New projects boost Amec’s PPP portfolio

The value of Amec’s PPP portfolio rose by more than 40%, from the £77m figure at the end of 2004, to a current value of £110m.

The figures used by Amec in its valuations are based on a weighted average discount rate of 10.6% (10.5%).

The main reasons for the rise in value were the addition of two new projects: the Incheon Bridge in Korea (Amec holds a 23% stake in the project) and the Docklands Light Railway extension to Woolwich. Looking ahead, Amec is currently preferred bidder for two further projects and is shortlisted for four more.

The turnover of Amec’s Project Solutions division fell to £980m (£1.3bn) as Amec drew in its horns by exiting from “unattractive” activities in the US (civil engineering and construction management), while in the UK it has walked away from road building on a lump-sum basis and building and refurbishment activities – areas that have been loss-making for the past two years.

The division’s operating profit of £11m represents a margin of 1.1%. However, the division dived into the red, overall, as a result of £72m-worth of exceptional items and a £10m charge stemming from a joint venture project. The result of all this was that the division ran up a pre-tax loss of £70m following a £12m loss in the previous year. All the above figures ignore the cost of financing the group’s large debt.

In the Wind Energy business, Amec continued to invest in the development of its onshore portfolio of around 1,400MW, while offshore, the group is leading a 75MW development near Aberdeen. Its large Isle of Lewis project still has further planning hurdles to clear.

The orderbook in Amec’s Project Solutions division was £1bn (£1.1bn) at the year end.