SkyCity deal unveiled: $402m centre, 230 more pokies

Economic Development Minister Steven Joyce and SkyCity chief executive Nigel Morrison look over plans for the new convention centre at a media briefing in Auckland this morning. Photo / Greg Bowker
Economic Development Minister Steven Joyce and SkyCity chief executive Nigel Morrison look over plans for the new convention centre at a media briefing in Auckland this morning. Photo / Greg Bowker

Details of the controversial SkyCity convention centre deal with the Government have been announced this morning - and the listed casino operator will pay $402m for the new centre.

The centre is expected to generate $90m of revenue each year. SkyCity will meet the full cost and be allowed to have 230 extra poker machines. Its exclusive license will be extended to 2048.

Today's announcement has seen SkyCity Entertainment Group shares surge 3.4 per cent to $4.55, the highest since November 2007.

Known as the New Zealand International Convention Centre, the new centre will cost $315 million to build and fit-out, while the land will be worth $87m.

Construction on the centre is expected to begin in 2014 and open in mid to late 2017. It will cater for 3500 international conference delegates at any one time and attract an estimated 33,000 more delegates each year.

Economic Development minister Steven Joyce made the announcement today alongside SkyCity chief executive Nigel Morrison and Auckland Mayor Len Brown at SkyCity.

"An international convention centre in Auckland will be a major asset for New Zealand and will generate significant spin-off benefits including a projected $90 million annual injection into the economy; an estimated 1000 jobs during construction; and 800 jobs once it is up and running," Joyce said.

Asked if it was acceptable for dozens of people to be playing pokies downstairs as Joyce gave the announcement shortly after 8am, he said: "I think you're applying a certain social judgement of your own, which is fine, but the reality is people can responsibly participate in gaming.

"This is a legal activity that people enjoy and, yes, there are some risks for some people but the harm minimisation aspects of this agreement will actually help manage those risks more than we've had to this point, and I'm proud of that."

The minister was confident the economic benefits would outweigh the social risks.

"I think it is important to point out the changes we have made and the changes that SkyCity have agreed to in terms of harm minimisation, pointing out in particular this $500 limit ... which will be the first time there is a requirement for ID above $500.".

Under the agreement, SkyCity would meet the full project costs of the convention centre - estimated at $402 million - in return for the following:

* An extension of SkyCity's Auckland casino licence, due to expire in 2021, to June 30, 2048 and an amendment to cover all SkyCity's properties in Federal Street

* An additional 230 pokie machines on the casino floor

* An additional 40 gaming tables

* A further 12 gaming tables that can be substituted for automated table game player stations (but not pokie machines)

* Up to 17 per cent of pokie machines and automatic table games (in restricted areas only) being able to accept banknotes of denominations greater than $20

* Introducing TITO (ticket-in, ticket-out) and card-based cashless gaming technology on all pokie machines and automatic table games at Auckland casino.

SkyCity will operate the convention centre for at least 35 years. The company made its own announcement to shareholders on the New Zealand Stock Exchange this morning.

SkyCity is contributing the 14,000 square metres Auckland CBD site for the convention centre, which is bounded by Nelson, Hobson and Wellesley streets.

The company said as well as the convention and exhibition space, there will be at least 780 carpark and a new linkway bridge over Hobson St.

As part of the deal, SkyCity has agreed to increased measures to deter problem gambling and money laundering including:

* A predictive modelling tool that analyses data to identify players at risk of problem gambling

* A voluntary pre-commitment system where players can elect to restrict the amount of time they play or the amount they spend

* Doubling the number of "Host Responsibility" specialists to deliver 24-hour, seven-days-a-week coverage.

* Introduction of player identification requirements when amounts over $500 are being put onto, or cashed from, TITO tickets in non-restricted areas.

An independent assessment by financial advisory firm KordaMentha described the value of the concessions made to SkyCity in exchange for the construction and operation of the International Convention Centre as reasonable for both parties.

The 230 new pokie machines is the same number granted to SkyCity under the previous Government in 2001 for the development of the existing, and much smaller, Auckland Convention Centre.

The Government has the final say on the design of the Convention Centre, which will be designed and built to contemporary international standards.

"This agreement to build a world-class convention centre is a good deal for New Zealand that will create jobs, boost tourism, and bring significant benefits both to Auckland and to the New Zealand economy," Joyce said.

"For years the tourism industry and business sector have been asking for an international-sized convention centre to be built in New Zealand to ensure we compete with Australia and Asia by tapping into the growing market of high-value business visitors."

Legislation would be required to give effect to the final agreement.

Read a Government-supplied Q and A document on the deal here.

Auckland Tourism, Events and Economic Development (ATEED) said the new facility would boost the local business events sector and likely stimulate investment in new infrastructure and services.

"Conventions and incentives delegates are high value visitors who deliver good economic returns," said ATEED chief executive Brett O'Riley.

"They have a long length of stay, often visit during the tourism low season and have a higher spend per night."

O'Riley said the centre would allow Auckland to compete against other international cities and secure major conventions.

Convention delegates spend about $365 per night, compared to an average spend of $200 per night for international leisure visitors, he said.

Air New Zealand issued a press release this morning saying it welcomed the convention centre agreement.

"The planned national convention centre, with its capacity of 3,500, will allow New Zealand to compete to host larger conferences, providing access to a new market that we are currently disadvantaged in due to a lack of appropriately sized infrastructure, said airline chief executive Christopher Luxon.

"As an airline based in New Zealand, which has relatively small volumes of business traffic, the conventions market is very important to us and one which we actively target in Australia, Asia and North America. The 33,000 extra delegates a year the centre is predicted to attract is a significant increase."

Luxon said that in addition to the increased international visitors and foreign exchange earnings that were forecast to result from the development of a national convention centre, "a key benefit is that conferences are held throughout the year which will help reduce seasonal variations in demand for travel to New Zealand."

SkyCity shares last traded at $4.40 and have gained 16 percent this year. The stock is rated 'outperform' based on a Reuters poll of eight analysts.

Prime Minister John Key has said the convention centre will create 1000 new jobs while it is being built and 800 permanent new jobs when it is up and running.

But the Opposition disputes those figures and says the deal amounts to the Government putting the law "up for sale".

Investment bank Goldman Sachs estimated the new pokies and other concessions could add $42 million a year to SkyCity's profits.

The deal has angered the anti-gambling lobby, which says it will increase problem gambling at a time when the number of pokies in Auckland should be falling under the city council's "sinking lid" policy.

Three months ago, an Auditor-General's investigation into the deal Minister, casino sign convention centre deal instigated by the Green Party cleared John Key of any improper involvement in early stages of negotiation.

Key has acknowledged that changes to the Gambling Act in return for SkyCity building the convention centre were first raised when he had dinner with the company's board in November 2009.

But the Auditor-General's report found the Government's subsequent dealings with SkyCity over the matter "fell short of good practice in a number of respects".

These included the fact the casino operator was given information and access to ministers and officials that other bidders to build the centre did not receive.

The casino had the advantage in knowing the Government didn't plan on putting any money into the project, enabling it to shape its offer.

Labour Leader David Shearer last night said his party objected to the convention centre deal on two ground.

The first was that it was "a shonky process".

"Obviously there was a backroom deal done between John Key and and his mates at SkyCity," he said.

"There were clearly other participants that didn't get the same information that clearly SkyCity did."

"Secondly, I personally find it objectionable to build a convention centre effectively on the backs of problem gamblers."

The Government's announcement almost certainly indicates United Future Leader Peter Dunne has agreed to support the deal, as the Maori Party has indicated it won't vote in favour of the necessary legislation.

Dunne was unwilling to comment last night, but recently told the Herald he was keen for Auckland to have a world-class convention centre, but was opposed to an increase in pokie numbers.

NZ Herald/ APNZ

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