BGC Australia has estimated it will cost more than $700 million to fix burst pipes that were installed across thousands of homes in Western Australia.
BGC Australia has estimated it will cost more than $700 million to fix burst pipes that were installed across thousands of homes in Western Australia.
It comes after the WA-focused builder installed the Iplex Australia-manufactured polybutylene pipe product at more than 1,000 homes across the nation that reportedly resulted in 2,000 water bursts in the walls and ceilings.
In a briefing to media and investors today, BGC confirmed it almost exclusively used Iplex polybutylene piping across about 46,000 homes for the past 20 years.
Building and Energy last year launched an investigation into the pipe failures and released its preliminary findings last month.
In the briefing, BGC strategy and commercial general manager Sam Gray said the company engaged its own independent expert to investigate the Iplex pipe bursts.
"The root cause is the resin, a principal ingredient in the pipe. Our cost alone is in the order of $700 million or more. We’re experiencing a very high rate of bursts," he said.
"We had over 2,000 bursts to last Friday across 1,118 homes. The bursts occur equally in the wall and ceilings.
"We spent $7 million so far in investigating this issue."
Mr Gray said BGC estimated it has built 11,817 homes with the TYPLEX-1050 resin pipe since the company started using it in volume in 2017.
BGC said fixing the burst pipes was a significant undertaking that would require the occupants be relocated before reverting the home back to the lock-up stage due to its double brick construction method.
The builder said it was responding to an average of about 46 burst pipes a week through three plumbing companies.
It costs on average $60,000 per home to fix the burst pipes, according to the builder.
Mr Gray said the company was actively working on a product recall through WA Consumer Protection and the Australian Competition and Consumer Commission.
He said it was their advice that litigation at this time would result in the regulators stepping away and encouraged the parties to allow the recall process play out.
Mr Gray said radial failure bursts had also been recorded in Victoria but believed the large numbers in WA was because 50 per cent of Iplex sales occurred in the state.
BGC and Delstrat are two major customers of Iplex pipe in WA, BGC said.
Investigation
Iplex Australia is a member of the Fletcher Building Group, a company listed on both the ASX and the New Zealand counterpart.
In its annual report, Fletcher Building announced it has allocated $15 million to tackle the pipe bursts issue after receiving a "number of product quality complaints" over its hot and cold water polybutylene pipe product manufactured under the name "Pro-fit".
Fletcher Building put its shares into a trading halt this morning after learning that BGC Australia, one of the builders who used Iplex Australia Pro-fit pipe products, would be presenting its own findings on the matter.
In the company’s ASX statement, lawyers from Russell McVeagh said Fletcher Building received a list of questions from a journalist this morning, alerting them to the planned briefing by BGC.
“Fletcher Building wishes to understand what BGC will present at its briefing and be in a position to respond to it, to ensure that the market is not materially influenced by false or misleading information emanating from BGC,” the statement said.
“Fletcher Building has been made aware that BGC (Australia) Pty Ltd, one of the group home builders in WA who installed the Iplex Australia Pro-fit in respect of which issues have arisen due to plumbing failures, is to present findings of what it terms an independent expert investigation into the Iplex pipes matter and has briefed persons in advance of that meeting.
“FBU wishes to ensure that the market does not trade materially influenced by false or misleading information and has sought a trading halt until it can respond to BGC’s briefing.”
The company said the trading halt is expected to end with the release of FBU’s response to BGC’s presentation.
BGC also claimed Fletcher's total exposure is about $1.8 billion, from multiplying the 30,000 potentially impacted homes across Australia by BGC's cost to repair.
Fletcher Building reportedly claimed the figure as "inflammatory".
Last month, the state government’s Building and Energy agency released its preliminary findings from an investigation into water pipe leaks across more than 50 homes in the Perth metropolitan area.
Building and Energy's investigation has been focused on identifying the cause of failure of the Pro-fit polybutylene pipes made by Iplex Australia with most water leaks occurring from products manufactured between mid-2017 and mid-2022.
In its preliminary findings, Building and Energy said the inspections found that installation work practices and workmanship were not the cause of the pipe failures.
BGC welcomed the preliminary findings but Iplex said the allegations that the leaks were due to a manufacturing defect were still unproven.
Builders are not required to replace all of the plumbing pipe but this order could change as the investigation continues, according to Building and Energy.
