Construction & Projects Forum

Rizwan A. ShahManaging Director, Leader Capital Projects AdvisoryWednesday 19 January 2011

What have we learned? Corporate strategies to face future new conditions in the Gulf

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• ‘Where were we’

• Lessons learned

• The future

• Responsibilities of stakeholders

• What has happened in 2010

• Regional restructuring

• IPO readiness

• PPP opportunity

• Final thoughts

Contents

‘Build it and they will come….’

(…or dream it and it will be financed)

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• Off-plan sales

• Contractor-friendly environment

• Everyone jumped in

• Competition for resources

• Lack of thorough planning

• Massive ROIs created “a race”

However projects are best delivered when there is a strong level of trust amongst all the entities involved, and the risk of the project is placed in the hands that are in the best position to control it.

Where were wepre-crisis

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Where were wepost-crisis

“With trust lost – the interrogation begins”

Key issues

Is it just a very expensive lesson learned or can participants in the region capitalize and prosper?

© 2009 Deloitte & Touche (M.E.)

Lessons learnedhow can we capitalize?

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Fear of the truth

A moving target

Poor contract administration

Need for control

Reporting improvement

Managing expectations

Government decisions

Shortage of liquidity

Shifts in plans, designs and variations led to stalled projects

Close examination of project documentation

Right people in the right structure

Effective decision making is key

Data gathering more timely and efficient

Communication to achieve successful outcomes

Social enhancement and public policy initiatives play a key role

Returns need to be revised based upon current projections of future demand

(some projects based on future projections)

Returns need to be revised based upon current projections of future demand

(some projects based on future projections)

Key lessons learned from crisis

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Lessons learnedKey focus

“Start right, finish right”

Over the years a number of players have taken the opportunity to expand their geographical footprint in order to capture opportunities in the key markets of Saudi Arabia, Abu Dhabi and Qatar.

© 2009 Deloitte & Touche (M.E.)

The futureWhat does it hold?

In excess of USD 1 trillion planned for the region in terms of construction projects

Construction – truly global industry

Working for sovereign governments – not a simple decision

International contractors – more selective and cautious

Higher risk – contractors don’t want to be involved

Emphasis on cost estimate and cost control

New innovative ways of structuring projects

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Responsibilities of stakeholders

Improve accountability

Regulatory requirements

Overall strategy / sustainability

“Think Smart … Plan Ahead”

“Successful Project Delivery / Outcome”

It has been all about the word “RE” …

©2010 Deloitte & Touche (M.E.) 13

And the future is gearing towards “IPO” and “PPP”

What has happened in 2010?

VisitingRE

StructuringRE

REBase-lining

AssessingInvesting

RE

RE

Timing

Understand what it takes

• Governance

• Historical information requirements

• Financial reporting procedures

• Operational scrutiny

Selecting the right advisors

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Initial Public Offerings (IPO’s)What does it mean for the Construction sector?

© 2009 Deloitte & Touche (M.E.)

Public / Private PartnershipsAn alternative?

Risk and its allocation between theContractor and the public sectoris a key facet of the Public-Private Partnership

Opportunity for Contractors

Preferred method for procurement

Understand the drivers for different markets

Accurately understand and capitalize on ‘risk’

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???

Final thoughts

Prepare to ‘RE’ bound

Be selective – and time it right

Big lesson learnt – battle scars received

Think Green

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