Subcontractors around the South Island swept up in the
Mainzeal receivership face an unnerving few weeks as the
receivers determine the state of the company, and the likely
tens of millions of dollars owed to subcontractors.
Dunedin-based Foley Plumbers stopped working with Mainzeal in
Canterbury 11 months ago. Other main contractors should ''sit
up and take notice'' of the Mainzeal issue, Foley director
Chris Sutherland said yesterday.
''This [receivership] is going to have a massive financial
impact on subbies ... we're likely talking tens of millions
of dollars [owed] here,'' he said.
The receivership appears to have taken by surprise most
subcontractors, estimated to number about 1000, who were
when greeted at locked site gates by security guards in
Auckland and Wellington yesterday. They must now wait for the
receivers to painstakingly determine who owns which tools and
building materials on site.
Separately, listed electricity lines distribution Horizon
Energy Distribution Ltd yesterday said its wholly owned
subsidiary, Aquaheat New Zealand, is likely to incur ''a
significant adverse financial impact'' because of the
Mr Sutherland said because of the tight economy and recession
during the past two and-a-half years, some main contractors
were ''screwing down'' subcontractors during the tender
process and their profit margins were being ''cut to the
''That sort of thing forces corners to be cut during
building. [But] that comes back to bite them,'' Mr Sutherland
said of the likelihood of inferior work having to be redone.
He affirmed the anticipated Canterbury rebuilding had been
slower to start than expected, but since the tendering aspect
of construction ''took off'' during the last quarter of 2012,
subcontractors were now having to commit to work and he
expected ''work will take off and fully ramp up this year''.
He estimated Foley's turnover from Canterbury work would be
hundreds of thousands of dollars for each of the next two
years. The 75-year-old Dunedin company has about 100
employees at six South Island locations.
It struggled a year ago to maintain work for its 12
Canterbury employees, but that number was up to 14 yesterday
and when needed, some Dunedin staff had worked two out of
three weeks in Christchurch.
Mr Sutherland said Mainzeal ''had a reputation'' for tough
dealing with subcontractors and Foley had pulled out of a
Mainzeal contract last year, because of ''post-tender
issues'', where job pricing was being forced down.
Mr Sutherland's estimates of ''tens of millions of dollars''
being owed is based on Mainzeal having about 400 staff, the
majority of who were project managers, who used
subcontractors, as opposed to employing their own carpenters,
concrete layers, steel-fixers, finishing carpenters and
electrical and plumbing tradespeople.
The impact will be ''severe'', because subbies working on
already tight margins would have been earning less in recent
times, so any unpaid debts hits their businesses harder.
''There's going to be a lot of very worried subcontractors
out there, waiting for the receiver's first report,'' he
Mr Sutherland said Mainzeal had operated in Dunedin until the
mid-1980s, and had since done a small number of smaller jobs
in the city and Queenstown, but he understood Mainzeal may
had been considered as a tenderer for the $50 million-$80
million dental school project.
Horizon Energy chairman Rob Tait said in a market update
yesterday that Aquaheat was owed an unspecified amount of
money on Mainzeal contracts and its management was still
assessing the financial position.
''However, it's clear there will be an impact on the Horizon
Energy Group profit for the current financial year,'' Mr Tait
The receivership announcement came as a surprise, as
contracts were proceeding as planned and as late as Tuesday
Horizon was engaged in discussions with Mainzeal personnel
over current and future work, without any hint of trouble, Mr
He said Horizon's lines business was constrained by
regulations and a limited growth potential in the Eastern Bay
of Plenty and the development of non-regulated businesses
such as Aquaheat was ''fundamental'' to its growth.
Once Horizon had ''reviewed our commitments and obligations
under the many contracts we have with Mainzeal'', the company
would advise shareholders and the market ''as soon as we have
more certainty'', he said.