Hornby mall upgrade halted

PRESS REPORTERS AND FAIRFAX
Last updated 16:26 07/02/2013
Mainzeal
IAIN MCGREGOR/Fairfax NZ

Mainzeal's southern region office in Riccarton Rd.

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Mainzeal's key partner in the Christchurch rebuild says home repairs will not be delayed, but cannot give such assurance to commercial customers.

Receivers from PricewaterhouseCoopers were called into Mainzeal yesterday and work has stopped at its building sites around the country.

No Mainzeal staff were today at work on the multimillion-dollar upgrade of the Hub Hornby shopping centre.

Mainzeal partnered global consultancy firm MWH for Christchurch rebuild work, and the joint venture was acting as project manager for Vero Insurance.

MWH Mainzeal programme manager Chris Pile said the receivership would not affect residential repairs as Mainzeal was not involved in that side of the business. "Customers' repairs and rebuilds will continue as scheduled."

However, Mainzeal was providing construction services for commercial repairs and rebuilds.

"Those customers will be contacted to arrange how their earthquake reinstatement will progress," Pile said.

Canterbury Earthquake Recovery Minister Gerry Brownlee said Vero had assured the Goverment that the Mainzeal failure would not affect its rebuild.

He expected to hear from MWH soon about the state of its finances, including the major demolition projects of the Clarendon Tower and Queen Elizabeth II Park. 

"It's so early in the picture," he said.

"The receivers will be trying to work out where it all lies, what work has been committed and paid for.

"We're as much as anybody else in a state of limbo."

CHRISTCHURCH REBUILD WILL NOT BE AFFECTED, SAYS PM

Prime Minister John Key says it is "highly likely"  Mainzeal Property and Construction will be sold if it goes into liquidation.

Aquaheat New Zealand, an engineering and contracting company, had many contracts with Mainzeal and says it is likely to incur "a significant adverse financial impact" from Mainzeal's troubles.

Horizon Energy, which owns Aquaheat, said it was still assessing the financial position, but it would be a serious setback for its subsidiary.

Horizon Energy chairman Rob Tait said the receivership of the country's third-biggest construction firm was a surprise as the contracts were proceeding as planned.

"As late as Tuesday this week we were engaged in discussions with Mainzeal personnel over current and future work without any hint of trouble," he said today.

Horizon said its core business, which revolved around electricity distribution in eastern Bay of Plenty, was otherwise on track, but the move was likely to affect its profit this year.

Key said the collapse would not affect the Christchurch rebuild because the firm's role in the post-earthquake rebuild was relatively small.

He said it was likely the company would be sold, and employees would find work elsewhere in the construction industry.

"My guess is that if the company is liquidated, then it is highly likely it will be bought in part or in totality," he said.

"Certainly we would expect those workers to find jobs in other places because we know that in Christchurch and in Auckland there is actually a shortage of skilled workers."

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There were 90 Mainzeal workers in Canterbury working on "a number of contracts".

"They are a really small component part and I'd be amazed if someone didn't come and either buy that bit of their business. My understanding is it was profitable," he said.

However, he was worried for subcontractors.

"I do have real concerns about the flow-on effects, that the small builder who does some contracting work for Mainzeal might be left out of pocket," he said.

Key said the collapse "unquestionably" reduced competition in the construction industry but it would not necessarily drive up prices.

"It is quite a dynamic environment, so you can see all sorts of companies being established or new people coming into the industry," he said.

"And there is always offshore players who want to contest as well.

Rival firms set to scramble for contracts

Rival construction firms are set to scramble for Christchurch rebuild contracts and staff after the collapse of one of New Zealand's largest building groups.

News that Mainzeal had gone into receivership was described as "a bolt out of the blue", with hopes that some of its estimated 400 staff will be picked up by those working in the earthquake-hit city.

PricewaterhouseCoopers partners Colin McCloy and David Bridgman were yesterday appointed as receivers for Mainzeal and associated entities as a result of a request made by directors to the BNZ.

Mainzeal director Richard Yan said that after "a series of events that had adversely affected the company's financial position" and a general fall-off in commercial construction work, the company was no longer getting shareholder support and could not continue trading.

The reasons for the company's collapse were not immediately clear, but there had been a suggestion that it had not been paid for part of a multimillion-dollar project because of a dispute.

Mainzeal managers referred inquiries from The Press to chief executive Peter Gomm, who did not return calls.

The company had been responsible for two of the biggest quake projects in Christchurch - the demolition of the Queen Elizabeth II Park sports complex and the 17-storey Clarendon Tower.

It had also formed a joint venture with consultancy MWH as a project manager for the repair and rebuild of quake-hit properties, with Vero Insurance one of its main partners.

MWH Mainzeal programme manager Chris Pile said the receivership would not stop the joint venture from doing its work.

"It certainly will have an impact on the partnership because we will be dealing with the receivers, but our obligations and our ability to perform the services is unchanged."

He said any staff who lost their jobs at Mainzeal could be directly employed by the joint venture, while Vero and AA Insurance had been informed of the receivership and were confident that it would not affect their work.

"When you form a joint venture, you do anticipate these types of situations, and I'm glad we did," he said.

Registered Master Builders chief executive Warwick Quinn said he was shocked by the failure of the long-established company.

"There was no heads-up, no warning. It was a bolt out of the blue."

He said the company was in the top tier of New Zealand construction firms, and he hoped that staff could play a role in the rebuild.

"There's still going to be plenty of work in Christchurch on the commercial front for a good part of a decade. They're going to need the skills," he said.

Construction Industry Council chairman Pieter Burghout said the shock news showed the fickleness of the industry.

"When you've got the second or third-largest construction company in New Zealand with an order book worth billions ... and it can collapse, that's a reminder to the whole industry that you have to run your company in an absolutely bulletproof way."

He said the receivership was unlikely to hold up the Christchurch rebuild as staff and resources from Mainzeal would be picked up by other construction firms working in the city.

"The staff are there, the tools are there, the contracts are there, the work will get done and all that will change will be the name on the contract," he said.

Canterbury Earthquake Recovery Authority chief executive Roger Sutton hoped that Mainzeal staff affected by the receivership could pick up work in the city.

The QEII and Clarendon Tower demolitions were unlikely to be affected by the receivership.

McCloy said the receivers were committed to doing the best they could for Mainzeal suppliers, staff and subcontractors.

"We will work closely with all parties involved with Mainzeal contracts to determine the best way forward," he said.

The former independent directors of Mainzeal Group, including former prime minister Dame Jenny Shipley, said they had resigned from the Mainzeal board on Tuesday "when it became apparent financial undertakings from its shareholder ... were no longer in place".

The directors said they were "fully aware and very saddened" of the impact the receivership on Mainzeal staff and contractors.

MAIN PROJECTS

- In December 2011, Mainzeal was awarded the contract for the demolition of the Clarendon Tower. The removal of the 17-storey central-city building has been the longest demolition job in post-quake Christchurch.

- Mainzeal was in charge of demolishing the quake-hit Queen Elizabeth II Park sports complex in the city's east. The company had offered to return the site to a parkland state until options for it were considered by the city council and community.

- Other construction projects managed by the company include the $15 million expansion of the Barrington Shopping Centre and the construction of a $15.2m complex for St Andrew's College boarders.

- Mainzeal has many projects around New Zealand, including work for Siemens-Transpower at Benmore and a courts complex for the Ministry of Justice in Durham St, Christchurch.

- The Press

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