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Downer shares recover on $2b coal win

Engineering firm Downer EDI Ltd has secured contracts worth $2 billion with one of Australia's largest coal exporters, sending its share price to a two-month closing high.

Downer shares had gained 27 cents, or 5.93 per cent, to $4.82 on Wednesday, its highest close since 1 June when it closed at $4.58.

Downer on Wednesday also it was hopeful of winning another contract with Fortescue Metals Group Ltd, for which the company was already the preferred bidder.

The share price is still recovering from a sharp slump in June, when the company's credit rating was downgraded to one notch above junk bond status after it reported a substantial cost blowout for its Waratah train project and tax impairments on other assets.

Shares had tumbled from an all-time high of $9.35 on January 1 to $3.42 on July 1.

Downer said in a statement on Wednesday the coal contracts, to June 2015, were for work at the Goonyella Riverside and Norwich Park mines in the Bowen Basin in central Queensland, owned by the coal mine venture BHP Billiton-Mitsubishi Alliance (BMA).

The contracts are for load and haul of pre-strip material and drill and blast services at Goonyella Riverside Mine and for load and haul of pre-strip material at Norwich Park Mine.

Downer said new equipment for the contracts, totalling about $190 million, would be deployed progressively over the coming 12 months and funded primarily through operating cash flow and new finance and operating leases.

"Downer has ample funding capacity for the BMA contracts and also the Fortescue Metals Group contract at Christmas Creek (in Western Australia) for which Downer is preferred bidder," Downer said.

"Downer will remain well inside its target leverage range of 25 per cent to 35 per cent."

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: BHP, BHP Billiton, Creek, Hewlett-Packard, HP, Mitsubishi

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