Reef-builders fish for investors

Photo: Michael Bradley

ASR managing director Shaw Mead says relying on local builders overseas nearly proved disastrous.

Relevant offers

Industries

Keeping with the 100% Pure message Fonterra sells stake in AFF joint venture Telecom granted more time for info systems separation Lamb, beef and dairy prices Report calls for Govt backed exploration business Capital controls not the answer Trans-Orient to drill for oil Debt soaks up milk payout Key rejects Goff's call for changes to monetary policy Five Mile venture sold to Aucklander

A New Zealand marine consultancy is raising capital from US investors to fund its expansion into the artificial reef construction business.

ASR Ltd is a privately owned consultancy based in the sleepy seaside village of Raglan, south of Auckland.

However the company's marine research activities involves projects around the world.

Part of its work has involved the design of artificial reefs, which are usually constructed to prevent coastal erosion, particularly of sandy beaches, but can also be used to alter wave patterns to make an area more attractive to surfers.

ASR has designed several artificial reefs, including one at Mt Maunganui and another on Queensland's Gold Coast.

However for its most recently completed project, a reef off Boscombe Beach near Bournemouth in the UK, the company decided to form its own construction arm to give it control of the entire project, from initial design to completion.

But the cost involved has created the need for new capital and last week the company's directors were locked in talks with new California-based investors.

Managing director Dr Shaw Mead said reefs were typically long-term projects, taking up to 10 years from the company first being engaged to advise on options until completion of construction.

And things don't always go to plan.

The Boscombe reef projected started in 1999 when the local council commissioned a feasibility study. ASR finally completed the reef two weeks ago, nearly a year late and at almost double the originally estimated cost.

The company's latest focus is Kerala, a state at the southern tip of India. The area's sandy beaches have made it a popular tourist destination, but over the past 20 years the beaches have been heavily eroded by the annual monsoons, compounded by the 2004 Indian Ocean tsunami.

The loss of sandy beachfronts has a negative impact on the area's tourist industry and ASR received an Indian government contract to build an artificial reef to preserve a local beach.

If the project is successful it could lead to many further contracts in the area but it nearly turned into a financial disaster for ASR.

Several government departments were overseeing the project and it became so tied up in red tape that ASR was incurring all the cost of construction but not getting paid.

"We were assured by various bureaucrats that payment was online and would come through, but after three months without a single payment we were wondering where to turn next," Mead said.

The company's legal advisers recommended court action to prise payment from the Indian officials, but a meeting arranged through NZ Trade & Enterprise's Beachheads programme, which puts exporters in touch with local experts in their overseas markets, advised against such a move.

The local experts said ASR's claim would probably become bogged down in India's notoriously clogged legal system for up to six years and instead used their local contacts to negotiate a deal with officials.

That saw the company receive a 60% upfront payment, allowing the project to continue.

"Without Beachheads steering us through that, it could have been a very difficult situation for us," Mead said.

ASR is now in discussions with several major hotel groups that own beachfront properties in the area, so with continuing access to local advice through Beachheads and hopefully also additional capital, the company is expecting to undertake "quite a few similar projects there".