The last 12 months have been very exciting for Orascom Construction (OC), Egypt’s leading builder and one of the largest engineering and construction firms in the world
In March 2015, the company demerged from its parent, Amsterdam-based OCI N.V., and launched a dual listing on the Egyptian Exchange and NASDAQ Dubai, becoming the first company to simultaneously list in the two countries. The move brought OC back to the Middle East, where its roots extend to the 1950s, and better positioned it to focus solely on its core construction and infrastructure investment businesses.
The company has achieved some major milestones since the Initial Public Offering (IPO), especially in Egypt and the United States, the two countries in which its efforts are largely focused. Its backlog of construction orders has grown to record levels and now stands at $6.7 billion, a 20% increase from the third quarter of 2014, bolstered by new contract wins. Of the company’s current order backlog, almost half is in Egypt and 38% is in the United States, with the rest divided between Saudi Arabia, Algeria and other countries. Not only is the company adding landmark projects to its backlog, but it is also delivering them at a record pace.
“People who understand the company and the stock know that we are the same company that they saw back in 1999, but slightly bigger, smarter, with more experience and diversity,” says OC’s Chief Executive Officer, Osama Bishai. “Today we are independent, we are implementing our growth strategy and we are confident in the long-term value that we are creating for shareholders.”
A leader in the domestic building business, OC is taking advantage of its longstanding track record and a recovering Egyptian economy to win contracts in the infrastructure and power sectors.
Responding to the country’s pressing need for electricity generating plants, the company is building projects based on both renewable and conventional energy sources. Most recently, an Orascom consortium constructed simple-cycle power plants in West Damietta and Assiut with a combined capacity of 1,500 megawatts (MW) in a record seven and eight months, respectively. After delivering them ahead of schedule, OC is now converting these power plants from simple-cycle to combined-cycle plants. The conversion will increase capacity by 50% through re-using waste products without any additional fuel intake. Furthermore, the company is currently building the two largest power plants in the world in Egypt, each of which will run on a combined-cycle scheme with a capacity of 4,800 MW.
OC and its subsidiaries are also making a push into the renewable energy and coal spaces under a Build Own Operate model that will help it grow its infrastructure concessions portfolio, and have already been involved in the construction of the first solar power plant in the Middle East and the first large-scale wind farm in Egypt.
The company is also part of some of the most important infrastructure developments in Egypt, such as the Cairo Metro, where it is currently executing various packages for Line III after having previously completed significant work on existing lines; the expansion of Egypt’s road network; and the New Cairo Wastewater Treatment Plant, the country’s first Public-Private Partnership project in which OC is co-owner and developer. This facility has a capacity to pump 250,000 cubic metres of water per day, serving one million people.
But perhaps the most iconic project in the company’s Egyptian portfolio is the new Grand Egyptian Museum (GEM), which, when up and running, will be the largest archaeological museum in the world. With 13,000m2 of floor space spread out on three levels, including a conference hall, a conservation lab and a learning centre, the GEM is sited on the Giza plateau, about a mile to the south of the country’s most famous pyramids.
In the US, OC is working to replicate its successful business model as builder, owner and operator, which allows it to benefit from ongoing cash flow from a project even after the construction phase is completed. Its US subsidiaries, Weitz and Contrack Watts, are well positioned to benefit from the recovery of the construction business in the United States, where an estimated $4.6 trillion in building projects are to be awarded through 2018.
But OC has already experienced significant growth in the United States. Since the acquisition of Weitz in December 2012, the US subsidiary’s order book has grown 3.5 times, as it targets sizable contracts such as the largest student housing complex in the US.
Closer to home, BESIX Group, of which OC owns 50%, was founded in 1909 and has been operating in the Middle East and North Africa (MENA) for 60 years. Its track record in the Middle East includes the Burj Khalifa tower in Dubai, the world’s tallest building, which opened in 2010.
Complementing the construction business, OC also has investments in companies focused on the manufacturing of building materials, such as fabricated steel products, glass curtain walling, paints and concrete pipes. But Mr. Bishai says the company’s main focus will be building sustainability by driving its infrastructure investment arm.
“Our goal is to create more value to shareholders and have a business that is sustainable alongside the construction, mainly through investment in infrastructure in Egypt and elsewhere,” adds Mr. Bishai. “This is our drive for the next couple of years.”