Casino operator Wynn Macau Ltd says it is concerned with the state of progress on construction of its upcoming Cotai casino resort in Macau, Wynn Palace (pictured in an August 2015 file photo).
In a letter sent to the construction contractor – Leighton Contractors (Asia) Ltd, a subsidiary of Australian-listed CIMIC Group Ltd, previously known as Leighton Holdings Ltd – Wynn Macau said: “We are concerned that with your current levels of progress in the execution of the work, you will fail to achieve the third interim milestone (tower fit-out of floors 10 to 15)”.
The letter, sent on Tuesday to the contractor, was made public by Wynn Macau in a voluntary announcement to the Hong Kong Stock Exchange, where the gaming operator is listed.
Wynn Macau is a subsidiary of U.S.-based gaming operator Wynn Resorts Ltd.
Tuesday’s letter added: “The contract provides that you will be liable to pay US$200,000 per day for each day of delay for achievement of this interim milestone and, accordingly, in the region of between US$8 million to US$10 million could become payable by the end of February 2016 in respect of this interim milestone.”
In November, Wynn Resorts already had announced a three-month delay – to June 25, 2016 – in the opening of the US$4.1 billion Wynn Palace resort. The company said at the time it had been notified by the contractor the project “will not be ready to open by the projected early completion date of March 25, 2016”.
The delay in the opening date meant Leighton Contractors was no longer eligible for an early completion bonus of US$38 million.
Wynn Macau’s Tuesday letter stated that Leighton Contractors had already failed to achieve a first interim construction milestone. In that regard, Wynn Macau added: “Our liability under the contract for the payment of liquidated damages for delay, US$1 million will be deducted from your December 2015 payment application. Your liability for payment of delay damages up to the end of January 2016 is likely to amount to an additional US$6.2 million.”
Wynn Macau said in its letter to Leighton Contractors that the contractor’s total aggregate potential liability under the Wynn Palace contract for delay damages was US$200 million. “Please be informed that it is our intention to deduct any liquidated damages which become payable by you from payments which are otherwise due to you under the contract in respect of any failure by you to meet your completion obligations under the contract,” the firm added.
Wynn Macau’s chairman Steve Wynn had stated last month that Leighton Contractors would be liable for a US$200,000 a day penalty if the first five floors of Wynn Palace were not “done” and accepted by the firm by December 24, with a further US$200,000 per day penalty if a further 10 floors of the 28-storey building were not accepted by the client by a January 24 deadline.
Mr Wynn added at the time – quoted by the Las Vegas Sun newspaper – that were the contractor unable to meet the June 25 opening deadline it would be liable for a “US$1.5 million-a-day penalty”.
Wynn Palace will include a 1,700-room hotel, a large lake with fountain display and a gondola ride around the grounds, meeting space, a casino, a spa, shops, and food and drink outlets.
In a note issued on Monday, prior to Wynn Macau’s announcement, Telsey Advisory Group analysts David Katz and Brian Davis had already warned that “sources indicate anecdotal evidence of further discussions between the operators and the construction company of the Wynn Palace around the quality of internal finishes and other cosmetic touches”.
The two analysts added at the time: “While this remains unconfirmed, if true, it implies the possibility of the 25 June opening date being pushed out further, though we have no way of substantiating that.”
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”We do not believe that reopening the advance notice nomination deadline [for board directors] is appropriate or justified”
Daniel Boone Wayson
Chairman of the Wynn Resorts board of directors