Contractor under the gun
Wynn Macau Ltd. says the contractor for its Wynn Palace casino project on Macau’s Cotai Strip could face penalties of up to $200 million if there are further delays in construction of the $4.1 billion resort.
Bloomberg News reports that Leighton Contractors Asia Ltd., a unit of Australia’s CIMIC Group Ltd., has been served with a letter “to reinforce the importance” of meeting the scheduled June opening, Wynn said in a stock exchange filing.
In November, Wynn Resorts’ CEO and Chairman Steve Wynn first announced that the resort would not open as originally planned on March 25, but three months later, on June 25. The builder forfeited a $38 million completion bonus at that time.
To say Leighton is under pressure is an understatement. “If they don’t make June 25, it’s a $1.5 million-a-day penalty,” Wynn told the Las Vegas Sun last year. “If they don’t have the first five floors done by December 24, it’s $200,000 a day. Then, on January 24, if they don’t have the next 10 floors, it’s $200,000 a day.”
The recent letter to Leighton said Wynn is “concerned … you will fail to achieve the third interim milestone,” and promised to deduct payments from Leighton “in respect of any failure by you to meet your completion obligations.”
However, added Wynn Resorts spokesman Michael Weaver, “We are not announcing any delay of Wynn Palace.”
CIMIC shares fell as much as 1.5 percent to AU$24.17, the biggest intra-day drop in more than a week, reported Bloomberg. Wynn, on the other hand, saw a bump in share values, and the Asia Gaming Brief reported the casino operator could see short-term outperformance ahead of the opening on Cotai.
Morgan Stanley analysts say the openings of Galaxy Macau Phase II and Melco Crown’s Studio City saw an outperformance for those companies of 8 percent and 20 percent respectively. “We conclude that Wynn Macau stock could see short-term outperformance ahead of its scheduled opening of Wynn Palace in June 2016,” the analysts wrote. “Sustaining the outperformance will depend on its ability to drive market share and EBITDA growth relative to peers.”
The lavish Wynn Palace will feature 1,700 hotel rooms, a lake with gondolas, a meeting space, a casino, a spa, restaurants and retail outlets. The resort will face competition from other resorts on the strip including Galaxy Entertainment’s Phase II and Broadway expansions; Melco Crown Entertainment’s new Studio City, which opened in October; and other mega-resorts now under construction by Las Vegas Sands Corp. and MGM Resorts International.
