Fire on October 23, a day after it broke out. Photo / Alex Burton
Fire on October 23, a day after it broke out. Photo / Alex Burton
Fire damage at SkyCity's NZ International Convention Centre could cost up to $250 million to fix - which could provide some upside to Fletcher Building, a finance expert says.
Grant Swanepoel, head of equity research and institutional equities at Craigs Investment Partners, said today the minimum cost to fix mightbe $150m although he stressed these were his estimates only.
The company refused to confirm if the figures matched its own assessment.
A Fletcher spokesperson said today: "It will be some time before any kind of informed estimation can be given due to the complex safety considerations as the building is assessed."
But Swanepoel said the repair could benefit the builder and almost be in the form of an entirely new quarter-billion-dollar contract if it did come to that cost.
"Upside potential: we estimate that the remedial work will be about $150m to $250m and should be viewed as a new construction project for Fletcher on a cost-plus basis," Swanepoel said today.
Graeme Stephens and Ross Taylor last month. Photo / Jason Oxenham
Instead of the fire hurting Fletcher financially, a possible insurance payout to SkyCity could result in so much extra work that it would boost the builder, he indicated.
But it would mean that the troublesome job in Fletcher's Building + Interiors division dragged out much longer, possibly into late 2021.
"Fletcher's fire risk is unlikely to be material. It will likely just drag the conclusion of the B&I saga out for a further 6-18 months," Swanepoel told the Herald.
Fletcher and SkyCity have released post-fire updates to the NZX citing insurance cover, the investigation and thanking fire and emergency services.
The centre was built up to the top floor, or level seven, but reports said it was damaged down to level five. Water damage extended into the basement where vehicles were partly submerged.
Fire damage at the centre. Photo / Dean Purcell
Fletcher took control of the site again after a full investigation. However, Swanepoel said parts of that investigation were still ongoing.
He forecast the next move would be for an instruction to be given by SkyCity's insurer to begin repairs. Fletcher has already said, that based on all current information, it is fully covered by insurance.
Swanepoel said Fletcher's latest update could open the door to potential negative news in February, when the company will announce its half-year result to December 31, 2019.
Both SkyCity chief executive Graeme Stephens and Fletcher chief executive Ross Taylor have said their businesses are committed to finishing the project.
Fletcher's AGM will be held later this month and some in the sector expect new information on the fire then. But Swanepoel quashed that: "It won't be till February," he said today.
He referred to direct inquiries he had made to Fletcher but said shareholders attending the AGM were most likely to get exactly the same response as the company has given so far - "that it's too early to tell".
On October 23, the fire continued to rage. Photo / Jason Oxenham
Fletcher staff on the site are now likely to be engaged in a major cleanup exercise and might not start work repairing the building for some time.
"These things are often lawyer-related matters," he said, referring to legal issues around the fire and payment for damage.
Fletcher had indicated a start on work there was "close" but Swanepoel said that word was open to interpretation.
Fletcher shares have rallied lately on the NZX: when the fire broke out on October 22, shares were trading at just $4.65 but yesterday they closed well up at $5.16.
