Construction firms have set aside working capital, made internal improvements and implemented material-price management in preparation for bidding on large-scale infrastructure projects this year.
The projects, including mass-transit electric-train lines and construction jobs under the Thai Khemkhaeng (TKK) scheme, are good news for a construction industry still hurting from the economic downturn. The improving economy, boosted by stimulus projects to be launched this year, will lift the industry’s work volume to the highest level in five years, said Ch Karnchang managing director Plew Trivisvavet. Bidding for many construction mega-projects has been delayed for more than five years by political turmoil. The government now needs to restore the local economy by launching both stimulus schemes and the delayed mass-transit electric-train projects, he said. Bidding for the delayed projects is expected to open this year. Ch Karnchang is one company that has prepared its resources to bid for more mass-transit jobs. It hopes the mega-projects will raise its backlog to Bt50 billion this year, from the present level of Bt20 billion. Domestic contracts are expected to come mainly from the government’s mass-transit rail projects and road construction. Bidders for these mega-projects must prepare working capital for the construction jobs, in order to avoid shortages of finance. “We’ve proposed an increase in registered capital for the company’s board to approve. Raising funds will strengthen the company’s capital structure,” he said. During the economic downturn, Ch Karnchang invested Bt100 million on internal improvements in information technology and human resources, in order to have sufficient money once the construction sector recovers. Plew said strategies to help the company achieve its goals included material-cost controls and expertise in infrastructure works. “We’re monitoring material prices to see whether they’ll increase. This is a key factor impacting on the construction outlook,” he said. Earlier, the company won the first contract for the Purple Line electric-train project. Worth Bt14.3 billion, construction will begin this month. Ascon Construction CEO Pattanapong Tanumathaya said construction firms should be preparing staff, reference works, working funds and construction-material price management, in order to bid for a large volume of work this year. Expectations of larger projects from the government is a positive factor for the industry, he said. However, the Map Ta Phut travesty is bad news, because private firms, including international investors, may suspend projects in Thailand, with a consequent effect on the construction industry. Ascon Construction will bid for the electric-train projects and is seeking joint ventures. Bidding is expected to open for the Blue and Red lines this year, and the company is ready to participate, Pattanapong said. “If the Blue and Red lines are divided into many contracts like the Purple Line, then we have a chance to secure some of them, because the value of some contracts will be within our potential,” he said. Ascon won a third contract to build a depot and a maintenance centre for the Purple Line project. He said the company hoped its backlog would increase this year by Bt2 billion or Bt3 billion from its present of level of Bt3 billion as the volume of construction projects increased. However, Pattanapong said construction companies also had to be cautious about the risk of delays in both government projects and payments, because this could seriously affect revenue growth. “Even if project winners have secured projects, our experience tells us if payments are delayed, revenue will not meet targets,” he said. Ascon expects revenue growth of 15 per cent this year, above the Bt1.5 billion to Bt2 billion expected for last year. Power Line Engineering has also increased its registered capital in expectation of business expansion, saying working capital was needed to strengthen its performance. Nawarat Patanakarn general manager Vajraput Vajrabhaya said the construction industry would have a brighter year in 2010, as long as the government remained stable. “If the mega-projects are launched as scheduled, that will be good news. But if they are not launched, 2010 will be unchanged from 2009,” he said. About 70 per cent of Nawarat’s contracts come from the state sector, and the company is continuing to bid for mega-projects despite the risk of delays. Vajraput said his company had no plans to increase its capital. It will instead rely on reference works and its civil-work expertise to win contracts. Siam City Cement expects this year’s cement demand to increase 5-10 per cent from last year’s 25 million tonnes, thanks to big projects like the electric-train lines and road construction under the TKK scheme, said Chantana Sukumanont, executive vice president for marketing and sales. The start of construction on the Purple Line will help drive cement consumption, as well as road construction and irrigation works, she said.
