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Value of Saudi contracts surged to SR270bn in 2011

JEDDAH: The continued surge in the value of awarded contracts during the fourth quarter of 2011, which reached SR93 billion, has led to a record setting year in 2011 on the back of heavy capital spending by the government.

The total value of awarded contracts catapulted to SR270 billion in 2011, surpassing the previous high of SR207 billion that was reached in 2009. In the second half of 2011 alone, the value of awarded contracts reached an impressive SR188.2 billion, which was higher than the total value of awarded contracts during all of 2010. The transportation sector garnered the largest share of awarded contracts during the fourth quarter, accounting for 32 percent of the total value. While the power and industrial sectors accounted for 20 percent and 12 percent, respectively, according to the National Commercial Bank ( NCB ) Construction Contracts Index Fourth Quarter 2011 released on Tuesday.

The unprecedented SR270 billion in awarded contracts during 2011 was propelled by the amount of mega-projects that were awarded during H2. Nearly 69 percent of the value of contracts during the year were awarded during H2. Moreover, the value of awarded contracts in 2011 grew by 155 percent over 2010 and by 32 percent over 2009. The government took an active role to increase the private sector's participation in strengthening the economy. According to the Ministry of Finance's end of year press release, approximately 2,600 government projects were signed with the private sector that were valued at an estimated SR148.3 billion.

The Construction Contract Index (CCI) ended the year by achieving its highest level in December, which was 453.6 points. The CCI reached 406.5 and 419.8 points during October and November, respectively. The CCI grew by 273.6 points from the end of 2010. The transportation, power and industrial sectors were the main growth drivers in 2011, contributing approximately 48 percent of the total value of awarded contracts.

While the Eastern Province has provided the largest share of the value of awarded contracts by region in 2011, the Makkah region made a significant contribution in Q4 with approximately 37 percent or SR33.6 billion worth of contracts being awarded.

The Madinah region had significant contracts awarded in the transportation and water sectors, which contributed to its 12 percent share of awarded contracts, the NCB report said.

Approximately SR53.3 billion worth of contracts were awarded in October, making it the second highest value of awarded contracts by month after July's SR69.8 billion. The transportation and power sectors represented the highest value of awarded contracts during October.

Within the transportation sector, a contract was awarded by the Saudi Railways Organization (SRO) to a consortium led by Al-Shoula Group for the second phase of the Haramain High Speed Rail Project in the amount of SR30 billion. Phase two of the project includes building 25 rail bridges, 157 crossings, including wadi bridges and culverts and 70 animal crossings.

In the power sector, the Saudi Electricity Company ( SEC ) signed several contracts, of which two where valued around SR10 billion. The first contract was awarded to Arabian Bemco in the amount of SR5.4 billion. The contract calls for Arabian Bemco to convert the PP10 simple cycle power plant in Riyadh to combined cycle technology. The PP10 will add 1,300MW capacity to the existing 3,400MW facility. When completed in 2015, PP10 is expected to be the largest combined cycle plant in the world.

The second contract by SEC was awarded to South Korea's Daelim to build a second power plant at Shoaiba. The combined cycle power plant will have a capacity of 1,238MW and will be powered by natural gas. Construction is expected to be completed by the third quarter of 2014.

The Sadara Chemical Company (50 percent-Dow Chemical Company; 50 percent-Saudi Aramco) awarded several contracts within the petrochemical sector worth approximately SR8.9 billion. Four contracts worth approximately SR6.6 billion were awarded to Daelim . The site of construction work will be at the Jubail New Petrochemical complex in Jubail Industrial City.

The Ministry of Transportation awarded numerous contracts to local contractors worth approximately SR2.3 billion. This brings the total value of contracts in the roads sector that were awarded by the government to approximately SR12 billion during 2011. Many of the contracts in October focused on the construction and completion of new highways, implementation of secondary roads and the maintenance of existing roads across the Kingdom.

The Ministry of Higher Education was actively involved in the development of the education sector where it awarded about SR2 billion worth of contracts during Q3. The total value of contracts awarded in the education sector during 2011 reached approximately SR11 billion.

The value of awarded contracts declined to SR14.9 billion in November with the power and industrial sectors providing the highest value of awarded contracts. SEC awarded two contracts to Al-Fanar Construction Company in the power sector in the amount of SR1.9 billion.

The SEC also awarded two additional contracts worth SR1.2 billion related to the construction of two electricity substations in the cities of Dammam and Taif. Both substations are expected to be completed within 30 months.

According to the NCB report, about SR3 billion worth of contracts were awarded in the industrial sector during November. The largest contract was awarded by the National Mining Company to STX Heavy Industries for the construction of an iron ore pelletizing plant at Wadi Sawawin in the city of Tabuk. The contract is worth approximately SR1.7 billion and is estimated to have more than 125 million tons of commercial reserves.

A second contract in the industrial sector was awarded by GASAN Investment & Industrial Development Limited to Shenyang Aluminum & Magnesium Engineering & Research Institute (SAMI) in the amount of SR1.1 billion.

Another contract was awarded in the transportation sector pertaining to the Haramain railway project. The SRO awarded a SR2.5 billion contract to the UK's Invensys Rail Dimetronic to provide the full turnkey signaling and train control systems. The contract includes a 12-year maintenance period.

A significant contract was signed in the hospitality sector that was awarded by the General Organization for Social Insurance (GOSI) to Al-Latifa Trading & Contracting to construct the Hilton Riyadh Hotel & Resort. The SR1.7 billion contract will involve the construction of a 20-story hotel tower covering an area of 49,000 square meters with 650 rooms.

The value of awarded contracts rebounded in December with a total of SR22.6 billion. A mega-project was awarded in the industrial sector by the South Steel Company (SOLB) to the SMS Group and STX Construction Company in the amount of SR7.5 billion. The contract calls for the construction of a greenfield steel plant in Jazan Economic City.

The Education sector had numerous contracts being awarded by the Ministry of Higher Education during December totaling approximately SR2.9 billion.

Within the water sector, the Saline Water Conversion Corporation (SWCC) awarded a contract to Sinopec International Petroleum Service Corporation (SIPSC) in the amount of SR1.6 billion.

The Kingdom's focus to increase its capital expenditures coupled with a growing participation from the private sector to help implement these projects, played a crucial role in making 2011 a record year in terms of construction contract awards, the NCB report said.

© Arab News 2012