Value of awarded contracts in Saudi Arabia falls to SR34.3 billion in Q3

(MENAFN- Arab News) The value of awarded contracts retreated during the third quarter of 2014 in Saudi Arabia after showing signs of recovery during the previous quarter.

About SR34.3 billion worth of contracts were awarded during Q3 2014. The value of awarded contracts in August slumped to SR4.3 billion which was the lowest output since April of 2010 according to a report by the National Commercial Bank (NCB).

The bank said anchor sectors suffered from a lack of mega-projects which was a major reason for the slowdown. Meanwhile the transportation sector alone accounted for 36 percent of Q3 2014 value of awards. The water sector witnessed a jump in the value of awards compared to the previous two quarters as it accounted for 13 percent. The power sector which usually holds a significant share of awarded contracts contributed an unusual 11 percent.

Through the first three quarters of 2014 the value of awarded contracts reached SR158.9 billion. The decline in the value of awarded contracts during Q3 2014 put a halt in the strong momentum that was witnessed during the first half of this year. The value of awarded contracts during Q3 2014 yielded a significant shortfall compared to Q3 2013 which reached SR148.9 billion alone a 77 percent decline. Furthermore the first three quarters of 2013 yielded SR251.6 billion marking a 37 percent decrease for 2014 thus far. Undoubtedly the value of awarded contracts in 2014 is not expected to come close to 2013's record of SR293 billion although it must be noted that 2013's performance was significantly enhanced by the Riyadh Metro project whereby SR85 billion worth of con- tracts were awarded.

The NCB report said Construction Contracts Index (CCI) has maintained a relatively healthy level on the back of strong performances during Q2 2014. The CCI leveled from 302.39 points in July followed by 286.60 points in August and settling at 290.70 points in September. While the CCI is currently hovering within the 200-300 point range a strong fourth quarter is needed to prevent a sub-200 point showing given the weak pipeline of awarded contracts during Q3 2014.

The Riyadh region garnered a significant share of the value of awarded contracts. This was mainly due to the King Khalid Airport terminal upgrade project in addition to a number of water contracts. The Makkah and Eastern Province regions captured the other bulk of awarded contracts. The contracts were spread across numerous sectors aimed at improving infrastructure capabilities as well as a few oil & gas projects in the Eastern Province. There were numerous contracts in the education sector across the rest of the Kingdom which were aimed at building and improving new and existing universities.

July

Approximately SR20.9 billion worth of contracts were awarded in July. The transportation sector garnered a significant portion of the value of awarded contracts as it reached SR11.3 billion. A significant contract was awarded by the General Authority of Civil Aviation (GACA) to a consortium

consisting of Shapoorji/ Hochtief/ Nahdat Al Emaar JV in the amount of SR10.9 billion. The contracts call for the consortium to upgrade in two parts terminals 1 through 4 at King Khalid International airport in Riyadh. Part A involves the upgrade of terminals 3 and 4 which consists of 284000 sqm on six levels including one basement. Part B involves the upgrade of terminals 1 and 2 which consists of 290000 sqm on six levels including one basement. The contract is expected to be completed by the third quarter of 2017.

The power sector witnessed approximately SR2.8 billion worth of contracts. Four contracts worth SR1.6 billion were awarded by the Saudi Electricity Company (SEC) which included the construction of Al Jallah electric power transformer station in the Riyadh region. Additional scope of the contracts include the purchase of main transformers to raise the capacity of generators feeding transformers to assist generating units in the 13 and 14th generating station in Riyadh in addition to the provisioning of compensatory facilities for fixed and dynamic power activation in the transformer stations in Hail and Al Jouf.

Another contract in the power sectors was awarded by SEC to Hyundai E&C in the amount of SR881 million. The contract calls for the construction of a 380kV substation at the Jubail Industrial complex. The project is expected to be completed by the fourth quarter of 2016.

Within the social sector a sizable contract was awarded by Raidah Investment Company to Al-Bawani for the construction of a science museum at King Abdullah Financial District in Riyadh. The contract was valued at SR1.1 billion and calls for constructing a four story museum a five story geo- climate center a six story national aquarium and a two story monorail station. The project is expected to be completed by the third quarter of 2017.

August

A dramatic slowdown in the number and value of awarded contracts occurred in August. The NCB report said value of awarded contracts dropped to SR4.3 billion with the oil & gas sector contributing nearly SR1.1 billion on two contracts. The first contract was awarded by Saudi Aramco to CAT Group in the amount of SR923 million as part of the Kingdom's Master Gas System Expansion (MGSE) in remote areas. The scope of the project includes the installation of MGS pipelines mainline valve stations and associated facilities in Yanbu. The project is expected to be completed by the fourth quarter of 2017. The second contract was also awarded by Saudi Aramco in the amount of SR203 billion to Essar.

The education sector had numerous contracts that pertained to the construction of new universities and technical colleges for a total amount of SR1 billion. All the contracts were awarded by the Ministry of Higher Education to local contractors.

Within the transportation sector the Saudi Railways Organization (SRO) awarded a contract in the amount of SR392 million to build 214 km as part of the first phase of doubling the freight mainline from Dammam to Riyadh. The track will pass through Abqaia Hasa Harad and Al-Kharj. The project is expected to be completed within 24 months.

September

The value of awarded contract rebounded in September to reach SR9 billion. The water sector garnered nearly half of the value of awarded contracts with approximately SR4.5 billion. The Saline Water Conversion Corporation (SWCC) awarded two contracts worth approximately SR1.4 billion. The main contract which was worth SAR1.3 billion pertained to implementing three pipelines as part of the new city feeder plan for the transmission of desalinated water in Riyadh. Two of the proposed pipelines will have a total length of 92.5 km while the third pipeline will have a total length of 41km.

Another contract in the water sector was awarded by the National Water Company to Al-Harbi Trading & Contracting in the amount of SR881 million. The contract is part of the Wasea water project in Riyadh which is expected to add 360000 m3/d of water capacity to the city's grid. The scope of the work for package three includes the installation of a pumping station transmission water lines and excavation and backfilling works. The project is expected to be completed by the second quarter of 2016.

Two contracts were awarded within the power sectors by SEC. The first contract was awarded to Middle East Engineering & Development Company in the amount of SR574 million. The scope of the work includes the construction of a 380kV substation in Jeddah. The project is expected to be completed by the third quarter of 2016.

The second contract that was awarded by SEC went to Larsen & Toubro for the improvement of the power system's reliability in Shedgum and Uthmaniyah areas in the Easter Province. The plan is to install 192 km of high voltage double circuit overhead transmission line. The SR563 million project is expected to be completed by the third quarter of 2016.

A notable contract was awarded within the residential real estate sector by Gulf Related to Drake & Scull International in the amount of SR487 million. The project entails the construction of Antara a residential compound for expatriates in Riyadh. Antara will comprise of a built up area of 98115 sqm consisting of 520 homes which include 12 apartment buildings with a total of 267 apartments 70 duplexes 151 villas as well as 32 short stay apartments. The project is expected to be completed with 24 months.

Outlook

The stalling of awarded contracts during the third quarter halted the momentum that was witnessed during the first half of 2014. As a result the value of awarded contracts is expected to fall short of 2013's record performance of SR293 billion. Nonetheless while the value of awarded contracts may end far below that of 2013 the fourth quarter still remains and may reenergize the contracting market heading into 2015 the NCB report said.