BUSINESSDESK: Fletcher Building, New Zealand's biggest construction company, 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 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% to $6.64 and are up 5.9% this year.
In August, the Auckland-based company reported a 17% 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 says the PPP structure of the prison deal meant a saving of $170 million for the government. The SecureFuture group "will face financial penalties if it fails to meet custodial, rehabilitation and reintegration measures".
Fletcher says construction will take about 2½ years, with completion due in mid-2015.