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Cimic to get lion's share of work in $750M Waikeria prison

ASX-listed Cimic to get lion's share of work in $750M Waikeria prison build

By Paul McBeth

June 14 (BusinessDesk) - ASX-listed Cimic Group says it will deliver most of the work in the government's new 500-bed prison in Waikeria plus mental health facilities for a further 100 people.

Corrections Minister Kelvin Davis yesterday announced the replacement prison, shifting away from a much larger facility planned by the previous administration to cope with a swelling muster. Davis said Cornerstone Infrastructure Partners was the preferred bidder for the $750 million project and that a deal would likely be signed in August.

Separately, Cimic said its subsidiaries CPB Contractors and Pacific Partnerships led the formation of the favoured public-private partnership consortium, and will provide equity financing for the 25 years of asset management and maintenance, while also designing and building the facility. Local investment bank and asset manager HRL Morrison & Co will also provide finance and management, real estate services firm Cushman & Wakefield will act as property manager, and Honeywell will look after electronic security services.

"Our New Zealand team has been working with the client on various scenarios that will ensure the Department of Corrections achieves its objectives for improved education, rehabilitation and enhanced mental health services," Cimic chief executive Michael Wright said in a statement yesterday. "Our focus is on delivering a superior facility that complements Correction’s current operating model, enabling the government to achieve its required outcomes over the long-term."

Cimic said revenue from the deal will be finalised once the contract is executed, probably in the third quarter of this year, with the facility set to open in 2022. The shares rose 0.7 percent to A$40.68 today, having dropped 21 percent so far this year.

In last month's budget, Finance Minister Grant Robertson earmarked $198 million of new capital spending to accommodate an extra 600 prisoners in rapid-build modular units by the end of next year, with $393 million allocated to renew and replace assets in the 2018/19 year, and a further $332 million of capital spending estimated in the following three years.

Australia's Decmil Group has already been a beneficiary of the Corrections Department's need for rapid expansion, winning a $60 million contract last year to build three sets of 126-bed units for lower security prisoners, two at Rolleston Prison and one at Tongariro Prison. Decmil's biggest corrections project in Australia is the A$415 million Manus Island offshore processing centre, which it finished building in October 2015.

Documents accompanying Davis's speech announcing the smaller prison said any innovations that benefit the facility may be picked across the broader prison network. Davis said yesterday the government's next step is to add 400 beds across the network, and that the government is working on long and medium term plans to address prison population concerns. That includes analysing different operating models and infrastructure, with a view to developing a strategy in the next six months.


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