EMEA: UPDATED: Skanska withdraws from major US PPPs

19 October 2018 - 12:00 am UTC

Executives at Swedish construction company Skanska have said the company will stop bidding for large construction P3s in the US after experiencing cost overruns on two projects.

The executives said on a Thursday (18 October) earnings call that Skanska made project write downs of SEK 0.9bn (USD 100m) related to two US P3s that have come across delays and cost overruns. It said it will now stop bidding for “mega design-build PPP projects” in the US.

The projects concerned are the new terminal at New York’s LaGuardia Airport and the Intersate-4 road project in Florida, both of which have experienced delays, said two industry sources. On an earnings call held on 19 October, Skanska executives declined to comment when asked if the LaGuardia project was responsible for the write-down.

Skanska’s withdrawal from significant North America P3 projects follows its retreat earlier this year from the European market, which the company said had too thin a pipeline. At the time, Skanska said it would focus instead on the US P3 market.

In addition to problems on existing projects, Skanska may have hastened its exit decision because it has failed to win other P3 projects in the market, said one industry source.

“They have been unsuccessful bidders on a number of big P3s, such as I-66 in Virginia and I-70 in Colorado. Submitting bids on these projects is expensive,” said the source.

Even if Skanska leaves the US P3 market, there is still a substantial number of multinational companies remaining, industry sources said.

The USD 5.7bn Gordie Howe International Bridge project, for example, attracted names such as AECON, Grupo ACS, Dragados and Fluor, companies that ultimately comprised winning consortium. Another shortlisted team included John Laing, Vinci and SNC-Lavalin.

Skanska could still bid for smaller P3 projects in the US but is unlikely to do so unless particularly favorable opportunities appear, said one of the industry sources.

Skanska’s P3 activities are carried out by its Infrastructure Development business, one of the company’s four divisions. The others are: Construction, Residential Development and Commercial Property Development. The US and Europe are the only markets Skanska operates in. 

The Infrastructure Development business has 12 staff members in the US, a company spokesman said.

Table showing Skanska’s existing US P3 projects:

Project name

Equity Holding (USD m)

Closing date

Skanska’s equity Holding %

Co-Sponsors

I-4 Ultimate

73

Sep 2014

50%

John Laing (50%)

LaGuardia Airport Terminal Building B Building

66.66

Jun 2016

33.33%

Vantage Airport Group (33.33%), Meridiam Infrastructure North America II (33.33%)

Midtown Tunnel (Elizabeth River Tunnels)

136

Apr 2012

50%

Macquarie Infrastructure Partners II (50%)

As reported, the DBFOM of the Interstate-4 was delayed by roughly eight months due to a number of issues including drill shaft failures. The delay had caused Moody’s Investors Service to revise the credit rating on bonds backing the project to negative.

LaGuardia’s Terminal B project, meanwhile, had missed its first construction milestone, but Moody’s affirmed over the summer that the project was still on track.

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