The roll of the dice continues to go against Fletcher Building and SkyCity Entertainment as a giant fire dealt what could be a major blow to the country's near half billion dollar convention business.
The New Zealand International Convention Centre was still under construction when it was engulfed in flames, believed to have been ignited by a worker's blowtorch.
As firefighters battled to get the blaze under control, the extent of the damage could not be assessed, but "clearly it's a setback for Fletcher Building and SkyCity," said Shane Solly, portfolio manager at Harbour Asset Management.
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He noted that the two companies were in dispute over continued delays to the project, while the project had already cost Fletcher hundreds of millions in dollars due to cost overruns.
"For the convention centre, it has potential to have a bigger impact on the Auckland economy," Solly said.
"It was on the cusp of providing some important stimulus - providing a facility that would have provided some good growth for the Auckland CBD and for the wider Auckland region, so any setback is not great."
SkyCity shares initially fell 16c to $3.86 as investors reacted to news of the fire before recovering somewhat to recently trade down 11c, or 2.7 per cent, at $3.87.
Fletcher shares were down 7c, or 1.5 per cent at $4.65.
Grant Davies, an investment adviser at Hamilton Hindin Greene, said the fire was obviously bad news for the project, but that there was a dearth of information for investors on how to judge the impact of the fire.
"Is there is an argument for trading to be halted until there's more certainty? It's a grey area," Davies said yesterday afternoon.
The convention centre had originally been slated to be completed in the first quarter of this year, but delays by Fletcher meant the current anticipated date has been delayed to the second half of next year. The casino operator had noted about $40 million in liquidated damages when it announced its annual result while Fletcher's liability is believed to be capped.
SkyCity has previously said it was already reviewing all 2020 conference bookings. Davies said further delays would push out its ability to secure signature conventions the company had hoped to secure.
Depending on the extent of the damage and length of further delays, New Zealand's international business reputation could take a hit from the fire, one construction lawyer said.
Ministry of Business Innovation and Employment figures showed last year domestic delegates spent $189m on attending events outside their home region, local delegates spent $103m inside their region and international visitors spent $163m in New Zealand.
There was now a question mark as to whether the giant Asia-Pacific Economic Cooperation (APEC) 2021 forum could be held at the NZICC as was planned.
The APEC CEO Summit is the Asia-Pacific´s most influential meeting of business and government leaders. Attendance is by invitation only.
Leaders from 21 countries, possibly including US President Donald Trump, are due to converge on Auckland in November 2021 for the event.
Graeme Christie, a specialist construction barrister and arbitrator, said the fire looked to be significant for the construction industry, the conference industry and for the hotel sector.
Holding any conferences there soon – including APEC there in 2021 - was up in the air Christie said.
"You can build apartments and have delays and people just have to wait to go into them. With a hotel, it's slightly different but with a convention centre, people need certainty to book."
Christie said contractors' all-risk insurance policies were likely to be comprehensive, meaning potentially a "large pay-out" to fix fire damage.
At SkyCity's AGM on Friday, chief executive Graeme Stephens told of two upcoming conferences: APEC around November 2021 and the International Federation of Library Associations and Institutions in August 2022, requiring 15,000 room nights and bringing in up to $8m.
Dean Humphries, hotels national director at Colliers International, said the intensity of the fire would determine the amount of damage to the convention centre.
"It's a sad day for us because we were all so forward looking to the convention centre opening and all the business coming to the city," Humphries said, raising questions about damage to SkyCity's neighbouring Horizon Hotel, now being fitted out ready for an opening before October next year.
"Smoke that thick and black billowing out for two hours – the convention centre was to be such a big demand driver and to bring so much business here," he said.
Auckland Tourism, Events and Economic Development manager of destination Steve Armitage said it was too early to assess the impact.
''At this stage, until we understand the extent of the damage, we are not in a position to comment on the potential impact this may have on the opening of the NZICC.''
Conventions and Incentives NZ says it is not in a position to comment on the fire ''at this time.''
Among the most recently announced events scheduled for the NZICC was the Australasian Tunneling Conference due in October 2022. It would attract 750 delegates from around the world who would spend an estimated $1.1 million.
In 2018 International delegates (Australia and other international) stayed an average of 6.6 nights in New Zealand (4.9 nights in the event region and 1.7 nights elsewhere in New Zealand).
- Additional reporting from BusinessDesk
Convention Centre timeline:
SkyCity wins with $350m bid. Its convention centre requires no taxpayer funding but depends on changes to Gambling Act to allow more pokies and other concessions.
December 2014: SkyCity lodges resource consent, revealing the cost of a new convention centre has increased by between $70m-$130m to approximately $700m.
October 2015: Fletcher Building wins the building contract, construction starts in February 2016.
February 2017-18: Fletcher Building announced a profit downgrade of $150m due to cost overruns and delays on projects including the Convention Centre. Overall losses from the company's B+I unit would eventually total almost $1 billion.
February 2019: SkyCity reveals it has withheld $39.5 million of liquidated damages from Fletcher on the convention centre and hotel projects, announces project delayed until second half of 2020.