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SkyCity convention centre damages dispute murkier after fire

Wednesday 23rd October 2019

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The major fire in downtown Auckland yesterday has added another layer of complexity to who should bear the cost of delays to the international convention centre.

Fletcher Building was meant to have completed the centre in the first quarter of this year, but that has been pushed out into the second half of 2020. SkyCity Entertainment Group has withheld $39.5 million in liquidated damages over the delays.

Raine Selles, managing director at CMC Asia Pacific, told BusinessDesk that SkyCity will have insurance and the fire will be considered a force majeure event.

That means it will immediately halt the liquidated damages claim that the casino operator has against Fletcher.

A construction expert, Selles said it is too early to tell if any party will become liable, as it will depend on the reason for the fire.

Smoke billowed across the country’s biggest city yesterday as the blaze on top of the centre disrupted downtown Auckland. The fire started around 1pm yesterday and emergency services have yet to bring it under control. Twenty-six fire engines are at the scene. 

Fletcher said all staff and contractors were safely evacuated, and that no-one sustained any injuries.

In October 2015, SkyCity and Fletcher Construction signed a $477 million contract for the lead role in the $700 million project to build the convention centre and a new five-star hotel. At the time, SkyCity said the contract had insurance covering comprehensive building works, public liability, and professional indemnity. 

However, delays and cost blow-outs saw the project become an albatross around the building company’s neck, a major contributor to its near $1 billion of construction losses over an 18-month period.

Those delays had already caused the casino operator to review all of its 2020 bookings, and it has been in consultation with union delegates over the likely loss of eight jobs from its existing convention centre workforce.

Any further delays to the convention centre opening have already created uncertainty for firms servicing events.

Oceania Productions technician Garrard Hobson said his company already booked to do several jobs at the new centre and it is unclear what it would mean for his company.

The market reacted despite the absence of any concrete information, with SkyCity shares falling to a seven-week low before ending yesterday at $3.87, down 2.8 percent, with more than twice the 90-day average number of shares traded. Fletcher’s shares fell 1.5 percent to $4.65, although upcoming MSCI index reweightings are seen as the likely driver of that movement.


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