23 Nov 2018

RCR Tomlinson's administration: A breakdown of what it means

2:38 pm on 23 November 2018

The Australian parent company of a key firm involved in the City Rail Link has announced it is in administration. Here's what we know so far about what that means for New Zealand's largest ever transport infrastructure project.

A platform view of the proposed Karangahape Road station (artist's impression)

An artist's impression of the platform of the proposed Karangahape Road station for the City Rail Link project. Photo: Supplied

Perth-based RCR Tomlinson had gained $A100 million from its shareholders in an equity-raising in late August, and later that month, had released audited financial statements to the ASX claiming to have a positive balance sheet.

In a statement to the ASX, RCR in Australia said it had appointed administrators McGrathNichol, having entered a trading halt last week.

Who are the key players involved?

  • City Rail Link Ltd - the company set up to run the $3.4 billion project - New Zealand's largest ever transport infrastructure project.
  • RCR Tomlinson - the Australian company which has gone in to voluntary administration
  • RCR Infrastructure New Zealand Ltd - a New Zealand subsidiary of RCR Tomlinson. RCR Infrastructure NZ is the engineering company chosen, alongside joint venture partner WSP Opus, to deliver a design solution for the C7 rail systems contract.
  • McGrathNichol - the administrators now running RCR Tomlinson
  • The New Zealand Government and Auckland Council - joint funders of the project

How important is RCR Infrastructure NZ to the overall project?

City Rail Link entered an "interim project alliance agreement" with joint-venture partners RCR Infrastructure NZ and WSP Opus last month.

The agreement relates to the C7 contract. C7 is one of 7 contracts that will collectively build the CRL. The C7 contract covers design and build of the rail systems of the CRL. This includes the track and signalling. The C7 contract is not responsible for areas such as tunnelling and stations.

City Rail Link Ltd says WSP Opus is working on the design element of the agreement, due for completion in March.

Once the design work is complete, CRL will make a decision on whether to continue with the alliance to complete the C7 contract.

What do we know about the impact RCR Tomlinson's move to administration might have on the City Rail Link project?

CRL Ltd is scheduled to meet with Auckland representatives of administrators McGrathNichol today to seek clarity on the ramifications for RCR New Zealand Ltd.

City Rail Link chief executive Sean Sweeney told Morning Report: "It is a reasonable likelihood that there will be some impact - the extent of it, though, is far too early to speculate."

What does administration mean?

Administration is the first step of business recovery. It does not mean a company is insolvent, however it suggests it is in financial trouble.

RCR Tomlinson has voluntarily gone in to administration. This means the company has asked outside experts to come in and look through the company's affairs and decide what options it has.

Administrators could apply a turnaround strategy to allow the company to continue operating.

If that's not possible, administrators might put the company, or parts of it, into receivership. That is when another independent is appointed to sell the company's assets.

If the company cannot continue to operate, or no parts of it are attractive enough to be sold, the company, or parts of it, can be placed in liquidation. That is when another independent comes on board to wind up the company and distribute remaining funds to owed creditors.

What is the Auckland City Rail Link project?

  • New Zealand's largest ever transport infrastructure project
  • A 3.45km twin-tunnel underground rail link, up to 42m below street level
  • The CRL will transform Britomart Transport Centre in to a two-way through-station, doubling the capacity of the rail network
  • It is jointly funded by the government and Auckland Council, with a total estimated cost of $3.4 billion
  • The CRL is due for completion in 2024

Who is RCR Tomlinson?

It is one of Australia's oldest engineering businesses, tracing its origins back 120 years when it was founded by brothers Ernest and Edward Tomlinson.

RCR Tomlinson has a workforce of more than 3400 Australia-wide specialising in big infrastructure and energy projects, ABC News reports.

Hundreds of contractors working at sites across Australia are now in limbo as administrators move in to see which parts of the business are salvageable.

The company website lists its current projects as the Melbourne Underground Rail Loop upgrade, property maintenance for big public hospitals in Melbourne, as well as a capital works program from Melbourne's Water and Sewerage system.

It is also involved in the construction of numerous solar farms across Western Australia, Queensland and Victoria, a power plant in Indonesia and a lithium-processing plant in the Pilbara.

- with additional reporting by ABC.

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