CIMIC Group selected for US$525 million prison PPP in New Zealand

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CIMIC Group selected for US$525 million prison PPP in New Zealand

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The government of New Zealand has selected a consortium led by CIMIC Group companies Pacific Partnerships and CPB Contractors as the preferred proponent to deliver the Waikeria Corrections and Treatment Facility Public Private Partnership (PPP) project.

The Waikeria Corrections and Treatment Facility will deliver accommodation for 500 prisoners, along with a world class secure mental health unit providing care for additional prisoners. The new facility will be built on the site of the existing Waikeria Prison in the Waikato region (upper North Island) of New Zealand.

The total project value is approximately NZD750 million (US$526.6 million).

CPB Contractors will design and construct the new facility. Pacific Partnerships, together with the HRL Morrison & Co, will provide financing and management over a 25-year period, with asset management and facilities maintenance performed by Cushman & Wakefield.

Commercial arrangements are at an advanced stage. Commercial close is expected in quarter three 2018, at which point the revenue to CIMIC Group will be finalised. The new Waikeria facility is set to open in 2022.

The scope of the project has changed since it was originally tendered. The tender launched in January 2017 sought a private partner to expand Waikeria Prison by 1,500 beds, with a further 500-bed option to be made available if necessary, at an estimated cost of NZD1 billion (~US$700 million).

However, when the current government came to power in October 2017, it announced that it would not continue to implement PPPs in the prison sector. The new administration is against "mega-prisons" and aims to reduce the prison population by 30% in 15 years, through a range of criminal justice and crime prevention measures.

The Corrections department did not comment on the Waikeria PPP until today, with the Minister for Corrections issuing a media statement outlining the new project as effectively awarded to CIMIC. The decision to alter the planned facility to 500 beds was motivated by evidence that smaller prisons make rehabilitation more likely, are closer to communities and link better to local work programmes.

The mental health unit will be the first of its kind in New Zealand, in an effort to address the high rate of mental health issues prevalent in the prison population.

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