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SkyCity, Fletcher won't name their insurers

Wednesday 23rd October 2019

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SkyCity Entertainment Group won't name its insurer but says it's an international company and that the consequences of the fire in the roof of the new convention centre and the disruption to its existing facilities will be fully covered.

Chief executive Graeme Stephens told journalists he isn't sure he can disclose the insurer's name.

"We're comfortable with the credibility of the insurer and their ability to meet their obligations," Stephens said.

Similarly, the lead contractor building the convention centre and hotel, Fletcher Building, says it has contract works and third-party liability insurance in place.

Both Fletcher chief executive Ross Taylor and Stephens rejected a suggestion that their insurance contracts could be nullified if the fire is proven to have been caused by negligence.

Stephens says assessing the new hotel from the street, it is "largely intact" and doesn't appear to have been damaged, and it won't have suffered water damage, but it probably has suffered smoke damage.

Taylor confirmed that workmen on the site had been using blow torches to seal bitumen used in the convention centre's roof but cautioned against speculating on the fire's cause because "speculation or word on the street can be very, very wrong."

It has been reported that a worker had left a blow torch to go for break and that started the fire.

Taylor said Fletcher will be conducting a full investigation once it regains access to the site. The fire is still burning but Stephens says he hopes it will be extinguished today.

SkyCity has withheld $39.5 million in liquidated damages over the new hotel and convention centre which was supposed to have been completed by the first quarter of this year. Fletcher's liability for liquidated damages on the project is believed to be capped at about $40 million.

Before the fire, completion had been pushed out to the second half of 2020.

Taylor said the roof is the same materials used in constructing the roof of the Spark Arena – that was built by Mainzeal.

The SkyCity project contributed to Fletcher's near $1 billion in losses provided for in the 18 months ended June 2018 and Fletcher has repeatedly said its construction losses would be contained to those provisions.

Today, Taylor said he was going to be "consistently annoying" in refusing to discuss individual contracts including the contract with SkyCity.

SkyCity evacuated its existing casino, hotel and restaurants yesterday but hopes to be able to reopen them tomorrow afternoon and it was the first time since the complex opened in 1996 that it has been empty of customers which was "a really weird feeling."

Stephens said he had inspected the site with Fletcher's construction chief executive Peter Reidy yesterday morning and that his team and Fletcher's have an "extremely constructive" working relationship.

"I left the site very buoyed and very excited" two or three hours before the fire started at about 1pm and that has been "absolutely devastating" but he's thankful the losses don't extend to any human lives.

"This is a discussion around building, money and time, but not around people" so SkyCity will be able to deal with the consequences "in a relatively unemotional fashion."

Both chief executives said the damage is "obviously significant" and will further significantly delay completion of the project, but that they won't be able to quantify that or establish a new timeline until after the fire is extinguished and the safety of the site has been secured.

"We understand that this is a very important project for SkyCity, a very important project for Auckland and a very important project for New Zealand," Taylor said.

There will have been structural damage, including heat damage to the steel and water damage that will have impacted on the services and finishes of floors below the levels affected by the actual fire.

He rejected a suggestion that the fire would have financial consequences for Fletcher, saying the company has a very strong balance sheet with about $300 million of net debt at June 30 and "we're in a very, very strong financial position so that's not an issue."

Stephens said all staff working at the time of the fire will be paid, as will all salaried staff, but that casual workers will only be paid for shifts they actually worked and that he was "quite irritated" to read news reports that said otherwise.

Taylor said Fletcher is "making sure that everybody's being paid" but that he won't be able to say anything about arrangements with subcontractors until his company can assess the damage, although he acknowledged Fletcher has had difficulty in ensuring it retains the people it needs to complete the project.

Stephens said SkyCity's chair, Rob Campbell, has spoken to Prime Minister Jacinda Ardern who will be visiting the city today.

SkyCity shares fell as much as 16 cents, or 4.1 percent, to $3.71 after shedding 2.8 percent yesterday, but were recently quoted at $3.76.

Fletcher shares fell as much as 17 cents, or 3.7 percent, to $4.48 after tumbling 1.5 percent yesterday, but was trading at $4.58 at noon.

Taylor said: "I don't talk about the share price either."

(BusinessDesk)



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