Alexandros Ignatiadis, co- founder & shareholder OCTAGON: Construction companies could gain capitalization and financing through Bucharest Stock Exchange listing

The research team of OCTAGON CONTRACTING & ENGINEERING has made an analysis of the

construction market between 2009- 2014, to study the evolution of the sector during the five years and has emphasized the main issues the market has been facing.  “We have compiled five top 100 construction companies, following this analysis, taking into account turnover, profit and shared capital, reported by these companies within the mention time period.  The novelty element brought by this analysis is the fact that, compared to other rankings, which have been published so far and which include companies selected upon one NACE code or upon the main construction NACE codes, we have taken into account all the existing codes.”, said Alexandros Ignatiadis during the conference “Financing, Guarantee and Insurance - Classic versus Innovation towards 2020”, organized by the magazine “Masini si Utilaje pentru Constructii” .

The share of foreign construction companies on the Romanian market is too high

Top 100 for 2014 includes 35 foreign companies which totaled a turnover of approximately 4 billion euro, accounting for 40% of the total turnover reported by the 100 companies present in the top. These 35 companies have also reached 65% of the total profit and own 17% of the total share capital. This tendency, with small changes, has been present in all the five analyzed years.

“Basically the share of foreign construction companies in the Romanian market is around 30%. 

Considering that the construction business should be mostly local, in any country, this share is too high and raises concerns.

In Romania there are around 35,000 construction companies, and the companies present in the rankings that we have compiled have made 90% of the total construction sector turnover.” said Alexandros Ignatiadis.

The burden of banking guarantees is too high for the companies

For a total turnover of 180 bln euro the companies must provide banking guarantees worth 1.8 billion euro- 10% of the total turnover. The major issue is the fact that the 1.8 billion euro represent the double of the total share capital of these companies. Besides the guarantees for the ongoing projects, the construction companies must also provide post- execution guarantees of at least 5%. “Considering that the profitability of the area does not exceed 6%, the burden of banking guarantees is too high for the construction companies.” added Alexandros Ignatiadis.

A major issue is the weak capitalization of construction companies, generated by the fact that funds are blocked in banking guarantees.  “Romanian companies must find financing and capitalization solutions and this could only be done through listing on Bucharest Stock Exchange. Another solution to unblock the capitals would be to set- up employers’ associations or a guarantee fund, which could provide funds for eligible construction companies. 

We all know that these guarantees are not payment, but insurance instruments, that we give to the beneficiaries. In order to solve this issue the National Bank of Romania could also relax the prudential rules and allow the constructors to guarantee with insurance contracts. We could then use these insurance contracts to obtain guarantees from the bank.” concluded Alexandros Ignatiadis.

OCTAGON CONTRACTING & ENGINEERING

For more information click HERE. 

Phone: (+4)021.232.39.20

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Alexandros Ignatiadis- interview The Money Channel: A licensing system and BVB listing could help Romanian construction companies participate in bids for large infrastructure projects

Romania is supposed to build 656 km of highway and 2,226 km of express roads by 2030, according to the Transport Master Plan, presented by the Minister of Transport Ioan Rus, at the beginning of October. The highway projects included in the Master Plan are Sibiu - Braşov (103 km), Ploieşti - Comarnic (49 km), Craiova - Piteşti (115 km), Comarnic - Braşov (54 km), Braşov - Bacău (158 km) and Gilău - Borş (177 km), the total estimated cost for these projects, reaching  6.28 billion euro. Moreover, the Master Plan includes the construction of express roads totaling approximately 2,200 km, the necessary funds for these projects accounting for around 17.5 billion euro. According to the document, 2,674 km of trans-regional roads, 293 km of EuroTrans roads and 172 km of city belt should be built, the total of necessary funds for the development of the road sector standing at 26.1 billion euro.

Alexandros Ignatiadis, co- founder and shareholder of the company OCTAGON CONTRACTING & ENGINEERING, commented on the Master Plan and offered solutions which could help Romanian construction companies participate in public bids for large infrastructure projects, during the TV show “Metropolis”, broadcast by the “The Money Channel”.

 

The Money Channel: What is your perspective on the Master Plan presented by the Minister of Transport at the beginning of October?

Alexandros Ignatiadis: The Minister of Transport presents a Transport Master Plan on a regular basis. It is our obligations to the European Community to send this report, but the question marks are related to the lack of responsibility towards the objectives within the previous Master Plans.  We never find out which of these have not been reached and who is responsible for the positive or negative results. In the private sector, companies that do not perform, pay through low profits or even losses, for the failed objectives. In the public sector we do not have an evaluation and control system, which could hold those governing the country, accountable. Each new government sends optimistic messages related to the plans for the ongoing terms, but at the end of the term, the results are always disastrous.

The Money Channel: What changes should occur on the construction market to allow Romanian contractors to have access to road infrastructure projects?

Alexandros Ignatiadis:  A major issue, which stops Romanian construction companies to participate in such large bids, is the weak capitalization. The financial burden, represented by bank guarantees and performance guarantees, combined with long delays on payments made by the state, which is the beneficiary of these projects, are the main causes why Romanian companies cannot stand the competition against foreign companies. A method to attract capital would be through Bucharest Stock Exchange, but right now there is no Romanian construction company listed on the Stock Exchange.

The second negative factor is the interference of politics in public bids, which could be eliminated by licensing the construction companies. Through licensing, only the companies with a certain level of capitalization and a certain level of expertise would have access to bids. Right now, the Romanian legislation allows any company, set up six months ago, with a share capital of 200 lei and obviously devoid of the necessary expertise, to be eligible for the construction of large infrastructure projects. The only condition is to partner with other companies willing to provide technical or financial support.

 

The licensing of construction companies would stop the phenomenon of “flat companies”, set up over night, politically backed, which vanish right after the end of the term of those who have supported them. 

Licensing could also solve the issue of contested results, which prolong almost three times the life cycle of a project.

We all know that, within all European projects, the funds are allocated for a certain term and if the implementation of the project exceeds the initial term, the funds can no longer be absorbed. In Romania the execution terms of infrastructure projects are prolonged 3 to 4 times due to the mentioned issues, and at the end of each year we manage to always wonder about the same thing: why do we absorb such a low percentage of the allocated European funds?  

Romania had, at the end of last year, 644 km of highway, 16,466 km of national roads, 35,587 km of county roads and 32,190 km of village roads. According to the Master Plan, there are no express roads in Romania.

You can watch the show here: 

OCTAGON building the second stage of the office complex Hermes Business Campus

Press release                                 

                       

                                                                                                                 October 15^th 2014

OCTAGON building the second stage of the office complex Hermes Business Campus

      Contract value: 6.2 mil Euro

      Hermes Business Campus- office complex located on 5-7 Dimitrie Pompeiu Blvd.

Hermes Business Campus - building C

Bucharest, October 15^th 2014: OCTAGON CONTRACTING & ENGINEERING, a company that specializes in civil and geotechnical construction works, started works on building C of the office complex Hermes Business Campus. The complex will be developed in three stages and this is the second stage. The works performed by OCTAGON will have a total value of 6.2 mil euro.

OCTAGON will build the infrastructure, consisting in diaphragm walls D 800, bored piles D 1,000 and D 1,500, foundation raft, crown beam. The company will also execute the superstructure of building C.

Hermes Business Campus - building C

“The fact that we are continuing works on the second stage of the complex Hermes Business Campus allows us to use the experience accumulated in the first stage to obtain better results and contributes to the project coherence. Construction works on building C started in September, and now we are building the special foundations.” said Mr. Alexandros Ignatiadis, co- founder and shareholder of OCTAGON CONTRACTING & ENGINEERING.

In July 2014 OCTAGON delivered the first stage of the project. The company was general contractor for building B within the complex, developed by NGY Properties Investment, the Romanian branch of the Belgian group Atenor. The building covers 37,000 sqm, has 4 underground floors, 8 ground floors and one technical floor and has been fully leased.

Hermes Business Campus is the first investment of Atenor Group in Romania. Works started at the end of

Hermes Business Campus - building C

2010, when OCTAGON won the infrastructure contract, consisting in the execution of  diaphragm walls, bored piles, excavation and foundation in top-down system, as well as the execution of the structure of levels -3 and -4.

In 2013 OCTAGON took over the general contractor role from the Austrian company Alpine and continued with the execution of reinforced concreting works on the superstructure, architecture, electrical installations and HVAC.

Building B obtained BREEAM certification with excellent grade for the execution of the superstructure.

About OCTAGON:

OCTAGON CONTRACTING & ENGINEERING (www.octagon.com.ro ) is a Romanian company set up in 2005, headquartered in Bucharest. The company also has a branch in Baghdad (Iraq).  With a 19.6 million euro in 2013, large scale projects in Romania, Iraq, Greece, Turkey and Bulgaria, OCTAGON is one of the main players in the civil and geotechnical construction sectors, in Romania.

Hermes Business Campus - building C

Among the reference works performed by OCTAGON in Romania there are: the office complex Green Court Bucharest (Gara Herastrau Street- Bucharest), the tallest office building in Bucharest Sky Tower (Barbu Vacarescu Blvd.), the office building Olympia Tower (Decebal Blvd.- Bucharest) and the Combined Cycle Power Plant 867 MW OMV- Petrom (Brazi- Prahova county).

 

OCTAGON CONTRACTING & ENGINEERING

For more information click HERE. 

Phone: (+4)021.232.39.20

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