Transfield wins detention centre contract

Last updated 11:02 25/02/2014

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Investors in Transfield Services have turned a blind eye to political risk attached to a A$1.22 billion ($1.3 billion) immigration detention centre contract, sending shares in the facilities management group soaring.

Transfield shares climbed 24.5 per cent to 99c in heavy trade on Monday after the company said the Australian government had granted it a 20-month contract to operate a centre on Manus Island in Papua New Guinea that has been beset by deadly violence.

The new deal expands on Transfield's existing contract to run the government's other offshore detention centre, on Nauru, and increases the amount the government will pay to run the two centres from about A$39m a month to about A$61m a month.

Transfield, which was until October chaired by Tony Shepherd, who is heading the government's Commission of Audit, replaces UK-listed G4S. Violence at the centre last week claimed the life of one detainee and forced the Minister for Immigration, Scott Morrison, to admit he had initially provided incorrect information about the fracas.

G4S is to be investigated by the Immigration Department over its role in the deadly violence. It faces a separate criminal investigation in the UK for allegedly overcharging the British government.

Simon Fitzgerald, an analyst at Moelis & Company, said the Manus Island contract was ''very politically sensitive and controversial''.

''This is where companies can get into a lot of trouble, because there'll be a lot of scrutiny of how smoothly it operates,'' he said.

But he pointed to Transfield's work cleaning up the government's troubled pink batts programme as evidence it had experience working on politically sensitive projects.

Transfield said the increased cost of the contract was due to higher security costs, more complex travel needs and tax rates in PNG being higher than in Nauru.

Spokesman David Jamieson said Shepherd's role at Transfield had nothing to do with it winning the contract. ''We believe our success on this bid was due to our ability to rapidly mobilise for Nauru and our ability to manage that facility to the department's satisfaction.''

The company will subcontract security on Manus to Wilson Security, as it already does on Nauru.

It will continue to use some PNG locals as security, even though G4S local staff have been accused of perpetrating some of last week's violence.

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- Sydney Morning Herald

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