Vaimaanga Hotel submission put to Cabinet

On Thursday morning at 9am, Mirage Group Directors Simon Herbert and Greg Kernohan met with the Cabinet of the new CIP government to present an updated submission regarding the Vaimaanga Hotel project.
The Timers understands some Ministers had little fore notice of the meeting, learning about it only moments before it took place.
The purpose of the meeting was to update the new government on progress and also to outline the areas where assistance of the government is requested.
It appears the developers are hoping for a better response than that received from the previous government when a submission was made in June 2010. The Times understands the then Cabinet had reservations about becoming involved in a private sector development.
Mirage seeks the new government’s assistance in expediting the necessary consents, approvals and agreements needed form various government agencies. Mirage also says it needs government to provide the basic infrastructure to support the hotel that is, electricity, water, sewage disposal and relocation of the road.
More specifically, the company seeks government assistance in expediting the following;
(1) Obtaining approval from NES for renovation of the hotel
(2) Construction of the relocated road and services
(3) Providing a guaranteed supply of electricity, water, and gas and confirmed long term pricing for this key infrastructure
(4) Receiving confirmation that all necessary work and residence permits for the directors and offshore workers will be issued
(5) Receiving confirmation that all necessary licenses will be issued to operate the hotel
(6) Any other matter the company or Cabinet considers relevant to assist with construction, funding or operation of the hotel.
The company says it will be difficult to complete the hotel without government providing the infrastructure required to support the hotel.
The company suggests that if thought a valid concept, a Memorandum of Agreement (MOA) be entered into with the company confirming agreement of the above work.
In its earlier submission to the Demo Party Cabinet, the developers had requested tax relief but this does not seem to be among the items this time around.
Due to the sheer size of the project, the hotel has the potential to turn our economy around by adding significantly to our GDP.
There would be spin offs in the form of potential for new business creation and increased revenue for existing businesses.
Most welcome would be those more discerning tourists not currently visiting the country and their spending power. The major draw card will be our stability and safety in a world becoming increasingly unsafe.
During construction, the project is expected to create work for up to 200 people and provide work for local existing businesses and new businesses. That has to be good as at present the construction industry is in a lull.
On completion the hotel is expected to generate $40 million per annum.
There is however one major drawback facing the developers.
As regards the points raised by the company it should be noted that it is now dealing with a government that is committed to achieving a 50 per cent level of renewable energy output.
People may ask, rather than government provide the necessary infrastructure at the taxpayer’s cost, should not the company be encouraged to provide the hotel with its own power generation plant at its own cost, its own mini sewerage treatment and disposal facility at its own cost, and its own water collection and purification plant at its own cost.
The developers should be looking to have a hotel independent of the national water supply and power grid. In other words the hotel should be self sufficient in terms of water and power. Clean and green and environmentally friendly.
Should government enter into a MOA? As evidenced by the recent Toa Petroleum experience, government should have the minimum involvement in commercial operations.
What would happen if a government HOM failed to action a point under the MOA and the construction was delayed? More law suits? There is still the unresolved $14 million law suit with Triad Shipping over government failing to uphold its part of a deal. Government must prop up Toa Petroleum’s profits each year for the next 8 years.
It is difficult to see this government agreeing to finance the infrastructure for the hotel in the present financial climate. While no costs are mentioned, there are no surplus funds to speak of and the upcoming Budget is likely to be restricted to priority items with some Ministries forced to take cuts. Government is unlikely to take out a loan for the purpose given its debt repayment constraints.
Next year growth is predicted at a moderate 2.6 per cent and this figure needs reviewing as the assumption appears to be partly based on a 3.7 per cent rise in the price of oil. The price of oil has already risen by more than 20 per cent due to the troubles in the Middle East. This has forced the NZ government to revise its growth figures down from nearly 3 per cent to 0.03 per cent.
Not made clear as yet is whether the developers have secured funding necessary for the first stage.

By Charles Pitt

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