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MILAN, June 25 (Reuters) - Prysmian’s giant WesternLink project contains a penalty clause of up to 120 million euros ($140.28 million)for failing to meet contract conditions but the group is confident provisions already booked are more than enough, two sources close to the matter said.
Prysmian, the world’s biggest cable maker, said on Friday it expected 50 million euros ($58 million) in extra costs due to problems related to its WesternLink contract.
As a result it lowered its 2018 adjusted core profit guidance by the same amount.
Prysmian had previously booked provisions of 30 million euros on the contract.
But the group sees no reason to make any further provisions on top of the 80 million euros already set aside to cover project risks, said two sources who attended an analyst conference call with Prysmian executives on Monday.
“The company believes that provisions already taken are enough ... and effective costs could even be lower,” one of the sources said.
WesternLink is a high-voltage cable connection bringing solar energy from Scotland to England.
The project, which had run into technical problems in 2014, has a total value of around 800 million euros.
Shares in Prysmian were halted from 1051 GMT after falling more than 8 percent to 21.31 euros, their lowest since November 2016.
Last week French rival Nexans issued a profit warning, saying it expected a deterioration in its high-voltage activities in the second half of this year. ($1 = 0.8554 euros) (Reporting by Francesca Landini and Massimo Gaia, editing by Louise Heavens)