January 4, 2008 -- Embattled Perth engineering group Clough has sold its 50 per cent stake in engineering firm Shedden Uhde, for $40 million as the company moves to axe non-core investments to bolster its balance book ahead of potential further fallout from the G1 arbitration process.

The sale marks the end of a seven-year strategic alliance between the two engineering groups, which was formed in 2001 when Shedden Uhde (a subsidiary of Germanys Uhde group) and Clough Engineering began to co-operate on the ill-fated $400 million Origin Energys BassGas onshore gas plant project.

Clough will pocket a profit of about $20 million on the transaction but will retain an engineering services co-operation agreement, which will outline the basis on which Clough and Shedden Uhde will continue to co-operate after the equity sale. Uhde is primarily focused on engineering for the downstream oil and gas industry.

Clough has been under a financial cloud for the past year with major shareholder South African group Murray & Roberts having to shore up its shaky financial position by underwriting a $40 million shareholder rights issue, offer a $25 million debt facility and a $160 million loan guarantee as well as injecting $5.6 million through a share placement.

Last month, Clough staged a failed bid to preserve an interim injunction that prevented peeved Indian client Oil & Natural Gas Corporation (ONGC) from claiming guarantee bonds worth $US21.5 million ($24.3 million). ONGC has also lodged a $1.2 billion counter-claim against Clough due to delays on the G1 project.

In submissions to the Federal Court of Australia, Clough said it had provided payment under the performance guarantees but, regardless of that provision, "Cloughs cash position and its financial position is far from healthy".

Source: The West Australian