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Construction provisions remain contained despite SkyCity disaster: Fletcher

Wednesday 6th November 2019

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Fletcher Building says it remains within the construction provisions announced in February 2018 despite the impact of the SkyCity International Conference Centre project fire.

"Fletcher Building is working to determine the impact of the NZICC fire on the project's delivery timeline and costs, the timing of insurance proceeds and project cash flows and any potential impact on the construction provisions," the company says in a statement.

Fletcher, the lead contractor on the SkyCity project, announced $660 million of additional provisions on its major construction projects including SkyCity on Feb. 14, 2018, taking construction losses over an 18-month period to almost $1 billion. It has consistently reiterated that those provisions won't need to be increased further.

"The company confirms that, based on information currently available, it remains within these provisions," Fletcher said today.

It says it is "working closely" with the insurer for the construction works and third-party liability insurances in place on the project.

"Fletcher Building notes and agrees with the comments by SkyCity confirming the credibility of the insurer and their ability to meet their obligations," the company says.

Neither Fletcher nor SkyCity have named their insurers. On Oct. 23, the day after the fire started, SkyCity chief executive Graeme Stephens said the firm was "comfortable with the credibility of the insurer and their ability to meet their obligations." 

At that same media conference, Fletcher chief executive Ross Taylor rejected a suggestion that their insurance contracts could be nullified if the fire was proven to have been caused by negligence.

The New Zealand Herald has reported that Nasdaq-listed insurance broker Willis Towers Watson is advising SkyCity and that the insurance cover was probably underwritten by more than one company because of the size of the risk.

Fletcher says that although the site has been handed back to it, access remains restricted while safety and structural assessments and investigations into the cause of the fire are completed.

The cause of the fire is believed to have been an unattended blow torch on the bitumen-based roof of the convention centre and hotel complex.

Fletcher says it will continue to give "active consideration" to the adequacy of its construction provisions as additional information becomes available and expects to be in a position to provide a further update at its half-year results announcement in February.

Fletcher shares closed yesterday at $4.85, up from its $4.72 close the day before the fire but down more than 18 percent from a year ago. The benchmark S&P/NZX 50 Index's gained almost 23 percent over the same period.


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