Puhoi-to-Warkworth PPP roading contract a nil-margin deal for Fletcher

Tuesday 17th April 2018

Fletcher Building says the company is currently making zero profit from the Puhoi-to-Warkworth roading contract it holds as part of the NX2 consortium.

The motorway is part of the Pūhoi to Wellsford Road of National Significance initiated by the previous government. Under a PPP contract the group will finance, design, construct, manage and maintain the motorway for the 25 years that will follow the expected five year period to build the motorway.

The consortium is made up of Fletcher, Acciona Concesiones, the Accident Compensation Corp and Public Infrastructure Partners II LP, a fund managed by Morrison & Co. In 2016 the NZ Transport Agency put a net present value on the contract of $709.5 million. Fletcher and Acciona are doing the construction. "The partners are now working actively on a range of options to mitigate these risks. At this point, Fletcher is reporting nil margin for the P2W project."

The announcement was part of a trading update Fletcher released with plans to raise $750 million in an entitlement offer. The roading contract sits within Fletcher's infrastructure division which also houses its Building + Interiors, which has forecast losses of $660 million this year.

On B+I, work was continuing to schedule with no change to the provisioning announced on Feb. 14. Of 16 projects, five were now complete including the Justice Precinct, seven would be completed in calendar 2018 and four, including the NZ International Convention Centre and the Commercial Bay development, were also on schedule, it said.

To date, Fletcher's infrastructure losses have been confined to vertical construction.

Fletcher shares are halted for the institutional leg of the $750 million pro-rata one-for-4.46 accelerated entitlement offer at $4.80 a share, or 23 percent below its last trading price of $6.27. Proceeds from the offer will be used to repay existing debt, the company said. The offer is fully underwritten by Macquarie Bank.

(BusinessDesk)

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