British engineering consultancies upbeat on Mideast despite Carillion collapse

British construction consultancies are encouraged by the increase in major infrastructure projects in the Kingdom such as the Riyadh Metro. (REUTERS)
Updated 31 January 2018

British engineering consultancies upbeat on Mideast despite Carillion collapse

LONDON: UK consulting engineering firms have faced leaner times in the Middle East in recent years as the lower oil price has squeezed the funds available to governments for new development in the region.
The collapse of British builder Carillion, which had also ran into trouble on some of its regional contracts has also cast a pall over the industry.
But with global growth picking up and the ambitious Saudi National Transformation Plan taking shape, some of the larger UK advisory firms see brighter prospects for their businesses in the region.
“I think it’s an improving picture,” said Chris Seymour, Middle East managing director, of UK-based engineering consultancy Mott MacDonald which employs 1,300 in the region and has five offices including Abu Dhabi, Dubai and Jeddah.
He describes the market for engineering consultancy services in the region as competitive but stable and said it has adjusted to an oil price in the $40-60 range as a “new norm.”
The recently-released Saudi budget with a heavy emphasis on infrastructure spending is a particularly positive sign for a sector that was hit hard by the sharp decline of oil prices in 2014.
“They will need more technical advice and it should mean good opportunities as the plans materialize and we should see an increase in business,” he adds.
His firm is now at the early stages of working on public private partnerships which may result in more work later this year.
Mott Macdonald is currently looking at schemes in the energy, health care, water and transport sectors in Saudi Arabia.
Atkins, the UK-based consultancy which also operates worldwide, last week pointed to increasing activity in the Saudi Arabian market when it appointed Lee Morris as its new head of architecture in its Middle East & Africa region. The firm, which is now part of Montreal-based SNC-Lavalin, sees its international design and architectural offering as “more important than ever.”
Simon Moon, Atkins’ CEO for the Middle East and Africa, said: “During this time of change in the region, fresh and innovative approaches to design are essential.”
Atkins employs around 2,000 staff in the Gulf with offices in Saudi Arabia, the UAE, Qatar, Bahrain, Kuwait and Oman and has masterplanned the King Abdul Aziz Road development in the Kingdom over the last eight years.
Last summer, Atkins was selected by the US Army Corps of Engineers Middle East District to support infrastructure improvement programs for the Gulf Cooperation Council coalition of countries. In September, Atkins also won an advisory services contract from the state-owned National Water Company as part of a consortium to provide sustainable sanitation services in Saudi Arabia.
One source of encouragement for consultancy firms seeking work in the region was the appointment early last year of the US contractor Bechtel Corp. to run a new oversight office to help the Saudi government set up and run its new National Project Management Organization.
The firm has worked on mega-projects in the Kingdom for 70 years and is currently developing two of six lines on the $20 billion (SR74.9 billion) Riyadh Metro project.
Nelson Ogunshakin, CEO of the UK industry body, the Association for Consultancy & Engineering, said his members have seen some pick-up in the market over the past year.
“There is more interest but people are cautiously optimistic,” he said. “We say please look but tread carefully and make sure you address some concerns — on areas such as procurement transparency, health & safety and payment terms — in your due diligence.”
Saudi Arabia’s ambitious plans for new cities, universities and hospitals as it seeks to reduce its dependency on petroleum revenue, make it the most promising market for UK firms.


Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Updated 59 min 39 sec ago

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

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Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal.