1. 18 September 2013
Prepared by: Emil Rademeyer

2. Agenda
• Looking back 2008-2012
– Project market
– Spending trends
– Cost trends
– Lessons learned
• Looking forward 2013-2017
– Project market
– Spending trends
– Demand forecast
– Escalation
• Summary

3. Agenda
• Looking back 2008-2012
– Project market
– Spending trends
– Cost trends
– Lessons learned
• Looking forward 2013-2017
– Project market
– Spending trends
– Demand forecast
– Escalation
• Summary
H

4. GCC Project Market: Awards
• In terms of contract awards, 2012 was the worst year in the GCC
since 2004, with just $172bn worth of projects awarded.
• The primary reason for this was the delay in awards of many
projects, many of which are now being awarded in 2013. Indeed, the
$30bn awarded in the first quarter of 2013 is considerably higher
than the $20bn awarded in the same period last year.
Projects Awarded 2008-2012
H
0
50,000
100,000
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
$million
GCC Value of projects awarded
2008 2009 2010 2011 2012

5. KSA Project Market: Awards by sector
• The construction sector has been consistently the largest sector
based on budget value of contract awards.
• The chemical sector saw the largest increase from 2008 to 2012
growing from almost 0% in 2008 to just shy of 19% in 2012.
• The power sector was in 3rd place with 17% of the total budget value
of projects awarded in 2012.
• Oil & gas was in the 4th place with 15%.
Project Awards 2008-2012
H
-
50,000
100,000
2008 2009 2010 2011 2012
$million
Project awards by sector
Construction Chemical Power Industrial Oil Transport Water Gas

6. Project Market: Quantity vs value
• The construction sector saw
most of the projects awarded
followed by the transport &
power sectors
• The industrial sector saw
more projects but the ranked
lower in the value of projects
awarded
Quantity Awarded 2008-2012 Value Awarded 2008-2012
H
38%
24%
17%
5%
5%
5%
4% 2%
Construction
Transport
Power
Industrial
Chemical
Oil
Water
Gas
31%
19%13%
10%
10%
9%
4% 4%
Construction
Transport
Power
Oil
Chemical
Industrial
Water
Gas
• Similarly the value of projects
awarded was the same for
the first 3 sectors.
• The oil sector had a higher
total value of projects and
placed in 4th position

7. Top 10 regions
• The Eastern province saw
bulk of the investment
during 2008-2012 with $83
billion worth of projects
awarded during the period.
• Mecca province was second
with total projects awarded
in excess of $68 billion
• Riyadh province was 3rd
with a total of $47.7 billion
worth of projects awarded
• Al Madinah was in 4th place
with $28.8 billion worth of
projects awarded
30%
25%
17%
10%
9%
5%
1% 1% 1% 1%
Ash-Sharqiyah
(Eastern Province)
Mecca Province
Riyadh Province Al-Madinah Province
Cross Province Jizan Province
Asir Province Al Qassim Province
Najran Province Tabuk Province

8. Spending trends: by sector
• The total cash flow for 2012 was just over $44 billion, an increase of almost
70% from 2011
• The construction sector saw most of the spending during 2012 with $15,7
billion
• The oil & gas sector had a project cash flow of approximately $8.5 billion
• The transport sector witnessed the 3rd highest spending with just of $8
billion of cash flow
Project cash flow 2008-2012
H
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
2008 2009 2010 2011 2012
Gas
Power
Oil
Industrial
Transport
Construction

9. GCC Cement demand vs capacity
• Only UAE has available capacity
• KSA decree to import 10 mtpa
• Increasing regional demand
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
2012 Demand 0.8 5.4 6.0 5.1 52.1 12.8
Capacity 0.5 5.4 6.2 6.2 56.2 38.3
-
10
20
30
40
50
60
MTPA
Cement demand vs capacity
H

10. Developer Cost Index: 2008-2012
• Even though the domestic construction market were
not greatly affected by the recession, global events
did have a positive effect on the cost of construction
• 2009 saw the highest escalation rate of 10.2%
• Construction costs reduced significantly during 2010
MCI Developer Cost Index
H
-30
-25
-20
-15
-10
-5
0
5
10
15
0
20
40
60
80
100
120
140
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Percentchange
Index
Market Average
Market Average Change

11. Construction cost breakdown
ElementStructureGroup ElementStructureComponent Market Average
Sub-structure Work below lowest floor slab 71.01
Lowest floor slab 16.06
Super-structure Frame 106.47
Upper floors 33.80
Roof 19.09
Stairs 9.20
External walls 69.36
Windows and external doors 31.49
Internal walls and partitions 32.33
Internal doors 16.50
Internal Finishes Wall finishes 25.71
Floor finishes 35.16
Ceiling finishes 16.75
Fittings, Furnishings and Equipment Fittings, Furnishings & Equipment 31.63
Services Sanitary appliances 11.78
Services equipment 20.27
Disposal installations 8.71
Water installations 19.85
Heat source 12.04
Space heating and air treatment 71.38
Ventilating systems 29.10
Electrical installations 122.08
Gas installations 3.46
Lifts 19.54
Protective installations 35.54
Communication installations 15.18
Special Installations 25.92
Builders work 16.12
Builders profit and attendance 22.49
External Works Site works 19.79
Drainage 10.35
External services 19.92
Minor building work 6.62
Sub-totals Provisional sums 318.34
Preliminaries 110.94
Prime Cost Sums 67.10
Contingency 6.83
H

12. Contractor Cost Index: 2013-YTD
• Cement, concrete and rebar has seen a slow increase
from the start of 2013
• Aggregates has experienced some demand from the
middle of the year
• Bitumen costs remained stable
MCI Contractor Cost Index
H
0
20
40
60
80
100
120
140
160
2013 Jan 2013 Feb 2013 Mar 2013 Apr 2013 May 2013 Jun
Aggregate
Asphalt
Backfill
Bitumen
Cement
Concrete
Electrical cable
Marine Plywood
Rebar
Safety barrier
Street lighting

13. GCC cement & concrete comparison
• Qatar has the highest cement & concrete prices in the
GCC
• Saudi Arabia has the lowest cement prices but not the
lowest concrete price (logistics)
• Regional demand will greatly impact future cement &
concrete costs
0
20
40
60
80
100
Cement ($/ton) Concrete ($/m3)
$
UAE Qatar KSA Oman Bahrain Kuwait
GCC concrete & cement
H

14. Lessons learned
• Stable economy
– Does not result in a stable construction market
• Regional influences
– Neighbouring markets affect domestic market
• Allow contingency
– The current 5% off plan & 5% on site not sufficient
• Plan for escalation
– Escalation affects project feasibility (client & contractor)
H

15. Agenda
• Looking back 2008-2012
– Project market
– Spending trends
– Cost trends
– Lessons learned
• Looking forward 2013-2017
– Project market
– Spending trends
– Demand forecast
– Escalation
• Summary
F

16. GCC Project Market: Awards
• Based on the current pipeline of projects, for 2013 we forecast that project awards
will bounce back to about $220bn, a 25 per cent improvement on 2012 figures.
• Saudi Arabia will be the main market followed by the UAE and Qatar.
• In terms of growth, the major market will be Qatar as it starts awarding projects in
preparation for the 2022 World Cup. However, if the UAE is awarded the Expo 2020
it will result in significant project activity.
Project Awards 2013 - 2015
F
-
50,000
100,000
150,000
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
$million
GCC Forecast of project awards
2013 2014 2015

17. KSA Project Market: Awards
• Construction sector is the largest sector accounting for nearly 40% of
anticipated project awards in 2013
• The transport sector accounts for over 30% of expected project awards in
2013.
• The power sector accounts for nearly 15% of the expected awards in 2013
but will increase to almost 24% in 2014.
• The oil & gas market will only account for 5% of projects awarded during
2013
Projects Awarded 2013-2017
F
-
50,000
100,000
150,000
2013 2014 2015
Forecast budget awards by sector
Construction Transport Power Oil Water Chemical Industrial Gas

18. Spending trends: by sector
• The construction sector have a stable outlook with regards
to cash flow
• However, with the exception of power, all other sectors
will see a decline in cash flow
– This is largely due to the lack of project awards during the second
half of 2012
Project cash flow 2013-2015
F
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
2013 2014 2015
Transport
Power
Oil
Industrial
Gas
Construction

19. Forecast cement demand
• All GCC countries will see an increase in demand for
cement
• Only UAE has available capacity
• KSA decree to import 10 mtpa
• Increasing regional demand
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
2012 0.8 5.4 6.0 5.1 52.5 10.2
2013 0.8 6.3 5.9 5.9 56.3 10.5
2014 2.7 9.6 10.3 11.0 79.6 12.5
2015 3.1 12.3 9.7 12.3 84.0 9.0
0
20
40
60
80
100
MTPA
Cement demand 2013-2015
F

20. S-curve
Resource cash flow
Project cash flow
S-curve
F

21. Exploring Risk
• Contingency
• Design
– Scope changes
– Specifications
– Utility
• Site
– Logistics
– Environment
– Productivity
• Escalation
• Global economy
– Europe - debt
– China – production/real
estate bubble
– USA – slow recovery
• Resource availability
– Raw materials
– Skilled labour
– Professionals relocating
• Technology
5%
5%
F

22. Developer Cost Index: 2013-2017
MCI Developer Cost Index
F
0
1
2
3
4
5
6
0
20
40
60
80
100
120
140
2013 2014 2015 2016 2017 Percentchange
Index
Market Average
Market Average Change

23. Escalation
• Hyperinflation can cause havoc with a project budget
– Irrespective of the contract type
• Moving from a buyers market to a sellers market
Worst case scenario
F

24. Summary
Strengths Weaknesses
• Liquid market
• Stable economy
• Aggressive government
investment drive
• Education
• Dependence on migrant
workers
• Lack of resources
Opportunities Threats
• Population growth
• Education
• Healthcare
• Religious tourism
• Regional political instability
• Impact of shale gas (oil
price)
• Escalation

25. An interesting thought
It is unwise to pay too much but it’s worse to pay too little.
When you pay too much, you lose a little money - that’s all.
When you pay too little you loose everything, because the thing you
bought is incapable of doing the thing it was bought to do.
The common law of business balance prohibits paying a little and getting a lot - it
can’t be done.
If you deal with the lowest bidder, it is well to add something for the risk you run.
And if you do that, you will have enough to pay for something better
John Ruskin Author and Art Critic 1819-1900

26. Thank you
Emil Rademeyer
+971 4 433 5180
Emil.rademeyer@meed.com
www.meedprojects.com
www.meedci.com