed is not supportive. It is going to a dead end and the solution now is legal recourse," he said, adding the firm is owed over 100 million dirhams.
Tabreed, the largest district cooling firm in the Middle East and which is also called National Central Cooling Co., is currently undergoing restructuring after it replaced its senior management.
A senior manager of another contracting firm said he was willing to offer discounts subject to a clear payment plan. "But Tabreed is non-committal and their approach seems threatening," he said, adding the discounts sought range from 10 to over 50 million dirhams.
Tabreed's CEO Sujit Parhar says that the company faced liquidity issues and weaker than expected profitability in the current economic climate and is working towards a solution.
"With 17 plants under construction, we are constantly in discussions with our contractors with regards to changes in the market conditions pertaining to construction and equipment costs," he said in a statement to news agency Reuters.
"While we cannot comment on the terms of individual contractor relationships, I can assure you that Tabreed is paying and will continue to pay its contractors," he said.
Tabreed, the largest district cooling firm in the Middle East has 34 plants across the UAE with total capacity of 440,000 tonnes of refrigeration and plans to commission 16 plants by end of this year, Parhar said in July.
Tabreed secured about 1.1 billion dirhams bank financing this year despite tight credit markets.
Tabreed had planned capacity expansion last year before the crisis as the construction boom saw several mega projects including the Dubai metro taking shape in the UAE.
But with the financial downturn, construction projects were stalled or delayed and commodity prices fell forcing Tabreed to rework payments.
"It seems they are readjusting contracting prices because of falling commodity prices," said an Abu Dhabi-based analyst that tracks Tabreed.
"Given the current market situation, contractors have lost their negotiating powers and definitely are under pressure. The choice is to renegotiate or take legal action," he said.
Last month, Standard and Poor's lowered its long-term corporate credit rating on Tabreed to `BB-` from `BB' due to liquidity concerns.
Contractors are mulling legal action against district cooling developer Tabreed for non-payment as the Dubai-listed firm grapples with liquidity issues due to the construction slowdown.
Tabreed, in which Abu Dhabi's state-run investment firm Mubadala has a stake, has withheld payments to some of its leading contractors, seeking discounts for some completed projects.
Some leading contractors working for Tabreed said that the firm has not paid them since the financial crisis began and has even written to them that future payments will be contingent on reaching agreements on the discounts.
"They are looking for backdated discounts on projects built and handed over. This is unprecedented," said an executive of an Abu Dhabi-based contracting firm asking not to be named due to confidentiality reasons.
"We are ready to renegotiate pricing on ongoing or future projects but Tabreed is not supportive. It is going to a dead end and the solution now is legal recourse," he said, adding the firm is owed over 100 million dirhams.
Tabreed, the largest district cooling firm in the Middle East and which is also called National Central Cooling Co., is currently undergoing restructuring after it replaced its senior management.
A senior manager of another contracting firm said he was willing to offer discounts subject to a clear payment plan. "But Tabreed is non-committal and their approach seems threatening," he said, adding the discounts sought range from 10 to over 50 million dirhams.
Tabreed's CEO Sujit Parhar says that the company faced liquidity issues and weaker than expected profitability in the current economic climate and is working towards a solution.
"With 17 plants under construction, we are constantly in discussions with our contractors with regards to changes in the market conditions pertaining to construction and equipment costs," he said in a statement to news agency Reuters.
"While we cannot comment on the terms of individual contractor relationships, I can assure you that Tabreed is paying and will continue to pay its contractors," he said.
Tabreed, the largest district cooling firm in the Middle East has 34 plants across the UAE with total capacity of 440,000 tonnes of refrigeration and plans to commission 16 plants by end of this year, Parhar said in July.
Tabreed secured about 1.1 billion dirhams bank financing this year despite tight credit markets.
Tabreed had planned capacity expansion last year before the crisis as the construction boom saw several mega projects including the Dubai metro taking shape in the UAE.
But with the financial downturn, construction projects were stalled or delayed and commodity prices fell forcing Tabreed to rework payments.
"It seems they are readjusting contracting prices because of falling commodity prices," said an Abu Dhabi-based analyst that tracks Tabreed.
"Given the current market situation, contractors have lost their negotiating powers and definitely are under pressure. The choice is to renegotiate or take legal action," he said.
Last month, Standard and Poor's lowered its long-term corporate credit rating on Tabreed to `BB-` from `BB' due to liquidity concerns.
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