The broader picture

16 November 2001

Few companies are in a position to announce that their order book has reached budget target just four months into the financial year. Lahmeyer International is one of them.

Orders from the Middle East and North Africa have grown tremendously since the start of the Lahmeyer's financial year on 1 July. Moreover, the company is optimistic about prospects for next year. 'Our expectations for the current financial year will be far exceeded and we are fully satisfied,' says general manager Martin Bay.

Lahmeyer has good reason to be jubilant. Business in the Middle East is flourishing. Boosted by high oil income, regional governments have pushed ahead with major infrastructure projects, increasing demand for Lahmeyer's services in its traditional fields of expertise, energy and water. Last year, the Middle East contributed about 25 per cent to the company's annual turnover. This figure is likely to be much higher in 2001/02.

The company's strategy is clear. It will focus on its core energy and water consultancy businesses, taking advantage of the rising number of power projects in the region, particularly new independent power projects (IPPs) and independent water and power plants (IWPPs). The company was appointed technical adviser by Abu Dhabi Water & Electricity Authority (ADWEA) for the Shuweihat scheme, the largest IWPP to date. It followed up the success by winning the consultancy contract for the associated 400-kV transmission expansion.

The UAE is Lahmeyer's largest regional market. As well as Shuweihat, the company is consultant on the 400-kV interconnection between the Taweelah and Abu Dhabi power stations. In Dubai, it has recently been appointed consultant by Dubai Electricity & Water Authority for phase 1 of the conventionally financed Jebel Alipower and desalination complex.

Qatar is another promising market. Lahmeyer is acting as technical adviser for the transfer of three power stations from Qatar General Electricity & Water Corporation (Kahramaa) to the joint-stock Qatar Electricity & Water Company (QEWC). The project timetable calls for the formal transfer to take place on 1 April 2002 and the asset transfer due 12 months later.

Focusing on the power sector does not mean Lahmeyer is limiting its options. Earlier this year, the company left its traditional business areas and core markets, taking on the design and preparation of specifications for a new house of representatives for the Yemeni government.

In Kuwait, it is working on its first regional airport project, having signed in 1997 a comprehensive package for the implementation of an airspace system plan with the Directorate General of Civil Aviation. The project has suffered delays because of budgetary constraints, but is now back on track, with the design phase set for completion in March 2002.

Other potential opportunities are being monitored. Says Bay: 'We expect to see more free trade zones as a result of rising trade, which will require increased logistical support. There is also rising demand in tourism projects. If we see special market potential for us in these sectors, we will become active.'

Such statements indicate that Lahmeyer's core activities will remain in the Gulf region, where economic growth and the number of new projects are relatively high. However, the incentive for doing business in countries such as the UAE and Qatar is not purely based on project consideration. 'Investments go where the risk is lower,' says Bay. 'In some countries there are problems with the legal framework. But the UAE has set a benchmark for the region. Now we are seeing the establishment of a minimum legal standard in states such as Qatar and Oman.'

Iran may not yet have a comprehensive legal framework, but this has not prevented Lahmeyer from establishing a strong presence in the Islamic Republic. High demand for infrastructure projects in both the power and water sectors is reflected in the company's order book. Lahmeyer is involved in nine ongoing projects, among them the Bakhtiari hydroelectric dam project, where the firm has teamed up with Philipp Holzmann and Voith Siemens to form an all-German consortium. Lahmeyer is carrying out a review and optimisation of the feasibility study for the project, which entails the construction of a 315-metre-high concrete arch dam and power plant generating about 1,500 MW.

The Bakhtiari project is the latest in a string of Iranian hydropower schemes Lahmeyer has worked on. The company is technical consultant on four other hydropower projects, the largest of which is the upper Gotvand hydroelectric power dam, which will have an installed capacity of 2,000 MW.

Buoyed by its success in the region, Lahmeyer now plans to expand its 60-strong UAE office. The move demonstrates that, despite intense competition on price for new orders, the firm is confident quality will eventually prevail over pure financial considerations. 'There have been too many problems with EPC [engineering, procurement and construction] performances and contractors have delivered poor jobs with good equipment. Clients will need to realise that quality is more costly,' says Bay.

One key to Lahmeyer's successful Middle East operations is its traditional independence, and consequent flexibility. 'The advantage of being independent is that we can work with all the players. We can carry out a wide range of works for different clients and remain neutral,' says Bay. 'We are following the [Saudi] gas initiative and the [UAE/Qatar] Dolphin scheme with great interest and trying to determine at which level opportunities may arise for us.' Potential work could also come in the form of major infrastructure projects such as the Asian games, due to take place in Qatar in 2006.

With the increasing trend among regional governments to diversify their economies and allow for more private involvement, there will be plenty of opportunities for Lahmeyer to pursue traditional and new fields of expertise. Having established a foothold in the region, the company is looking at a bright future.

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