‘We feel cheated’: anger at CIMIC builds

In the dusty outskirts of Qatar’s capital, PP Shanavas is close to giving up.

Works at the Miller's Rd entrance to the West Gate Freeway in Victoria. Picture: Jake Nowakowski

In the dusty outskirts of Qatar’s capital, PP Shanavas is close to giving up.

“We feel cheated to be honest. When an Australian company comes to our country, we welcome them,” Shanavas told The Weekend Australian. “Now we want to see the back of them.”

Shanavas runs a small power supply firm called Planet Engineering in Doha, in the Gulf nation whose gas riches have sparked a multi-decade economic boom.

But for the past few years he’s been unable to pay some staff. A contract struck with a business part-owned by CIMIC, Australia’s biggest construction company, turned sour and left the small company out of pocket.

The venture, called Leighton Contracting Qatar — the name a throwback to Leighton Holdings before it was rebadged as CIMIC — worked with hundreds of local contractors, hire firms and builders on a string of projects that ­appeared to be a golden ticket for profits.

Former Leighton boss Wal King visited Doha in late 2005 when an office was set up with local partner Hawar Group.

Big-ticket contracts started to flow almost immediately. In 2006, Leighton Asia won a $545m contract to build the state-of-the-art, airconditioned Al Shaqab Equestrian Academy in Qatar as part of a push into the Middle East. It was also eyeing up lucrative work building stadiums for the soccer World Cup, to be held in 2022.

Then a year later Leighton merged its Middle Eastern operations with Dubai-based Al Habtoor Engineering group, taking a 45 per cent stake in the combined Al Habtoor Leighton, which has done work in the United Arab Emirates, Qatar, Kuwait and Saudi Arabia. It has since been renamed BIC Contracting, after billionaire Khalaf Al Habtoor sold his stake in 2016 to then chairman Riad al-Sadik, who now owns 55 per cent of the venture.

While winning new contracts seemed to come easily enough, ­securing payments and profits became much harder — particularly when the global financial crisis hit. The BICC venture was faced with its own debtors refusing to pay for projects in both Doha and Dubai, setting off a chase for outstanding debts that plagued CIMIC for years, including its own rollercoaster journey in Qatar.

When CIMIC finally announced plans a year ago to sell its stake in BICC, there appeared little appetite to work through the complicated situation around legacy contracts over and above making sure it had covered its legal obligations.

But anger within Qatar’s tight-knit contractor community remains. An investigation this week revealed towering debts, an offer by BICC to sell the Qatar unit for just 36c and two executives working for the venture being arrested and placed in jail as authorities sought an explanation over the fallout.

Shanavas said he was forced into filing his own legal claim more than two years ago after “dribs and drabs” of payments dried up completely.

“There was no official explanation, but from what I understand one or two local projects here in Qatar suffered losses which caused some of the problems,” Shanavas says.

“I was negotiating with LCQ but once they found out I had made a claim, they wanted me to withdraw the case unconditionally. I said let’s make a payment structure and an agreement and then I will withdraw the case if the arrangement is acceptable to us. They declined and that is the last I heard.”

CIMIC declined to comment, while BICC did not respond to requests from The Weekend Australian.

CIMIC is controlled by the Spanish-German shareholder Hochtief-ACS, which owns a 73 per cent stake in the business.

While CIMIC still hopes to sell its 45 per cent stake in the BICC venture, which includes Qatar operations, its exit may still be some time off given uncertainty over its liabilities.

CIMIC on Monday downplayed its exposure and referred to a $700m cash pledge made a year ago to cover debts the Gulf venture owes to its lenders. But the reputational damage may leave a more lasting stain.

The Hong-Kong based GMT Research — which sparked a $1.5bn fall in CIMIC’s stock in May last year after questioning CIMIC’s financial account “engineering” — said the company may have accounted for its Middle East exit, but questions around what went wrong may never be answered.

“At the time of the BICC exit, they were always pretty vague about what that involved and how that set of numbers stacked up. There was always quite a bit of smoke and mirrors involved,” GMT analyst Nigel Stevenson said.

“But having said that, you would have thought they could ultimately walk away from the corporate entities having paid any guarantees they are legally obliged to do.

“There’s not a great deal of transparency but you certainly feel CIMIC have said everything they’re going to say about it.”

Shanavas says his hopes of ­securing long overdue payments are dimming.

“Maybe they took on more than they could swallow,” he says. “We don’t know what has happened. We just want the money that’s owed to us.”