25 March 2019

The Aveng Strabag Joint Venture (ASJV)
reported on Friday that it would appeal the dismissal of an urgent application,
lodged by the ASJV in February, seeking to prevent the South African National Roads Agency Limited(Sanral) from
making a call on the bonds relating to the Mtentu bridge contract,
terminated due to force majeure.

The ASJV launched a pre-emptive application in
the North Gauteng High Court for an
order preventing Sanral from making a call on the Mtentu bonds until its
dispute with the agency had been resolved.

Two bonds had been provided, including a
R245-million performance guarantee and a R82-million retention money guarantee.

On March 22, Judge Tintswalo
 dismissed the application with costs, but no
reasons were immediately provided.

“The ASJV has provisionally noted its intention to
appeal the order which will be supplemented when the reasoned judgment is made
available,” Aveng said in a statement to shareholders.

The ASJV reiterated its stance that it had a right
to terminate the contract after having been prevented from executing works on
the project site, in
the Eastern Cape, by “community
unrest, protest action and threats of violence against its personnel”.

In court papers, the ASJV outlined civil commotion
and unrest on the site from October 22, 2018, when it formally notified Sanral
of force majeure.

As at January 14, 2019, the force majeure event
had endured for a continuous 84-day period, at which point the ASJV was
entitled to terminate the contract. The contract termination took effect
February 6, 2019.

Sanral argued, however, that there was no force
 and that the ASJV’s termination, therefore, constituted a
repudiation or abandonment of the contract.

Aveng said in its statement that, should a demand
be made by Sanral, the ASJV would, if required, institute further proceedings
to interdict payment of the bonds by the guarantor.

“Aveng has engaged with and has satisfied its
financiers regarding the consequences of a call being made,” the company added,
highlighting a Sanral concession that any potential call relating to the
retention money guarantee be limited to a maximum of about R22.5-million.

The ASJV was comprehensively indemnified, Aveng
added, for all losses resulting from any claim Sanral might make with regard to
the performance security.

Sanral welcomed the High Court’s decision to
dismiss the ASJV application, arguing that the judgment confirmed its position
that the ASJV consortium was wrong to suspend construction of the Mtentu Bridge on
the N2 Wild
Coast Road.

Spokesperson Vusi Mona said: “ASJV’s
action has placed the entire project in
jeopardy. We acted in the best interest of the community, the region and the
country when we opposed ASJV’s application and our position has now been
vindicated by the judgment.”

The ASJV said it remained confident, however, that
its entitlement and decision to terminate the contract would be vindicated by
the facts.

To resolve the dispute over the contract, the ASJV
had commenced formal dispute proceedings against Sanral.

“The Mtentu contract requires the dispute to be referred to adjudication followed by High Court proceedings if the matter is not finally determined at adjudication stage,” Aveng explained.

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