SkyCity v Fletcher Building on $330m NZICC claim: Call for a ‘tombstone’ to mark completion

SkyCity Entertainment Group and Fletcher Building would have been better to settle the $330 million NZ International Convention Centre dispute, an analyst says, while another wishes for a “tombstone” to mark the project’s end.

Geoff Zame, head of institutional equities at Craigs Investment Partners, said avoiding court would have been the better path.

“One would hope they would come to a resolution quickly to remove uncertainty,” he said, noting Fletcher’s share price falling.

Zame was reacting to SkyCity saying it intends to file legal proceedings against Fletcher Building and The Fletcher Construction Company for $330m.

Jarden’s equity research director, Grant Swanepoel, said analysts and shareholders may learn more at the Fletcher investor day on June 24.

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However, the company would be restricted in what it could say, given there was legal action, he noted.

The October 2019 fire at the NZICC. Photo / Dean Purcell

“Poor Fletcher Building. This is what we have come to expect all the time, until we get the tombstone on the NZICC.”

The $330m seemed “a bit on the high side”, Swanepoel said.

Zame said the two companies had problems already before the litigation announcement.

Fletcher not only had the NZICC but also the Perth leaky pipe issue, he noted.

Last August, it was announced Fletcher’s Iplex Pipelines Australia would provide A$155m ($168m) to pay for the Perth leaky pipes debacle after it struck a deal with the Western Australian Government to help homeowner victims.

The NZICC fire started on October 22, 2019. Photo / Will Trafford

Zame also noted SkyCity’s Adelaide casino problems.

The company last year suspended dividend payments until 2026, noting that it expected to pay a penalty of A$67m ($73m) for anti-money laundering breaches in Adelaide.

In a research note released after SkyCity’s NZX announcement Craigs Investment Partners said the NZICC claim related to damages for losses incurred by SkyCity arising from ongoing delays.

The project is now six-and-a-half years behind the contractually agreed delivery date of January 2019, SkyCity says.

“We understand that SkyCity’s claim is inclusive of liquidated damages paid to date, which implies that SKC are seeking an additional circa $75m to $100m of compensation from Fletcher Building,” the Craigs note said.

The 2019 fire, mid-blaze.

Swanepoel and Craigs also noted further time needed by Fletcher to finish the centre.

Instead of being done by June 30, final works are taking place in the second half of this year.

Both parties expect the handover to be in the second half of 2025 so that SkyCity can begin its commissioning process ahead of taking events from February 2026, Craigs noted.

Fletcher said it would vigorously defend itself against the claim but that the NZICC would cost a further $12m to $15m to finish.

That is in addition to extra costs announced in February when it revealed a further $165m was needed.

SkyCity’s claim alleges that breaches of contract occurred. Those related to the fire and constituted gross negligence or persistent flagrant or wilful neglect by the Fletcher entities to carry out obligations under the building works contract.

SkyCity claims it is entitled under that contract to liquidated damages of more than $330m from Fletcher.

“SkyCity has attempted to resolve these claims by agreement with Fletcher but has been unable to do so.”

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Initially, the NZICC was referred to as a $750m project but former Fletcher CEO Ross Taylor said last year before he left it had cost more than $1 billion.

Fletcher said its focus has now moved to remediating defects and, seeking to work collaboratively with SkyCity, completing the complex commissioning processes and securing required Auckland Council sign-offs.

Jason Walbridge on Hobson St outside the headquarters of the business. Photo / Jason Oxenham

SkyCity chief executive Jason Walbridge said the project was significantly delayed.

“The NZICC was originally scheduled to take approximately three years to build, and it has now taken almost 10.

“This is a project of key importance not only for SkyCity but also Auckland and the wider New Zealand economy.

“We remain confident in our opening date of February 2026 and expect the building to be handed over to us in the second half of this year.”

Andrew Reding is chief executive and managing director of Fletcher Building. Photo / Supplied

Fletcher, whose chief executive is Andrew Reding, said that Fletcher Construction has already paid significant liquidated damages to SkyCity for delays, in accordance with the building works contract.

“Accordingly, Fletcher Construction will vigorously defend itself against the SkyCity claim for further liquidated damages beyond the capped amount provided for in the building works contract,” it said.

The project had suffered from a number of challenges, including as a consequence of the fire and Covid-related impacts.

“Fletcher Building rejects absolutely that it has breached its contract with SkyCity in the manner alleged,” its statement said.

Shares in SkyCity were down 1c or 1.05% to 94c in mid-afternoon trading and are down more than 36% over the last year.

While Fletcher Building shares have been hit harder with its share price down 12c or 3.81% to $3.03. Over the last year, its share price is up 4.8%.

Anne Gibson has been the Herald‘s property editor for 25 years, written books and covered property extensively here and overseas.