Big Project ME January 2016

118

JANUARY 2016 meconstructionnews.com

THE BUSINESS OF CONSTRUCTION

creating history

CSCEC (ME)’S awaRd wINNINg CENTRal BaNk OF kUwaIT HEadqUaRTERS TakES CENTRE STagE

Dominic De Sousa 1959-2015

It is never easy to say goodbye to a friend and colleague. When that person is the owner of the company and the driving force behind its growth and success, then the task is almost impossible.

CPI Media Group's founder and publisher, 56-year-old Dominic De Sousa, died doing what he loved best – singing and entertaining people, at the BBC Good Food Middle East Awards on December 16 – which has been postponed until further notice.

His publishing empire with more than 25 magazines, web portals and vertical industry awards, was founded two decades ago.

Born in 1959 in Kenya to Goan parents, he lived what he later recalled as an idyllic childhood, full of sunlight, happy people and nature. A passionate lover of wild animals, it was here that the rebellious and independent streak that made him so successful in business was born.

When he was 11, the family moved to Wimbledon in South London and he encountered two things which he spent the rest of his life fighting: cold, wet weather and racism. The experience of the latter, he later admitted, made him unusually sympathetic as an employer to the problems of his staff, a large number of who have been with CPI for years.

After studying biochemistry at the University of London, De Sousa joined Reed Business Publishing in London as an advertising salesman on Middle East Computing, thus laying the foundations for his future career. He was a sales natural, combining an empathy with his clients with a killer instinct for closing a deal. Soon poached by London-based Alain Charles Publishing, he launched Computer News Middle East, which would form the basis of the CPI empire when he later bought the title and started his own company.

Success followed from a start-up in a small back office. Today, the company ranks as one of the leading B2B players in the region, thanks to his drive, his entrepreneurial spirit and his belief in people.

In sharp contrast to other publishers, De Sousa wanted his staff to succeed, encouraging them to become his business partners rather than employees and the simple CPI start-up is now a web of intertwined companies and relationships that he forged and held together. Never content with the status quo, he would constantly challenge what his staff were doing, encouraging them to seek new opportunities while opening new doors for others.

Although a private man, he seemed happiest when he was on stage performing with a group of musically inclined CPI employees.

Early on in his career, he had sung with a semi-professional group and he later reignited that passion by singing at CPI events.

For those of us who remain at CPI, he is – quite simply – irreplaceable. The number of lives he touched across multiple industries in the Middle East and Europe is humbling and we, his colleagues, have been overwhelmed by the messages and memories of those who knew, respected and loved him.

One of a kind to us, he was always, just Dom. He will be missed more than we can express but his legacy lives on in the magazines he helped create and nurture.

Contents

Issue 118 January 2016 10

16

22

30

36

40

06 ME Construction News.com OnlIne

The biggest stories from Big Project Middle East’s home on the web

20 Egypt Market Overview InfOgraphIc

Examining Egypt’s market supply for four key sectors

40 Staying Safe On-Site fIre safeTy fOcus

Why more needs to be done to ensure better fire safety on construction sites

10 Deyaar’s Atria towers 25% done 22 Affric Infrastructure Advisory 42 DSCS The bIg pIcTure

Dubai developer says massive mixeduse project will be ready by mid-2017

14 FCC gets $777m capital injection InTernaTIOnal news

Spanish contractor to issue 118 million new shares at $6.57 each

16 Infrastructure Invested news analysIs

Big Project ME looks at the impact of increased infrastructure investment on regional construction industries

In prOfIle

Big Project ME talks to Stephen Watson and Andrew Ward to find out why construction needs a new way to fund projects

30 That Winning Feeling prOJecT prOfIle

evenT revIew

Big Project ME reports from the first ever Dubai Sustainable Cities Summit

46 Smart City - Fast Payback? cOMMenT

Examining what made CSCEC(ME)’s Central Bank of Kuwait a BPME Award winner

Dr Rupert Booth explains why specific investments offer better returns when investing in smart cities

36 Tough times ahead?

50 Middle East Tenders

MarkeT fOcus

Jerusha Sequeira asks the experts what we can expect in 2016

Tenders

Listing the GCC construction industry’s biggest tenders for January 2016 January 2016 3

Online

L A U N C H PA R T N E R

Big Project Middle East’s home on the web MOST POPULAR

1

EDITOR'S CHOICE

READERS' COMMENTS

In pictures: Big Project ME Awards winners

“It was interesting to read about yet more allegations of labour exploitation in Qatar (“Qatar labour abuses still ‘rampant’ – Amnesty”, December 2).

Amnesty International says there are still “appalling conditions faced by most migrant construction workers” in the country. Whatever the truth, what is clear is that Qatar needs to step up its reforms to the kafala sponsorship system if it is to avoid future allegations like this in 2016”

Saudi Binladin Group to lay off 15,000 workers – Reuters

Possible layoffs come amid uncertainty caused by oil price slump

2

PHOTO GALLERIES ME Consultant Awards: Winners announced

More than 200 guests attended event at Jumeirah Emirates Towers Hotel

3

ALEC’s Kez Taylor and Brookfield Multiplex were among the big winners.

See photo galleries at: meconstructionnews.com/photos

Damac removes Trump name from Dubai golf site

Move apparently prompted

Comment to story “Qatar labour

by presidential candidate’s

abuses still ‘rampant’ – Amnesty”

anti-Muslim remarks

4

READER POLL Gulf construction in 2016:

What was the mood like at The Big 5 construction show in Dubai?

Experts give their outlook

Industry looks to year ahead after “interesting and challenging” 2015

5

”Dramatic” decline in GCC construction optimism

VIDEO

18-tonne Volvo truck... driven by a four-year-old

more disputes than expected

Four-year-old Sophie drives an 18t Volvo FMX through a construction area – with the help of a remote control.

this year, survey finds

See videos at: meconstructionnews.com/videos

Longer payment periods and

29%

13%

16%

42%

Upbeat: Lots of deals on the table

Good: Business was brisk

No change: About the same as last year

Slow: There’s a gloomy outlook for 2016

Log on for the latest from across the Middle East construction sector. Write to the editor at contact@meconstructionnews.com 6 January 2016

S C C r e v o c s i D

Take a break from your project stress with CCS state-of-the-art software.

For over 35 years, our software solutions have been developed for contractors by contractors. At the leading edge of industry trends, Candy and BuildSmart put you in complete control of your project: from check-in to check-out, a 7-star experience.

CCS proudly partnered with contractors involved in landmark hotel and hospitality projects including Burj Al Arab, Emirates Palace, Bab Al Shams Desert Resort & Spa, Madinat Jumeriah and Atlantis the Palm.

“CCS is the best construction estimating and project control software I have come across. Saving half it provides, easily surpasses similar software applications.�

David Baker, Estimating Manager, Habtoor Leighton Group, Qatar.

Set yourself free today and call on +971 4 346 6456 or check-in at info@ccsgulf.com

Introduction

Explore your options

I

t’s certainly been interesting to hear the viewpoints of some of the leading minds in the GCC’s construction industry when it comes to how things are going to pan out in 2016.

The general consensus seems to be that the year is going to be quite a tough one for the industry, thanks to the continued decline in oil prices.

Budgets are going to be tighter, while decision-making is going to be tougher.

Therefore, while there’s a lot going on in the market, contractors and consultants are both taking a stance of cautious optimism when it comes to setting out their plans for the year ahead.

To that end, perhaps it’s interesting to hear from a company like Affric Infrastructure Advisory. As a boutique financial advisory firm, they are at the forefront of exploring new ways to find financing in a changing marketplace.

It was interesting to hear how they’re helping developers and contractors find alternative sources of funding for their projects, and I certainly think that what they’re doing could become the norm for the industry in the coming years.

As we’re looking at the way the industry is unfolding in 2016, I think now would be a good time to remind you all to participate in the 2016

EDItORIAL EDItOR GaVIn DaVIDS gavin.davids@cpimediagroup.com +971 4 375 5480 REPORtER JeRuSHa SeQueIRa CPI MEDIA GROUP GROUP ChAIRMAn AnD FOUnDER DomInIc De SouSa GROUP CEO naDeem HooD

jerusha.sequeira@cpimediagroup.com +971 4 375 5477 OnLInE EDItOR Ben FLanaGan ben.flanagan@cpimediagroup.com SUB EDItOR aeLReD DoYLe aelred.doyle@cpimediagroup.com

PUBLIShInG DIRECtOR RaZ ISLam raz.islam@cpimediagroup.com +971 4 375 5471 EDItORIAL DIRECtOR VIJaYa cHeRIan vijaya.cherian@cpimediagroup.com +971 4 375 5472

8 January 2016

ADvERtISInG COMMERCIAL DIRECtOR mIcHaeL STanSFIeLD michael.stansfield@cpimediagroup.com +971 4 375 5497 SALES MAnAGER FaaJu aBDuLFaTaH faaju.abdulfatah@cpimediagroup.com +971 4 375 5495

MARKEtInG MARKEtInG MAnAGER LISa JuSTIce lisa.justice@cpimediagroup.com +971 4 375 5498 DESIGn ARt DIRECtOR SImon coBon CIRCULAtIOn & PRODUCtIOn DIStRIBUtIOn MAnAGER SunIL KumaR sunil.kumar@cpimediagroup.com +971 4 375 5476 PRODUCtIOn MAnAGER VIPIn V. VIJaY vipin.vijay@cpimediagroup.com +971 4 375 5713 DIGItAL WEB DEvELOPER mohammad awais WEB DEvELOPER umair Shamim

Construction Intelligence Report survey that we’ve got up and running on our website.

We got a fantastic response last year and were able to glean some valuable information from it, so I’m looking forward to finding out what the industry has to say about 2016.

And if that’s not enough of an incentive to fill out the survey, I’m particularly delighted to add that we’ll be donating two dollars to Save the Children for every response we get to the survey. Given the extraordinary work that the charity has been doing for refugee children around the world, we’re extremely proud to be supporting them in our own small way.

Have a great 2016!

Gavin Davids Editor gavin.davids@cpimediagroup.com

PUBLIShED By

Registered at ImPZ Po Box 13700 Dubai, uae Tel: +971 4 440 9100 Fax: +971 4 447 2409 www.cpimediagroup.com Printed by Printwell Printing Press LLc © copyright 2016 cPI. all rights reserved While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

THE NEW RANGE OF FORD TRUCKS

Unflinching performance.

Undoubtable capability.

Ford trucks are not just built tough and durable, they are also built to give you an advantage in your business. Besides their competitive pricing, they come with affordable service contracts that help you lower your running costs.

Call for more information on how it makes sense for you to invest in a Ford truck.

1843

TRACTOR HEAD

4135 MIXER

3535 TIPPER

1832 COMPACTER

FREE EXTENDED WARRANTY

IDEAL FOR • Logistics • Ready Mix & Construction • Building Material Handling • Waste Management • Special Applications For retail sales only. Terms & conditions apply. Specifications may vary from those shown in the picture.

Abu Dhabi, Musaffah

www.premier-motors.ae

800

MOTOR S 6 68677

Dubai, Al Ittihad, Dubai Investment Park 2

www.altayermotors.com

The big picture

Deyaar’s Atria twin towers in Dubai 25% complete, developer announces Massive mixed-use project scheduled for handover by the middle of 2017 Dubai’s Deyaar Development says The Atria project, an 116,129sqm mixed-use twin tower complex launched in April last year, is 25% complete. A RERA report has been compiled following an on-site inspection of the project

and construction progress, the developer said in a statement.

Enabling works and substructure have been completed on the project in Dubai’s Business Bay district.

The superstructure is now in

progress at the mezzanine level.

“We reiterate our commitment to the investors and owners of The Atria to ensure that we remain on the right schedule for completion and delivery as per the timeline disclosed On schedule Saeed Al Qatami, Deyaar CEO, has said that The Atria remains on schedule for delivery.

“We reiterate our commitment to the investors and owners of The Atria to ensure that we remain on the right schedule for completion and delivery” 10 January 2016

at the time of the launch,” said Saeed Al Qatami, Deyaar CEO. Scheduled for completion and handover by mid-2017, The Atria is Deyaar’s first foray into the hospitality sector. It follows the developer’s allocation of one million square feet of land for the development of hotel properties in the coming years.

One of the twin towers will be a 30-storey residential complex featuring a total of 219 units. The units will include one-, two- and three-bedroom apartments, as well as three-bedroom duplex options and two four-bedroom penthouses.

The second building will be a 31-floor hotel apartment tower featuring 347 apartments, including studios, one-, twoand three-bedroom apartments and three-bedroom duplex units. It will also include a five-star spa, gym, infinity pool and fine dining restaurants.

In October, Deyaar posted a lower net profit of $13.3 million for the third quarter of 2015.

According to Reuters, that amounts to a 37.7% drop in net profits from the $21.3 million posted in Q3 2014. Though Deyaar did not provide a breakdown of its quarterly numbers, it did report on its website a ninemonth net profit of $51.7 million.

“This achievement is a result of our constant commitment to our customers, shareholders and stakeholders. Our team develops innovative plans and strategies to achieve optimal efficiency, by monitoring market conditions and studying the current market requirements,” Al Qatami said.

The big picture

Landmark projects Bahrain Bay will be home to a number of high-profile projects, like the United Tower and Bay City.

Bahrain Bay development set for busy 2016 as construction work picks up $2.5 billion development includes a number of hospitality projects The developer behind Bahrain Bay, the $2.5 billion waterfront real estate development on the northern coastline of Manama, has said that 2016 will be an “exciting year” in terms of construction progress.

The district is already home to a number of landmark buildings in Manama, such as the Four Seasons Hotel Bahrain Bay, Arcapita Bank global headquarters and the winding United Tower. The Bahrain Bay

project was launched in 2006 and the last 10 years have seen it take shape, with a number of residential, commercial, retail, tourism and community facilities within the development area.

“We’re delighted with the current pace of development at Bahrain Bay. We’re happy to say that most projects are being developed ahead of the planned schedule. 2016 looks to be an exciting year for us as we see many investors complete their

$2.5 billion

Value of the waterfront real estate development

developments and others begin construction,” said Gagan Suri, Bahrain Bay Development CEO. The latest inauguration at Bahrain Bay was in March 2015, with Canadian luxury hotel operator Four Seasons opening the Four Seasons Hotel Bahrain Bay. The beginning of 2016 will also see Al Baraka Banking Group, one of the largest Islamic banking and financial organisations in the world, move into a building that will house their Middle East headquarters.

Another major investor is Bin Faqeeh Real Estate Investment Company, which is developing the Water Bay residential complex.

The project is being developed with a fast-track approach,

with preparatory ground works already under way. Basement construction is scheduled to begin by early 2016, with the first of three 10-storey towers ready for residents by early 2018.

The United Tower, a winding 47-storey building, will house the Wyndham Grand Manama, an international five-star hotel

by US-based Wyndham Hotel Group. The hotel will occupy 14 floors of the building, along with office space that will be leased to the open market.

Bay City, a development of almost 290,000sqm of residential, commercial and retail space on the waterfront overlooking Manama, is also scheduled for construction in 2016.

January 2016 11

The big picture

Low oil prices to hit Gulf infrastructure spend, Jones Lang LaSalle experts say Future plans likely to be curtailed as governments seek to adjust Low oil prices are leading to a fiscal restructuring across GCC nations, which will likely lead to cuts in infrastructure spending, according to a report by real estate consultancy JLL, which explains that restructuring in Gulf states is already evident in the form of budget cuts. It will involve reduced public spending and increased taxation to bolster government revenue, with implications for infrastructure real estate investment in the region.

“While many of the announced projects are likely to proceed, they may be scaled back or rescheduled over an extended time frame, with future projects being curtailed.

This will inevitably have a knockon effect on local real estate markets,” the consultancy said.

Meanwhile, governments are also seeking to raise revenues through sales tax, land or housing taxes and the reduction or removal of subsidies.

“While we remain positive on the long-term outlook for real estate markets across the region, there is little doubt that the rebalancing of the fiscal position will result in headwinds and challenges over the next 12 months,” said Craig Plumb, head of Research JLL MENA. Although governments will continue to spend on development and infrastructure projects, the level of this spending will be curtailed over the medium term to adjust to the reality of lower oil revenues.

Overseas property investments by government-controlled sovereign wealth funds (SWFs) 12 January 2016

2016

Overseas property investments by government SWFs to decline next year

are expected to decline in 2016.

JLL expects more funds to be diverted into local real estate, providing “an important source of additional capital for real estate markets across the Middle East”.

However, some of the decline in offshore investments by SWFs will likely be offset by private Middle Eastern investors, who

are becoming active purchasers of property overseas. “The prevailing geopolitical and security tensions across the Middle East are expected to result in an increased flight of private capital as wealthy Middle East investors seek opportunities in more stable and secure overseas real estate markets.

Increased investment JLL expects more funds to be diverted into local real estate by government-controlled SWFs.

The big picture

3

1. Spain’S FCC approveS multimillion-dollar Capital injeCtion Spanish contracting giant FCC has approved a capital increase of around $777.25 million by issuing over 118 million new shares for a unit price of $6.57 each. FCC said that its primary aim was to reinforce the contractor’s capital structure and reduce its level of debt. It added that shareholders will hold preferential subscription rights to the new shares.

In August 2015, Carlos M Jarque was appointed as the new CEO of the company, replacing Juan Béjar Jarque, whose appointment came after Mexican billionaire Carlos Slim took control of the group.

Esther Koplowitz and Iversora Carso, the core shareholders, said they were committed to subscribing to the total number of shares proportional to them through their preferential subscription rights.

Inversora Carso added that it would subscribe to surplus shares in the event that, upon completion of the preferential subscription period and the additional allocation period, there were unsubscribed shares left over.

14 January 2016

1

$111m

Wates Construction contract win for Cambridge student buildings

2. Saudi inveStor “in talkS over $4bn egypt projeCt” An unnamed Saudi investor is reportedly in talks over a $4 billion tourism project in Sharm El Sheikh, Egypt.

Egyptian tourism minister Hisham Zaazou told Saudi

newspaper Okaz that the proposed project would be the largest resort in the Red Sea tourist destination, Reuters reports. Zaazou did not name the prospective investor, or elaborate on what stage the talks were at. The country’s tourism industry

has taken a hit after political instability in the country, as well as the October air disaster involving a Russian airliner flying out of Sharm El Sheikh, which killed all 224 people on board. Russia, the US and the UK believe a bomb brought down the jet.

The big picture

$1.4bn

4. Sk engineering raiSeS $100m From gulF bankS

Amount of funds needed to build first phase of Faw container port in Iraq

4

2

250

Number of Italian investors present at a forum to discuss Iran’s infrastructure plans in Rome

3. iSg rejeCtS takeover bid

by CathexiS The board of British builder ISG has unanimously rejected a takeover bid by the US investor Cathexis, and warned shareholders that the offer “materially undervalues the company”.

The Texan firm made an offer of $2.15 per share on December 19, a 17% premium on ISG’s closing share price

at the time. This valued the company at $105.48 million.

ISG warned its shareholders that Cathexis, its majority shareholder, was an astute investor that had bought shares at times when its price was low and now saw further value at the struggling contractors’ shareholders’ expense. It added that the $105.48 million offer did not represent an adequate premium for control of ISG,

warning that dividends could be at risk if it seized control.

“Cathexis is an astute investor which has shrewdly built up its shareholding in ISG,” said Roy Dantzic, in a report by UK-based Construction Enquirer. “The board urges shareholders not to give away your value in ISG at today’s inadequate offer price.”

Shareholders have until January 11, 2016 to accept.

A consortium of banks led

by Mashreq has signed a $100 million loan for financing general corporate requirements of South Korea’s SK Engineering & Construction (SK E&C).

Mashreq Bank said the consortium included itself as the exclusive arranger and book runner, and Al Ahli Bank of Kuwait and Commercial Bank of Kuwait as joint lead arrangers.

John Iossifidis, head of the Corporate and Investment Banking Group at Mashreq, said: “Over the last seven years, we have actively supported SK E&C on 12 key infrastructure and oil and gas projects in the region, including the likes of Ruwais Refinery Expansion Project, Bab Gas Compression Project and Doha Metro’s Red Line North Underground Project.”

Ho Eun Hong, vice president at SK E&C, added: “SK E&C has executed various mega-size projects in the Middle East, focusing on oil and gas and infrastructure. Mashreq has always cooperated with SK E&C by supporting our operations in working capital and contract finance.”

January 2016 15

News analysis

Infrastructure Invested Big Project ME looks at the impact of increased focus on infrastructure construction projects on regional economies and construction industries The regional infrastructure market is expected to see tremendously increased activity over the coming years as GCC governments look to increase budgetary allocations in order to boost job creation, economic growth and diversification, despite the slump in oil prices.

Back in August 2015, a Ventures Onsite report estimated that the region’s sovereign wealth funds had $291 trillion between them, highlighting their capabilities when it came to investing in infrastructure projects, even with budget deficits brought on by low oil prices.

These infrastructure projects are also expected to provide countries in the region with much-needed job creation and economic stimulation, leading to an upward trend in the GCC infrastructure construction market in coming years, for a few reasons: • Population growth – The GCC population is forecast to grow from 35 million to 60 million 16 January 2016

News analysis

PPP law Dubai’s new PPP law will encourage PPPs to fund new infrastructure projects.

by 2050, which translates into the growth of infrastructure construction activities.

• The pan-Gulf railway network – Expected to be operational by 2022, the GCC pan-Gulf railway network runs for 2,177km and connects the six countries of the region.

It is expected to encourage travel and increase trade in the region, while also helping on the logistics side to really diversify their non-oil economies.

• Integration of rail and metro projects • Intensified investments – Roads and railway projects in the GCC have been witnessing unprecedented investment, accounting for the largest share of government spending.

It is estimated that the GCC’s combined rail, road and maritime projects are worth in excess of $422 billion over the next five years.

• Airport spending – Airports in the region are expected to expand massively by 2020 due to an increasing number of passengers and cargo traffic, driven by strong tourism growth and mega events such as the 2022 World Cup in Qatar and Dubai Expo 2020.

Starting from 2015, it has been interesting to see that governments in the GCC have been increasingly willing to embrace private sector investment to safeguard their wide array of existing and planned infrastructure projects.

The Ventures Onsite report says that it expects that this trend will continue for a few years to come. Some examples listed are: • Kuwait planning to finance half of the capital expenditure under its new development plan through the public-private partnership (PPP) model

“It is no coincidence that the countries which have led on transport infrastructure investment and, crucially, those that have successfully executed these projects, are leading on economic growth, diversification and opportunity creation” • Dubai has passed a new law that encourages PPPs to fund new infrastructure projects • A key element of Bahrain’s Vision 2030 is for the private sector to be the engine of growth for infrastructure projects Last year’s Alpen Capital’s GCC Construction Industry report was published, and it found that the UAE’s infrastructure was the third most competitive in the world, ranking first for roads, second for ports and third for airports.

Bahrain ranked 21st across 100 countries globally, while Oman, Qatar, Saudi Arabia and Kuwait were ranked 25th, 26th, 29th

and 67th respectively in 2014.

The report added that it expected to see an 11% increase in GCC infrastructure sector contractor awards in 2015 – $53 billion, up from $48 billion in 2014.

Saudi Arabia remained the largest market (31%) in terms of infrastructure project awards in 2015, followed by Qatar (28%), Kuwait (18%), the UAE (12%), Oman (10%) and Bahrain (1%).

An anonymous source from a leading international infrastructure contractor told Big Project ME that the “recent, unprecedented infrastructure programmes” will be as important to the regional economies as they are to the construction industries. “It is no coincidence that the countries which have led on transport infrastructure investment, and, crucially, those that have successfully executed these projects, are leading on economic growth, diversification and opportunity creation.”

Saudi Arabia’s strong growth last year can be attributed to the government’s investment in major infrastructure projects, including the upgrade of the Kingdom’s railway network.

KSA, Qatar and the UAE are the big spenders and market leaders amongst the GCC countries for infrastructure projects, with a total planned investment of $106 billion for various rail projects alone within their countries. In fact, the UAE and Saudi Arabia are the only two countries in the GCC in line with the schedule to complete their rail networks by 2018, the original deadline for the pan-Gulf network.

“The pace of payback in infrastructure investment can vary – and notably skill in integrating technical and economic urban planning is important in this – but overall, it is undeniable that the most January 2016 17

News analysis

15,000

10,000

5,000

UAE

KSA

Qatar

Kuwait

GCC Infrastructure Construction Contractor Awards, 2014-2015 (in $ million) successful economic growth stories are all intrinsically linked to successfully implemented transportation infrastructure investment.

“It is unfortunate that there are still some corners of the Middle East, including in the GCC, where transportation problems are holding back economic growth, sometimes chronically and sometimes in the most basic of ways, but it seems that there are now enough local case studies for comparison that overcoming the blockages has become a very high priority for governments, even amidst the current revenue crunch,” the source pointed out, adding that it is interesting that often the solutions to the transportation problems in the region are well known, and have been for many years, but that while planning and design impetus is present, funding clarity and skilful execution is lacking.

“In terms of impact on the construction industry, infrastructure is, physically and metaphorically, the backbone of the region – different countries may have different themes of peripheral construction activity, and even different drivers, be it commercial real estate in 18 January 2016

Dubai, social services in Saudi Arabia, the 2022 World Cup in Qatar, tourism in Oman, social stability in Egypt – but the common thread through all of these markets is major core infrastructure development.”

This has led to some fundamental shifts in business models in the region, with traditional building-focused firms diversifying into core infrastructure (HLG and Khansaheb in Dubai, for fundamental shift Traditional building-focused firms are now diversifying into core infrastructure.

example). In addition, major international firms and conglomerates are committing to large infrastructure schemes (Siemens, FCC, Bechtel, Samsung and Ansaldo in Riyadh), while new international players are entering the regional market (such as the four Chinese-led consortia that bid on the first phase of Oman Rail tenders).

“The recent infrastructure investment programmes have helped to create a significant

Oman 2014

Bahrain 2015

new marketplace in the world.

To note, there is an onus on those managing policy and commercial behaviours in government to manage this developing supply chain in a way that obtains sustainable long-term value for the market – infrastructure development is a priority in many competing developing markets too, and the global supply chain is increasingly fickle,” said the source in conclusion.

Source: Ventures Onsite Projects Database www.venturesonsite.com

Contractor Awards (US$ Million)

20,000

Market report

egypt market SeCt Office supply

Residential supply

0 0 5 , $3

$35

t i a l r en t n e d i r es Pr i m e onth) (sqm /m xecutive

nt f f i ce r e o e m i Pr onth) (sqm /m

to be reviving; Smart Villages has announced a new development at Future City in New Cairo and CityStars has pressed ahead with development of an additional office building. However, a less positive sign is Cairo Festival City’s postponement of its Phase II office development.

Prime office rents in the city centre have declined to $35 per sqm per month, but even so they remain around double the rents in peripheral areas.

Office development stalled as a result of the political disruption of recent years, but activity now appears to be reviving 20 January 2016

The mid- and low-income brackets are widely seen as having the best growth prospects, given the potential size of these markets Residential development has declined over recent years, though the market had previously been very active. The slowdown has been due to difficulties in obtaining construction permits and a general easing of construction activity, rather than any reduction in demand.

The mid- and low-income brackets are widely seen

as having the best growth prospects, given the potential size of these markets.

In a move designed to revitalise the residential housing sector, the Egyptian authorities have announced an agreement with UAE-based Arabtec for the construction of one million units of lower income housing across Egypt.

Source: Knight Frank Research

Demand for office space in Cairo comes from the banking, oil and gas, pharmaceutical, construction and ICT sectors. Notable recent transactions have included the Canadian Embassy’s lease of offices at Nile City Towers, while Barclays Bank will be relocating from the city centre to CityStars in a move which will see them lease 14,000sqm. Office development stalled as a result of the political disruption of recent years, but activity now appears

n r oom e *4 -bed pr im e locat io house

Market report

Or OVerVIeW Industrial supply

0 5 .

3 $

0 0 1 $

t i a l r en r t s u d in Pr i m e onth) (sqm /m

The government’s Industrial Development Authority (IDA) is a major driver of industrial activity, attracting new investment to the sector and developing industrial areas.

At the end of 2015, the IDA said $1.62 billion would be invested in industrial projects.

Key industrial locations

Retail supply

e nt retail r e m i r P onth) (sqm /m

in Greater Cairo include 6th October City and 10th Ramadan City, both of which are expected to see further investment by the IDA. Government land is available for purchase at a cost of $15-25 per sqm, about half the typical price of commercial land.

Key industrial locations in Greater Cairo include 6th October City and 10th Ramadan City, both of which are expected to see further investment by the Industrial Development Authority

More than 900,000sqm of additional retail space is expected to be delivered over the next two years Cairo’s modern retail provision has continued to increase, with recent openings including Cairo Festival City Mall (168,000sqm GLA) in 2013 and the smaller Galleria 40 in 2014. These have joined existing malls in Greater Cairo including CityStars (150,000sqm GLA) and Mall of Arabia (180,000sqm GLA). More than 900,000sqm of additional retail space is expected to be delivered

over the next two years, most notably in Citadel Plaza in Mokattam and Madinaty Mega Mall in New Cairo. The most significant international retailer to enter the market recently is IKEA, which opened a store at Cairo Festival City in 2013.

Despite increased uncertainty in the market, retail rents have remained broadly stable, but a growing number of tenants have sought to pay turnover rents.

January 2016 21

In profile

“The realiTy is ThaT conTracTors can’T Take every single projecT risk, nor should They be required To” Big Project ME sits down for an illuminating chat with Stephen Watson and Andrew Ward of Affric Infrastructure Advisory, about why it pays to have the right kind of advice before you start a project 22 January 2016

In profile

January 2016 23

In profile

a

s oil prices continue to spiral downwards, developers and construction companies in the GCC are being forced to come to terms with a new reality, where they don’t have access to the lavish funding that once fuelled the region’s extraordinary development.

Prior to the global financial crisis, projects in the region, and especially in cities like Dubai, found investors and financial backers relatively easily, no matter how outlandish they may have been. However, post-crisis, investors and lenders became increasingly wary of backing projects that didn’t have clear monetary value. As a result, projects became increasingly sober and tailored towards the needs of the market, while only the big developers – ones with quasi-government status – chased the big, extravagant projects.

Despite this reticence from the market, the falling price of oil has seen countries in the GCC shift their focus towards spending on vital infrastructure and economically significant construction projects. Therefore, those in the private sector looking to build and develop their own projects will need to look at viable, alternative sources of funding for their projects.

It is this scenario that brings Big Project ME to the offices of Affric Infrastructure Advisory, a boutique financial and commercial advisory firm which specialises in helping clients raise debt and equity funding for 24 January 2016

stephen Watson With more than 18 years of experience advising government and private developers, Watson is something of an infrastructure specialist.

projects in the infrastructure, real estate and utilities sectors.

Comprising a team of former Ernst & Young Infrastructure Advisory and investment banking professionals, the firm offers clients what they call a “more personal, bespoke and costeffective advisory solution, while still providing the skills and experience of banking and Big Four advisory professionals”.

Stephen Watson, managing director of Affric, is something of an infrastructure specialist, with more than 18 years of experience advising government and private sector developers within the three sectors. Having set up shop just 18 months ago in Dubai’s JLT district, he’s now turning his sights to the UAE’s construction market, as he sees a major

“Developers are finding funding more and more difficult to source from the banking community and are looking for alternative ways to fund projects”

opportunity for firms like his to open up new avenues for clients.

“The market is changing significantly; however, good projects remain fundable,” says Watson. “However, with the fall in oil prices restricting liquidity in the senior debt market, access to capital is getting harder.

Developers are finding funding more and more difficult to source from the banking community and are looking for alternative ways to fund projects.”

So what is a good project?

Andrew Ward, a director at Affric, explains: “A good project is economically viable, has the right capital structure and provides appropriate security to funders – if these foundations are in place, then there are always ways to finance a project.”

He continues: “2016 is undoubtedly going to be a very challenging year from a funding perspective. Senior funders are retrenching and only extending facilities to a very select customer base, if you don’t have a strong relationship with them, or if you don’t have existing yielding assets that you’re willing to provide as security, then you’re going to find it very difficult to source funding from the senior debt market. As a result, the up-front structuring of a project is even more important for our clients.”

But even for well-structured projects, funding will come at a price. “Everyone has to get more realistic about where the market is going,” Ward says. “Government-backed infrastructure projects will still attract multiple funders and competition to provide funding to these projects will be fierce. But for everybody else funding, whether it’s debt or equity, is going to cost more.

That’s the reality of it.”

Ward continues: “As a developer, you have

In profile

a straight choice: Option 1 – You can sit looking at your patch of land and wait for the prices to go up, or wait for liquidity to come back into the market.

“Option 2 – You can accept where the funding market is and take the higher cost of funding. Option 2 may not be palatable to some, but it provides the huge advantage of giving the green light on the project and making it real. Then you can start construction, start the sales process and start generating profits. Meanwhile, those taking Option 1 are still looking at their patch of desert.”

This choice becomes increasingly stark for developers looking at the residential real

estate market, says Stephen Watson. “Going into 2016, the view from the banks and funders is that residential real estate will remain highly challenging to finance as there is perceived to be an oversupply in the market.

Private equity and real estate funds remain active in this market – but these funds are expensive.”

“Developers really need to ensure their financial feasibility studies are robust and can absorb the higher cost of finance, and this is where we can help. But given the prevailing economic conditions, that choice is something developers and investors in the region will have to think long and hard about.

While the funding is available in the market, it is going to

be expensive. Ultimately, a developer will simply have to decide whether or not they want their project to succeed.

“However, I think that those capital projects that hit a gap in the market, where there’s a strong demand for their services, those will always be fundable.

These projects need to have good counterparties, so that means either a strong developer, a strong construction company or a government or quasi-government agency sitting behind.”

Developing funding structures in this market is a complex process. This is perhaps best illustrated by the structure Affric put together for the relocation and expansion of a primary school in Jebel Ali, which took

nearly six months to develop.

“That was a complex process,” says Watson. “JAPS is a notfor-profit entity and therefore did not have the ability to raise finance. Combining this to the requirement of Institution Funding via Emirates REIT was a complex process which led to a lot of late nights and difficult discussions.”

Andrew Ward says, “That was a complex deal. But not all projects are like this and most of the key issues can be addressed during the initial feasibility assessment.”

Ward adds that the firm also conducts initial feasibility assessments for developers who come to them with ideas for projects and want to know if

is it feasible?

Affric conducts a number of initial feasibility assessments for developers to find out if a project is viable.

January 2016 25

In profile

they are financially viable. “We can do all the work necessary to say, ‘Right, that initial feasibility assessment – before you do anything, does that make sense?’”

“This is a key document for any project. It doesn’t have to be hundreds of pages, but it does have to be robust,” Ward continues. “We have worked with lots of developers at this initial stage, supporting them to present a project structure that is financially viable. We help them shape their strategy, build their financial models and present a project that ultimately makes financial sense.”

“That initial work for developers, to ask them, ‘Does this make sense? Can we go have a sensible conversation with banks?’ The feedback we’ve had on that has been really good.

“I think this is our real area of distinction in the market. I hate to use the word disruptive, because it just sounds like a cliché, but I do think that we have been disruptive to the market, to an extent. We are aiming to bring a different quality of work and a different quality of assessment, and this reflects the feedback we’ve been getting from developers and from funders,” he adds proudly.

“The feedback we have had from the market is that our name stands out, and when people see the Affric logo, they know it is a serious proposal that is worth spending time and effort on.

“But that doesn’t always mean our advice is accepted.

I have never understood why developers have always relied significantly on pre-sales to fund their developments and not had sufficient funding in place for the full development.

“Why would you put one dollar into the ground unless you knew that you could build all the way to the end? At the 26 January 2016

“ Why would you put one dollar into the ground unless you knew that you could build all the way to the end?”

very least, if you can build to the end, then you can manage the development and sales process in parallel and manage the funding of the development, then say, ‘Here’s the finished product. We can do something with that,’” Ward explains, gesturing out the window to a half-completed tower.

Despite the pitfalls, this approach continues to be prevalent in the Middle East, evidenced by the number of buildings that stay half complete for years, many of them likely to never progress from there. “Pre-sales continue

getting it right Andrew Ward says that a project that has the right foundations in place will always be able to get funding.

to be seen as a route for project funding, and in the current market, this remains a high-risk strategy,” explains Watson.

As many know, Dubai’s development has been based on a pre-sales strategy. Back when the economy was high and when investor capital was flowing into Dubai from all corners of the globe, banks lent heavily into those types of projects. Apartments, villas, entire residential communities, were all being sold off plan. What this meant, Watson explains, is that builders didn’t have all the capital to build out their projects, because everything was coming from pre-sales.

However, this worked, as investors were hungry to invest into the Dubai success story.

“Obviously, after what happened in 2008/2009, banks were a lot more wary of projects seeking to finance based on a pre-sales strategy,” says Watson.

“This is a reasonable argument.

Effectively, by relying on presale, developers are transferring a large proportion of sales risk to the funders and, given the perceived oversupply in the market, funders are a lot more wary of exposing themselves for fixed returns, particularly when banks have less liquidity.”

Andrew Ward chimes in: “If you’re starting a project now, I think the key is to make sure that you have financing to complete the whole project, without relying on pre-sales, particularly in the residential sector. If pre-sales can be generated, this is great, but you can’t build a business case on them. Having that as your key source of funding makes a project very difficult.”

In order to take advantage of this rapidly evolving marketplace, Affric’s leader says that he’s keen to use the strong relationships he and his team

FIRE SAFETY & BUILDING SECURITY REPORT Next month, Big Project ME takes an in-depth look at the GCC’s fire and life-safety industry for the 2016 Fire Safety and Building Security Report.

Some of the topics we’ll cover are: How to engineer buildings for fire safety Fire safety and green building Procuring appropriately rated firesafe materials Developing fire-safety on site Developing the fire codes in the GCC Designing safety into buildings in an unobtrusive manner Creating intuitive security systems in buildings Developing a city-wide security grid If you would like to participate, contact: ADVERTISING Faaju AbdulFatah, Sales Manager +971 56 674 5757 faaju.abdulfatah@cpimediagroup.com EDITORIAL Gavin Davids, Editor +971 4 375 5480 gavin.davids@cpimediagroup.com

A supplement of:

In profile

The importance of tenders Getting tender documentation right is crucial to the success of a project, Ward and Watson say.

have built up in the regional construction industry to allow his young company to flourish.

“Predominantly,” says Watson, “the opportunities for Affric are focused mainly on existing relationships. It’s based on the relationships we have within the market, with developers, the larger construction companies, as well as the technical advisory and project management firms here in the UAE.” Affric tends to deal with two types of clients, Watson adds –Western-based multinationals with operations in the GCC, and local, home-grown organisations.

28 January 2016

“We’re looking to do work with these organisations, if we’re not already working with them.

And we’re speaking to them about different funding options for different types of projects.

One of the areas we will be focusing upon is working with our construction clients, so that they’ll be able to take not only construction solutions but also financing solutions to their developer client base.”

The funding market is set to change in the UAE and the wider GCC in the coming years, and both international companies and home-grown firms will

“ I think that those projects that hit a gap in the market, where there’s a strong demand for their services, those will always be fundable”

need to put more thought into how to fund capital projects and not just rely on their tried and trusted partners in the banks.

With traditional funding sources proving difficult to tap into, both Watson and Ward say there will have to be a period of education in the local market as it comes to terms with the fact that structuring of projects is key to access funding, and that this is where Affric can assist its clients.

“As a result of market and economic conditions, we’re starting to have discussions with both types of clients.

They’re starting to see the need for different types of funding structures,” Watson points out.

“But it keeps coming back to the point that good projects remain fundable. We keep reiterating that [to our clients].”

Affric also offers a plethora of other services to its construction clients, but one particular service bound to attract the attention of construction firms and developers is their offering of Tender Support. Often a source of considerable angst to contractors, having balanced tender documentation and tender packages is something that both Watson and Ward are keen advocates of. Together they have worked on both sides of the table over the years, and the duo are adamant that having the right kind of tenders issued into the market will solve a number of problems projects encounter during the development and construction phases.

“The development of the tender documentation is so important to the success of the project,” says Ward. “Particularly where the tender requires the construction company to source finance for the project.

The tender document itself must be coherent, setting out exactly what is required,

In profile

by who, and by when.”

“If a project is being funded by a developer’s own equity, then it is possible to retain a large element of flexibility, but as soon as third-party external funding is involved, that flexibility has diminished significantly or even gone. Funders want to know exactly what is being built, how much it will cost, and how and when they will get repaid.”

Watson continues. “In addition to being clear and concise, a good tender is a balanced tender, one that understands the capabilities and limitations of the private sector. The reality is that contractors can’t take every single project risk, nor should they be required to. However, the desire to push everything down to the contractor level means the contractor is just

storing issues up for down the line when the project starts to be delayed or the funding runs out.”

The discussion in relation to contractor risk quickly leads to PPP, and its ability to solve the funding of infrastructure in the region. Both Watson and Ward have significant experience in the PPP market, having advised both public and private sector clients in the GCC, the UK and Australia.

“There are a number of factor that are required to unlock the PPP market here in the GCC,” says Watson. “There are macro issues such as PPP laws, a centralised PPP unit, a developed funding market, as well as micro issues such as robust feasibility assessment, high quality procurement documentation, appropriate allocation of risk, cross-departmental

working, the provision of appropriate government guarantees – the list goes on.”

“But the impact of oil price and its impact on sovereign reserves mean governments around the region will increasingly look to PPP as a way of funding capital projects in the region. The UAE and the wider GCC, however, has a good track record here, as the basic principles involved in many PPP structures have been used successfully in the region for a number of years through the various IPP and IWP projects.”

Discussing the new PPP law, Ward is more sanguine: “The introduction of the new PPP law in Dubai is a welcome development, but in itself will not have an immediate impact.

However, its introduction does provide a useful background

for investors. For international investors in particular, the use of the new law provides a defined structure for how these projects will operate and how investors can be protected – this is fundamental when seeking foreign investment into projects.”

So what’s the outlook for 2016 from Affric’s perspective?

“It’s been a great year for Affric. Closing the Jebel Ali School deal and winning the ME Consultant Team of the Year Award at Big Project ME’s sister magazine’s awards night were great achievements for our team,” says Watson.

“2016 is going to throw up some real challenges in funding capital projects, but with the right structure, these good projects in the UAE remain fundable.”

Global water, wastewater and processing storage solutions Epoxy coated steel tanks

Concrete tanks

Cylindrical steel tanks

Hot press GRP tanks

Hot press steel tanks

Roof structures

Tank installation

Technical services

Balmoral Tanks Providing turnkey services to the water, wastewater and processing sectors, Balmoral Tanks offers what is potentially the widest range of accredited tanks from a single supplier in the world.

+44 (0)208 665 4100 watertanksales@balmoral.co.uk

When this is supported by unrivalled engineering design experience and industry-leading customer service, installation, maintenance and repair services, why consider going anywhere else?

Balmoral Tanks: Not just another tank company

Stand 3E151

www.balmoraltanks.com January 2016 29

Project profile

30 January 2016

Project profile

that winning feeling Big Project ME profiles the Central Bank of Kuwait headquarters, CSCEC(ME)’s winning entry for the Big Project ME Award for Project of the Year 2015 January 2016 31

Project profile

L

ate last November, the winner of the 2015 Big Project Middle East Project of the Year Award was announced at a black-tie awards dinner with 400 guests from all over the region in attendance.

The event provided a fitting backdrop for the revelation that China State Construction and Engineering Corporation (Middle East) had scooped up the award for its Central Bank of Kuwait headquarters project in Kuwait City.

This landmark project has been a decade in the making, having first broken ground in 2005 in the Sharq area of the Kuwaiti capital. Situated near the Seif Palace and Mosque Yaseen, the project is intended to be a symbol of the country’s significant economic power and contribution to the region.

Valued at $406 million, the significance and importance of the project is probably best displayed by the fact that its image is used on the new Kuwaiti five-dinar note to represent the client’s objectives of “ensuring resilience, stability and sound monetary policy”.

Covering a total gross area of 160,000sqm, the building is a 240m tall, 47-storey triangular, truncated pyramid tower. The total gross area consists of a visitor parking lot, office building, banking hall, staff parking lot and shelter area.

The 47 storeys will also include a mezzanine level and a parking lot built to accommodate 1,300 cars. Once fully operational, the building is expected to house a total of 1,800 full-time staff.

Designed by HOK International 32 January 2016

Safe and secure A number of safety features have been put in place for the structure, including anti-explosive features that cover half the building.

“We had a discussion with our technical team and they [engineers and client] understood how to approach their design, and also how to approach our procedures towards construction”

Project profile

ProjECt dEtAilS Area of project: 163,464sqm Occupied area: 25,872sqm Total height: 238.475m Typical floor height: 4.60m Area of tower: 56,682sqm Area of basement: 47,343sqm Area of podium: 59,439sqm Floors in tower: 47 Floors in basement: 2 Floors in podium: 2

Quality control China State sent engineers to quarries and factories to conduct quality tests on the stone materials being used on the Central Bank of Kuwait HQ project.

Ltd, the building is meant to be a reflection of the culture of Kuwait.

It integrates the latest technology and security requirements, while also paying due consideration to energy consumption reduction through the installation of stone materials on the southern side of the building. These work to absorb the heat of the intense Kuwait sun during the day, store it and then fend off the cold at night, thus delivering sustainable value to the building, China State says.

The northern façade is covered in glass to protect the interior of the building, while also providing a panoramic view of the gulf, the contractor says.

Part of the elevation’s finishing materials consist of curtain wall plus stone louver, or curtain wall plus aluminium alloy louver, or aluminium alloy louver plus aluminium alloy diagrid, adds Yang Chunsen, manager of China State’s operations in Kuwait and project manager for the Central Bank of Kuwait HQ project.

“It was a big challenge. There were a lot of calculations and the design and engineering team spent a lot of time on this issue,” he tells Big Project ME. “Also, we were very strict about quality control. We sent engineers to the quarries and to the factories [to quality check the materials]. There were a lot of testing procedures to control the stone and to make sure that they met the requirements and were safe for building.”

A further challenge for the team, Chunsen says, is that they had very high requirements in terms of security. Given the highprofile nature of the building, every precaution has been taken to ensure that the building and its inhabitants will be protected.

This anti-explosion feature covers almost half the building, and in doing so delivers the highest security requirements, as per the client and design briefings.

January 2016 33

Project profile

“There was a very high requirement from the security side.

There is bomb-blast protection, with a big panel that is 3x1.5 metres. This is very heavy because of the bomb-blast requirements.

There is another piece that is 4.6 metres high – that’s a single piece.

The weight of the biggest piece was several hundred kilograms, so it was quite a difficult challenge.”

As the main contractor for the building, China State had several packages to cover over the course of the project. These were Structural; Architectural; Mechanical, Electrical and Plumbing; Façade; Soft and Hard Landscape; Building Maintenance Units; and Other Provisions, as per the client agreement.

The workflow on-site was initiated by the structural work, and ended up with the second fix of the MEP and finishing activities. Special consideration was given to the starting time between the main tower and the podium, the integration between the main tower and the podium, and also the integration between the main core activities (like the core wall) and the steel structure for the main tower.

An additional complication for the construction team was that they had to consider the starting time for the attached auditorium hall, which protruded out of the building by 25 metres.

Obviously, in order to support this structure, further calculations and planning were needed to ensure that it had the required support during construction.

Other major hurdles the team had to clear were the construction of the structural system which integrates the concrete and heavy steel structure and the procurement of the translucent glass panels, which involved a complicated process of obtaining and integrating the layers from the different countries in which they 34 January 2016

“It was a big challenge. There were a lot of calculations and the design and engineering team spent a lot of time on this issue”

were manufactured, in order to have a final product that matched up to design requirements.

The north-facing elevation uses double-glazed, solar-controlled glass, which allows occupants to look out over the Gulf, while also conserving energy for the building.

One of the biggest challenges on the project was the complicated structural system, made of concrete and steel. To make it work, China State says its construction team had to integrate the usage of spiral reinforcement in a “unique method, in comparison to traditional methods”.

“The main problem is that the columns are not vertically Staying in shape The project team found the complicated structural system to be an engineering challenge.

spaced,” says Chunsen. “They are all crossed together. But we have a similar project in Guangdong, China. It’s similar, but not exactly the same. We took the engineers and the client to see our project there and show them the design.

We had a discussion with our technical team and they [engineers and client] understood how to approach their design, and also how to approach our procedures towards construction.”

Concrete quality was also an issue for the team. Obviously, since this was a prestige project, they had to take every precaution to ensure that the concrete used on-site was absolutely right for the job, no easy task in Kuwait.

To this end, Chunsen says they had to change suppliers to ensure that quality levels remained high.

“The stone cladding was also a challenge for us; the whole building, other than the north side, is enveloped by stone, the thickness is 40mm,” he adds.

“It was a big challenge and there were a lot of calculations.

The design team spent a lot of time on this issue.”

Despite the many challenges, China State remains confident that it has been able to achieve the client’s targets on the project, and with the handover date fast approaching, says it has delivered a project that matches any development in the region.

“Building the new headquarters for the Central Bank was one of the strategic aims of Kuwait government to accommodate the strategic expansion in the country and ensure that the country’s infrastructure matches current developments occurring around the world and in neighbouring countries. This project will bring guaranteed returns to the economy of Kuwait and assist in improving the financial and banking sector.”

Market focus

Tough Times ahead?

As GCC governments come to terms with the reality of low oil prices and challenging economic conditions, Big Project ME examines the regional construction industry outlook for 2016

dramatic decline Compared to survey results from a year ago, the GCC construction sector has seen a dramatic decline in optimism.

36 January 2016

The year 2015 was a challenging one by all accounts, globally and within the GCC. Perhaps the most significant factor driving uncertainty in the Gulf was continued low oil prices, fast being established as a new norm rather than a temporary setback.

The decline in oil revenues, combined with the geopolitical turmoil in much of the Middle East and the expected lifting of Iranian sanctions, have led key figures in the construction industry and its many verticals to adopt a wait-and-see approach to what the future holds in store. It is thus unsurprising that a recent survey found a dramatic decline in optimism for 2016 in the GCC construction sector, compared to results from over a year ago.

Law firm Pinsent Masons’

annual GCC Construction Survey, which was presented to companies involved in projects with a value of over $27.2 million, shows that just 32% of respondents are optimistic about 2016. This compares to 77% stating that they were optimistic about 2015 when asked the same question a mere 12 months earlier.

The shift in sentiment is consistent with less positive responses from the industry to questions about order books, contract conditions, payment periods and disputes. Out of those surveyed, 16% said that their 2016 order books had declined by over 10%, which compares to just 4% a year earlier.

A significant majority of respondents (95%) also said contract conditions had become

Market focus

ExPErT insiGhT “The Middle East market and the wider global economy face challenges just now; the regional engineering and construction industry is heavily dependent on government expenditure sourced from oil income. That said, there are also major global events planned for this region in several years which will continue to drive development in all areas.

Irrespective of the challenges faced, our focus remains on adding value for our clients, retaining and attracting the best people and driving the themes of health and safety, quality, sustainability and technology through everything we do. We are always thinking about how we can meet and exceed our clients’ expectations – that is our fundamental purpose.”

Martin Bassett, director – Transport & Infrastructure, WSP | Parsons Brinckerhoff “2015 was a tough year in general for the construction industry with bright spots in parts of the region. It shaped us well and made us focus on the things that matter.

Overall, expectations were met, but not without trying very hard. I expect consultants and contractors will be better placed in 2016, as they have had time to adjust and prepare in 2015. We enter 2016 cautiously optimistic. We make our fortunes by careful planning and selection of opportunities.

2015 has calibrated our expectations, and we are ready with positive energy.”

Wael Allan, Middle East CEO at Arcadis

less favourable during 2015, a 14% increase from a year earlier.

Moreover, 95% of participants said payment periods were longer this year, and 60% said they were involved in more disputes during 2015 than had been expected.

The survey’s results are indicative of the increasingly tough economic conditions as the construction industry – like many others – comes to terms with the impact of ongoing low oil prices, turmoil in the wider MENA region and general concern about emerging markets from many global investors, Pinsent Masons said.

Country-wise, the UAE was considered to have the strongest market opportunities in 2016.

Optimism surrounding its larger neighbour Saudi Arabia

saw a significant decline, with just 12% of respondents saying Saudi Arabia would provide the strongest growth opportunity in 2016. This represents a substantial drop from a year earlier, when 40% of respondents believed the Kingdom would be the strongest market in 2015.

“This is the sharpest annual decline in optimism our survey has seen, and there is no doubt that economic and geopolitical concerns are playing heavily on people’s minds,” says Sachin Kerur, head of Middle East region at Pinsent Masons.

However, there could be “a swift return to positivity” once these issues are resolved.

“Nowhere in the region is falling optimism as pronounced as it is in Saudi Arabia,” Kerur

says, noting that this is to be expected, given the central role oil maintains in its economy.

“Despite this, there is a general sense amongst the industry that if the current financial squeeze can deliver greater diversification of the economy, Saudi Arabia will remain a highly attractive market.”

The Kingdom does seem to be on the right track, he says, with positive diversification measures under discussion, which if implemented would lead to greater private participation in the GCC’s largest economy.

Meanwhile, neighbouring Qatar is benefiting from a surge in enthusiasm as the 2022 World Cup edges closer, even amidst the scrutiny it has come under for working conditions for migrant labour and corruption allegations

uae stays top The UAE is considered to be the market that generates the most optimism in 2016.

January 2016 37

Market focus

involving top FIFA officials. A growing portion of the industry now views Qatar as offering the strongest regional opportunity.

Positivity surrounding the GCC state more than doubled, with about a third of respondents (33%) considering it to be the strongest market opportunity, as opposed to just 14% in the previous year’s survey. infrastructure investment

The decline in oil revenues around the region is likely to lead to cuts in infrastructure spending brought about by fiscal restructuring among the GCC’s hydrocarbonbased economies, according to real estate advisory JLL. This is already evident in the form of budget cuts

by GCC states, including the UAE. While many of the projects

already announced are likely to proceed, they may be scaled back or rescheduled over an extended period, with future projects curtailed, JLL says. On the other side of the coin, GCC governments are also looking to raise additional revenue through sales tax, land or housing tax and the reduction or removal of subsidies – developments which also have implications for various real estate stakeholders.

“While we remain positive on the long-term outlook for real estate markets across the region, there is little doubt that the rebalancing of the fiscal position will result in headwinds and challenges over the next 12 months,” says Craig Plumb, head of research at JLL MENA. “While governments continue

more to be done The private sector may still believe that more reform is needed before PPPs become mainstream.

38 January 2016

ExPErT insiGhT “2015 has been good.

I think with the oil prices, everything is becoming a little bit soft. But hopefully, things will move forward.

There’s a lot of master planning projects coming through, so a lot of people are testing the projects, and they’re willing to spend the money for master planning to take a look at the economy and what we can do for them.

HOK is very well-rounded from a design standpoint, and master planning is a very big part of our business.”

Mark Streetz, senior vice president and managing principal Dubai, HOK “I think 2016 is actually going to be tougher [than 2015], so what we’ve got to do is just consolidate where there are key clients, continue to deliver strong teams for our clients and make sure that we deliver our projects to their satisfaction. We understand what our clients require. We normally embed ourselves in their organisation, so we know what motivates them to have a successful project.

We have a really good team of senior management, and it’s really just us understanding how to deliver and give the clients what they need. And we represent them to make sure that we can deliver the projects for them in accordance with their business plan.”

Brian Fisher, Middle East head of project management, Faithful + Gould

to spend on development and infrastructure projects, the level of this spending will inevitably be curtailed over the medium term as spending needs are realigned with the reality of lower oil revenues.”

Kerur also acknowledges that there might be a slowdown, but reiterates that infrastructure spending is nevertheless likely to continue. “First of all, there’s a big infrastructure deficit in this region, which needs to be bridged.

Secondly, infrastructure is a very important catalyst and driver for an economy, so when there are difficult times, infrastructure construction is an important element of the economy to keep it ticking over, so I think the governments around the region would be keen for both reasons to keep infrastructure moving along.”

If governments don’t have the money required to do so, they will probably rely on other forms of financing to ensure that infrastructure continues, he adds. “Otherwise, it can have a very negative impact on the economy and they will slip further behind in their ability to diversify their economies.”

Given the fiscal environment GCC governments are currently operating under, it perhaps comes as a surprise that two thirds (67%) of respondents surveyed

by Pinsent Masons said they are not currently involved in, or anticipating to be involved in, PPP (public-private partnership) projects over the next 12 months.

“These arrangements could offer a favourable solution for numerous major infrastructure and construction developments, and there have been legislative changes made to make them more accessible and attractive,” Kerur points out. “It may well be that the private sector still believes more reform is needed before PPPs become mainstream.”

www.wspgroup.com I www.pbworld.com

#IamWSPPB

I AM WSP PARSONS BRINCKERHOFF

I AM PLUMBING ENGINEER OF THE YEAR

GIOVANI TAUCKOOR PRINCIPAL ENGINEER – PUBLIC HEALTH

Fire safety focus

Staying Safe onSite

Sami El Azzami of Bristol Fire Engineering tells Big Project ME that more needs to be done to ensure that adequate fire and life safety measures are installed on operational construction sites in the Middle East

40 January 2016

At no point in a building’s lifecycle is there a greater risk of fire than at the construction phase. A combination of exposed wiring, welding work and stored flammable materials can result in smoke on the skyline and headlines in the morning papers.

Just this month, plumes of smoke were seen at a construction site on Dubai’s Palm Jumeirah when a fire broke out as workers installed a building’s air-conditioning system. And earlier in the year, an apparent electrical short circuit started a fire on the upper floors of a tower under construction on Reem Island, Abu Dhabi.

Even when construction sites are fitted with fire alarms, the current systems are often not properly equipped to deal with the realities of the workplace.

There is a risk of alarm wiring being severed by excavation or careless workmen, while dust and humidity on-site can limit the effectiveness of detector sensors.

The answer, according to Sami El Azzami, business unit manager at Dubai-based Bristol Fire Engineering, lies in interlinked wireless emergency systems that overcome the pitfalls of conventional fire practice.

Construction sites often have insignificant or no technology-

Fire safety focus

Safety first A well-designed wireless fire alarm system can be an effective life-saving measure on a construction site.

based fire protection in place, which means they depend on personnel on-site acknowledging a fire incident and notifying others.

A well-designed wireless fire alarm system surpasses these issues. An adequate system includes manual fire alarm stations installed on-site in accordance with the project’s Fire Plan. These are wirelessly interlinked, creating a completely secure mesh network so that the alarm can be manually triggered throughout the site by personnel from any station.

When automatic heat or smoke detectors are incorporated into the system, automatic detection ensures site protection even

when personnel are not present.

The fact that they are wireless prevents accidental disconnection due to severed wires between detectors and the control panel.

In addition, every device has its own unique address, so that when fire is detected, the device’s specific location shows up on the control panel, allowing firefighters to find the exact point of a blaze and tackle it quickly.

El Azzami says it could soon be mandatory to install wireless emergency systems on the emirate’s construction sites if local authorities work them into soon-to-be-updated fire codes.

“One of the foremost difficulties is that the fire protection systems used on most construction sites just aren’t designed to ensure life safety,” he says. “Response time is a major factor in preventing life-threatening situations.”

“When a construction site progresses, it rapidly changes the risk of fire incidents. Combustible materials increase in proportion, creating an added challenge for fire safety, although this can be overcome if a wireless fire alarm system is in place.”

According to El Azzami, local authorities are impressed with the technology and are considering making it mandatory on construction sites in new fire codes. “When fires do occur, proper consideration to passive and active fire protection features can minimise the extent of damage and loss that will occur,” he says.

“Such losses can include the owners’ exposure to financial losses incurred due to delays caused by fires during construction activities, a concern that is often outside the scope of most regulatory requirements that apply to buildings under construction.”

Construction companies should embrace best practice and invest in wireless emergency

“One of the foremost difficulties is that the fire protection systems used on most construction sites just aren’t designed to ensure life safety” systems, El Azzami says. He points to their ease of installation and repositioning at fire points as the site progresses, which in turn avoids the need for specialists to set them up.

“They are relatively inexpensive and can save lives, as well as significantly reducing consequential losses running to several million dirhams,” he says.

“And because they can provide proactive fire detection, such a system can provide automatic cover even when your site isn’t populated, where call points rely on someone pressing the button.”

Bristol Fire Engineering has a history of implementing life safety technologies to help bodies draw up codes and draw awareness to new trends in fire and safety.

“We’ve been operating in Dubai for a long time now and have built up a remarkable reputation across the GCC, equipping local authorities with the best fire protection and fire prevention solutions.”

Last updated in 2011, the UAE Fire & Life Safety Code of Practice is undergoing a full update for 2016. While the

document specifies that alarms must be installed, tested and maintained according to National Fire Protection Association regulations (NFPA), it does not specify the type and specification of alarm that should be used.

El Azzami is pushing for a GCC-wide independent inspection laboratory that would test new fire safety products before they are manufactured and used in the Gulf market, ensuring that minimum standards and specifications are met.

“When a company manufacturers a product, it would have to test it in this region according to local regulations and codes before receiving a permit to distribute throughout the Gulf,” he says. “And because a single company typically distributes to the UAE, Qatar, Saudi, etc, the codes must be GCC-wide to achieve consistency of quality.”

El Azzami is also pushing for a GCC-wide non-profit inspection body funded by those in the fire safety market. This body, similar to the British Standards Institution in the UK, would set the specifications or codes that fire-related equipment and products would have to adhere to for GCC-wide distribution.

This would limit the regional use of poorly-made goods in buildings, such as fire doors, fire hydrants, sprinkler systems and fire alarms, and would complement a GCC Building Code, which is expected to come into effect next year.

Currently, developers and contractors in the region follow country-wide codes, as well as standards set by the NFPA with regard to building construction, fire protection, fire alarm and smoke ventilation systems. But there is no official region-wide regulatory document relevant to market conditions in the Gulf.

January 2016 41

Event review

dubai goes for green

Big Project ME reports from the Dubai Sustainable Cities Summit at the Jumeirah Beach Hotel in Dubai, on December 17, 2015

On December 17, 2015, the Jumeirah Beach Hotel hosted the first Dubai Sustainable Cities Summit (DSCS), a major international event that aims to provide a forum to debate and present the best global practices on sustainability for the built environment.

Featuring a range of speakers from across the globe, the summit was part of a partnership between the Dubai Land Department and the United Nations Environment Programme (UNEP), which will see the establishment of a Centre of Resource Efficient and Sustainable Cities in Dubai.

Working in collaboration, the UNEP and Dubai Land Department’s Real Estate Investment Management & Promotion unit put together the summit, which was open to delegates with a genuine interest in sustainability from all over the region. Government departments, industry experts, business people, technology specialists and consultants, and educators were among the attendees. The event was held under the patronage of HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister of the United Arab Emirates and Ruler of Dubai.

42 January 2016

Under the summit’s slogan, “Sharing knowledge for a more sustainable future”, and in line with its goal of supporting the UAE and Dubai’s commitment to developing, executing and measuring the success of sustainable strategies in line with UAE Vision 2021, Dubai Plan 2020 and the Dubai Expo 2020, the DLD designed the summit’s agenda around a number of key themes that focus on how cities can successfully employ technology, education, employment and measurement to accelerate adoption rates for effective sustainable strategies for the benefit of the UAE and the region.

These key themes included integration between design and the construction sector, technology as an enabler in building effective sustainable cities, behaviour and the importance of sustainable cities for the future of this planet, sustainable social responsibility, and developing regional benchmarking standards to measure the sustainability of cities in the Arab world.

“Design integration, technology, behaviour and measurement are the key topics that contribute towards making a

Event review

city more efficient. We gathered more than 20 local, regional and global experts to speak and participate in panel debates to inspire and stimulate new innovations that will help Dubai and other cities around the region learn from their wisdom and plan for the future,” said HE Majida Ali Rashid, deputy director general at Dubai Land Department.

Speakers included some of the best-known voices in the sustainability and green building field, the likes of Sir Tim Smit, co-founder and executive vicechairman of the Eden Project in the UK; Cooper Martin, programme director for the Sustainable Cities Institute at the National League of Cities; and Terri Wills, CEO of the World Green Building Council.

“It is imperative for cities to focus on sustainability to better prepare themselves for the challenges they are facing around resources, whether that challenge is from a strain like a drought, aging infrastructure, disasters or an increase or decrease in population,” said Amy Aussieker, executive director for Envision Charlotte, another speaker at the summit. “Cities can address this through the use of smart technology, creating efficiencies through cross department/ cross city collaborations.”

Guy Hammersley, BRE group director, Research and Innovation, added that the Summit provided a forum for a “lively, informative and stimulating” discussion about sustainability. At the event, he spoke about a tool developed at BRE, the Healthy Cities Index.

“This tool enables a measure of the impact a city has on the health and wellbeing of its population against 11 groups of criteria, covering issues such as air quality, transport, security,

etc. Many of these relate to the built environment itself and the index provides a means of identifying and benchmarking performance and feeding this into a wider sustainability framework,” Hammersley said.

“Using this tool it is possible to drive positive change in health and wellbeing through governance, planning, urban design and development. Probing and understanding what is really meant by the term ‘sustainable city’ is more than just an interesting academic exercise, it is a fundamental part of planning, designing and developing a city.

“The environmental, social and economic factors that feed into this definition of sustainability include many criteria influenced by local circumstances, so there will be no single answer that is right for every city. Instead a city needs to develop a framework that is relevant to the environment, situation and culture of that city.”

This sentiment was echoed

by Dubai authorities, who announced at the event that a new Dubai Sustainability Council would be formed to oversee an environmental agenda that will create a healthier emirate in a low-carbon future realised by measurable change.

Sheikh Ahmad Bin Mohammad Bin Rashid Al Maktoum unveiled the agenda, a forward-looking roadmap that frames four strategic goals – education and knowledge to raise awareness; smart technology and innovation; health and environment; and employment and economic growth.

The Dubai Sustainable Council will also set strategic deadlines and develop benchmarks to gauge the success of the new sustainability agenda.

January 2016 43

Comment

Daniel Brawn

Act quickly to tAke AdvAntAge

Daniel Brawn, senior associate at Galadari Advocates and Legal Consultants, looks at how Dubai’s new energy efficiency rankings will impact the construction sector Dubai has recovered from the crash of 2008 and has placed itself in the vanguard of international moves towards sustainable development by now joining the C40 group of megacities fighting climate change by reducing carbon emissions. Dubai’s Green Building Regulations applied initially to public buildings and now apply to all new buildings.

However, existing buildings represent the greatest potential for cost-effective energy saving, and new regulations are being put in place for the audit and retrofitting of existing buildings. Recruitment has been stepped up for experts to act as energy efficiency auditors, and contractors are lining up to carry out the necessary work.

44 January 2016

Contractors and consultants need to act quickly if they hope to grab a slice of the pie.

The Executive Committee of the Dubai Supreme Council for Energy (DSCE) supervises the Dubai Integrated Energy Strategy 2030, which aims to reduce energy demand by 30% by 2030.

Research has shown that some 60% of energy is used in existing buildings and the operational energy efficiency of a building is of paramount importance. The Emirates’ Green Building Council estimates that there are 120,000 existing buildings in Dubai that could benefit from retrofitting, and has identified 30,000 highconsuming buildings for major refits to save a million tonnes of carbon emissions by 2030.

The DSCE’s Demand Side Management programme, in line with best international practice, aims for smart building management systems and smart owners who are aware of the need to reduce waste. The programme aims to achieve savings of 30% electricity consumption and 40% water consumption by 2030, through regulations, technical guidelines for retrofits (which are expected to be introduced in January 2016), increased use of district cooling and more efficient use of electricity and water supplies. Dubai municipality plans to introduce a ranking system to assess a building’s energy efficiency, with the entry level Bronze Category based on the minimum standards required

to meet the municipality’s Green Building Regulations.

Energy Service Companies (ESCOs) will deliver energy savings through performance contracting, already well established in Europe and North America, whereby the ESCO will carry out a LEED audit of a building’s energy usage, propose appropriate retrofit solutions, organise funding and subcontract the work to specialist subcontractors. This will reduce the building’s carbon footprint and save the occupiers money.

ESCOs may assume some of the risk for delivery of the energy-saving measures they propose to clients. To promote client confidence, the Regulation and Supervision Bureau (RSB)

Comment

great opportunities Contractors that are sufficiently flexible and astute can take advantage of the new policy.

“There are great opportunities in Dubai for international practices with a track record in energy auditing, local entrepreneurs, technology and equipment providers�

aims to support the ESCO market by developing a framework for accrediting ESCOs, based on their track record in delivering successful projects, the expertise of their personnel and their financial robustness. There will be provisional accrediting for ESCOs that have the expertise and financial robustness but not yet the track record to achieve full accreditation. Applicants require a certified measurement and verification professional and either a certified energy auditor or a certified energy manager. A subcontractor cannot be an ESCO. DEWA has established the Etihad Energy Service as a super ESCO to work with other ESCOs to promote energy efficiency in Dubai’s existing building stock

by developing, managing and obtaining finance for energy efficiency projects and demandside management initiatives.

In relation to public buildings, Etihad ESCO will produce detailed design plans for retrofits and subcontract building work.

The RSB has also introduced a Measurement and Verification Protocol for electricity and water saving, with a standard approach to measurement and verification based on international best practice tailored to Dubai conditions. It includes five options, to be applied in the particular circumstances. The greatest savings are expected to be found in the building envelope (insulation, fenestration and doors), and the power consumption of

the heating, ventilation and air conditioning system.

There are two standard forms of contract to be used by ESCOs and their clients, one for Shared Savings, where the ESCO provides the funding, and the other for Guaranteed Savings, where the client provides the funding.

Both forms comprise 57 pages of closely drafted provisions, with 20 schedules of further information and 22 pages of optional additional clauses. The provisions relating to indemnities, limitations of liability and intellectual property are of such complexity that some consultants and contractors may wish to seek legal advice.

There is also a tailored approach to resolving disputes through expert determination, which will be binding up to a certain value, with the option of an appeal in court or arbitration for higher value determinations.

To summarise, there are great opportunities in Dubai for international practices with a track record in energy auditing, local entrepreneurs, technology and equipment providers and financial institutions. For those who do not yet have a track record, provisional accrediting allows a period of one year to gain a track record. As for contractors (who cannot also be ESCOs), they have the opportunity to be appointed as subcontractors to carry out retrofit works, although they will need to incorporate new provisions into their standard documentation when bidding for projects. The market is competitive and tough, especially for small specialist contractors who must implement new procedures in a challenging environment. Their costs may rise, placing them at a disadvantage versus larger businesses, but there are great opportunities for those who are sufficiently flexible and astute to take advantage of the new policy.

January 2016 45

Comment

Dr Rupert Booth

Smart City – FaSt PaybaCk?

Dr Rupert Booth, chief economist at Faithful + Gould, explains how a series of specific investments will offer more attractive returns to those looking to invest in smart cities ‘Smart city’ is a vogue term, but it means different things to different people, involves multiple stakeholders with differing perspectives and often requires a combination of public and private investment, which is appraised in different ways.

This article summarises some of the main difficulties that arise, and then more positively considers a series of specific investments more likely to offer attractive returns.

But first, just what is a smart city? The British Standards Institute, in PAS180, defines it as “The effective integration of physical, digital and human systems in the built environment to deliver a sustainable, prosperous and inclusive future 46 January 2016

for its citizens”. The focus on integration and interfaces is natural for a standards-setting institution and there can be no doubt that standards are important in containing wholelife costs. The UK’s Department of Business Innovation & Skills (2013) has a different definition: it cites three ‘hard’ criteria: modern digital infrastructure (providing access to reusable data), citizen-centric services and intelligent physical infrastructure (Internet of Things). It also lists three ‘soft’ criteria, namely openness to learn from others, transparency of outcomes and a clear and consistent vision.

At this point, alarm bells may be ringing. Investment in infrastructure is expensive, and

investment in ICT (Information & Communication Technology) in particular can have a short lifespan. Also, intangible outcomes can be very difficult and slow to bring about. All this adds up to a difficult business case, with large investment up front and slow, uncertain payback subsequently. So, are there any investments with more rapid payback that justify the label ‘smart’? There are a few.

The head of budget for a very wealthy Gulf state surprised me one day by telling me that traffic violations (as registered by legions of road cameras) were the third most important source of revenue to the state, after hydrocarbon and alcohol sales (the state did not levy

income or sales taxes). From a theoretical point of view, this is a win-win – technology is assisting with fewer accidents and increasing revenue. However, it comes with a political price of unpopularity. For example, in the UK, there has been controversy as the police seek to raise revenue from speed cameras by offering safety courses, for a fee, as an alternative to black marks on a driving licence.

Another related payback is parking revenues coupled with enforcement of fines for illegal parking. Here again, there is win-win, with less congested roads (with fewer obstructions and less circling of cars as drivers seek spaces), higher occupancy of car parks and

Comment

New revenue streams In many business cases, the focus is not simply on the reduction of operating and capital costs, but also on identifying new revenue streams.

higher revenue. For authorities who already make use of this revenue stream, there is potential for raising revenue further by demand-responsive pricing, so that scarce parking spaces attract a higher charge (an approach well-rehearsed for airline seats).

Demand-responsive pricing is facilitated by technology that allows price-setting to be done remotely. Similar arguments apply to dynamic road-pricing: ancillary benefits include reduced congestion and pollution, and increased security from tracking of vehicle numbers. These systems can produce counterintuitive results. In Minneapolis, drivers were more willing to pay higher prices because they presumed these indicated higher

“In many business cases, the focus is not simply on the reduction of operating and capital costs but also on identifying new streams of revenue�

congestion on non-toll roads; furthermore, they priced their time saved at $60-120 per hour, far higher than assumed in most value-of-time calculations in transport planning exercises.

Even street furniture can be made smart. Replacing traditional lamps with LED equivalents not only saves energy but wireless connectivity can be provided at the same time. This allows more flexible control of lights and a canopy of wireless connectivity over a built-up area. In Copenhagen, smart streetlights can even increase lighting intensity as pedestrians or cyclists move past.

Metering is also an opportunity to reduce operating costs. In many water distribution

systems, up to 30% of water is lost through leaks – remotely readable meters allow problems to be quickly identified, whether in public or private networks.

Smart energy meters also identify potential for energy reduction by detecting trends in energy use and comparing usage between nominally similar spaces.

In many business cases, the focus is not simply on the reduction of operating and capital costs but also on identifying new streams of revenue. Revenue for private companies is also crucial, as the private sector may be willing to make capital contributions to obtain it, or pay licensing fees. Sometimes revenue can come from unlikely sources; for example, when Copenhagen replaced half its streetlights with smart equivalents, the city was able to auction off the old lights to private buyers who viewed them with nostalgia!

While broadening the sources of funds for an investment seems an obvious benefit, it can create challenges in investment appraisal. Private appraisals are usually based on a discounted cash flow basis, i.e. calculating the net present value of a cash stream, whereas public investments consider costs and benefits (and their net present value), reserving examination of cash to assess affordability. Many benefits are non-cash, e.g. reduction in travel time, and investment needs to be made by parties whose appraisal methods recognise the benefits, with private sector focusing on cash-generating assets and public authorities considering the non-cash economic costs, as well as the social or environmental gains, that might justify a public investment. Another difference is that discount rates used in the public sector are typically much lower than in the private sector, increasing January 2016 47

Comment

the significance of costs and benefits in the distant future.

These considerations are of particular relevance to consultants and system vendors who are trying to develop a business case for the investment from various sources. In some cases, the private sector partners consider gain-sharing arrangements, performancerelated payments or impact fees to facilitate investment, and these arrangements require an appraisal to confirm that the return on investment meets corporate thresholds.

What are the implications of all this for contractors? I recall listening to a senior figure in a major programme management contractor for an expressway programme in the Gulf region, mixing technologies Mixing old and new technologies creates issues regarding procurement strategies.

as he was speaking to potential bidders. He remarked that although many of the road designs were large by any standard, he was unconcerned about the ability of the bidding contractors within that room to build them. What kept him up at night, to use his words, was the increased level of ICT-systems in the designs, i.e. intelligent transport systems. He perceived these to be a source of risk.

This mix of technologies, of the old and the new, also creates issues regarding procurement strategies: should one tender be placed for all sub-systems of particular technologies, to maximise the potential for standardisation and scale within that technology? Or alternatively, should the

“Even street furniture can be made smart.

Replacing traditional lamps with LED equivalents not only saves energy but wireless connectivity can be provided at the same time�

packages focus on a selfcontained physical system, to minimise interface management complexity by limiting the interfaces to those within a single system and therefore within the remit of a single main contractor? The answer of course is that it all depends, not least on the completeness of the technical standards for particular technologies.

Finally, from the point of view of the owners of the systems, whether municipal or private, it is important to avoid lock-in to particular suppliers wherever possible and instead to adopt open standards that appear set to last. The aim should always be to minimise whole-life costs rather than initial outlay, when choosing between options.

C

M

Y

CM

MY

CY

CMY

K

48 January 2016

Tenders

Top tenders The Avenues RiyAdh Mixed-use PRojecT Budget $2,000,000,000 Project number WPR823-SA Territory Riyadh, Saudi Arabia client Shumool Real Estate (Saudi Arabia) Phone (+966-11) 229 1166 Fax (+966-11) 229 1137 email info@shumool.com.sa Website www.shumool.com.sa description Construction of a 1.7 million square metre shopping mall, including a number of towers comprising a five-star and four-star hotel, residential apartments, offices and parking for 14,000 vehicles Period 2019 status New Tender Tender categories Leisure & Entertainment, Prestige Buildings, Construction & Contracting, Hotels Tender Products Commercial Buildings, Hotel Construction, Residential Buildings, Retail Developments

passengers a year, bringing the total capacity to 18 million a year Period 2019 status New Tender Tender categories Airport, Construction & Contracting Tender Products Airports Development & Management

dohA indusTRiAl AReA inFRAsTRucTuRe PRojecT – PAckAge 2 Budget $340,000,000 Project number WPR807-Q Territory Doha, Qatar client Public Works Authority – ASHGHAL (Qatar) Address Al Faisal Tower, Al Corniche Street, Dafna

Phone (+974) 4495 0000 / 4495 1111 Fax (+974) 4495 0900 email customerservice@ ashghal.gov.qa Website www.ashghal.gov.qa description Execution of infrastructure involving reconstruction of urban road works, including the construction of a new sewerage network and new substations, as well as smart networks for the management of circulation and telecommunications, among others Period 2018 status Current Project Tender categories Communications / Telecommunications, Information Technology, Power & Alternative Energy, Roads, Bridges & Infrastructure, Sewerage & Drainage Tender Products Infrastructure, Roads Construction, Sewerage/ Drainage Pipelines & Pumping Stations, Substations Construction, Telecommunications Networks

ceMenT clinkeR PRoducTion lines PRojecT Budget $500,000,000 Project number MPR1484-SA Territory Riyadh 11411, Saudi Arabia client Yamama Saudi Cement Company (Saudi Arabia) Address Yamama Cement Bldg, Batha Street Phone 966 1 405 8288 Fax 966 1 403 3292 email salesdep@ yamamacement.com Website www.yamamacement.com description Engineering, procurement and construction (EPC) contract to build two cement clinker production lines with overall capacity of 20,000 tonnes a day Period 2018 status Current Project Tender categories Industrial & Special Projects Tender Products Cement Plants

shARM el-sheikh AiRPoRT exPAnsion PRojecT Budget $671,000,000 Project number MPP2899-E Territory Cairo 11776, Egypt client Egyptian Airports Company Address Airport Road Phone (+20-2) 267 7610/7613 Fax (+20-2) 418 2972 description Carrying out expansion of an airport, which will provide capacity for 10 million

INTEGRATED ESTIMATING, PROJECT CONTROL AND ERP SOLUTION FOR CONTRACTORS www.ccsgulf.com | Tel: +971 4 346 6456 | info@ccsgulf.com

50 January 2016

Showroom Doha - Industrial Area: Main Industrial Area Road.

T : 44638804 F: 44602440 E: heavyequipment@jaidah.com.qa

Service Doha-Industrial Area: Gate 57, Al Wakalat Street.

T: 44638866 F: 44602440 E: heservice@jaidah.com.qa

Parts Doha-Industrial Area: Gate 69, Al Wakalat Street.

T: 44638854 F: 44606290 E: heparts@jaidah.com.qa

www.Jai dahhed.com

Quick Service & Parts Al Khor Infront of Al Khor Mall T: 44170388 F: 44170351

Watch Us On

Tenders

Middle East tenders UAE TeRhAB Residences PRojecT Budget $60,000,000 Project number WPR831-U Territory Sharjah, United Arab Emirates client Manazil Real Estate (Sharjah) Address Al Mamzar – Taawun Street Phone (+971-6) 577 1777 Fax (+971-6) 577 1117 email info@manazil-uae.com Website www.manazil-uae.com description Construction of twin towers comprising 30 and 40 floors offering 294 furnished apartments with hotel services Period 2018 status Current Project Main consultant Design House Engineering Consultants (Dubai) MeP consultant Design House Engineering Consultants (Dubai) Main contractor Naseria Contracting Establishment (Sharjah) MeP contractor Naseria Contracting Establishment (Sharjah) Tender categories Hotels, Prestige Buildings Tender Products High-rise Towers, Hotel Construction, Residential Buildings

disTRicT cooling PlAnT PRojecT – Al hAMRA villAge (PhAse 4) Budget $15,000,000 Project number WPR816-U Territory Ras Al Khaimah, United Arab Emirates

client Al Hamra Real Estate Development LLC (Ras Al Khaimah) Phone (+971-7) 243 4477 Fax (+971-7) 243 4466 email realestate@alhamravillage.com Website www.alhamravillage.com description Construction of a district cooling plant Period 2017

status Current Project Main consultant DC Pro Engineering LLC (Sharjah) Main contractor Turner & Miller International (Dubai) Tender categories Construction & Contracting Tender Products District Cooling Plants

BuRjeel TeRTiARy cARe hosPiTAl PRojecT Budget $5,000,000 Project number WPR828-U Territory Al Ain, United Arab Emirates client VPS Healthcare Group (Abu Dhabi) Phone (+971-2) 222 2366

INTEGRATED ESTIMATING, PROJECT CONTROL AND ERP SOLUTION FOR CONTRACTORS www.ccsgulf.com | Tel: +971 4 346 6456 | info@ccsgulf.com

52 January 2016

All-steel casing Suitable on extremely rocky surfaces Extra-long tread life High puncture resistance Outstanding stability

bkt-tires.com

Tenders

email info@vpshealth.com Website www.vpshealth.com description Construction of a tertiary care hospital featuring suites, premiere and deluxe in-patient rooms Period 2017 status New Tender Main consultant Society Technology House Consultant (Abu Dhabi) design consultant Society Technology House Consultant (Abu Dhabi) Tender categories Construction & Contracting, Medical & Healthcare Tender Products Hospital Construction

sPeciAlised clinics & hosPiTAl coMPlex PRojecT Budget $50,000,000 Project number WPR799-U Territory Abu Dhabi, United Arab Emirates client Abu Dhabi Health Services Company PJSC (SEHA) Address Executive Bldg, Das Tower, 9th Floor, Sultan Bin Zayed Street (32nd Street), Khalidiya Phone (+971-2) 410 2000 Fax (+971-2) 410 2311 email info@seha.ae Website www.seha.ae description Construction of Specialised Clinics and Hospital Complex with all facilities Period 2017 status Current Project MeP consultant Implement Engineering Consultants (Abu Dhabi) design consultant Leo A Daly Architecture (Abu Dhabi) Project Manager Secure Project Management LLC (Abu Dhabi) design consultant-2 Morgan Consulting Engineers (Abu Dhabi)

Main contractor Chief Contracting Company (Abu Dhabi) Tender categories Construction & Contracting, Medical & Healthcare Tender Products Hospital Construction

dAlMA oFFshoRe Field develoPMenT PRojecT Project number MPP3001-U Territory Abu Dhabi, United Arab Emirates client Abu Dhabi National Oil Company (ADNOC) Address Next to Hilton Hotel, End of Corniche Road Phone (+971-2) 602 0000/ 602 3266 Fax (+971-2) 602 3389 email info@adnoc.com Website www.adnoc.ae description Engineering, Procurement and Construction (EPC) contract for the development of an offshore oil field status New Tender Specialist Consultant:

Genesis Oil & Gas Consultants (Abu Dhabi) Tender categories Gas Processing & Distribution, Oilfields & Refineries Tender Products Gas Exploration & Production, Gas Export/Import Terminal, Gas Processing & Separation, Oilfields Exploration & Development

Qatar liFesTyle hoTel PRojecT Budget $50,000,000 Project number WPR820-Q Territory Doha, Qatar client Al Jassim Group (Qatar) Phone (+974) 4432 9263 / 4446 6222 Fax (+974) 4432 9365 Website www.ajgqatar.com description Construction of a 5-star hotel comprising 4 basement levels, a ground floor, a mezzanine floor and 20 additional floors, including a serviced apartments building consisting of 4 basement levels, a ground floor, a mezzanine

floor and 10 additional floors status New Tender Main consultant Arab Engineering Bureau (Qatar) design consultant Arab Engineering Bureau (Qatar) shoring contractor Navayuga Engineering Company WLL (Qatar) Tender categories Hotels, Prestige Buildings Tender Products Hotel Construction

Oman The links inTegRATed TouRisM coMPlex PRojecT Budget $24,000,000 Project number WPR806-O Territory Muscat, Oman client Al Badr Group (Oman) Phone (+968) 2469 2151 email badr@savills.om description Development of an integrated tourism complex comprising 260 residential apartments and recreational facilities, in addition to an extensive array of restaurants and shops

INTEGRATED ESTIMATING, PROJECT CONTROL AND ERP SOLUTION FOR CONTRACTORS www.ccsgulf.com | Tel: +971 4 346 6456 | info@ccsgulf.com

54 January 2016

Period 2017 status Current Project Main consultant Lines & Visions International Engineering Consultant (Oman) Main contractor Unique Contracting Company (Oman) Tender categories Construction & Contracting, Hotels, Leisure & Entertainment Tender Products Residential Buildings, Retail Developments

Saudi Arabia MARRioTT hoTel PRojecT – dAMMAM

groups@marriott.com Website www.marriott.com description Construction of a 4-star hotel comprising 140 elegant guestrooms and stylish suites Period 2016 status Current Project Main consultant Dewan Architects, Engineers & Planners (Saudi Arabia) Main contractor Al Ansari Trading & General Contracting (Saudi Arabia) Tender categories Construction & Contracting, Hotels Tender Products Hotel Construction

Bahrain lighT RAil neTWoRk PRojecT

Project number WPR815-SA Territory Saudi Arabia client Marriott International Inc (Dubai) Address Level 5, 6 Emaar Square Phone (+971-4) 440 7786 Fax (+971-4) 440 7788 email globalsalesdubai.

Project number MPP2353-B Territory Manama, Bahrain client name Ministry of Transportation & Communications (Bahrain) Phone (+973) 1732 1105/ 1732 1055/ 1753 4534

Fax (+973) 1753 0243 description Construction of a light rail network comprising 22 kilometres of elevated double track, with 19 stations and an initial capacity to handle 8,000 passengers Period 2022 status New Tender

Tender categories Public Transportation Projects Tender Products Railways

Iraq PeTRocheMicAls PlAnT PRojecT – WesT QuRnA-2 oil Field Project number MPP2909-IQ Territory Iraq client name LUKOIL Overseas Service BV (Russia) Address Bolshaya Ordynka str I Phone (+7-495) 933 1700 Fax (+7-495) 933 1800 email mail@lukoil-overseas.ru Website www.lukoil-overseas.com description Engineering, Procurement and Construction (EPC) contract to build a petrochemicals plant for producing methane and methanol from associated gas at an oil field status New Tender Tender categories Industrial & Special Projects Tender Products Chemical Plants

INTEGRATED ESTIMATING, PROJECT CONTROL AND ERP SOLUTION FOR CONTRACTORS www.ccsgulf.com | Tel: +971 4 346 6456 | info@ccsgulf.com

January 2016 55

Last word

Qatar emerges as a built asset wealth world leader

Q

atar has become the world’s richest country per capita, measured by the value of its built environment, according to the latest Global Built Asset Wealth Index published by Arcadis, a leading global design & consultancy firm for natural and built assets.

The Gulf state has become a global leader, toppling Singapore as the most asset-rich country per capita, with built assets of $198,000 for every citizen.

The index, which was compiled for Arcadis by the Centre for Economics and Business Research (CEBR), calculates the value of all the buildings and infrastructure that contribute to economic productivity in 32 countries which collectively make up 87% of global GDP.

56 January 2016

Qataris are the richest built asset population, with built asset wealth of $198,000 per capita, says Dr Kamiran Ibrahim, managing director - Qatar, Arcadis “The health and wealth of a nation can be measured in many different ways, and while factors such as GDP or employment have great value, a prosperous society is underpinned by a well-developed built environment that meets the needs of its people and economy,” said Alan Richell, head of Business Advisory in the Middle East at Arcadis. “Today, Qatar has the fastest growing construction industry in the GCC, rapidly expanding at an annual rate of 18%, and this is expected to continue for the next decade.

This growth will be underpinned by a number of large investments in infrastructure programmes.”

Qatar and Singapore stand comfortably ahead of the pack on built assets per capita, at $198,000 and $192,000. The countries near the top of this ranking are disproportionately made up of smaller nations, either by

population or area, so the density of the built asset stock is much greater per resident. The UAE for example also came in high at number five, with a strong built asset per capita of $140,500, whereas Saudi Arabia has a smaller built asset stock per capita, at $107,000, with its built asset wealth spread among its large and growing population.

Richell says “The 2022 World Cup and Qatar’s 2030 National Vision are driving huge infrastructure investments over the next ten years. These include plans for further investment in transport infrastructure, water and electricity in the next five years, by 2020. Qatar’s total built asset stock has grown 677% since 2000 and will continue to grow at double-digit levels for the foreseeable future.”

Total built asset wealth globally now stands at an estimated $218 trillion, equivalent to $30,700 per person alive today.

The stock of built assets

“Today, Qatar has the fastest growing construction industry in the GCC, rapidly expanding at an annual rate of 18%, and this is expected to continue for the next decade.

This growth will be underpinned by a number of large investments”

is closely correlated with a nation’s economic output. On average, countries analysed have a built asset stock worth 2.9 times GDP. China now has a built asset wealth of $47.6 trillion, overtaking the US, which comes in second place with wealth of $36.8 trillion. On a regional basis, Saudi Arabia has a built asset wealth of $3.15 trillion, while the UAE and Qatar are at $1.33 trillion and $0.45 trillion.

Concluding his thoughts, Richell says,“The Global Built Asset Wealth Index shows a dramatic shift of wealth to emerging economies. Saudi Arabia and the UAE will continue to climb due to their especially high rates of investment. Whilst still heavily dependent on oil and gas export, the GCC states have used resource revenues to make initial steps towards diversification of their economies in sectors such as tourism, financial services and education.”

Dongdaemun Design Plaza