The Italian job

The construction of the second metro line in Warsaw is to cost a grand total of PLN 4.117 bln. The clock is now ticking for the winner of the tender – a consortium made up of Astaldi, Gulermak and Przedsiębiorstwo Budowy Dróg i Mostów. While Astaldi gets down to work on this major project, Francesco Paolo Scaglione, the general manager for the CEE region, makes it clear that the company is here to stay

Mladen Petrov, Eurobuild CEE: Astaldi is a fairly new player on the Polish market and the company has already won two contracts. What else have you got on the agenda? Are you participating in any new tenders?

Francesco Paolo Scaglione, general manager CEE:  We began studying the market two years ago, since when we have participated in many construction tenders in Poland. We were initially invited here on a business study trip by the Italian embassy. I didn’t need a lot of persuading that Poland is the right place to be for us – it is a big market. The opportunities are great; however, it is not an easy market to be active in. This is one conclusion I came to after studying the local laws.

What took you so long?

We have been on the Romanian market since 1990. We were the first foreign company to sign a contract immediately after the revolution, and today we are considered a local Romanian construction company. I am fluent in Romanian myself – one example of how dedicated we are to our activities there. Prior to this, I had personally been working abroad for 20 years, on various assignments around the globe. I’ve been connected with the Romanian market for many years now. From there the company expanded its scope to Bulgaria, Hungary and – last but not least – we are now finally in Poland, a country that has come a long way since the early 90s, when I happened to be here on a study trip.

Tell me about your experience so far here. The contract for Warsaw’s second underground railway line has now been finally signed, but with so many protests from competing parties it was certainly no picnic for you.

Things like that are normal, generally speaking. Our experience so far, however, is different. People tend to regard the CEE countries as one and the same, but this is not true. In Romania, for example, we have never had to deal with such a situation as in we have had Poland. There is a fight – but before the tender, not after. Once the general contractor has been appointed, that’s it – the work can get underway on the project and the other companies can focus on new tenders. Here we can see that things are different. We have lost five months due to the various objections; but I’ve been hearing that we are actually lucky and this is quite a short period for such an issue to be resolved. For us as a company, all the press conferences held by our competitors and the entire media circus surrounding the tender was quite incredible. There were many different opinions expressed, but for us the way the media covered the topic was very professional, without taking sides.

Well, you could use some publicity. There are a lot of foreign construction companies on the Polish market, but you are the first Italian representative. For the Poles, used to Italian cuisine and fashion, a construction company of Italian origin is quite exotic, I have to admit.

That’s ok, but we didn’t take that into consideration. Poland is not so close to Italy, but despite all the stereotypes associated with our nations, I am sure there are lots of things we have in common. Yes, our foreign competitors are better known here, but we also know what we are doing. Please don’t forget that the beginnings of road construction can be traced back to ancient Roman times. We know infrastructure construction. There is a large number of Italian construction companies with considerable portfolios of big projects, but I don’t know why they are not here yet. Maybe it is just a matter of time. Up until now we have been enjoying good cooperation with the local authorities, who have been very helpful. Let’s hope that will continue once the actual work on the project kicks off for good.

Looking at your portfolio we can see that you are involved in all kinds of projects.

We are a general construction company, but our main focus is on transport infrastructure.

Is this how you want to also keep it in the CEE region, or are you willing to diversify your portfolio in the region?

We are now operating in Romania, Bulgaria, Hungary and Poland. That’s it – at least for now. As a company we are not willing to grow at any price. We follow a conservative approach to growth and prefer to carry out comprehensive analyses first. Establishing the company here was a very important step for us and it is a project still in progress. We are focused on that, turning down a number of invitations to enter other exciting markets, such as Ukraine. This was an interesting proposition, for sure, but now is not the right time. We are taking things step by step. Transport infrastructure projects are of the greatest interest for us, here and globally. We will also be bidding for airport and railway projects. And, of course, the construction of metro lines. Currently we have 12 tunnel boring machines for tunnel excavation, with a capacity of up to 25 meters a day. We will have three more of these machines next year.

I can recall a recent interview with the China Overseas Engineering Group – one of your competitors in the metro tender – in this magazine, in which they laid out quite similar plans for growth regarding Poland. It’s getting crowded here with new ambitious players entering the market, don’t you think?

For sure, the Polish market is highly competitive. It’s not news that Chinese constructors are very persistent when it comes to getting a slice of the European cake. Recently, the International Association of Contractors made a request to the European community to take tougher measures against Chinese-based competitors. The major concern is that European funds are being used to benefit non-European companies. The general feeling in the industry is that Chinese firms are able to offer very low prices, as some of them are state-owned and have access to government subsidizes. We don’t have any such support. European constructors have to make a profit and play by market rules. I am concerned that the competition in this respect is unfair and it is not easy for us to protect ourselves from such price dumping. This is happening all over the region.

I guess in turbulent times like these, big companies such as yours are particularly interested in sticking to what they consider to be their own. What has been the impact of the crisis on the big market players? How severely have you been hit?

We have been relatively lucky as a company. The crisis came at a moment when we had our hands full with ongoing projects that would keep us busy for a while. Therefore, we had no desperate need to look for new contracts. The other saving factor has been the conservative policy of the Italian banks, which in this regard are similar to their Polish equivalents. Our banks, which are not big risk takers, remained somehow above the crisis, especially in comparison to other Western banks. We are also a very conservative company and are all about avoiding risk. This is why for we are not planning to start operations in new countries in the region soon. We have done our research and are happy with the countries we’re focusing on. ν