Pipeline contractor Aecon Group Inc. shares fell sharply on Tuesday, July 2, after the infrastructure company announced a settlement in its long-running dispute with Coastal GasLink over construction.

Aecon, a former contractor on the pipeline project, disclosed on Friday that it would record a non-cash charge of $127 million related to the construction of two pipeline sections.

“The Coastal GasLink settlement allows Aecon to close the chapter on one of the most technically and financially challenging projects in its history," Aecon CEO Jean-Louis Servranckx said in a release, commending his company’s team for “delivering this project safely and with incredible resiliency” despite challenges. 

The 670-kilometer Coastal GasLink pipeline, stretching from Dawson Creek, British Columbia, to Kitimat's LNG processing facility, finished construction last fall after five years.

Initially, TC Energy Corp., the project owner, indicated pursuing compensation from contractors after the project's budget ballooned from an initial $6.2 billion to $14.5 billion.

TC Energy attributed the cost increases to factors such as labour costs, skilled labour shortages, and "contractor underperformance," as well as environmental challenges such as drought conditions, erosion, and sediment control.

Aecon emphasised the settlement with Coastal GasLink would not affect its cash flow and did not constitute an admission of fault by either party. It also described the settlement as "amicable" and "mutually agreeable," with both parties releasing their claims and considering the dispute definitively resolved.

Aecon also anticipates additional charges of $110 million related to three other large, near-completion projects and is expected to provide further details in its second-quarter financial results on July 24.