Khaldoun Tabari is vice-chairman and CEO of Drake & Scull International PJSC.
Drake & Scull International (DSI) PJSC, the first MEP contractor to be listed in Dubai – and, indeed, the entire Middle East – is hoping that this will raise the profile of the MEP industry in the region.
MEP Middle East speaks to DSI vice-chairman and CEO Khaldoun Tabari about the company’s successful listing, and the implications for the MEP sector.
DSI began listing on the Dubai Financial Market (DFM) on 15 March, becoming the first new listing on the DFM this year. Originally the company sold 55% of its shares in July 2008 in its initial public offering (IPO), raising an overall $326.7 million. The stock, at AED1 each, plus an offering cost of AED0.02 per share, attracted 45,600 investors and was 101 times oversubscribed.
On 16 March, DSI announced that it had won an AED596 million design-and-build contract for a 65 ton district cooling plant in Durrat Al Bahrain. Tabari says this is the company’s largest infrastructure, water and power project to date. It will comprise two plants. The scope of work includes pipe reticulation, an energy transfer station and all metering systems. DSI is hoping to break ground on the five-year project in September this year.
Acquisition trail
In addition to this mammoth high-profile contract, DSI is also negotiating to acquire three GCC construction companies – namely, a civils and an MEP contractor in Saudi Arabia, and an MEP contractor in Qatar. Tabari says DSI plans to have finalised these acquisitions by the third quarter of 2009. “They will add a substantial percentage increase to our turnover and profitability for the year.”
DSI’s expansion plans were formulated “when no one else was even looking at expanding,” says Tabari. “Now this is going to unfold, and you will be able to see what we can do. And that is the excitement, of establishing one brand name across the entire region, with the same mission and objectives and strategy. Now all that will come together; and that is what this listing is all about.”
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Tabari comments that DSI’s listing has set a benchmark for the MEP industry, which does not enjoy as high a media or marketing profile as civil and structural engineering, for example. “It is the same with architecture. People see a beautiful building, but forget who designed it. Similarly, does anyone even know who the MEP contractor was?”
Status quo
This status quo has resulted from the way the industry functions, says Tabari. “District cooling plants are offered as a contract via the main contractor. But who should be driving this contract? It should be the MEP contractor.” Instead what happens is that the major construction companies are cited when such projects are up for tender – even when the MEP component can be as much as 70% of the total contract.
Tabari argues that DSI’s listing will help convince its shareholders that the MEP sector finally has a high-profile spokesperson. “With a high-rise building, say 40 to 50 storeys, MEP is secondary as it only comprises 25% of the main contract. But on a water treatment, sewage treatment or district cooling plant, it is as high as 80%. So why are not saying let us give it to an MEP contractor?”
Similarly, infrastructure projects are also often awarded to major construction companies as opposed to MEP contractors. “Why? It is because of their visibility as main contractors. Infrastructure is about supplying water, taking away sewage, and providing power and cooling. All these four critical elements are MEP,” asserts Tabari. “What is construction ultimately about? It is about providing essential services.”
Economic volatility
Commenting on the economic volatility, Tabari says it is survival of the fittest at the moment. “Yes, of course we have a downturn. Everybody is being reluctant, prudent and cautious. What you buy today might be cheaper tomorrow. But value is value, and you can never time the lowest and highest prices. This has created opportunities for us in Dubai, which is an employers’ market at present.
“This is our home territory, and the UAE is second to none in infrastructure, for example. We will use that as a platform to build upon. Thus I can only foresee exciting times ahead. Those who have established themselves in the home market and who have done their homework to date will be the ones who succeed. This is the ideal opportunity for a company with visionary leadership to seize the day,” concludes Tabari.
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