Report from BusinessDesk
Fletcher Building, New Zealand’s biggest construction company, said it has concluded negotiations with the government on the $300 million design and build for South Auckland’s new Wiri prison.
Fletcher is part of the SecureFuture group along with Serco, which will operate the 960-bed facility, Spotless Facility Services, which will do maintenance, and equity partners John Laing, InfraRed and Accident Compensation Corporation. The group is being advised by Macquarie Capital.
The total cost of the 25-year contract is $840 million and it is the first of the government’s so-called public-private partnerships, or PPPs, where the private sector is allowed to invest in what has traditionally been a public sector role of providing health, education and other facilities.
Shares of Fletcher rose 1.4 percent to $6.64 and are up 5.9 percent this year.
In August, the Auckland-based company reported a 17 percent drop in construction earnings to $50 million though its backlog of building work had climbed to $1.09 billion at the end of June from $764 million a year earlier.
Corrections Minister Anne Tolley said the PPP structure of the prison deal meant a saving of $170 million for the government. She said the SecureFuture group “will face financial penalties if it fails to meet custodial, rehabilitation and reintegration measures.”
Fletcher said construction will take about 2 ½ years, with completion due in mid-2015.
Press Release – New Zealand Government
Corrections Minister Anne Tolley says a contract has been signed allowing the SecureFuture consortium to design, finance, build, operate and maintain the new 960-bed public-private partnership (PPP) prison at Wiri, South Auckland.
The new prison will deliver value for taxpayers and support the Government in reaching the target of a 25 per cent reduction in reoffending by 2017.
The 25 year contract is worth approximately $840 million, which is 17 per cent less than if the prison was procured through conventional means, representing a $170 million saving for taxpayers.
Fletcher Construction will build the new facility which will be operated by Serco and maintained by Spotless Facility Services. Construction will begin soon, with the prison set to open in 2015.
“The PPP will allow Corrections to draw on the experience and expertise of SecureFuture’s international partners,” says Mrs Tolley.
“It will provide a modern prison, with improved facilities and services, and will be strongly focused on rehabilitating prisoners and reintegrating them back into the community.
“The new prison will increase capacity in an area where there is a need to meet population projections.
“It will also give a huge boost to the Auckland economy. SecureFuture expect close to 300 staff will be employed to operate the prison, while up to 1000 workers could be involved in its construction.
“The contract has strong performance incentives, and SecureFuture must perform ten per cent better than Corrections in reducing reoffending rates.
“The consortium will face financial penalties if it fails to meet custodial, rehabilitation and reintegration measures.”
The new prison will still operate within the current Corrections’ framework and all prisoners will remain the responsibility of the Chief Executive of the Department. It will have to comply with all relevant New Zealand legislation and international obligations.