Algeria: Infrastructure demand boosts construction
Updated infrastructure is currently in high demand throughout Algeria, and as a result, the construction sector looks set to offer a host of major projects to local and international contractors this year.
The government has become increasingly aware of the need to ensure local companies, including contractors, design consultants, architects and engineering firms, are given the opportunity to compete in the tender process.
While complex engineering contracts usually go to partnerships, such as the one between Cosider and Dywidag, the authorities have made state funds available for supporting local construction firms in their bid to become more involved in the country’s development projects.
The state-run Management Company of the State Participation Public Works (Société de Gestion des Participations de l'Etat Travaux Publics, SGP SINTRA) facilitates financing for more than 50 local design study firms, construction supervision companies and contractors, providing them with tax concessions and preferential credit terms when bidding for national public works contracts.
Other initiatives in the construction sector include a National School for Housing. The new training centre will focus on developing the skillsets of local construction workers on every aspect of the building sector. The state-run school will focus on developing engineering skills, knowledge and expertise. Specifically, architecture, the development of urban spaces, and urbanisation will all form part of the curriculum. The overall aim is to improve the current management of master planning for urban renewal and redevelopment.
Much of the work for construction companies will come from Algeria’s power, water and urban transport sectors. In early April, Sonelgaz, the state-run power firm, announced plans to invest up to $30bn in new generation plants, which will provide 1200 MW of additional capacity to the national grid each year until 2020.
The plants are necessary to meet rising demand for electricity. According to Noureddine Boutarfa, the CEO of Sonelgaz, demand is growing at 10% per year, with peak usage occurring over the summer months. The investment will further support Sonelgaz’s existing plans to meet demand, which include an $80bn programme that will provide 21,000 MW of renewable energy – 40% of its total output – between 2011 and 2030.
This major investment in new power generation plants forms part of the country’s broader 2010-14 Plan Quinquennal, which has excited interest from companies around the globe. Heightened activity is expected to bring 5.5% growth year-on-year (y-o-y) to Algeria’s construction industry in 2012, according to Business Monitor International, a consultancy firm, with the value of the sector forecast to rise to $21.7bn this year.
While speaking at a conference in Casablanca in early March, Faycal Reda Laraba, the CEO of the Algerian Energy Company (AEC), said expressions of interest for three new desalination plants will be issued by the end of 2012. The plants, located in El Tarf, Oued Sebt and Bejaia, will each have a capacity of 100,000 cu metres of water per day (cm/d).
The new plants are part of a wider programme of commissioning new desalination plants across the country by 2015. A total of 11 privately financed plants are planned and are expected to have a total capacity of 1.91m cm/d. Thus far, the AEC has sought out private firms to construct the plants on a build-own-transfer contract model.
Although the government has looked to the private sector as a means of financing and building these infrastructure projects, it has also been able to rely on other partners for funding, such as the EU. In July 2011, for example, the EU granted €30m towards the Algeria water sanitation programme (EAU II). The programme is 75% EU-funded, while the government is contributing up to $13.06m.
Infrastructure works are also in progress, with Algiers in particular slated for improvements. A budget of $2.6bn has been allocated to modernising the city’s infrastructure. International firms have been at the forefront of these developments, either bidding for projects separately or forming joint ventures with local firms. For example, local construction firm Cosider and Germany’s Dywidag are completing a 4-km extension of the Algiers Metro line one, which runs between Hamma and Hai El Badr.
While many multi-national companies have expressed an interest in bidding for contracts that form part of the investment programme, Algeria’s public works department and local businesses are also set to benefit from the projects.
However, while the government is keen to see local firms play a more active role in the country’s complex engineering projects, it is also aware that this support has to be balanced with the need to ensure the country’s infrastructure is completed on time.
The developments either planned or underway in the water, power and transport sectors are already providing a wealth of opportunities for international firms. State financial support for local firms bidding on contracts and a new training school for housing should boost the involvement of local firms, workers and engineers in the Plan Quinquennal, as well as providing them with the skillsets needed for the future.