Positive OUTLOOK THE BIG INTERVIEW. Nathan Hanns, general manager, ALEMCO, is looking forward to an upturn in business in a more stable MEP market

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2 Positive OUTLOOK Nathan Hanns, general manager, ALEMCO, is looking forward to an upturn in business in a more stable MEP market March 2017 MEP Middle East 19

3 ALEMCO, the MEP division of ALEC, is feeling positive as it looks forward to an upturn in business later in the year. Nathan Hanns, general manager, concedes that 2017 may be soft for the most part, but says work will start on significant projects in Q4 and carry the company forward for the next two years. I think we re quite positive about the outlook for the market, Hanns says. We believe it s going to be slow through the first three quarters, picking up towards the end. So next year, 2018, and 2019, you re going to see a lot of developments moving for the whole business. Much of that work will be in support of ALEC and projects it has either secured or contracts it is busy negotiating on and closing. They have picked up a number of key developments, and those are in the early stages and will be picking up towards the third quarter from an MEP perspective, says Hanns. ALEC is a multi-disciplinary construction group established in Dubai in 1999 with operations in Abu Dhabi, Oman and Qatar. The company has worked on projects as diverse as schools, residential buildings, airports and hotels and recently secured a contract to build a data centre at Dubai International Airport. Clients attitudes are changing, but price still remains a very important part of the process. ALEMCO is the mechanical, electrical and plumbing division established in The work in the pipeline is diverse and includes infrastructure projects, freehold developments and commercial buildings. ALEMCO s current and recent portfolio of work includes Select Group s The Residences, a twin-tower development at Dubai Marina; Meraas s Bvlgari Resort Hotel at Jumeirah Bay Island; and the Wahat Al Karama memorial park in Abu Dhabi. The projects show ALEMCO s ability to deal with diverse challenges, including finishing to an extremely high standard in the case of the Bvlgari Resort Hotel and a highly accelerated work schedule in the case of the memorial park. We are in the final stages of the delivery of Meraas Bvlgari project, which is quite a challenging project with a very high level of finish- 20 MEP Middle East March

4 Hanns (right): ALEMCO s work on the Bvlgari Resort Hotel required a, very high level of finishing. ing, explains Hanns. That will be a wonderful project when it is complete and it is in the final stages at the moment. We had a very fast track and successful run on the memorial park in Abu Dhabi with Miral and ALEC. It was an extremely intense delivery process, with 5-6 months maximum to get that delivered. It required a good working relationship to get that done in such a short space of time. While ALEC s focus has very much been on premium projects, it operates in a regional market that has often been seen as price driven. Hanns senses some shift in attitudes, while stressing that the market remains price sensitive. Clients attitudes are changing, but price still remains a very important part of the process, he tells MEP Middle East. There are certain time constraints in any delivery mechanism and clients are perceiving that there is a shortage of MEE resources in the market to deliver the level of projects that are in the pipeline at this stage. There is definitely a focus on getting the right contractors, the right party to the table, but price definitely remains a key driver in that process. Hanns senses that better relationships between contractors and clients will allow for more honest discussions about what can be done for a certain budget. I would say going forward into the future there s what could be considered a better working relationship to obtain the budgets on projects, closer working relationships between clients and the contractors to develop those budgets, and making sure they re the right budget for the right performance, he says. Other longstanding challenges remain in the regional market, including prolongation and variation, and how to deal with them. The variation process on a contract can be quite time consuming and as a contractor you have to carry out the variation, but you don t necessarily get that variation approved in the shortest possible time, says Hanns,...so on projects with large variation and prolongation it s very difficult to maintain a financially positive perspective. Challenges with variation and prolongation tend to be greater on fast track and speed to delivery projects, he adds. Problems with the integrity of parts and supplies, as highlighted by the recent debate over counterfeit and fake steel, are less of an issue for ALEMCO because of the nature of the projects it is working on. We have been fortunate enough to work on quite prestigious projects with high quality specifications and the selection of the process probably cuts a March 2017 MEP Middle East 21

5 lot of that out, Hanns explains. I know in the market that there is a problem with counterfeit materials and as a business we try to use the reputable supply chain. We don t see a lot of that [fakes and counterfeiting] with the projects we work on. ALEMCO has sought to keep its staffing levels very much in line with its workload. This has been eased by the company s ability to avoid large fluctuations in turnover that may require a sudden increase or decrease in manpower. As a contractor, you don t have this never ending tap of human resource available and your resource is kept in line with the revenue you re working to, explains Hanns. We maintain key staff. We keep a pretty stable resource in house. We also maintain a pretty stable turnover. The only problem is when you fluctuate up or down on turnover. But we ve been fortunate that we ve maintained a pretty stable turnover in the last 4-5 years. Hanns has been in the region for more than a decade and experienced the downturn of 2008 when projects shut down overnight. He feels that some of us have learned from that experience, by restructuring and thus being in a better position in the last five years to maintain stable revenue and returns. Elaborating, he says, One thing is to get your price point right. It s to know the clients and what the project requirements are. If you know what the project requirements and you ve got a working relationship with the client, you ll know how to price the project. In the past, because of the price-driven processes that tendering has gone through, often the prices have been substantially lower than they should have been from the contractor s side, for the delivery aspect of the project and the scope and scale of a project. Going forward, the UAE has green building codes in place and they are are being incorporated into the majority of new designs. Hanns also senses a drive to retrofit existing buildings, with government entities leading the way. The regulations relate to selection of equipment, the efficiency that the equipment s being operated to, the efficiencies of the building itself, the water side of the building and reclamation of grey water, he says. There s definitely a ALEMCO has recently worked on Select Group's The Residences at Marina Gate. RECENT PROJECTS The Residences, Marina Gate Bvlgari Resort Hotel Cargo Mega Terminal Expansion Wahat Al Karama Al Falah Community Park Hyatt Saadiyat 22 MEP Middle East March

6 Hanns: The nuts & bolts and the cables in the building are where our success lies focus on achieving less of an energy footprint for buildings. Within the ALEC group of companies, there is ALEC Energy, which focuses on solar. Last October, the company signed an agreement with Al Nabooda Automobiles to build a 6.8 MW, grid-connected rooftop plant at Al Nabooda s body and paint shop. Another ALEC division, Smart4Power, focuses on auditing existing buildings and proposing solutions to make them more energy efficient. So are clients telling ALEMCO that they want solar panels and solar water heaters on the roofs of their buildings? They are, to a certain extent, he answers. Some of the costs of the new technologies, because they are new, are not quite at the level where they can be incorporated into the smaller projects. The larger projects definitely, the smaller projects are more difficult, but we definitely see a drive from the developers as well as private owners to incorporate as much as possible into their buildings. Recent months have seen reports of MEP contractors either exiting the market or temporarily closing their order books. Does this make life any easier for ALEMCO? Well, as We believe it s going to be slow through the fi rst three quarters, picking up towards the end [of 2017]. soon as someone exits left, often someone enters right, Hanns says. Where there s a market and there s availability of construction projects, there will always be new challenges and new parties. What has happened in the market over the last three years is there s been a lot of restructuring of the existing businesses and those are going to have a better operating perspective in the future on projects. It s always challenging to operate in a tendered market. For its part, ALEMCO does bid individually on projects, but it largely works with the main ALEC contracting division. As a group of companies, we ve performed well on projects and it s difficult to replicate that in an open market if you don t have the relationships. We do work with other main contractors; it will be on a project by project basis and it will have to be the right project. ALEMCO s success over the last decade was recognised at this magazine s annual MEP Middle East Awards in 2016 when an independent panel of judges gave it two key awards. Hanns was named MEP Executive of the Year and Severin Tenim collected the Young Engineer of the Year award. Hanns says retention of key staff, an engaged management team and a commitment to quality lie behind its success. We take it personally and we want to achieve the best results on every project, he says. As an individual, I ve been in the construction industry for 20 years and as much as companies grow, we re a construction company. The nuts & bolts and the cables in the building are where our success lies and it s very key for our management to be involved in the projects. We try to get round to all of them and see what s going on on the jobs. There s a learning experience on every project that you work on. March 2017 MEP Middle East 23