Skanska To Announce Financial Close On First US PPP Project
04/13/2012| 06:22am US/Eastern
Swedish construction company Skanska AB (SKA-B.SK) is close to announcing an agreement on the financial terms for a major infrastructure project in Virginia, which entails a construction contract worth about $660 million for the company, executive vice president for infrastructure development Karl Reichelt said in an interview.
The project, part of a joint venture with Macquarie Group Ltd. (>> Macquarie Group Limited), includes the construction of a new Midtown Tunnel, rehabilitation of existing tunnels, and extension of the Martin Luther King Freeway in Virginia. Skanska has 45% of the $1.5 billion construction assignment.
The total project value is about $2.05 billion, and Skanska will make a $140 million equity investment in the project, which is the construction firm's first public-private partnership in the U.S.
"This has been highly anticipated and it is extremely important for Skanska because it is helping to fulfil our growth plans in a key market for the company," Reichelt told Dow Jones Newswires.
The five- to six-year construction contract, which will be awarded to Skanska's civil construction unit, is likely to have a margin in the lower double digits--higher than the 9.2% margin posted by the unit in 2011.
"When you're accepting the responsibility of a guaranteed on-time, on-budget delivery, and taking all the significant construction risk, you would expect the margin to be more robust than for a traditional project," Reichelt said.
He added that the internal rate of return for the project is "comfortably" within the 11% to 14% range targeted by the company for infrastructure development.
-By Niclas Rolander, Dow Jones Newswires; +46-8-5451-3102; firstname.lastname@example.org