Arabtec yesterday won a Dh453 million (US$123.3m) contract to help build Europe's highest tower, the future headquarters of the Russian gas producer Gazprom.
The construction company, based in Dubai, will deliver the early works for the 463 metre high Gazprom Tower in St Petersburg, giving Arabtec a foothold in the Russian market and paving the way for more lucrative contracts.
"We expect more projects to be awarded in the promising Russian market. Russia as been set as a target market in the overall expansion policy of Arabtec worldwide," said Hasan Abdulla, the managing director at the company.
Arabtec has been working on the project since 2008, when Gazprom awarded it a $2.7 billion contract to build the tower and the surrounding complex. But the plan was derailed by local opposition to the shard-like tower, which was deemed incompatible with the city's historic skyline. The revamped project will be built at a more remote site on coast the Gulf of Finland.
The early-works contract is far more modest than the original deal but it raises the prospect of winning further packages.
"Dh453m is not a game-changer for Arabtec but the implication is that if they get the initial contract they may well get the entire thing and that would be significant," said Loic Pelichet, an analyst at NBK Capital.
"The fact that the contract has been sliced into little bits might be interpreted as a sign that Gazprom Neft is unwilling to give Arabtec the whole thing but I'm pretty sure there is going to be supplementary work."
Arabtec reacted to the slump in the Dubai property sector from 2008 by seeking business abroad. It has established itself in regional markets such as Saudi Arabia and Qatar and it is exploring its options in other Middle East countries including Libya.
It has also been successful in winning business in Abu Dhabi, where it will be building Abu Dhabi International Airport's new Midfield Terminal in a consortium with Greece's Consolidated Contractors Company and Turkey's TAV Construction.
Confidence in the company's ability to add to its Abu Dhabi portfolio was boosted after the capital's investment fund Aabar raised its stake in Arabtec to 21.6 per cent.
Target Engineering Construction, Arabtec's oil and gas subsidiary, has won contracts worth Dh270m in Abu Dhabi and Qatar, the company announced yesterday.
Mr Pelichet suggested regardless of the downturn in Dubai's construction sector in the wake of the financial crisis, Arabtec had outgrown its local market.
"In order to continue growing the company, they need to diversify and they have been doing that quite successfully. I see them continue doing that successfully."
Arabtec's shares rose 4.7 per cent in trading on the Dubai Financial Market yesterday, closing at Dh2.64.
Most analysts covering Arabtec have a sell recommendation on its stock after the share price surged by 128 per cent to Dh3.45 at the end of February.
