Spanish construction and engineering firms are internationally competitive and today operate worldwide. This has also become particularly important for them now with the recent implosion of the Spanish economy, and the halting of many major new internal local infrastructure projects there.
Jewish Business News has previously highlighted the operations and story of giant Spanish international construction, water and environmental services group Fomento de Construcciones y Contratas (FCC), which is publicly listed on the Spanish Stock Exchange and is controlled by billionaire Esther Maria Koplowitz.
After losing large amounts of money, and having seen a sustained fall in its shares, late last year FCC raised some new equity capital when Bill Gates bought in to the company, and George Soros also bought some shares in the market too in December. With a programme of asset sales and changes in management the corporate ship has stabilized enough, with its shares recovering again somewhat already, for FCC to focus more of its management time on some of its particularly important new overseas contracts now.
One of these is a massive contract FCC has to build three major new subway lines for the Kingdom of Saudi Arabia in Riyadh. The Saudis are building a total of six new subway lines for the fast-growing city of 5.7 million people. When it is all finished it will be the world’s longest subway system and should go a long way towards alleviating current traffic gridlock in the city at rush hours.Accordingly, last week FCC’s Chairman and CEO Esther Alcocer Koplowitz, who is the daughter of Esther Maria Koplowitz, and who became the company’s Chairman almost a year ago, turned up in Riyadh with Executive Vice Chairman Juan Béjar. They met there with Ana Pastor Spain’s Minister for Infrastructure, in order to show the flag and as well to discuss progress of the new project with their customers.
The total budget for designing and building the whole 176 kilometre subway system exceeds US$22 billion (Euros 16.3 billion). FCC is leading the FAST consortium, which is building three of the new lines for US$8.2 billion (Euros 6 billion). FCC’s lead partners in the consortium are Korean company Samsung and French company Alstom.
FCC expects to commence construction of the three subway lines by mid-2014, and to complete the project within five years. The contract includes the design and construction of Lines 4, 5 and 6 which will have 25 stations. Construction will include 65 kilometres of track, 24 kilometres of viaducts, 28 kilometres of underground track and as well 13 kilometres of overground track. A total of 69 driverless trains will be delivered to operate on these three lines.
To win this contract in the first place FCC had to demonstrate that it knows quite a lot about building subways. Currently FCC is also building Line 1 of the Panama metro, which is scheduled to open soon, at a cost over US$1.3 billion (Euros 1 billion); the Toronto-York Spadina Subway Extension in Canada, which includes construction of the North tunnels and the Highway 407 Station and is worth US$0.4 billion (Eorus 0.3 billion); and, the first section of the Bucharest Metro’s Line 5 (Romania), for US$0.4 billion (Euros 0.3 billion). FCC is also currently building the Metro in Málaga and Line 9 of Barcelona’s Metro in Spain.
FCC’s recent corporate divestitures and financial re-structurings have been extremely important to rebuilding the company. So is finding a way to collect the hundreds of millions of dollars in delinquent accounts, that Spanish local authorities still owe the company for current services, in its municipal services subsidiaries. However looking ahead strategically, the real key for restoring the financial health of FCC rests squarely on its ability to write new business at a profit in their big ticket construction divisions.
With long lead times, and a highly competitive international bidding environment, for obtaining new business this is both critical and complex. All of these new subway programmes therefore, and the Riyadh project in particular, are key elements on which FCC is building its future.