New contractors in soon for Meydan project - chairman

Contractors could be appointed “within days” to take over the construction of Dubai’s new racecourse following the sacking of two firms involved in the mega-project, the chairman of Meydan Group said on Wednesday.

Government-owned Meydan remained confident the Nad Al Sheba racecourse would be open in time for the Dubai World Cup horse race in 2010, chairman Saeed H al-Tayer said in an interview with Arabian Business.

He confirmed the 4.6 billion dirhams ($1.25 billion) contract with Dubai-based Arabtec Holding and Malaysia’s WCT Bhd was terminated by Meydan because the joint venture was not able to “deliver certain zones” of the project on time.

The two companies had been contracted to build the 60,000-seat main stand and infrastructure works including a luxury hotel, offices for Dubai Racing Club and Meydan Museum and Gallery.

But al-Tayer said Meydan was keeping its options open as to whether it brought new firms in to complete the work or use the services of existing contractors working on other parts of the scheme.

“We are geared up to deliver the project as announced to host the Dubai World Cup in 2010,” he said.

“It has always been our philosophy to have various companies on the ground who can take over the responsibilities, plus we have other people waiting in the wings, we just want to go through the formalities for the time being.

“As far as we were concerned they (Arabtec and WCT) weren’t on time to deliver certain zones for us as per the programme agreed between us, so we had to take a decision.”

He said Meydan had already paid both contractors up to date for the value of the contract completed.

Arabtec was still refusing to comment to Arabian Business on Wednesday but in a press release issued by the contractor, seen by SHUAA Capital, it expressed regret for Meydan’s decision to cancel the deal.

The termination of the contract chipped around 1.2 billion dirhams off Arabtec’s order backlog and could end the contractor’s hopes for achieving growth next year, Roy Cherry, vice president – research, real estate and construction, of SHUAA Capital said in a research note.

Arabtec’s backlog of work was reduced by 2.7 percent to 41 billion dirhams following the termination, Cherry said.

He said the total contract value for Arabtec was 2.05 billion dirhams, with an estimated 1-1.2 billion dirhams of the contract left as of 2008 year end.

He said the maximum bottom line contribution of the cancelled contract would have been 120 to 144 million dirhams, which represented most of the 15 percent growth Arabtec was expected to achieve next year.

This was assuming that Meydan paid any money owed to Arabtec for work completed to date and that no compensation would be paid for the cancellation of the remaining contract, he added.

Arabtec’s silence over the termination of the deal was a typical reaction in dispute management situations in the Gulf, added Cherry.

He said attempts by Meydan to bring in replacement contractors could prove difficult.

“We are not sure that this is the simplest of tasks in the current environment,” he said.

“The coming days will tell us whether this move is a hunt for a winning horse, a better deal, or a search for nickel and dimes in a world where cash is more king than ever.”