Korean construction companies are stepping up efforts to diversify their project portfolios and customer bases in search of increased stable revenue streams.

Hyundai Engineering & Construction Co., Korea’s largest contractor, is leading the industry’s transition with a range of contracts for skyscrapers, infrastructure and plants.

While 83 percent of overseas construction projects that a majority of domestic companies are running largely involve building power plants or development facilities, Hyundai E&C has diversified its project portfolio in a number of different international markets through new contracts for green energy production and harbor works in Middle Eastern countries like Kuwait and the United Arab Emirates.

Under the five-year plan to promote overseas construction, the government has proposed a mid- and long-term strategy to fit the rapidly-changing global market climate, involving measures to diversify markets and project types to explore future growth industries such as green technology-related businesses. 　

The plan focuses on practical strategies for a shift to higher value-added businesses, improved profitability and the development of niche markets, while diversifying project portfolios to occupy new areas such as green energy resources such as nuclear, water, wind and tidal power, which has been emphasized due to hikes in oil prices and the growing need for renewable energy.　

Since CEO Kim Joong-kyum took office last year, Hyundai E&C has successfully stepped up in the global market, targeting new business areas such as alternative energy, nuclear power, water industry and environment, especially for low-carbon green growth, officials say.

The construction firm aims to receive orders worth $12 billion in total by the end of this year, more than double last year’s $4.5 billion. The goal seems highly achievable, since the number has already reached $6.7 billion as this month, and additional projects in regions such as Southeast Asia and the Middle East are expected to button up. 　

Between January and June, the company won domestic and overseas contracts worth 10.6 trillion won ($8.97 billion), up 45.3 percent from the same period last year, posting a net profit record of 331.1 billion won, a 50 percent increase from a year earlier.　

The builder also collected 283 billion won in operating profits in the first half of the year, a 22.4 percent increase due to reduction in costs, it said.　

In the pace of the global economic rebound, the number of overseas construction orders received by Korean builders swings upward rapidly, the government reported.　

So far this year, contracts have exceeded $41 billion mark, according to the Ministry of Land, Transport and Maritime Affairs’ data, a 138.6 percent increase from the same period of last year.

The drastic increase is driven by growing demand in the Middle East, where oil-rich nations have expanded investment for facilities. Orders from other Asian countries also grew, the ministry said.

By region, orders from the Middle East reached $30.8 billion, which includes $18.6 billion worth of deals to build nuclear reactors in the UAE. Asian countries come next with $8.5 billion, followed by $1.2 billion from Latin America　

The latest totals are in line with trends over the past six years. 　

In 2004, Korean builders secured a combined $7.5 billion in overseas orders, with the corresponding figures growing to $10.9 billion in 2005, $16.4 billion in 2006 and $39.8 billion in 2007.

The figure rose further to $47.6 billion and $49.1 billion in 2008 and 2009. 　

The ministry forecasts that the upward move will continue, predicting the nation’s overseas orders will likely top the annual objective of $60 billion for this year.　

A artist’s conception of Bubiyan port in Kuwait to be constructed by Hyundai Engineering and Construction.                                                                                                        Hyundai E&C

Hyundai E&C said it set a goal to achieve 10 trillion won in revenue for this year and 500 billion won in operating profit.　

“The company is likely to see steady and stable increase in orders and revenue as it has secured projects worth 52.6 trillion won for the next five years,” a company official said.

The United Arab Emirates

In May, Hyundai E&C won a $937 million deal deals to build a large petrochemical complex in the UAE for Abu Dhabi-based polymer producer Borouge, following last year’s successful bid by a Korean consortium to build nuclear power plants there.

The nation’s largest builder, under the deal with Borouge, will build the world’s largest polymers facility on the Gulf coast outside Abu Dhabi city for 44 months. Samsung Engineering also received the other order.

Korea became the world’s fifth exporter of nuclear power plants by winning a major project from the UAE in December 2009.
Qatar

An international consortium led by Hyundai E&C won a $430 million deal in April to construct buildings in Doha, the capital of Qatar.　

The consortium formed between Hyundai Engineering and Qatar’s HBK Contracting Co. plan to complete the buildings by June 2012, and the Korean builder holds a $340 million stake in the construction project.

Vietnam

In June, Hyundai E&C received an order worth $81 million to build a hotel in Vietnam from Binh Minh Import-Export Production & Trade Co. Construction of the eight-story hotel in Hanoi will take 23 months to complete.

Singapore

Hyundai E&C has started work on a $391-million commercial building complex in Singapore, for the contract it won last month from the United Engineering Developments, a Singapore-based property developer, to build the complex including a 20-story hotel, an eight-story commercial building and an 11-story office tower.　

The groundbreaking ceremony was held in the city-state on July 16 with Kim Joong-kyum, chief executive of the Korean company, and other dignitaries attending, the company said.

The complex, designed by famous Japanese architect Kenzo Tange, will be completed by August 2013.

India

In June, the industrial plant developer has obtained a $400 million order to build two combined cycle power plants in southeastern India in partnership with Hyundai Corp., a domestic trading firm.

Under the deal with Indian power company Gunapati Venkata Krishna, Hyundai E&C will complete the combined 392 megawatt power plants by November 2013, the company said.

Kuwait

Hyundai E&C also won a $1.13 billion contract to build a commercial seaport on Kuwait’s Bubiyan Island, placed by the Middle Eastern nation’s Ministry of Public Works, which will serve as a gateway to both Kuwait and Iraq.

The contract was awarded to Hyundai in partnership with Kuwait’s Kharafi Group. The contract is for the second part of the first phase of the project. The development will be carried out in four phases and is expected to cost around $3.47 billion in total.

By Shin Hyon-hee (heeshin@heraldm.com)