SkyCity gets 27-year licence extension to build $402M centre
SkyCity gets 27-year Auckland licence extension, 230 more slots to build convention centre
May 13 (BusinessDesk) – SkyCity Entertainment Group has gained a 27-year extension to its Auckland casino licence and can add 230 slot machines and 40 gaming tables in exchange for meeting the $402 million construction, fit-out and land costs of a new convention centre in the city.
The company is gaining concessions with a net present value of $316 million, according to a base case scenario assessed by Korda Mentha. The value range was put at $261 million to $329 million.
The agreement signed this morning between the government and the company is the culmination of almost four years of talks in what was a controversial decision to award the tender to SkyCity, the only interested party to propose meeting building costs for the centre.
“This will make us more competitive on the international stage,” SkyCity chief executive Nigel Morrison told reporters at a briefing in Auckland. It will allow the company to provide the facilities and services “that our interstate and international guests expect.”
The total cost of the development includes land costs of $87 million. The land is currently owned by state-owned Television New Zealand.
In addition to the extra slot machines and gaming tables, SkyCity gets a further 12 gaming tables that can be substituted for automated table games, while up to 17 percent of slot machines and automated tables in restricted areas will be able to accept bank notes greater than $20.
The company also gets the right to install TITO and card-based cashless gaming technology on all the slot machines and automated tables in the Auckland casino.
Today’s binding heads of agreement now needs to be followed by legislation and local council approvals.
Economic Development Minister Steven Joyce said the convention centre will add an estimated $90 million a year to the local economy, create 1,000 jobs during construction and 800 jobs once the centre is running. It is estimated the centre will draw some 33,000 additional conference delegates to New Zealand each year.
Construction is scheduled to start in 2014 with the centre completed in 2017.
Shares of SkyCity last traded at $4.40 and have gained 16 percent this year. The stock is rated ‘outperform’ based on a Reuters poll of eight analysts.