Hawkins Aussie subsidiary in administration

Last updated 14:48 09/07/2012

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New Zealand-based Hawkins Construction has placed an Australian subsidiary into administration.

Hawkins Ararat Ltd is a joint venture partner in a public private partnership to construct a new 358-bed prison in Victoria.

Its failure follows St Hilliers Construction, the other joint venture partner, which was similarly placed into administration in late May.

In a statement released today, Hawkins Construction said it was keen to remain involved with the Ararat Prison extension project and was encouraged that discussions between the state, receivers and the project's funders were continuing.

However, interim chief executive David McConnell added he was "extremely disappointed" that the discussions had become protracted. McConnell said the situation was complex and outside Hawkins' control.

The company had now been forced to avoid incurring further costs and liabilities by placing its special purpose vehicle for the project, Hawkins Ararat Ltd, into voluntary administration.

"The directors have made a responsible, commercial decision. Voluntary administration effectively allows us to remain in a holding position on the project, without incurring further costs and liabilities, until the state and AEGIS [the prison consortium] receivers manage to resolve a funding solution which will allow the project to continue," he said.

"We believe there is a role for Hawkins on Ararat over the long term but, particularly following the receivership of our client AEGIS, the project's current commercial arrangements have become unworkable."

McConnell said Hawkins, a subsidiary of McConnell Group, remained in a strong position and he did not believe this development would have any material effect on the company's operations in New Zealand, or on its other projects.

In May he told Sunday Star-Times that costs from the project were "very, very manageable".

Contracts, however, indicate Hawkins is jointly and severally liable with its erstwhile construction partner St Hilliers. Whether that is enforceable beyond the PPP subsidiary is not known and may depend on whether cross guarantees were provided by companies in the wider Hawkins and possibly McConnell groups.

Australian reports have said the project is A$150 million (NZ$191m) over budget and eighteen months behind schedule. All construction stopped last week when Hawkins laid off contractors still working on the project.

Former Hawkins chief executive Chris Hunter left in May. Both he and McConnell said that was unconnected with the Ararat issues and had been planned for some time.

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- BusinessDay.co.nz

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