The Louvre Abu Dhabi ... work in progress.
Engineering marvels
Despite having a portfolio of projects worth billions of dollars, Arabtec's ambitions have no bounds. It now aims to rank among the world's top 10 contractors
01 June 2014
Arabtec Holding, which has established a reputation for delivering high-quality construction projects in the Middle East, is currently working on many of the region’s largest developments, including the Louvre Abu Dhabi and the Midfield Terminal Building at Abu Dhabi Airport in the UAE.
The leading engineering and construction group secured some stunning deals this year, which have seen its order book skyrocket in value. These include the Dh21.8 billion ($5.93 billion) contract – the UAE’s largest-ever project award in value – to build 36 tower buildings in Abu Dhabi and Dubai for Aabar Properties; and a memorandum of understanding (MoU) to deliver one million homes in Egypt at an estimated value of Dh147 billion ($40 billion), both together worth a whopping Dh168.8 billion ($45.93 billion).
Arabtec has, in the past, delivered many iconic buildings, most notably the world’s tallest building, the Burj Khalifa in Dubai and Emirates Palace hotel in Abu Dhabi. It has forged a reputation for building a range of complex and technically-challenging large-scale developments, including infrastructure, airports, pipeline construction, marine works and manufacturing facilities.
Formed in 1975, the UAE-based company has grown across the GCC region and now operates further afield in Egypt, Jordan, Kazakhstan, Syria, Saudi Arabia, Palestine, Russia, India and Pakistan. Other new markets include Iraq, Libya, Algeria and the Balkans. The company was listed on the Dubai Financial Market in 2005.
“Arabtec is committed to quality, timeliness and cost-efficiency – values that have seen it grow rapidly in recent years and through highly competitive times,” Hasan Ismaik, managing director and CEO of Arabtec Holding tells Gulf Construction. “Today, Arabtec Holdings comprises more than 20 market-leading subsidiaries, with specialisations in various sectors including construction, water and energy, real estate and financial services.”
Arabtec has built a strong brand in the construction field and has, over the years, become a highly sought-after contractor for major contracts both in the UAE and further afield. To achieve this, the company built a number of subsidiaries to cater to the different segments of the industry. These include mechanical, electrical and plumbing (MEP), engineering, procurement and construction (EPC), steel work, concrete, interior contracting and facilities management services.
PROJECTS
Arabtec’s strong track record and commitment to timely and cost-efficient delivery has contributed to its rapid growth in recent years and a reputation for quality that has often translated into a market-led pricing premium for completed projects.
High-value infrastructure projects awarded in 2013 included a Dh3.3-billion ($898.44 million) contract to build a new 358,000-sq-m hospital in Al Ain, UAE, enabling the company to expand into new high-margin areas of construction.
Residential projects awarded in 2013 include a Dh180-million ($49 million) deal at the Dubai Silicon Oasis, and a Dh240-million ($35 million) contract to construct 253 new residential villas at the ‘Casa’ district in Dubai’s Arabian Ranches, also in the UAE.
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Arabtec’s project in Astana. |
Arabtec has also boosted its already extensive portfolio of hospitality projects. Following the Dh1-billion ($272.26 million) deal for the Fairmont Hotel and Serviced Apartments in Abu Dhabi, the company was selected to construct the final phase of the Tiara Hotel on Palm Jumeirah, valued at Dh200 million ($54.45 million).
Further afield, the company expanded its reach into Central Asia by signing a deal to take part in the construction of the Dh4-billion ($1.09 billion) Abu Dhabi Plaza project in Astana, Kazakhstan, as part of a joint venture.
In addition, Arabtec has expanded into Jordan, having won a Dh720-million ($196 million) contract to build The St Regis Amman and The Residences at The St Regis Amman project and subsequently a Dh770-million ($209 million) deal to construct four international hotels as part of the Saraya Aqaba project.
Also in Jordan, Arabtec Construction has signed an MoU valued at Dh5.7-billion ($1.55 billion) contract to construct the country’s first themed entertainment resort, the Red Sea Astrarium. The 74-hectare entertainment park will host four hotels providing 2,000 rooms in total.
“These projects re-emphasise our commitment to geographic expansion as well as our ability to construct complex, large-scale projects,” says Ismaik.
The gross value of new contracts awarded to Arabtec in 2013 totalled Dh9.9 billion ($2.7 billion) and provided an outstanding start to 2014, with a series of high-value projects in the Middle East and North Africa (Mena) region announced in the first quarter of 2014.
In the UAE, Arabtec began this year with an award of a Dh2.6-billion ($707.85 million) contract to Arabtec Construction for building a mixed-use development on Abu Dhabi’s Reem Island. The development will include a 61-storey residential tower, alongside a 15-storey tower comprising a five-star hotel and hotel apartments.
Additionally, the company signed an MoU to build 36 towers in Dubai and Abu Dhabi valued at Dh21.8 billion ($5.93 billion) – Arabtec’s biggest project by value in the UAE. Arabtec also won a Dh1-billion ($272 million) contract to build 1,500 townhouses for Emaar Properties in Dubai as part of the Mira community in the first phase of the Reem development.
Arabtec is further contributing to Abu Dhabi’s infrastructure development as its MEP subsidiary Emirates Falcon Electromechanical Company (Efeco), was awarded a Dh263-million ($71.6 million) contract to provide mechanical, electrical and plumbing work at the Midfield Terminal Building in Abu Dhabi as part of a joint venture.
Arabtec also has a strong presence in Saudi Arabia. It is currently building Aldara Hospital and Medical Centre, a 105-bed hospital that will house the largest and most technically-advanced outpatient centre in the Saudi capital, Riyadh. In Al Hasa in the Eastern Province, the company is building 5,000 villas along with the associated infrastructure works.
In Qatar, Arabtec is working on a regeneration project in the centre of the capital, Doha.
Meanwhile in North Africa, Arabtec has signed a historic MoU with the Egyptian Ministry of Defence to develop and construct one million mid-income homes across 13 locations in Egypt, with a total value of Dh147 billion ($40 billion), the biggest project of its kind in the region and the first project for Arabtec Real Estate.
VISION 2018
Arabtec has set for itself an ambitious goal: to ascend to the rank of the top 10 companies globally in the ENR (Engineering News Record) list by 2018. Towards achieving this goal, in February 2013, the board of Arabtec approved a detailed growth strategy, which is underpinned by organic as well as acquisitive growth, and the formation of significant joint ventures to take advantage of higher-margin, specialised construction opportunities.
In line with this, Arabtec signed an agreement in April 2013 with Samsung Engineering to form a joint venture to bid exclusively together for mutually agreed and selected work in the oil and gas, infrastructure and power sectors of the region. The new company, owned 60 per cent by Arabtec, is focusing on large-scale contracts, ranging from $3 to $10 billion in total value.
Arabtec is also active in oil and gas through its subsidiary Target Engineering Construction Company, which carries out projects in the areas of civil, mechanical and marine construction, as well as providing electrical and instrumentation works for onshore and offshore development.
It has also expanded its MEP division, through the acquisition of the remaining 45 per cent minority stake in its subsidiary Efeco, raising Arabtec’s ownership to 100
per cent.
In November 2013, Arabtec demonstrated further progress in diversifying the business into higher margin and high-growth segments of engineering and construction, through signing an MoU with GS Engineering and Construction Corporation, a leading international engineering and construction company based in South Korea. Once launched, the joint venture will pursue heavy infrastructure engineering and construction projects, such as metro, railway, bridge, port, and tunnel projects in the Mena region.
Arabtec started 2014 with an aim to capitalise on identified opportunities across the region, and hence launched five new subsidiaries to expand the company’s reach into new sectors. Two of the subsidiaries will focus on infrastructure projects inside and outside the UAE; one dedicated to education, training and certification of UAE nationals in the construction sector; one on water and energy projects; and fifth one will concentrate on the Egyptian market.
The company also announced plans to open its first office in the Iraqi capital of Baghdad, to capitalise on the country’s high potential, particularly in the oil, and gas and infrastructure sectors; as well as its regional headquarters in Belgrade, Serbia, to drive its ambitions in the wider Balkan region.
The company is currently implementing this ambitious growth strategy, which was approved by its shareholders at the annual ordinary general meeting earlier this year.
“At the latest annual general meeting held on April 30, Arabtec launched its ‘Vision 2018’, which will see it grow from a medium-scale regional contractor to the ranks of the top 10 firms in the world. This leap is envisioned through expansion into specialised construction, oil and gas, infrastructure, property development, facility management, franchises, and healthcare. This expansion will lead to higher profit margins and better returns to shareholders. It will also allow the company to maintain influence on these sectors and to have stable, recurring returns and will enable the company’s value to grow many folds,” says Ismaik.
“In line with this vision, Arabtec is planning a series of acquisitions and mergers in the forthcoming period. We are targeting global players in such high margin sectors as oil and gas, power plants, infrastructure, and facility management of huge industrial plants. The planned acquisitions and mergers will lead to significant synergies, in terms of accumulated experience, enhanced cash flow and stronger brand,” he adds.
“Today Arabtec is in a good standing, with strong financial position and strong brand value. It has attracted high-calibre experts to lead its foray into the strategic sectors targeted by Vision 2018,” he says.
During 2013, Arabtec jumped to the 117th position in the ENR ranking, from 187th in 2012. The company expects to achieve a far better ranking in the current year, and to join the Top 10 by 2018.
Arabtec has a strong presence in all segments of the construction industry. “Our backlog is huge, and ever growing. Our client base is expanding as well. And we are venturing into a number of new high-value sectors including oil and gas, power plants, infrastructure, facility management of huge industrial plants, and affordable housing,” says Ismaik.
“In terms of results, we have made great achievements in 2013. Our backlog grew 22 per cent to Dh24.1 billion ($6.56 billion) while revenues jumped 30 per cent to Dh7.4 billion ($2.01 billion). This led to a record growth of 171 per cent in net profit to Dh377.8 billion ($102.85 billion).
“The 22 per cent increase in backlog in 2013 paved the way for an excellent beginning to 2014, which has so far seen unprecedented success that has exceeded all expectations. Arabtec is now well poised to take on a larger number of new projects, as it continues to upgrade its systems, processes and project execution platform, and has an expanding senior management team with world-class expertise, to support the successful growth of the company.
“Since the start of 2014, our company’s subsidiaries have been selected to execute a series of new projects, with a total value of Dh180 billion ($49 billion), which gives us visibility on our earnings growth for many years to come,” he adds.
