Investing in infrastructure: Road, rail, port, airport and utilities projects are all in the works

With the goal of upgrading existing facilities and laying the foundations for future economic growth, the Abu Dhabi government is investing billions in public infrastructure. Transportation and energy projects comprise about a third of planned or existing construction spending in the UAE, according to a recent report from Middle East Economic Digest, and Abu Dhabi is leading the charge in both sectors with large-scale projects including a nationwide railway, an upgraded international airport and a nuclear power project. In its 2013 report highlighting opportunities across the GCC construction sector, international professional services firm Deloitte stated, “Government-supported infrastructure spending in transport and utilities will intensify as a means of diversifying the economy away from oil.”

Salem Al Noaimi, the CEO of Abu Dhabi-based investment company Waha Capital, told OBG, “We believe the process of economic diversification will continue, thanks to government investments such as Abu Dhabi’s $90bn, five-year programme. This will be particularly marked in areas like energy-intensive industry and social infrastructure, where the government is looking to private investment to help raise quality and competitiveness.”

Indeed, in keeping with the emirate’s national strategy, the public investments are targeted to enhance industrial infrastructure and expand freight and port capacity. In addition, projects in the pipeline will increase public transportation options and expand power capacity to meet the needs of a growing population. By 2030, according to estimates from the Department of Transport (DoT), metropolitan Abu Dhabi is expected to be home to 2.6m people, up from just 0.9m in 2008.

Transport Infrastructure

While the 2009 Surface Transport Master Plan outlined a strategy to achieve the transport goals set out in Plan Abu Dhabi 2030: Urban Structure Framework Plan, in May of 2013 the DoT released more detailed plans for the proposed light rail transit (LRT), bus rapid transport (BRT) and metro systems. These large-scale projects have attracted global players, according to local English-language newspaper The National, with Germany’s Siemens, South Korea’s Samsung Engineering and the US-based Bechtel expressing interest in the bids.

With the goal of awarding contracts in 2015, the DoT launched the pre-qualification process in mid-2013 and will issue requests for proposals in early 2014, multinational law firm Norton Rose Fulbright reported in a 2013 analysis. The first phase of the 20-km Metro line will be divided into three contracts, according to the DoT, while Norton Rose Fulbright anticipated the remaining projects – the LRT, which will include 51 km of track distributed across three lines, and the BRT, which will comprise a single 14-km path – will each be awarded through a single contract.

Connecting The Emirate

The emirate is investing in road and rail infrastructure to better connect Abu Dhabi with the rest of the nation and the region. In 2013 the Executive Council approved the $2bn construction of the Mafraq-Ghweifat road connecting the capital city to Dubai. To build the 327-km highway, the DoT announced plans to divide the contracts among Al Geemi & Partners Contracting Company, Al Jaber Transport and General Contracting, Bin Hafeez General Contracting Establishment, Ghantoot Transport and General Contracting, Larsen & Toubro/Delma Engineering, and Tristar for Engineering/Abu Dhabi Salini Construction.

Work is already under way on the $10.98bn railway that will ultimately stretch 1200 km to connect the seven emirates with the rest of the GCC. Etihad Rail, the government-backed company responsible for the rail system, is developing the freight project in three stages, with the possibility of incorporating commuter transit at a later date. When completed in 2014, stage one of the project will connect Habshah and Shah to the port of Ruwais (see Transport chapter). The tendering process is under way for stage two, which will connect the railway to the Saudi border at Ghweifat, the Omani border at Al Ain, as well as Dubai. Stage three, scheduled for completion by the end of 2018, will stretch from Dubai to the Northern Emirates.

The project is providing significant business for international firms and local suppliers alike. To manage the network, Etihad Rail and DB Schenker Rail, announced the formation of a joint venture in June 2013, with Etihad Rail owning a majority stake in the new entity and the German firm responsible for operations. Etihad Rail has already received the seven locomotives purchased for stage one from Caterpillar-owned Electro-Motive Diesel. Future clients of the railway include Sharjah Cement, Centre Waste Management and Emirates Steel.

Airport

 In one of the largest and highest-value projects under way in the emirate and the greater region, Abu Dhabi Airports (ADAC) is expanding the capacity of Abu Dhabi International Airport from 12.5m to 47m passengers per annum. The upgrade includes a third terminal and an additional runway (both delivered in 2009), as well as the Midfield Terminal Building (MTB). The joint venture partnership between TAV Construction, Consolidated Contractors International and Arabtec Construction signed a contract with ADAC to carry out the MTB project, which will include structural, civil, electro-mechanical engineering and site works, and finishes for Dh10.8bn ($2.9bn) in total, with Arabtec’s share being Dh3.6bn ($979.9m). The terminal is expected to be commissioned in late 2017 (see Transport chapter).

Port

 When all phases are completed in 2030, Abu Dhabi’s new Khalifa Port and the neighbouring Khalifa Industrial Zone Abu Dhabi (Kizad) will occupy a space two-thirds the size of Singapore, The New York Times reported. The nearly complete phase one of construction cost $7.2bn and involved building a 5-km artificial island, the infrastructure for an annual shipping capacity of 2.5m twenty-foot equivalent units (TEUs), and the largest single-site aluminium smelter in the world. The government plans to expand Kizad to 418 sq km in five phases, and provided activity at the port continues to grow, Khalifa Port will reach a total capacity of 15m TEUs and 35m tonnes of general cargo by 2030. The project, managed by master developer Abu Dhabi Ports Company (ADPC), includes significant investment in technology, and the semi-automated container terminal is set to be the most advanced in the region. ADPC also is upgrading smaller ports, investing Dh17m ($4.6m) in the development of Marfa Port and redeveloping parts of Zayed Port to accommodate cruise liners.

Utilities

 Along with transportation infrastructure, the government is expanding public utilities to meet growing demand for power, water and sanitation. In its 2013 report on the GCC construction industry, Deloitte emphasised growth opportunities in the UAE’s utilities sector, which must expand significantly to keep pace with residential and commercial construction. The Abu Dhabi Water and Electricity Authority (ADWEA) is an attractive partner for private investors, Deloitte noted, as the public utility is willing to provide government guarantees and take majority stakes in projects. ADWEA has attracted approximately $18bn in investment to power and water projects, the authority stated.

Scheduled for completion in 2017, construction of the first of the UAE’s four nuclear power plants in Barakah, a town in Al Gharbia, is spurring development in the area. Over $1bn in contracts for related construction have been awarded to more than 180 UAE firms, the CEO of the Emirates Nuclear Energy Corporation, Mohamed Al Hammadi, told local media in June 2013.

Jones Lang LaSalle (JLL) has also noted an increase in construction opportunities due to the approval of a major sewerage upgrade by the Executive Council. One of the most significant infrastructure projects under way in the emirate is the 40-km wastewater tunnel. The Dh5.7bn ($1.6bn) project, set for completion in 2015, will be the world’s second-longest gravity-driven tunnel. Four main contractors are working on the project: Korea’s Samsung, Italy’s Impregilo, Austria’s Zublin and Brazil’s Odebrecht.

Public-Private Partnership

 Abu Dhabi’s infrastructure projects are successfully executed through a range of contracting and funding mechanisms. The lion’s share of Abu Dhabi’s metropolitan transit projects, for example, are fully funded by the government and contracted to private firms. Of the three contracts awarded to build Abu Dhabi’s metro system, two are design-and-build contracts, but the contract for the depot, track and rolling stock is a design-build-operate-and-maintain contract.

The municipality is increasingly interested in employing build-operate-transfer (BOT) contracts under which the private sector, rather than the government, finances the initial investment. “New opportunities under the BOT model will be made available to the private sector, affording them a larger role to play in the delivery of municipal services and provision of investing in community facilities,” Ahmed Shareef, undersecretary of the Department of Municipal Affairs, told OBG.

Local media reported in March 2013 that contracts for service stations along the emirate’s highway would be put up for auction for private investment. Indeed, government-sponsored projects have attracted significant local financing. With a long-term plan for infrastructure upgrades, Abu Dhabi is on track to offer opportunities to both contractors and financers.