Project Auckland: Construction bosses upbeat about the state of the industry (NZ Herald)

Project Auckland: Construction bosses upbeat about the state of the industry (NZ Herald)

When surveyed in September for the Herald’s Mood of the Boardroom, the country’s leading construction and infrastructure companies said they were scrambling to reset their businesses in the new world created by Covid-19.

There was huge uncertainty in project pipelines, with works significantly down due to the cancellation of jobs. CEOs told the Herald that the priority over the next six months would be to ensure specialist skills could be secured despite the border restriction constraints, and re-setting a “forward cost base within an uncertain demand profile”.

Six months on, CEOs are upbeat about the state of the industry, noting it has recovered well following the initial lockdown last March.

This is critical to Auckland’s future where the lion’s share of the infrastructure and construction build is taking place.

Peter Reidy, Fletcher Construction chief executive and co-chair of the Construction Sector Accord says it is was pleasing to see how well the industry adapted to Covid-19 protocols, noting that Fletcher’s biggest projects continued throughout Covid-19 alert level 3 and essential workers adapted to new ways of working safely in level 4.

“That speaks volumes to the emphasis we are all putting on safety in the workplace,” he says. But he raises concerns with local council infrastructure investment, with pressure on rates and a decline in developer contributions and local council investment returns pointing to big gaps in infrastructure capital investment to meet expected demand.

Reidy says it is pleasing to see that the Minister of Finance, Grant Robertson, is now also the Infrastructure Minister: “We look forward to continued investment to plug New Zealand’s considerable infrastructure deficit,” he says.

Downer chief executive Steve Killeen says the remarkable recovery from what could have been an 80s-style recession speaks to the resilience of the sector and the actions taken by the Government to ensure workload, liquidity and confidence remained intact. He says it was particularly reassuring that Downer’s clients — public and private — maintained dialogue about their project intentions and opted for simple, effective procurement mechanisms.

“I’m pleased to say the commercial building market recovered quicker than expected and we have now secured wins in education, health and defence that will see our revenues recover in the FY22 financial year.” However, he notes that the past year of uncertainty has reinforced the tendency of the sector and its client base to think short term, slowing down the focus and investment needed to resolve intergenerational issues that stand to negatively impact both the sector and the quality of life in the communities it serves.

Beca CEO Greg Lowe says that large infrastructure projects have started to build up momentum again following the Government’s commitment to the New Zealand Upgrade Programme, the investment in “shovel-ready projects”, and some urgent work needed around water supply and water treatment.

However, he says many private sector projects — particularly the vertical construction market (construction of high rise commercial and residential buildings, as compared to horizontal construction which relates to infrastructure and related construction) — have slowed right down.

“This is an area where small contractors and tradespeople are employed,” says Lowe. “However, more hospital and university projects are helping to fill this gap, and vertical projects driven by local councils are also helping to keep contract work and employment up.”

Fulton Hogan managing director Cos Bruyn says though he is seeing signs of improvement in the private sector now, it will still be some time before activity matches the level that existed pre-Covid. He says that short-term the workload is a good, but describes the medium- to long-term outlook as “murky”.

He puts this down to the challenges of getting work consented being as problematic as ever, the legislative reform being considered by the Government including RMA, and the implementation of National Environmental Standard for Freshwater 2020 — which he says is a big issue for the Auckland region and has the potential to sterilise new residential and commercial development land and quarry reserves.

The industry’s leading chief executives were asked about the biggest challenges they are now facing:

Peter Reidy, Fletcher Construction

The technical skills capacity shortage, particularly in core, frontline project delivery roles is a major challenge.

We are starting to see the real impact of border closures on labour and skilled technical capability. There is competition for these skills domestically and labour costs are increasing in the infrastructure and commercial construction sector.

There is a lot of time and effort going into apprenticeship and graduate programmes in the industry, which is great to see, but you just can’t train in a short space of time for roles which require very specialist skills or international experience.

As an industry we need a much greater focus on inclusion and diversity in our workforce. The number of women attracted to and entering construction is still far too low and we have to do something about that. It’s great to see a real focus on apprenticeships and graduates and what we can do there but ensuring our workplaces are genuinely inclusive for everyone — culture, gender, age and sexuality — is still a priority.

Plenty of challenges today.

The challenge for tomorrow is attracting the new skills needed for the future of the industry, including a more digitally-enabled construction eco-system.

Steve Killeen, Downer

I guess my biggest personal challenge is facing the reality that I may finish my career in a sector that is no better, and in some cases worse, than when I started in the 80s. A sector typified by a lack of sufficient skilled resource, failure to adopt technology, mixed quality and efficiency and very alpha male in the way it goes about business.

I’m still committed to making a difference and have given a lot of thought to the root cause of the sector’s challenges – I believe there are three nuts we need to crack:

• How do we provide confidence in the pipeline of work and ultimately level the workload?
• How do we get the best creative, technical and practical minds around our immediate and future social and economic infrastructure needs?
• How do we focus on long term cost-efficiency rather than price?

Covid and the restrictions it imposes could well be described as the greatest current challenge to the construction industry. However, it is my view that it purely magnifies immediate issues and reduces our focus on the long-term challenges in the sector.

Cos Bruyn, Fulton Hogan

Availability of skilled labour is of growing concern and this is being felt now in the Auckland market. This is a big issue in Australia presently with high demand in a number of states given the strong infrastructure build materialising now. NZ will be targeted as a labour resource pool adding to the challenge.

There is a distinct lack of major project work in the South Island and this will have long term ramifications in retaining resources and key skills.

Overall, the sector along with the rest of NZ will have to contend with the ongoing uncertainty the Covid response brings; recent decisions to lock down have been made with little notice and reduce our ability to plan or mitigate the impacts. This is impacting on the mental wellbeing of our staff and all New Zealanders.

We are also starting to see significant cost increases in imported materials and availability. We have yet to see the worst of this.

Bitumen is a high-volume and high-cost input in the roading sector. Production of domestic bitumen at the Marsden Point Refinery has closed, so the NZ market is 100 per cent reliant on imported bitumen. This may lead to supply chain resilience issues and cost increases.

Greg Lowe, Beca

Predicting start times for design work on large projects is an ongoing challenge. Across many sectors there is a long delay from being advised of bidding success, to then getting contracts in place and work starting. This can leave people intended for projects sitting “on the bench” for longer than needed.

With low unemployment and a need to bring more resources into the sector to ensure projects get to construction as early as possible, staff capability growth is key. We focus heavily on graduate recruitment, staff development and attracting Kiwis back to New Zealand, but longer term this won’t be enough. We will need more skilled labour from offshore to augment staff development here.

Border restrictions are still a challenge with high demand on managed isolation and quarantine. We have three main challenges — getting overseas Kiwis we have recruited a confirmed place in MIQ, getting critical workers needed for projects who are not Kiwis through MIQ, and getting a plan in place for our people who are needed on site on our overseas projects.

Overseas sites have considerable restrictions in place and it’s tough work, meaning people want to know they can get home for a break. This is important because this is export services revenue for NZ — we do work here on overseasprojects, then need to send Kiwis overseas to the site for implementation. This generates export revenue, which is currently on hold. We need a way to book people into MIQ say six months out so our staff have the confidence to go on overseas assignments.

2020 year in review (NZ Herald)

“Start the new decade with a splash.” That was the first headline in the New Zealand Herald on January 1, 2020. The same cover featured Steve Braunias’ wish list for 2020, which included “anything resembling peaceful easy feelings in 2020”.

The front pages of the Herald in 2020 started out tame enough: the Australian bushfires, Harry and Meghan’s departure as senior members of the royal family (Megxit), Elton John cutting his Auckland concert short due to illness, and complaints about the number of cones in Auckland’s CBD. The cones stuck around, but the tame headlines didn’t.

The pandemic was first hinted at on the cover of the Herald on January 24, with a story about two international students who were due to start school in New Zealand and were stuck in Wuhan due to a “deadly virus causing global alarm”.

The word “Covid” premiered on the front page of the Herald on February 29 (following confirmation on February 28 that the first New Zealand case was confirmed). From there, the pandemic tightened its grip on the world and since then, the word appeared on the cover some 376 times this year.

March was a challenging month for so many of us, and as the events of the year so quickly blurred together, it is easy to forget the rapid succession of events that took place in that month alone.

The national remembrance for the first anniversary of the Christchurch mosque attacks was cancelled over concerns of the virus. Pasifika was also cancelled. Then, one after the other, we saw mandatory self-isolation introduced for returning travellers, restrictions on travel to the Pacific Islands, a ban on cruise ships and public gatherings, the closure of the border to all but New Zealand citizens and residents, the Covid alert level system introduced, and then finally, the nationwide lockdown and the introduction of the 1pm Jacinda Ardern and Ashley Bloomfield show.

Over this time, the front pages of the Herald featured photos of the empty streets of central Auckland, Covid testing centres and people taking to the beaches and parks for fresh air during the lockdown.

Unsurprisingly, Ardern tops the list with the most appearances on the front page of the Herald, featuring some 66 times throughout 2020. Bloomfield made the cover nine times during the year – his first appearance was on March 16.

  • The Herald used the alert level changes to get creative with puns, with some of the best including:
  • April 21: One more week (but it won’t be level free)
  • April 28: Threedom
  • May 5: Zeroing in on level 2
  • May 8: Two good!
  • May 11: Two be or not two be
  • June 4: One-derful
  • June 8: Only 1 option
  • June 9: What a one-derful world

The National Party received a large share of cover stories throughout the year as it was besieged by leaks, turmoil and the leadership change from Simon Bridges (eight cover appearances) to Todd Muller (13 appearances), then to Judith Collins (29 appearances).

Other major events that made the cover of the Herald included the tragic death of policeman Matthew Hunt in June; the sentencing of the Christchurch terrorist in August; Auckland’s damaged Harbour Bridge in September; the run-up to the delayed New Zealand election that felt like it would never come; the US election in November (Donald Trump had 15 cover appearances in the Herald, Joe Biden had 10).

It is hard to believe that NBA legend Kobe Bryant’s untimely death also happened this year, all the way back in January.

While sport had a muted year, cricket, rugby, rugby league and the America’s Cup all featured on the front pages of the Herald. All Black Beauden Barrett topped the count with 26 appearances – eclipsing captain Sam Cane who had 15.

Kiwi music star Benee made the cover eight times.

Several iconic cartoons by Herald editorial cartoonist Rod Emmerson were published on the front pages this year, including: “The ripple effect” (for the anniversary of the Christchurch mosque shootings), “A whānau of 5 million” (at the start of New Zealand’s Covid-19 lockdown), and “A time for justice” (for the sentencing of the Christchurch terrorist). Emmerson’s superb cartoons also featured on the covers during the election, and for Finance Minister Grant Robertson’s announcement of the Government’s economic support package for Covid-19 and its “Rebuilding Together” 2020 Budget.

In a year with little good news to celebrate, opportunities for positive front pages of the Herald this year were limited. But for me, it was those stories that showed the resilience of Kiwis in the face of adversity that really stood out:

  • Inspirational Whakaari/White Island survivor Kelsey Waghorn was on the cover on January 9 – one month after the volcano erupted – with the headline: “She’s not giving up.” Five months later she was on the cover again, this time with: “Thank you for saving my life,” directed at the strangers that came forward to donate the blood she needed in
    the aftermath of the eruption.
  • The sense of community felt during the first lockdown in March saw the “team of five
    million” featured several times on the cover – though this feeling waned by the second
    Auckland lockdown on August 26, when the Herald led with a headline: “Team of 5m: ‘We’re over it.'”
  • On April 4, the cover was dedicated to the courage shown by workers performing essential services on the frontline during the lockdown. Also on the cover during the lockdown was the Bear Hunt movement, as communities around the country used teddy bears to put smiles on the faces of children during a time of such incredible uncertainty.
  • As New Zealand emerged from lockdown and sprung back into a level of normality, the
    covers showcased business people, shops, cafes and restaurants as they were able to return to work, throw open their doors and be back in action.

2021 will not be the year we had anticipated a year ago. Many of the major events we were looking forward to: Apec, the men’s Softball World Cup, the Women’s Cricket World Cup, Auckland’s Laneway Festival, Womad and the kapa haka Te Matatini festival have been cancelled, postponed, or will instead be held online. But as we look around the world and see that, unlike most other countries, we have been able to celebrate Christmas and the end of 2020 tonight at New Year’s Eve parties, it is hard not to appreciate how lucky we are to be in Aotearoa.

I won’t be so bold as to wish for “anything resembling peaceful easy feelings” for the coming year, but perhaps a wish for a little less time spent inside the house and a few more upbeat news stories will suffice. Flipping the calendar over may not be a panacea that puts an end to the raging pandemic, but it is not an election year – so at least that’s a start! Here’s to 2021!

By the numbers – the number of times on the cover

  • Jacinda Ardern: 62 (+4 cartoons) – not including election advertising
  • Judith Collins: 27 (+2 cartoons)
  • Beauden Barrett: 26
  • Sam Cane: 15
  • Donald Trump: 15
  • Todd Muller: 11 (+2 cartoons)
  • Joe Biden: 10
  • Ashley Bloomfield: 9
  • Benee: 8
  • Meghan Markle: 8
  • Winston Peters: 8 (+3 cartoons)
  • Prince Harry: 7
  • Simon Bridges: 6 (+2 cartoons)
  • Greg Foran: 4
  • Queen Elizabeth II: 3

Deloitte Top 200: Beca wins Sustainable Business Leadership award (NZ Herald)

Deloitte Top 200: Beca wins Sustainable Business Leadership award (NZ Herald)

Beca is motivated by its purpose to “make everyday better” and a values-driven culture to deliver transformational solutions with its clients and rise to the challenge of sustainability.

Beca is one of Asia-Pacific’s largest independent advisory, design and engineering consultancies. It has over 3300 employees in 21 offices around the world, and has delivered projects in more than 70 countries. It says the most positive impact it can have on the planet is to work with its clients, its people and its communities to help deliver transformational solutions and succeed in a sustainable way.

The Deloitte Top 200 judges commended Beca for putting sustainability at the centre of its operations; even recognising sustainability’s importance 10 years ago when it wasn’t mainstream. The judges said it is clear that Beca recognises how crucial building resilience to climate change is to its business, and this is one of the key reasons the firm has been chosen as winner of the Sustainable Business Leadership award.

“Sustainability requires both mid-term foresight and a critical assessment of its current practices,” says Top 200 judge Ross George who is managing director of Direct Capital. “Beca balances these two elements and has the ability to encourage clients to do so in their projects as well.”

The award highlights businesses that are working towards the creation of long-term environmental, social and economic value. The judging criteria covers governance, long-term perspective, integration of ESG (Environment, Social, Governance) considerations and projects to support sustainable development.

In Beca’s most recent sustainability review, Chair David Carter and CEO Greg Lowe say: “The global challenges facing our world present numerous opportunities for Beca and our clients to mitigate risks, adapt, evolve, innovate, and thereby make everyday better for future generations.”

Beca was one of 60 founding signatories to the New Zealand Climate Leaders Coalition that commited to voluntary action on climate change.

The firm set a carbon target, committing to reducing its emissions 32 per cent by 2030 from a 2018 baseline — consistent with the need to keep planetary heating below two degrees. It has adopted an absolute emissions reduction approach, to include those emissions Beca has direct control over, as well as indirect emissions from its full supply chain. This includes building energy efficiency, its global supply chains, the vehicle fleet, business travel and even how its employees get to and from work.

Initiatives introduced by Beca include recommending its staff to use public transport to visit clients, reducing the number of vehicles it has and replacing them with more fuel-efficient models. Its Hamilton office even has a worm farm on-site, which converts food scraps from the kitchen to bottled fertiliser.

Beca has made a strategic response to the critical challenges New Zealand’s most populous city faces. Beca says it wants to help Auckland grow sustainably, and is working with clients including Auckland Council, Auckland Transport, Watercare, Panuku and NZ Transport Agency to deliver sustainable solutions to the challenges the city faces.

One example is New Zealand’s largest wastewater project, the Central Interceptor. It is an integral part of Watercare’s long-term wastewater strategy for the region. The 13km tunnel is expected to decrease wastewater overflow by approximately 80 per cent.

Beca says an important focus for the Central Interceptor is maximising opportunities for long-term sustainable outcomes. Its services include the integration of sustainability requirements into all project areas to support the eventual delivery of an ‘Excellent’ rating under the Infrastructure Sustainability Council of Australia (ISCA) Infrastructure Sustainability Rating Tool. One key requirement of this is to complete a carbon footprint baseline for the project, from which carbon reduction initiatives from the design and construction phases will be measured.

Beca’s sustainability team recently put together a think piece on how New Zealand’s post-Covid recovery and rebuild opportunities could support decarbonising New Zealand and contribute to a future of sustainable prosperity.

The think piece says, “The scale of investment we are making and the legacy of this for future generations, means it is critical that we take this opportunity to significantly accelerate the decarbonisation of our economy. By taking this approach, our recovery will support a more prosperous, equitable and sustainable society.”

It identified eight key transitions that would best enable New Zealand to rapidly shift to a low-emission economy, while simultaneously creating jobs, addressing many of New Zealand’s critical challenges and moving to a prosperous, circular and equitable economy. These include transport, electricity, agriculture and forestry and social infrastructure.

The judging panel commended Beca for not only encouraging sustainability and climate change within its own organisation, but for working alongside its clients and communities to continually challenge and improve sustainable outcomes.

Finalist: Kathmandu

Kathmandu Holdings is a global outdoor, lifestyle and sports company. As a group, it owns outdoor adventure brand Kathmandu, North American hand-made footwear wholesaler Oboz and Rip Curl surfwear.

This year, the group launched its first combined sustainability report. Inside, Kathmandu chair David Kirk and CEO Xavier Simonet say despite the impacts of Covid-19, all three brands have made significant strides in sustainability this year.

“Covid-19 threw many challenges to our brands, but each of them have found ways to learn from these challenges and make the most of the opportunity to rethink the way we operate,” they say.

The Top 200 judges commended Kathmandu for boldly making sustainability commitments and note the firm has begun putting actions in place to embed sustainability right throughout the organisation. This is one of the key reasons it was chosen as a finalist for the Sustainable Business Leadership award.

Last year, Kathmandu Holdings’ original brand and namesake Kathmandu became the largest Australasian retailer to achieve B Corp certification — the stringent certification process as part of the Certified B Corporations movement.

B Corps implement the Global Reporting Initiative, an independent standards organisation that helps businesses, governments and others understand and communicate their impacts on issues such as climate change, human rights, governance and social wellbeing. Kathmandu will need to re-certify every three years to maintain the status.

In its 2020 Sustainability report, Kathmandu says that being a B Corp comes with a lot of responsibility, but acknowledges that without that responsibility right at the top, it can be easy to overlook.

By 2025 it aims to become a leading Global B Corp and integrate circular economy principles within its business.

Back in 2014 Kathmandu also became the first Australasian company to join the internationally renowned Fair Labor Organisation as part of a commitment to enhance its social compliance programme and use ethical suppliers.

“These accreditations confirm Kathmandu’s commitment to balancing human, environmental, transparency, and profit considerations,” says judge Ross George.

Across its other brands, other advances from Kathmandu Holdings this year include Oboz launching its first range of footwear containing recycled materials and algae boom insoles and Rip Curl celebrating its 20th anniversary of its planet day.

Inside this year’s sustainability report, Kirk and Simonet say that Kathmandu Holding’s brands will be able to leverage their strengths to work together for an even greater positive impact.

Finalist: Vector

Vector is New Zealand’s largest distributor of electricity and gas.

It owns and operates networks which span the Auckland region.

Vector says its approach to sustainability is to deliver innovative, long-term solutions for its shareholders, customers, partners and suppliers to build shared resilience, reduce its carbon footprint and help regenerate the environment.

It has been taking an active leadership role in how it decarbonises and electrifies transport while maintaining the reliability and affordability of energy.

Energy systems in New Zealand and globally are under pressure to respond to the uptake of new consumer energy technology, electrification of transport, demands for decarbonisation, increased consumption of renewable energy and energy poverty.

The judges say Vector’s business is centred in the middle of a digital and technological revolution and that this puts it in a great position to look at a cleaner energy future.

“Vector is not frightened of facing disruption during a time where decarbonisation is accelerating and its customers are increasingly aware of this,” says judge Ross George.

While some energy companies are taking a “wait and see” approach, Vector has introduced its “Symphony” strategy to address this disruption and create a new energy future.

Vector says this strategy enables it to drive better environmental, social and economic business outcomes such as energy affordability, decarbonisation and the circular economy, aligned to the UN Sustainable Development Goals.

Vector is an active participant in the Aotearoa Circle, Sustainable Finance Forum, Sustainable Business Council and Climate Leaders’ Coalition.

In the past year it has reduced its carbon footprint by 23.6 per cent.

Earlier this year, Vector’s renewable energy business Vector PowerSmart worked alongside Watercare to deliver New Zealands’s first floating solar array on the Rosedale wastewater treatment pond.

The array was opened in October and features more than 2700 solar panels and 4000 floating pontoons.

It will generate 1486MWh per year — the equivalent of 200 average New Zealand homes and enough electricity to power a quarter of the energy plant — with zero emissions.

The Battery Industry Group (BIG) is another sustainability initiative led by Vector.

Launched last year, BIG is a cross-industry collaboration to design reuse and recycling solutions for large batteries, commonly found in electric vehicles or in stationary energy storage.

BIG now has more than 140 organisations and individuals as members across energy, waste, transport and battery industries.

Opinion: Covid-19 provides impetus for fundamental change (NZ Herald)

 

Opinion: Covid-19 provides impetus for fundamental change (NZ Herald)

It has been three years since Prime Minister Jacinda Ardern called climate change “my generation’s nuclear-free moment”.

While the previous Government was unable to declare a climate emergency in the last term — believed to be because Labour’s coalition partner New Zealand First blocked it — she has now made it a priority with a declaration of a climate emergency.

Since Covid swept the world, it has done a lot to emphasise the social and economic inequalities that exist globally. The harsh reality of the lockdown exposed that, even in New Zealand, women and low wage workers were most impacted by job losses and reduced work hours.

Similarly, the relationship between climate change and inequality will see those who are disadvantaged suffer disproportionately from the adverse effects of global warming. The need for action to achieve New Zealand’s vision of a thriving, climate-resilient, low emissions future is widely understood.

The same areas that New Zealand used to successfully respond to the Covid-19 outbreak are needed to address global warming: listening to scientists, public policy and international co-operation.

When US President-elect Joe Biden spoke with Ardern for the first time since the US election last month, he spoke positively about her handling of the pandemic and said he looks forward to working closely with her on common challenges, including tackling climate change. Biden has named ex-US Secretary of State John Kerry — one of the leading architects of the Paris climate agreement — as his climate envoy.

“America will soon have a government that treats the climate crisis as the urgent national security threat it is,” said Kerry.

This break from the Trump administration’s climate policy will put our Government to the test, and necessitate that our ambition reflects our action.

Speaking recently at the Institute of Financial Professionals in New Zealand (Infinz) conference, Climate Change Commission chair Dr Rod Carr said the commission’s current programme of work is to produce the first emissions budget out to 2035 — and to the extent that we are not on track to achieve our domestic targets and global obligations, advise on a reduction plan that will reduce those emissions having regard to a wide range of impacts.

“It is important to understand that climate action is now mainstream conversation, and understand what is to be done, by who, and by when,” he said.

New Zealand emits about 80 million tonnes of carbon dioxide-equivalent greenhouse gases every year, and under the international accounting rules sequesters about 10 million tonnes, largely through forestry. Nearly half of those emissions come from agriculture.

The challenge for New Zealand, says Carr, will be that although our form of pastoral agriculture may be one of the most efficient ways of producing meat and milk protein in pastoral agriculture, there may now and in the future be ways of producing meat and milk proteins with an even smaller greenhouse gas footprint.

Of the remainder of our greenhouse gas emissions, transport makes up about 40 per cent. It is a growing contributor, with household transport emissions increasing by 15 per cent between 2011 and 2017.

Carr says this will be one of the major challenges that will go to the heart of both the allocation of capital by private vehicle owners, fleet operators and government infrastructure providers.

“Converting ground transportation to low or no emissions is a 100 plus billion-dollar investment challenge over the next 30 years,” he says. “Known technologies exist. They largely require electrification, and that electrification needs to be provided from renewable energy sources, unless it is to continue to contribute to greenhouse gas emissions.”

Navigating our economic recovery from Covid-19, while finding solutions for our climate change challenges will require a substantial and coordinated response. This will mean making sure capital is deployed to support the new age, new technologies, and new and necessary ways in which we conduct business.

Covid-19 exposed major weaknesses in our society. But it has also given us the impetus to make fundamental changes that will address inequality and fuel an economic recovery that is long-lasting and sustainable. Without a handbrake on the Government — and with a renewed impetus from international leadership to deliver — now is the time to make sure New Zealand isn’t left behind.

Deloitte Top 200: Liz Coutts named Chair of the Year (NZ Herald)

Deloitte Top 200: Liz Coutts named Chair of the Year (NZ Herald)

Liz Coutts is a highly regarded director with over 20 years’ experience in governance roles across public and private enterprise.

She currently chairs Ports of Auckland, Oceania Healthcare, Skellerup Holdings and Ebos Group and is highly respected for her governance style, which she describes as “inclusive, calm and decisive”.
The Deloitte Top 200 judges say these attributes have been demonstrated by Coutts in the way she has dealt with Covid-19 this year across a range of industries to achieve success, and, it is what distinguished her as 2020 Chairperson of the Year.

“Skellerup has had another year of strong performance, and Ebos Group’s total shareholder return over the past decade exceeds 20 per cent per annum,” says Deloitte Top 200 judge and independent director Cathy Quinn.

Coutts has been on the board of many of NZ’s leading organisations, and her dedication to governance saw her appointed an Officer of the New Zealand Order of Merit in 2016.

She enjoys being involved in industries that have a significant impact on the economy. “Each one of the companies I am involved in plays a key role — whether it be in a market or an industry,” she says.

The judges say Coutts is someone who regularly moves from a director role to then chairing the audit and risk committee of an organisation, and then becomes chair. She has held many of her directorships for a long period of time — she joined the Skellerup board in 2002 and appointed chair in 2017, became director of Ebos Group in 2003 and chair in 2019, and joined the board of Ports of Auckland in 2010, becoming the first woman to chair the port in 2015.

Coutts says one of the things that keeps her interested in her roles are the people on the board and in management. “That’s what keeps you there — you are interested in the people you’re working with and you feel like you have a key role to play to make a difference,” she says.

This year, Coutts says the biggest challenge with Covid-19 was dealing with the unexpected on such a global scale. “We all have risk registers that include pandemics, but to actually operationalise something and bring it into effect when it hasn’t been done before on such a scale has been difficult because of the unpredictability,” she says. “And now we are thinking about what next year is going to look like, how it will affect us, how and when the world’s economy will open up and what will the future be like — we try to predict that but it is hard.”

Each of the companies Coutts chairs have been affected differently.

Skellerup Holdings provided an early warning about Covid-19 because of its operations in China, Italy and elsewhere around the world.

“We have been at the forefront internationally with this global pandemic, learning what has been happening around the world from international staff,” she says. “It has given us huge insight into what is happening globally.”
The rubber goods manufacturer was able to mostly continue to operate throughout the worldwide lockdowns because of the critical nature of many of its products. The strength and resilience of its agri-business helped it to achieve net profit on par with last year’s result.

Chairing Ports of Auckland is not an easy task and it requires strong and courageous leadership to advocate for it. This was made even more challenging this year when the worldwide surge in consumer demand resulting from the pandemic created challenges for all ports around the world.

Coutts says it has been very difficult to manage, but “regardless of that we just have to keep calm, keep focused and get through this.” Despite it being a tough role, she says she relishes the challenge because of the incredibly important role the Ports of Auckland plays in New Zealand’s economy.

Aged care provider Oceania Healthcare is another business that has required intense management over the pandemic in order to keep its operations functioning and its residents and staff safe.
“We worked hard with residents to make sure they still had a good experience and could communicate with their family and friends virtually,” she says. “We put in a lot of extra support so we could do their shopping for them and keep up their communication.”

Communication has been critical for all her companies this year — “People were working at home and they were working alone… it wasn’t just physical support but emotional support that people needed.”
When asked to name a highlight in her governance roles this year, Coutts says it is the way the companies she chairs have been able to continue with business as usual while operating in a totally different way.

“I have been so impressed with some of our leaders around the world with what they have achieved.

“It’s quite amazing when you get something like this global pandemic how well everyone pulls together.”

Finalist: John Loughlin
John Loughlin says he enjoys working with businesses that are trying to do things where he senses there is an aspiration for performance and a drive to do things that are special.
Loughlin has had a broad governance career with a focus on the primary sector, infrastructure and logistics.

He currently chairs Powerco, EastPack, Rockit Global, Hop Revolution, Coda Group, as well as the Meat Industry Association.

“I like an exciting challenge,” he says, noting that can come in many different ways. “In some cases, it comes from early stage companies like Rockit and Hop Revolution, but also in the infrastructure area where there are significant challenges in companies that are very mature.”

Judge Cathy Quinn says Loughlin is regarded as a wise head in the primary sector who has helped a variety of businesses deal with challenging circumstances and then prosper and is among the reasons he has been chosen as a finalist for Chairperson of the Year. “It’s not an easy industry given that Mother Nature can play a huge influence in any year and that global markets, trade barriers and protectionism are matters largely beyond the control of any domestic player or NZ Inc.,” she says.

All of Loughlin’s companies were classified as essential businesses during the lockdown. He says trading through Covid meant massive uncertainty, new risks, and significantly increased degrees of difficulty.
“EastPack and Rockit had to pick fruit at alert level four while maintaining social distancing,” he says. “We had to operate pack houses which have been designed for people to stand shoulder-to-shoulder — that was no longer possible and we had to find new ways to operate as well as navigate a supply chain to market where there was disruption at ports.”

He says while the uncertainty was dramatic and the degree of difficulty was massively elevated, these kinds of challenges make life exciting and they provided some of the most satisfying outcomes for the year.

“At Rockit we packed and sold a crop that was 25 per cent bigger at a price that was one per cent higher than last year, and we did that with some channels to market being closed to us,” he says. “We had to open new channels, we had to be fast on our feet, and we had to use digital advertising particularly effectively. To achieve our growth targets in a really difficult world was incredibly satisfying.”

Finalist: Patrick Strange
Patrick Strange says a chair can only be as good as their board and management, and his nomination as a finalist for Chairperson of the Year is a reflection of the board and management of those companies he chairs.
Strange brings extensive experience in regulated infrastructure to his current chairperson appointments at Auckland International Airport and Chorus. He enjoys these roles because they are both important infrastructure companies for New Zealand.

“We have seen with Chorus the clear benefits of the fibre network during the Covid lockdown, and the airport is the driver of both our business and leisure travel,” he says.

The Deloitte Top 200 judges say he is an inclusive chair that brings out the best in his fellow directors and management teams.

“Patrick is seen as a chair that has been effective in building relationships with Government for the organisations he chairs — he is seen as an honest straight shooter in government circles,” says judge Cathy Quinn.
Strange says this year has been particularly busy, with both companies facing very different and significant challenges due to Covid-19.

“The airport had a huge loss of income which required the board and management to respond very quickly with cost changes but also with the raising of capital to address the balance sheet,” he says.

The judges say the capital raise and the speed at which it was done at a very uncertain time has seen Auckland International Airport well positioned to manage through the uncertainty brought to the business from the impact of Covid-19.

Strange notes that the challenges faced by Chorus were different. While its income wasn’t significantly impacted, the rollout of fibre had to stop during the lockdown and its contractors needed to be supported.

He says the highlight for him at Chorus has been the performance of the fibre network under huge load while so many New Zealanders had to work from home during the Covid-19 lockdown. “It was absolutely unconstrained and fault free, which is a great reflection of the build that has gone on,” he says.

The judges noted that the Chorus share price has risen by 77 per cent in the past 12 months.

“This performance has been recognised with its win in the Most Improved Company category this year,” says Quinn.

Deloitte Top 200: Light in a dark year for NZ’s Top 200 companies

The high-level view of the 2020 Deloitte Top 200 Index shows total revenues for Top 200 companies increasing from $188,561 million in 2019 to $191,580m in 2020 — an increase of 1.6 per cent. This compares to a 4.0 per cent increase in 2019.

Underlying earnings (EBITDA) decreased from $27,027m in 2019 to $25,062m in 2020. This is a decrease of 7.3 per cent, compared to a 5.7 per cent increase in 2019.

The EBITDA margin, an assessment of operating profitability as a percentage of total revenue (total EBITDA/total revenue), decreased slightly between 2019 (14.3 per cent) and 2020 (13.1 per cent).

Total profits after tax have decreased from $10,367m in 2019 to $6,503m in 2020. This is a 37.3 per cent decrease year-on-year, compared to a 6.3 per cent increase in 2019.

Net profit margin (profit after tax/total revenue) decreased between 2019 (5.5 per cent) and 2020 (3.4 per cent).

Total Assets have increased from $230,004m in 2019 to $252,108m in 2020, which is a 9.6 per cent increase and compares to a 4.8 per cent increase in 2019.

The number one spot in the Top 200 Index has been held by Fonterra since its formation in the early 1990s. Its revenue increased by 5.3 per cent during the year to reach $20,282m.

This increase is mainly due to Fonterra’s improved ingredients business pricing and product mix sales.

The 200th ranked entity on the Top 200 index in 2020 is a newcomer to the Index, Airwork, with revenue of $200m. Last year’s 200th ranked company, Juken (the 176th ranked entity for 2020) had revenue of $206m. This is a 2.9 per cent decrease in revenue between the 200th ranked companies year-on-year.

EBOS Group (2nd) has increased in revenue by 25.0 per cent from $7,393m in 2019 to $9,241m in 2020, overtaking Fletcher Building (3rd) whose revenue has decreased by 12 per cent from $8,308m in 2019 to $7,309m in 2020. Fletcher Building had previously held the second-place ranking for four years.

EBOS Group’s increase in revenue is attributed to significantly higher sales volumes in its community pharmacy and institutional healthcare businesses. This results in an 11.2 per cent increase in the revenue of the second-place entity year-on-year, however the revenue gap between the top two companies has remained fairly constant, slightly increasing by 0.9 per cent, as Fonterra (1st) had a revenue increase of 5.3 per cent.

The top 10 has remained quite consistent, with Foodstuffs NI re-entering in tenth place. It had previously dropped from fourth place to 12th place in 2019 due to a change in how revenue was recorded (following NZ IFRS 15 adoption in 2019). Foodstuffs NI’s revenue has increased by 6.3 per cent, from $3,332m in 2019 to $3,543m in 2020.

Foodstuffs NI’s re-entry in the top 10 sees Meridian Energy move down from 10th place in 2019 to 11th place in 2020. It reported a 2.5 per cent decrease in revenue from $3,491m in 2019 to $3,405m in 2020.

Top profits

Fonterra (ranked first in the Top 200 Index) reported the top profit for 2020 at $803m, with its profit after tax increasing by $931m from a loss of $122m in FY19.

This increase in profit is attributed to significantly lower net interest-bearing debt, improved cash flow and an increase in sales revenue for Fonterra in the current year. The prior year loss was mainly due to the write-downs of $203m impairment of its China Farms investment and $237m on its New Zealand food service business.

The top profit figure of $803m reported by Fonterra compares to the 2019 top profit of $1,397m achieved by Shell. The top profit figure has decreased by 42.5 per cent year-on-year.

The average profit after tax across all 200 companies has decreased from $51.5m in FY19 to $32.5m in FY20 – a 36.9 per cent decrease.

Infrastructure investor Infratil (ranked 32nd) has entered the Top Profit Index in 2020, taking second place with a profit of $509m, a 609.1 per cent increase from its $64m reported in 2019.

Telecommunications giant Spark (ranked 9th) has moved up to third place in the Top Profit Index this year, up from fourth place 2019, with its profit after tax increasing by 4.4 per cent, from $409m in 2019 to $427m in 2020.

Specialty dairy company A2 Milk (ranked 22nd) has jumped from eighth place in 2019 to fourth in 2020. Its profit after tax has increased by 31.8 per cent from $295m in 2019 to $388m in 2020.

Lotto NZ (ranked 29th) climbed to fifth place in 2020. Its profit has increased by 27.6 per cent from $261m in 2019 to $333m in 2020.

Biggest losses

The biggest loss for 2020 was reported by Air New Zealand (ranked sixth in the Top 200 Index), with a loss of $454m. This is a $730m decrease for the national airline from its 2019 profit after tax of $276m.

This loss is reflective of the decline in profits in general for the travel industry due to Covid-19. Border restrictions have severely restricted international travel, evidenced by Air New Zealand’s reported 74 per cent decrease in passenger revenue from April-June 2020 compared to the same period in 2019. In addition to this, Air New Zealand incurred $338m aircraft impairment expenses due to the grounding of fleet for the foreseeable future.

KiwiRail (ranked 61st in the Top 200 Index) is 2020’s second biggest loss maker, making a loss of $325m. Note that the financial statements obtained for Kiwirail in the current publication year are for the year ended 30 June 2019, as 30 June 2020 financials had not been made available in time for the publication of the Index.

Pacific Aluminium (49th) and Goodman Fielder (42nd) respectively hold the third and fourth biggest losses in 2020. Pacific Aluminium is a new entrant to the biggest losses index, reporting a loss of $313m (compared to a $236m profit in 2019). Goodman Fielder, ranked 11th on the biggest losses index in 2019, has reported a loss of $242m (compared to a $15m loss in 2019).

The fifth biggest lost was reported by Kiwi Property (170th). Kiwi Property has reported a loss of $187m in 2020, in comparison to its $138m profit in 2019.

Fonterra (1st) no longer holds a spot on the losses index. Last year it was ranked second with a loss of $122m, but in 2020 it reported $803m – the top profit in the Top 200 Index, with its profit after tax increasing by $931m.

Most improved profit

Kordia (ranked 183rd in the Top 200 Index) is a newcomer in 2020 after dropping off the Top 200 Index in 2019. It recorded the most improved profit out of all the entities on the Top 200 index, with a 6558.4 per cent increase from a $0.1m loss in 2019 to $9.6m profit in 2020.

This jump in profit can be attributed to a 9.6 per cent increase in revenue year-on-year from $203m in 2019 to $223m in 2020, specifically in revenue from its Australian business unit, which had declined in 2019 due to the Australian Government’s Chinese vendor ban on 5G networks at the time, but has recovered in the current year.

Meat processor Silver Fern Farms (ranked 18th) has the second most improved profit, recording a profit of $70.7m in 2020 compared to a $5.8m profit in 2019. This is an increase of 1,114.7 per cent.

City Care (ranked 140th) holds third place for most improved profit, with an increase of 875.7 per cent. In the current year, City Care recorded a profit of $5.6m, compared to 2019 where a loss of $0.7m was recorded.

Silver Fern Farms (ranked 18th), Powerco (89th), and Spotless (109th), are the only three companies to be included in the most improved profit table in both 2019 and 2020.

In 2019, Silver Fern Farms held 13th place with a 201.8 per cent increase in profit, Powerco held 16th place with a 194.2 per cent increase in profit, and Spotless held second place with a 734.2 per cent increase in profit. This year, Silver Fern farms holds second place with a 1114.7 per cent increase in profit, Powerco holds 11th place with a 242.9 per cent increase in profit, and Spotless holds 18th place, with a 132.0 per cent increase in profit.

Most Improved Performance

Oil and gas company OMV (ranked 57th in the Top 200 Index) has reported the most improved revenue in 2020. Its revenue increased to $721m in the current year compared to $202m in 2019. This 256.8 per cent increase in revenue can be attributed to increases in both domestic and offshore sales, reporting significant increases in its sales of crude oil and gas.

Newcomer to the Index Microsoft (95th) is ranked second for most improved performance, with a 153 per cent increase in revenue on last year’s result from $183m to $462m.

Another newcomer, Simsmetal Industries (181th), has seen a similar increase in revenue, reporting an increase of 123.2 per cent from $101m in 2019 to $226m in 2020.

Horizon Energy, Scott Technology, and Seeka are also new entrants to the Deloitte Top 200 Index in 2020.

A2 Milk and Xero are the only companies to be included on this index for four years in a row, while Scentre has been included for two years in a row, following its entrance into the Top 200 Index in 2019.

This year’s best growth strategy finalist, Xero, held 11th place in 2019 (35.9 per cent), and now holds the eight spot in 2020 with a revenue growth of 29.9 per cent. Xero has experienced increased revenue over the last four years mainly due to the increase in international subscribers exceeding those from New Zealand.

CDC Pharma is the only company to be included in both the most improved profit and most improved revenue index in 2020.

Return on assets

Return on Assets (ROA) provides an indication of how efficiently a company manages its assets in order to generate earnings. It is calculated by measuring profit against total assets reported.

As a measure, this number tends to be heavily influenced by the requirements of the industry in which the business operates.

Agriculture and manufacturing businesses for example, requiring significant amounts of property, plant and equipment, will typically have a much lower return on assets percentage than a software company.

Lotto NZ (29th) now holds the top spot for return on assets for the second year in a row after entering the Top 200 Index in 2019. It has improved on its previous ROA of 201.2 per cent in 2019 to have an ROA of 214.0 per cent in 2020. The high ROA is driven by a 25.5 per cent increase in profit after tax from $261m in 2019 to $333m in 2020, with total assets of $190m in 2020.

Holding the second spot for ROA is TAB (120th), despite a decrease in its ROA to 102.6 per cent from 109.4 per cent. This is driven by an increase in total assets from $130m in 2019 to $136m in 2020, and a decrease in profit after tax from $146m in 2019 to $137m in 2020.

The third place is held by A2 Milk (22nd), with a ROA of 31.6 per cent (compared to 34.2 per cent in 2019), moving up from placing sixth for return on assets in 2019.

Zespri (12th) placed fourth in terms of ROA, rising from seventh place in 2019. Zespri’s ROA has decreased from 29.9 per cent in 2019 to 23.0 per cent in 2020. This is due to net profit increasing from $180m in 2019 to $201m in 2020 with total assets also increasing from $677m to $1,070m.

The general trend of decreasing return on assets falls in line with the 36.9 per cent decrease in average profits, with second to 20th places for 2020 decreasing year-on-year against second to 20th places in 2019. Only the ROA for first place, held by Lotto NZ, improved year-on-year, resulting in a wider gap between first place and the remaining top return on assets placeholders.

Return on equity

Return on Equity measures how effectively a company can generate income relative to the amount of money shareholders have invested in the firm.

It’s a useful tool for investors, particularly when comparing firms within the same industry and is calculated by measuring the revenue earned against the average equity held over the past two years – to prevent changes in shareholder contributions skewing the results.

Retailer Bunnings (ranked 27th in the Top 200 Index) has taken the top spot for return on equity, moving from 13th place in 2019, with a return on equity percentage of 2639.9 per cent.

Lotto NZ (29th) has replaced mining company Oceana Gold for second place with a return on equity of 767.3 per cent.

TAB (120th), a new entrant to the top return on equity index, has placed third for return on equity of 349.1 per cent.

Oceana Gold (86th) has dropped to fourth place, with a return on equity of 210.2 per cent, a decrease from last year’s return on equity of 786.5 per cent.

With the entrance of TAB, Nestle (101st) now holds the fifth place spot with a return on equity of 204.0 per cent. Last year it was ranked fourth with a return on equity of 566.6 per cent.

The newcomers

As usual, there are a number of companies making a debut on the Deloitte Top 200 Index, with 13 companies added in 2020.

Microsoft entered the index at the highest rank (95th) with revenue of $462m.

Horizon Energy entered the index at the second highest rank (163th) with revenue of $251m. Fleet NZ came in at 171st, with revenue of $242m. Seeka (175th) came in as the fourth highest newcomer, with revenue of $237m.

The rest of the new entries were Simsmetal Industries (181st), Scott Technology (182nd), Kordia (183rd), McConnell Dowell (187th), Baxter Healthcare (190th), Mitre 10 (193rd), Progress Capital (194th), Sistema (196th), and Airwork (200th).

Missed the cut

The 200th place in the 2020 Deloitte Top 200 is Airwork, which recorded $200m in revenue. This compares to Juken, which was last year’s 200th-ranked company on the Index, with $206m in revenue in 2019.

Missing the cut – by just $1m – was Aurecon (201st) and Huawei (202nd), recording revenue of $199m.

Kia Motors (203rd), Pushpay (204th), Skyline Enterprises (205th) and Comvita (206th) were close to breaking into the Top 200 Index in the current year, all achieving revenue around the $196m – $198m mark. Of these companies, Kia Motors and Skyline Enterprises have fallen out of the Top 200 in 2020, previously holding 198th and 176th places respectively in 2019.

Other narrow misses include Oceania Healthcare (207th), Sumitomo Capital (208th), Rexel (209th), and Sealed Air (210th), all with revenue above the $191m mark.

Top 30 Financial Institutions Index

This year’s Top 30 Financial Institutions Index sees the return of Mercedes-Benz Financial Services, claiming 23rd place. There were no other new additions to the Index this year. Last year there were three new additions.

The Top 30 have once again grown their total asset bases, this year by $44,266m from $557,606m in 2019 to $601,873m in 2020. This is a 7.9 per cent increase compared to the 4.0 per cent increase from 2018 to 2019.

Once again, the top bank is ANZ, holding assets of $169,416m which has increased by 6.5 per cent from its 2019 total asset value of $159,012m. ANZ sits comfortably at the top spot with a $60,304m gap in total asset values between first place and second place (BNZ). Furthermore, ANZ also outpaces all other banks in terms of profit and equity.

The second spot in the Index is BNZ for the second year in a row, with total assets of $109,112m. This is an increase of 9.1 per cent from total assets of $99,991m in the previous year.

Westpac and ASB are the next top financial institutions with $106,762m and $105,212m of total assets respectively. This year has seen them trade third and fourth places between themselves, with Westpac overtaking ASB in the current year, after reporting total assets of $96,656m and $98,467m in 2019 respectively.

All of the big four banks: ANZ, BNZ, Westpac and ASB have seen an increase in their total assets of 6.5 per cent, 9.1 per cent, 10.5 per cent and 6.9 per cent respectively.

Of the big four banks, ANZ and Westpac have the two highest return on assets ratios, both of 1.1, while BNZ and Westpac have the highest return on equity ratio of 13.3.

Kiwibank has retained its fifth-place spot with total assets of $25,510m. Kiwibank’s total assets have increased by 12.2 per cent from $22,734m in 2019.

Cumulative profits for the top 30 financial institutions have decreased by 7.5 per cent from $6,503m in 2019 to $6,014m in 2020.

Of the top four financial institutions, only Westpac has increased its profit year-on-year, increasing 1.1 per cent from $1,117m to $1,129m. ANZ reported a decrease in profit from $1,953m to $1,819m (-6.9 per cent), BNZ reported a decrease in profit from $1,029m to $1,022m (-0.7 per cent) and ASB has decreased profit from $1,274m to $958m (-24.8 per cent).

Cumulative equity has increased by 5.7 per cent from $47,263m in 2019 to $49,934m in 2020.

The top 10 financial institutions have remained the same 10 entities from 2019 to 2020.

HSBC has reclaimed eighth place after dropping to ninth in 2019. This is due to a 10.1 per cent increase in total assets. HSBC’s total assets have increased from $6,030m in 2019 to $6,642m in 2020.

MUFG Bank has claimed ninth place in 2020 (up from tenth in 2019), reporting an increase in total assets of 21.0 per cent from $5,383m in 2019 to $6,516m in 2020.

AMP life has increased total assets by 3.5 per cent to $6,315m from $6,100m in 2019 and is ranked tenth this year (down from eighth in 2019).

It is noted that certain financial institutions may have released unaudited earnings announcements that are not reflected in the indices or commentary above.

Deloitte Top 200 2020 event MC (video)

Infrastructure: Bridging the troubled water gap (NZ Herald)

Infrastructure: Bridging the troubled water gap (NZ Herald)

Water is New Zealand’s most valuable asset and the biggest infrastructure challenge of the next decade.

That is the view of Fletcher Construction chief executive Peter Reidy, who says New Zealand’s water infrastructure is well overdue for investment as pipes reach the end of their useful lives.

Reidy says that more than a third of wastewater treatment plants will require re-consenting within the next decade, and almost a quarter are operating on expired consents. Conservative estimates are that the cost of upgrades and renewals will be measured in billions of dollars.

“The public’s environmental expectations are also increasing and the consequences of climate change, including more frequent and more intense droughts, require urgent attention,” he says.

Over the past three years, central and local government have been considering how to address the challenges facing delivery of three waters services (drinking water, wastewater, stormwater) to communities. The review followed the 2016 Havelock North campylobacter contamination crisis that exposed systemic issues in the regulation and provision of three waters.

The result has been the establishment of Taumata Arowai as a Crown water regulatory body to administer and enforce a drinking water regulatory framework, with additional oversight on improving the environmental performance of wastewater and stormwater networks.

In July this year, as part of the Covid-19 stimulus, the Government announced $761 million in funding to maintain and improve three waters infrastructure and to support the reform of local government water services delivery arrangements.

At the funding announcement, Local Government Minister Nanaia Mahuta said there are “massive looming costs across the three waters networks” and the current delivery arrangement, particularly for smaller rural and provincial councils, are not well-placed to meet them.

Although councils currently own and manage most water services, the investment from Government was made contingent on local councils opting in to the government’s wider reform programme.

Fletcher Construction supports the Government’s plans to reform the way we manage water.

“At the end of the day it is all about customers — improving environmental standards, value for money and productivity for customers,” says Reidy. “Having water utilities at scale will also allow for greater investment in digital solutions to water.”

Fletcher Construction has brought together two of its businesses — Fletcher Construction Infrastructure and Brian Perry Civil — to support the establishment of capital construction plus operations and maintenance for water assets to help local government meet their challenges.

In September, Fletcher Construction along with Fulton Hogan signed a $2.4 billion contract with Auckland Council-owned Watercare Services for the delivery of water and wastewater infrastructure for Auckland over the next 10 years.

Watercare said the long-term, collaborative partnership is a first for New Zealand. The planned programme of work — rather than discrete projects — is expected to help drive greater cost-efficiency and innovation. A key goal is Watercare’s aim to reduce carbon in infrastructure by 40 per cent by 2024, to reduce the cost of its infrastructure programme by 20 per cent by 2024 and to “improve the health, safety and wellbeing of all people involved in delivering our infrastructure by 20 per cent year-on-year.”

Reidy says the 10-year partnership with Watercare was secured under a new enterprise model which has audacious cost and sustainability goals. “This is a transformational model of partnership built around carbon reduction, safety improvements and cost savings that challenged our team to collaborate across their specialty areas,” he says. “Watercare has changed the way it partners and that has stimulated Fletcher Construction to respond in a way that puts safety, sustainability and innovation at the core of our model.”

Reidy says it is that kind of model that could work across the country.

“With Wellington Water we are also offering more than just a straight subcontractor model. And that’s because real progress can be made when deliverers are embedded within planning and project teams.”

Reidy says the Government has started this conversation, but we all need to collaborate together to find the solutions. “That’s critical for our cities, our waterways and our people,” he says.

Infrastructure: ICBC - strengthening our resilience (NZ Herald)

Infrastructure: ICBC – strengthening our resilience (NZ Herald)

Infrastructure is one of Industrial and Commercial Bank of China (ICBC) Group’s strategic sectors.

Karen Hou, ICBC NZ’s chief executive, says this focus extends to New Zealand, and has been an area that she and her team care deeply about.

“When you consider infrastructure, it is about delivering long-term projects,” she says. “It is not about short-term profit or short-term achievements, but instead requires a long-term vision.”

She notes that infrastructure not only helps to build the economy but also helps with the country’s resilience.

Hou says while Covid-19 demonstrated that New Zealand can be very resilient, other recent events — including the International Convention Centre fire and the damaged Auckland Harbour Bridge — show that resilience in infrastructure is an area that needs bolstering.

“We are operating here in New Zealand because we are committed to providing the long-term support required to strengthen the resilience of the country’s infrastructure,” says Hou.

“We are interested in all aspects of infrastructure — bridges, railways, motorways, water, power, schools, hospitals, ports, airports, aged care — these are all important areas of infrastructure that will provide fundamental support to the country and help the economy.”

Boosted capacity for funding
In May this year, the Reserve Bank announced it had granted ICBC a licence to operate directly as a branch in New Zealand.

While ICBC NZ will continue to operate in New Zealand as a subsidiary, Hou says the branch licence allows the bank to make a stronger contribution to New Zealand by bringing the consolidated Group balance sheet into play to support local projects. “With this licence, we have a greater capacity for lending in New Zealand — especially into infrastructure and green projects,” she says.

ICBC NZ has been active in New Zealand for over seven years now, and has already been involved in several of New Zealand’s major infrastructure projects.

One of the first projects ICBC NZ became involved in was Transmission Gully. ICBC NZ, along with ICBC Sydney Branch, provided around NZ$100m in the banking syndication to fund the public-private partnership project.

The 27km four-lane project will provide safer, quicker, less congested and more reliable route, bypassing many existing bottle-necks and the more hazardous stretches of the existing SH1, and connecting Wellington to the growing economic centres of Kapiti and the Manawatu and subsequently the wider North Island.

ICBC NZ, along with ICBC Asia, has also recently provided funding to assist Napier Port with their capital investment programme, which includes the development of the new 6 Wharf. “We have been able to leverage the wider ICBC Group’s global resources for this project which provides more funding capacity to our client,” says Hou.

In the 10 years prior to Covid-19, Napier Port has experienced a 50 per cent increase in containers, 94 per cent increase in cruise ships and 64 per cent more bulk cargo.
The new 350-metre-long wharf, for which construction commenced earlier this year, will be a crucial piece of infrastructure for Hawke’s Bay. It will future-proof the port, allowing it to handle larger ships and improve operational performance.

International experience
ICBC NZ has been a long-time supporter of the Infrastructure NZ symposium and is again a sponsor for today’s conference. Now in its fourth year of sponsorship, ICBC says this long-term support reflects its commitment to New Zealand’s infrastructure industry as a whole.

ICBC NZ helped co-ordinate Infrastructure NZ’s delegation to Singapore, Hong Kong, Beijing and Shanghai last year, which included sessions on the national, regional and city governance, their economy and infrastructure funding and financing, masterplan of these mega cities and transport system, and how these countries and areas look at prioritising their investment planning.

Hou says some of the experiences from international practice for New Zealand include the public-private partnership models, alternative construction methods and new funding mechanisms.

Modular construction is an area that quickly gained momentum in international practice and is something New Zealand should consider. In modular construction, the components of a project is done away from the construction site, and then delivered for assembly.

This can include buildings, ships and other key pieces of infrastructure. The use of this method can dramatically increase the speed and lower the cost of large-scale infrastructure projects.

Another example is infrastructure leasing, which is a funding mechanism ICBC uses with operators across Europe, Asia and China, and Hou says is something that could be considered for the delivery of some New Zealand infrastructure assets. This type of funding is often used for aircraft or maritime vessels. “There is a leasing financial team within ICBC Group in China that specifically works on this funding model,” says Hou.

Outlook for the Future
Hou says the Covid-19 pandemic has seen New Zealand raise its profile and position in the world due to its adept management.

“New Zealand has proven to be one of the most successful countries to manage the pandemic, which sets the country up well for future investment — because people want to invest in countries that can demonstrate they are resilient,” she says.

Hou hopes that the opportunity the recovery presents will help New Zealand with its economy, and ultimately ensure its infrastructure is as resilient as it can be.