Leighton Lands Job At Dubai Airport

The Age

Monday December 8, 2008

By SCOTT ROCHFORT

LEIGHTON Holdings has continued to shrug off expectations that it could soon succumb to the looming construction slowdown in Dubai, after being part of a consortium that was awarded a 4.9billion dirham ($2 billion) contract to build the new expansion of Dubai Airport.

The announcement comes two weeks after the 45 per cent Leighton-owned Al Habtoor won a $3.75 billion contract to build the world's largest building, the four 73-storey tower Dubai Pearl.

The Dubai Airport project will involve the construction of a new concourse connecting to the airport's recently opened Terminal 3, which will include two hotels and will be 645 metres long. The contract is worth $800million to Al Habtoor or $360 million to Leighton.

The deal comes after Leighton chief executive Wal King told a lunch on Friday that he remained optimistic about the outlook for Dubai, despite increasing fears that the debt-fuelled construction boom in the Middle Eastern emirate could soon turn to bust. While Mr King acknowledged that there could be some pain ahead, he said there were a "lot of contradictions" in the region. He noted that areas surrounding Dubai, such as the neighbouring oil-rich emirate of Abu Dhabi, were sitting on huge stockpiles of cash.

Some expect this cash could be used to help rescue the region - including Dubai - from any major economic crash.

Analysts are cautious about Leighton's exposure in the Gulf. Last month, JPMorgan slashed its price target on the contractor from $40.41 to $23.20, partly on fears of a slowdown in the Middle East and the slowdown in contract mining.

The broker warned that if construction activity in the Gulf contracted 20 per cent, it could take 11 per cent off Leighton's profits in 2009-10 and 15 per cent in 2010-11.

"With confidence declining and liquidity in the property finance market drying up, the situation in Dubai appears to be deteriorating fast," JPMorgan said in a note last month.

But despite having its contract to build the 62-storey Trump International Hotel suspended by the troubled Dubai property group Nakheel, Leighton still has its head above water in the region.

Aside from the Dubai Pearl being the biggest building in the world, one factor that may give Leighton some comfort in constructing the building is that much of the money behind it is from Abu Dhabi.

At 1.4 million square metres, the building is 2 times bigger than the Pentagon in Washington and around 25 times bigger than Sydney's Governor Phillip Tower.

Al Habtoor Leighton also recently won a contract to build a university campus in Abu Dhabi.

Meanwhile, Leighton's contract mining arm was given a boost over the weekend, after the Indonesian coal producer PT Bayan Resources confirmed it had expanded its contract with Leighton.

Bayan said it would extend its six-year contract with Leighton to 10 years, and quadruple the value of the contract to $US3.1 billion ($A4.8 billion).

© 2008 The Age

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