Electricity firms see 60% drop in orders

Fall in real estate and construction projects had a big impact on utility companies. (YUNIS AL AMIR)

Service providers in the power sector saw up to 60 per cent drop in real estate and construction-related business, particularly in Dubai. They, however, saw flat to marginal growth in infrastructure projects across all the GCC countries.

Industry players speaking to Emirates Business during the Middle East Electricity Exhibition said the ongoing infrastructure projects were the saving grace for the power sector.

But the big source of the turnover in the past few years – the real estate sector – has seen a steep dive in most GCC countries with the exception of Abu Dhabi and Qatar, who until now are experiencing space shortages.

"Generally speaking, companies suffered about 60 per cent setback in property and construction. Saudi, Kuwait, Abu Dhabi and Qatar saw 30 per cent fall but Dubai has suffered 50 to 60 per cent due to projects being put on hold or cancelled," Nabil Zoghbi, exports sales manager, marketing and sales at Nexans, a Paris-based cable manufacturer.

"I do not think that projects will restart this year, although there is speculation that they will start in 2011. I think this year will be a little bit better," he added.

The company yesterday announced a 90 per cent drop of net profits from €82 million (Dh415.2m) in 2008 to €8m in 2009.

The company said the level of sales in the first quarter of 2010 of the cable activity is expected to be at a similar level as the fourth quarter 2009 and less than first quarter 2009 sales.

The group is pinning its growth on transmission and distribution networks as well as on renewable energies, rail transportation and offshore oil resources.

"We are confident about the future, even if early 2010 still reflects an economy struggling to recover," said Frederic Vincent, Chairman and CEO, Nexans.

According to Zoghbi, the drivers for growth in the region last year will remain the same this year.

"Infrastructure projects from Dewa, Adwea, airports, etisalat, railways, oil and gas are the main drivers. Airports in Abu Dhabi, Dubai, Oman Kuwait and Saudi are either being expanded or being rehabilitated," he said.

Last year saw few new contracts and most of them were priced substantially lower, Fernando Calle, Managing Director of Spain-based Himoinsa.

"It is better in Abu Dhabi but even there projects went slowly," he said.

Most of the projects last year were therefore a continuation of the contracts signed in the past few years when demand was outstripping supply, said analysts.

"Even if there is a slowdown, UAE projects cannot afford to stop their electricity projects," Vahid Rahmanian, Managing Director of Dubai-based Electro Energy. "They cannot suffer from shortage of electricity. They can delay property projects because it is not very obvious but not power projects because when there's a shortage it will be obvious."

Rahmanian said demand for low voltage panels saw a 50 per cent decline in the property sector.

A window of opportunity that remains open, he said, is the shortage of power in the Northern Emirates.

"In 2009, there has been a slowdown. But there were still lots of projects in Sharjah and Northern Emirates due to power shortages," he added. Despite this, the generator business felt a downturn due to reduced demand from developers and rise in government power supply.

"The effect is big in terms of the generators volume but thankfully we are in a cash business so we are not that much affected in terms of payment," Raad Hamoodi, Sales Manager at Sharjah-based AT generators.

However, Vincent is positive that the generator business will perform better this year. "Every company needs a backup and stand-by power… we think it'll be better in 2010, even in Dubai."

 

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