Arabtec signs joint venture with Saudi partners

Arabtec Construction, a subsidiary of Arabtec Holding, has formed a joint venture with two Saudi partners to establish Arabtec Saudi Arabia. The Saudi participants are CPC Services, a member of the Saudi bin Laden Group, and Prime International Group Services. Arabtec will have a 45 per cent stake in the partnership, while CPC will hold 35 per cent and Prime 20 per cent. "The aim of Arabtec Saudi Arabia is to play a key role in the ongoing growth of the Saudi construction and infrastructure market," said Riad Kamal, the chief executive of Arabtec Holding. He added that the company's first project, which has been secured by CPC, would be in Riyadh. "The company is well placed to accomplish this, through available and substantial Arabtec resources currently present in the UAE, ranging from management and skilled labour, to equipment and know-how." Mr Kamal said projected turnover of the new subsidiary in its first year would be more than 1.5 billion Saudi riyals (Dh1.47bn), with an anticipated 3.5bn riyals in two to three years. He hoped the move would help compensate for the slowdown in construction in the UAE, where Arabtec, the largest construction firm in the country and the only one that is publicly listed, has been a key player. The company has lost a number of contracts since the financial crisis took hold and also lost the Meydan racecourse project in January after the client cancelled the contract, citing a failure to meet the construction schedule. The lost work led to Arabtec cutting 250 administration jobs. The company has a workforce of 62,000. Still, Mr Kamal said the company was starting to receive payments from clients that were due in December. "The situation has changed in the last three weeks and we are beginning to see liquidity being pumped into the system," he said. "We are told the receivables will flow over the next few weeks, so already the cash position is beginning to show positive results." With the Saudi government and private companies continuing to invest heavily in construction projects, UAE firms are looking towards the country to help compensate for the slowdown at home. "There are lots of projects in the pipeline from the government and the private sector," said Mouhtaz Sawwaf, the chief executive of CPC Services. "The reason why CPC formed a joint venture with Arabtec was because of the growth in construction activity in Saudi Arabia." Mr Kamal said Arabtec would announce its profits for the fourth quarter of last year on March 31, adding that although there was a slight drop in net profit for the quarter, the turnover and profit for the period and full year was still "very good". Meanwhile, the company and its partner on the Meydan racecourse, Malaysia's WCT Engineering, have launched arbitration proceedings as they seek compensation from their former client, Meydan Group. WCT Engineering said last month that the joint venture partners were seeking to claim Dh1.69bn. "It might take a year or longer to resolve the issues," said Mr Kamal. On the possibility of Emaar Properties cancelling Arabtec's Warsan Estates contract in response to pressure from investors, Mr Kamal said it would "have little impact" on the company's order book as construction had not yet started. The company is also awaiting approval from Gazprom Neft, the Russian oil producer, on whether the construction of its headquarters in St Petersburg, will go ahead. Arabtec won the Dh10bn deal for the project in April last year but has since had to re-price the contract because of the global economic meltdown. If the new figures, which were submitted to Gazprom last week, are approved, Arabtec could see Dh3bn trimmed from the contract. agiuffrida@thenational.ae