x Abu Dhabi, UAETuesday 16 January 2018

Egypt defies Samsung unit's rise in the region

Samsung eagerly prepared to bid as Egypt reissued a tender for a power plant delayed since the 2011 revolution.

SEOUL // Executives at Samsung C&T in Seoul were thrilled when Egypt revived a tender this year for a multibillion-dollar power plant on the western bank of the Nile.

Dairut, the town where the 1,500- to 2,250-megawatt project is to be built and the name given to the project, had been on hold since the removal of Hosni Mubarak, and the revival of the tender process gave the Samsung unit an opportunity to line up its main suppliers and partners again for the formal bid.

But the excitement came to an abrupt end last week as military jets roared over Cairo for the second time in two years.

"Because of the revolution in Egypt we are worried if we can proceed on schedule," said Seung Deuk Kang, the senior vice president of Samsung's power plant business. "Nobody can control it."

Samsung C&T, one of Samsung's two engineering and construction companies, has been one of the Korean giants to benefit on a large scale in the Arabian Gulf thanks to a combination of low bids and generous support from its home government.

Today it boasts of work on 12 gigawatts worth of power plant projects in the Gulf, from gas-fired turbines at Emirates Aluminium's smelter to the Arab world's first civilian nuclear reactors at Baraka in Abu Dhabi.

The contracts in progress total US$5.5 billion, with as much of half of that backed by financing from the Export-Import Bank of Korea and the Korea Trade Insurance Corporation, all part of the well-oiled government machinery supporting the country's push for engineering projects abroad.

But the political headwinds in Egypt represent one of the few rough patches that not even easy Korean credit can smooth over.

"It's not easy to forecast," said Mr Kang, whose company has 472 men at plant sites and others monitoring the region's political and economic developments from a satellite office in Abu Dhabi. "We hope all the issues in the Middle East can be solved positively … but I cannot predict the political issues. Frankly, I don't know."

Samsung C&T also checks on potential clients to minimise the risk of not getting paid on time, a common complaint in the region.

"That's why we have to check the status of the customer, too - for example their financing status and their plans for securing money for pursuing the projects," he said. "This is one of the many important items we have to check as the big risk."

The Gulf remains a steady client. Last month Qatar Railways awarded Samsung C&T a $693 million contract, and the company is preparing to submit proposals for similar transport projects in Abu Dhabi, Dubai, Jeddah, Mecca and Riyadh.

In recent years, Samsung C&T has tried to position itself as distinct from other low bidders like the Chinese by concentrating more on feasibility studies and other pre-engineering work. This year it bought Whessoe, a British company and one of the oldest engineering firms specialising in liquefied natural gas.

Matching clients with export credit agencies has also become more important during the economic downturn as project finance from traditional banks dwindles.