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Saudi Binladin Group makes a comeback

8 November 2024

 

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The Saudi Binladin Group (SBG) has undergone a dramatic revival over the past year with the award of high-profile construction contracts and financial support from the Saudi government.

Founded in 1931 by Muhammad Bin Ladin, SBG grew to become Saudi Arabia’s largest construction company with a reputation for delivering large programmes of work for the government and leading figures within Saudi Arabia.

SBG’s fortunes declined following the oil price crash of 2014-15 and the collapse of an SBG crane at the Grand Mosque of Mecca, which resulted in a temporary ban on the contractor taking on new projects.

As its finances deteriorated, SBG hired US-headquartered Houlihan Lokey as the adviser for its SR56.4bn ($15bn) debt restructuring programme in April 2020.

These challenges combined meant the contractor was unable to regain its position as the go-to contractor for the Saudi Arabian government.

Financial support

Financially, the big turning point came in late October when Saudi Arabia’s National Debt Management Centre (NDMC) announced that it had completed arranging a syndicated loan facility for the Ministry of Finance to support SBG.

In an official statement, NDMC said that the loan facility amounting to SR23.3bn ($6bn) has been secured with several local and international banks.

The support includes a series of arrangements to settle the firm’s outstanding amount with banks, provide loans to the firm and potentially increase the government’s stake in the company.

The move to announce financial support follows the Ministry of Finance’s announcement in July, which outlined an intention to improve SBG’s financial capacity. The injection of cash into the firm will also enable it to improve its financing for various other projects in the kingdom.

The government has a vested interest in SBG’s fortunes. In 2019, a parent company known as Binladin International Holding Group (BIHG) was formed. That entity is owned by Istidama, an investment arm of the Ministry of Finance. The remaining 63.78% is owned by the Binladin Company for Development & Commercial Investment. Its subsidiaries include SBG.

In addition to SBG’s finances being shored up, over the past year the contractor’s orderbook has grown with several high-profile awards.

Jeddah Tower

While the financial turning point came at the end of October, the key moment symbolically came on 2 October, when SBG was appointed to complete the world’s tallest tower, the 1,000-metre-plus Jeddah Tower.

SBG was the original contractor on the project before construction work stalled in 2018. This left the tower’s superstructure about one-third complete, with 63 floors built out of 157.

The SR7.2bn ($2bn) contract award to complete the record-breaking structure took many in the market by surprise after it was reported that a joint venture of China State Construction Engineering Corporation and the local El-Seif Engineering Contracting was the frontrunner for the contract.

The Ministry of Finance’s support was crucial for the project client, giving the contract financial credibility. This allowed it to put together a winning proposal to complete the tower with a reduced programme and a more competitive price.

There were also practical reasons for selecting the original contractor on the project, according to Kingdom Holding’s CEO Talal Ibrahim Almaiman. SBG already has offices established on-site and, as a Jeddah-based company with a long history of delivering major projects in Saudi Arabia, it has well-established connections with the local supply chain.

The Jeddah Tower award followed important contract awards a year earlier. In October 2023, SBG won contracts totalling about $1.3bn from Saudi Entertainment Ventures (Seven), a wholly owned subsidiary of the Public Investment Fund (PIF).

The contracts were awarded to build Seven’s two entertainment destinations in the Dammam and Alkhobar regions in the kingdom’s eastern province.

The entertainment complex in Alkhobar will be built on reclaimed land on the waterfront. It will span around 300,000 square metres (sq m) and is also known as “The Waves”.

The Dammam entertainment complex spans 360,000 sq m and will also be built on reclaimed land on the Dammam waterfront.

SBG also has historical work. It is delivering the third Mecca Grand Mosque expansion programme after resuming construction activities at the project site following this year’s Hajj pilgrimage.

The first section is understood to include expansion works for the main building, with the second and third sections of the programme covering ancillary, security, media, hotel and hospital buildings, among others.

The programme to expand the Mecca Grand Mosque was reportedly launched in 2011 by the late King Abdullah Bin Abdulaziz. It faced delays following the crane collapse at the mosque in September 2015, with work resuming in late 2019.

King Salman Bin Abdulaziz Al-Saud launched five projects in July 2015 as part of the third expansion programme. These projects covered an estimated built-up area of 1.47 million sq m.

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Colin Foreman

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