Supplier update: Iplex
Ongoing dispute that involves BGC Housing in WA
Iplex owner Fletcher Building was forced to temporarily halt its shares from trading to brief investors, analysts and media after BGC went public with its claims that Iplex pro-fit pipes was to blame for leaks and the product should be recalled
Tue Nov 07 2023
BGC Housing estimates the cost to fully re-pipe its impacted homes to be about AUD700 million, which extrapolated equals about AUD900 million and about AUD1.8 billion to refit all the homes in WA and around Australia, respectively. According to BGC's findings, released in October 2023, a change in resin and formulation led to Fletcher Building's Iplex pipes failing.
However at its recent AGM, Fletcher Building chief executive Ross Taylor said the cost to repair affected houses in Western Australia, the only area impacted, would be more like AUD50 million to AUD100 million for a fault he blames on "shoddy" installation practices.
Mr Taylor told shareholders that BGC's cost estimate was based on removing Iplex pipes from all houses across Australia but said that was "sensationalist" and "a little bit fanciful", given there were no abnormal leak rates with the 15,000 houses on the East Coast, and only 10.9% of the 17,000 homes in Perth in Western Australia known to be affected.
To date, the repairs had cost an average AUD4000 each, and were caused by issues such as over-bending pipes, he said.
Wherever there's been a leak, there's been an installation failure. What that does is it puts extra stress on the pipe and it just takes time then for that to manifest itself in a leak.
Mr Taylor said the issues were concentrated to two plumbers and one builder.
Background
BGC's independent experts say the problem is the pipe itself, and not its installation as Fletcher continues to claim.
The average BGC house build will have about 90 metres of the Iplex Pro-fit pipe in it, carrying hot and cold water through the home. It estimates on average 6.7 of these Iplex pipes are bursting each day and it is peaking on homes built in 2019.
Through its remediation programme, BGC has re-piped six homes completely, which took more than six months and cost on average AUD60,000, of which 25% came from relocating residents. Based on this, it claims the cost alone of repairing BGC housing stock is AUD709 million.
It also claims it discovered problems with Iplex pipes in Victoria, suggesting it's not just a Perth issue.
BGC is warning there are not enough workers to fix all the pipes and it claims what's been discovered so far is the tip of the iceberg. The company also said it wants the product safety regulator to issue a recall.
Our advice is that litigation at this time will result in the regulators stepping away, so we encourage affected parties to let the recall process play out rather than engage in a three-to-seven-year litigation process.
Fletcher maintains there is no valid basis for a recall.
BGC's experts found the failure of the pipe was due to "environmental stress cracking" and the cause of that was the resin used to make the pipe. BGC told BusinessDesk:
Its particular physical properties meant that it is not able to cope with reasonable bending stresses, or stresses expected for a pipe of this type. Essentially instead of a flexible, bending pipe we've got something that is behaving more like glass, particularly when it gets cold.
BGC's experts hypothesise the problem started in 2017 when Iplex started using a different supplier of resin.
Fletcher said BGC's report, supporting the allegations of a manufacturing defect, lacked credibility and relied on flawed methodologies and so could not be relied on for causation. According to Fletcher:
To date we have also collected evidence from 270 individual inspections of homes in Perth constructed by 12 different builders and plumbers. This has conclusively identified significant installation failures, in breach of Australian Standards, the Plumbing Code and installation guidelines.
Those failures are the type that generate the plumbing failures that have been experienced by homeowners.
Despite being offered access to the AUD15 million fund that Iplex established to assist builders and their homeowners to fix plumbing failures that occur and in turn help to establish the root cause of the failures which have occurred in Perth, BGC has refused to access the fund and refused to facilitate Iplex's technical teams access to homes that they have constructed.
Fletcher said its fund was planned to support repairs for one year and to date it has done 383 homes and used around 20% of the fund.
Related
In April, Fletcher Building set aside AUD15 million in a fund to help establish the cause of the leaks and appropriate fixes, and help Perth builders and plumbers complete repairs.
Iplex is under investigation in WA for leaky water pipes - HNN Flash, April 2023