Abu Dhabi Offers New Oasis for U.K. Engineers as Dubai Dries Up
Dec. 11 (Bloomberg) – Abu Dhabi, armed with oil wealth and a $500 billion spending plan, is providing the escape route for British engineers as their bets on Dubai’s construction boom turn sour.
Dubai’s focus on financial services, luxury homes and mass tourism attracted U.K. skyscraper designers and road-network planners like WS Atkins Plc and builders including Carillion Plc. It also made the emirate dependent on industries that have been hit hard by the economic slump.
Abu Dhabi, where 1 million people sit atop 8 percent of the world’s oil reserves, is pumping money into developing tourist attractions and manufacturing to break away from its dependence on crude. Oil prices have fallen to below $50 a barrel from $147 in July. The spending project, titled “Plan Abu Dhabi 2030,” includes the world’s first Ferrari-branded theme park and museum ventures with the Louvre and Guggenheim.
“Abu Dhabi has a master plan,” Atkins Chief Executive Officer Keith Clarke said in an interview. “You can even buy a copy and read it. They have developed a plan for which they have the cash. All the budgets were done on $50 to $55 a barrel of oil.”
Dubai accounts for half of Epsom, England-based Atkins’s 112 million pounds ($163 million) in Middle East sales, though Abu Dhabi is on course to match that level in a couple years, Clarke said. Dubai will see a slowdown from its “vastly impressive growth,” said Clarke, whose firm is the U.K.’s biggest engineering-design company.
Carillion’s Reach
Abu Dhabi will be the main driver behind Carillion’s goal to double Middle Eastern sales by the end of 2009, according to CEO John McDonough. He has moved 150 senior directors from Europe to the Gulf region this year and has added 6,000 employees in Abu Dhabi, working on projects ranging from hotels to aluminum smelters. Britain’s second-biggest construction company is adding jobs this year, while many of its peers slash employee numbers.
“The wealth and power to invest in infrastructure is absolutely enormous,” McDonough said yesterday. “What’s going on in Abu Dhabi is unbelievable and the growth there is sustainable over the next 10 to 15 years.”
Gulf Arab cities are struggling to expand infrastructure to match population growth. Traffic jams cost the Dubai economy about 4.6 billion dirhams ($1.25 billion) a year in lost man- hours, according to the emirate’s transportation authority. The population of Abu Dhabi will triple to about 3 million by 2030, the country’s planning council estimates.
Joint Ventures
U.S. companies also have the emirate in their sights. General Electric Co., the world’s biggest maker of power-plant turbines and medical-imaging machines, formed an $8 billion venture with Abu Dhabi’s Mubadala Development Co. in July to expand commercial investments in the Middle East and Africa.
GE, which is contributing half the money, will pursue financing for the region’s power plants, hospitals, roads and water treatment. The Fairfield, Connecticut-based company will also build a research center in Abu Dhabi’s new Masdar City. Las Vegas-based casino company MGM Mirage and Mubadala have also formed a venture to develop non-gaming hotels and resorts, and would start with projects in Abu Dhabi, Las Vegas and the U.K.
“Dubai is energy poor and Abu Dhabi is energy rich,” Giyas Gokkent, head of research at National Bank of Abu Dhabi, said in an interview. “Dubai has been the paragon, the leader. Abu Dhabi’s economic model can be summed up in one word: diversification.”
Dubai Dims
For Carillion, based in Wolverhampton, England, revenue from Middle Eastern operations is set to soar to more than 600 million pounds by the end of 2009, nearly double the group’s 2007 figure, CEO McDonough said. Most sales will stem from Abu Dhabi’s infrastructure plans, and the company yesterday raised its earnings growth target to 15 percent.
As Abu Dhabi plans and invests, the economic slump has taken the shine off of Dubai, which borrowed $80 billion to finance its transformation through projects such as the world’s tallest building, the biggest hotel and man made palm-tree shaped islands packed with luxury homes for bankers and professional athletes.
Real-estate prices may drop 20 percent or more, analysts at EFG-Hermes Holding SAE, the biggest publicly traded investment bank in Egypt, said in a report this month. House prices in Dubai quadrupled in the last five years, fueling concerns that a slump is imminent. The government has set up a committee to restore confidence in the real-estate market.
Scaling Back
Nakheel PJSC, the Dubai state-owned developer of three palm- shaped islands in the Persian Gulf, said Nov. 30 it is scaling back or delaying work on some of its $30 billion in projects, including the 62-story Trump International Hotel & Tower near the Mega Yacht Club on the trunk of Palm Jumeirah.
“There is no question that Dubai has seen its outlook soften, with contracts delayed, some indefinitely,” Tim Jones, finance director at Interserve Plc, said in a Dec. 5 interview. “Abu Dhabi will be extremely exciting over the next few years.”
Interserve, which has built roads, towers and electricity stations in the Gulf region, gets nearly one-third of its annual sales from the Middle East through building contracts including roads, apartment blocks and electricity stations.
“We can initially attack Abu Dhabi from our Dubai base because they are so close, and the more work we get, the more likely it is that we will seek to set up an office there,” said Jones.