Hon Steven Joyce

Minister for Economic Development
13 May 2013 Media Statement
Govt & SkyCity agree to $402m Convention Centre

Economic Development Minister Steven Joyce today announced the Government and SkyCity have signed a Heads of Agreement to build a $402 million international-standard convention centre in Auckland.

The New Zealand International Convention Centre will cater for 3500 international conference delegates at any one time. It will be built for a total estimated project cost of $402 million, made up of $315 million in construction and fit-out costs and $87 million in land costs.

Mr Joyce was joined by SkyCity Chief Executive Nigel Morrison and Auckland Mayor Len Brown at SkyCity in Auckland for the announcement. Construction of the New Zealand International Convention Centre is expected to begin in 2014 with the facility to be open in 2017.

“An international convention centre in Auckland will be a major asset for New Zealand and will generate significant spin-off benefits including a projected $90 million annual injection into the economy; an estimated 1000 jobs during construction; and 800 jobs once it is up and running,” Mr Joyce says.

“It’s estimated this new facility will attract around 33,000 more conference delegates each year.”

Under the agreement, SkyCity will meet the full project costs of the convention centre – estimated at $402 million – in return for the following:

• An extension of SkyCity’s Auckland casino licence, due to expire in 2021, out to 30 June 2048, and an amendment to cover all of SkyCity’s properties in Federal Street

• An additional 230 “pokie machines” on the casino floor

• An additional 40 gaming tables

• A further 12 gaming tables that can be substituted for automated table game player stations (but not “pokie” machines)

• Up to 17 per cent of pokie machines and automatic table games (in restricted areas only) being able to accept banknotes of denominations greater than $20

• Introducing TITO and card-based cashless gaming technology on all pokie machines and automatic table games at Auckland casino.

SkyCity will operate the convention centre for at least 35 years.

SkyCity will have enhanced measures to deter problem gambling and money laundering including:

• a predictive modelling tool that analyses data to identify players at risk of problem gambling

• a voluntary pre-commitment system where players can elect to restrict the amount of time they play or the amount they spend

• doubling the number of Host Responsibility specialists to deliver 24-hour, seven-days-a-week coverage.

• introduction of player identification requirements when amounts over $500 are being put onto, or cashed from, TITO tickets in non-restricted areas.

An independent assessment by financial advisory firm KordaMentha has described the value of the concessions made to SkyCity in exchange for the construction and operation of the International Convention Centre as reasonable for both parties.

The 230 new ‘pokie’ machines is the same number granted to SkyCity under the previous Government in 2001 for the development of the existing, and much smaller, Auckland Convention Centre.

The Heads of Agreement is a legally binding document which settles the key principles on which a full agreement will be based. SkyCity and the Government are required to complete a full agreement, based on the Heads of Agreement, by 14 June 2013.

Legislation will be required to give effect to the final agreement.

The Government will have the right to approve the design of the Convention Centre, which will be designed and built to contemporary international standards.

“This agreement to build a world-class convention centre is a good deal for New Zealand that will create jobs, boost tourism, and bring significant benefits both to Auckland and to the New Zealand economy,” Mr Joyce says.

“For years the tourism industry and business sector have been asking for an international-sized convention centre to be built in New Zealand to ensure we compete with Australia and Asia by tapping into the growing market of high-value business visitors.”

For more information go to: http://www.med.govt.nz/sectors-industries/regions-cities/nz-international-convention-centre

ENDS

International Convention Centre – Questions & Answers

How will New Zealand benefit from the New Zealand International Convention Centre (NZICC)?

New Zealand will have a convention centre with a capacity for 3500 delegates built and operated to international standards, and capable of attracting international conferences to New Zealand.

The economic benefits to New Zealand from the construction and operation of the Convention Centre are projected to be an additional $90 million a year into the economy; up to 1000 workers would be employed during the building phase; and about 800 people would be employed by the convention centre.

What does the agreement involve?

In return for the construction and operation of a $402 million International Convention Centre (including construction and fit out of $315 million), the Government has agreed to the following:

• Extending SkyCity’s Auckland casino licence, due for renewal in 2021, to 30 June 2048, and amending it to cover all of SkyCity’s properties in Federal Street

• Allowing an additional 230 “pokie” machines

• Allowing 40 extra gaming tables

• Allowing a further 12 gaming tables, with SkyCity able to swap each table for an automatic table game that seats up to 20 players

• Allowing up to 17 per cent of electronic gaming machines to accept banknotes greater than $20, but only in restricted areas

• Allowing ticket-based and card-based cashless gambling across the Auckland casino (Ticket in- ticket out), with differential limits applied to the amounts that could be deposited and withdrawn.

The concessions will begin on the day the main construction contract is signed and apply for the length of the agreement between SkyCity and the Government, which is 35 years.

What Harm Minimisation and anti-money laundering measures have SkyCity agreed to implement?

• introduction of a predictive modelling tool that analyses loyalty data to identify players at risk of problem gambling

• introduction of a voluntary pre-commitment system where players using “pokies” can elect to restrict the amount of time they play or the amount they spend over a selected period

• doubling of the number of Host Responsibility Executives that SkyCity employs, to deliver 24-hour, 7 days a week coverage of its Auckland site

• the introduction of player identification requirements when amounts over $500 are being loaded onto, or cashed out from, TITO tickets in non-restricted areas

What is covered by the $402 million price tag?

It covers the costs to design, construct and fit out the NZICC and includes the value of the land on which the NZICC will be built. SkyCity will enter negotiations with TVNZ in order to secure some of that land. That will be a standard commercial transaction.

What aspects of the agreement are conditional on resource consents being granted?

Any agreement would be conditional on SkyCity obtaining resource consents for the NZICC, including at least 780 car parks. It would also be conditional on SkyCity obtaining resource consents for changes to its existing premises needed to accommodate the additional gaming facilities that SkyCity is to receive as a result of the agreement.

What compensation arrangements has the Government entered into with SkyCity in regards to the Convention Centre Agreement?

The Government has agreed that if the Crown acts in a way to change the concessions as listed in the agreement, SkyCity will be entitled to compensation under the agreement calculated by reference to the KordaMentha report

Why has the Government agreed to compensate SkyCity if certain gambling regulations and casino duty rates change?

SkyCity will be making an upfront investment of $402 million (including $315 million for the construction and fit-out and $87million in the provision of land) to build the NZICC but it will take 35 years for the company to receive all the benefits of the regulatory concessions granted in return.

Given the size of the investment, SkyCity needs some certainty about what would happen if any of those concessions were changed. For that reason, the agreement says that if the regulatory concessions are changed before the 35 year period is up, SkyCity will be compensated by the Government under the agreement.

Any compensation paid to SkyCity would be equivalent to the concessions lost over the time period for which they are not available to SkyCity. Any compensation will never exceed SkyCity’s total investment in the NZICC (land and building) and any other assets it acquires or develops as a consequence of the agreement with the Crown.

The Government would also compensate SkyCity for any increase in casino duty in respect of SkyCity’s casino business in Auckland from the signing of the full agreement until four years after the completion of the NZICC. It is important to note that the Problem Gambling Levy is not covered by this arrangement and any change in the Problem Gambling Levy is not subject to any compensation.

Why did KordaMentha work out the value of the agreement?

KordaMentha was engaged to assess the value of the agreement to both parties, and to assess for the parties whether the agreement was fair to both. They have concluded that they consider the proposed transaction to be within the range of reasonableness from the perspective of both parties.

They have also provided values for each element of the concessions provided to SkyCity, which will be used by the Parties in the future should the concessions be altered in such a way that compensation is payable to SkyCity by the Government.

What additional investment is the Government making to promote New Zealand as a convention centre destination internationally?

The Government is investing $34 million over four years through Tourism NZ to attract large-scale events and conferences to New Zealand but this funding is not specific to any convention centre.

What happens if no agreement is finalised by mid-June?

The parties are able to agree to extend the deadline if they wish to. However, if no final agreement is reached, the Heads of Agreement would lapse, and the Government and SkyCity would no longer be bound by commitments included in the Heads of Agreement.

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