Signs Point to Fluor Role in Rebuilding Kuwait

Fluor Corp., the nation’s biggest heavy construction contractor, isn’t saying much, but informed speculation is rampant that the company is almost certain to capture a big chunk of the business of reconstructing war-ravaged Kuwait.

Analysts say the company is well-positioned to vie for a variety of jobs--rebuilding burned-out petroleum facilities, power plants, hospitals, electrical and water systems. It also can provide engineering and technical services for telecommunications, sanitation and desalination facilities.

Wall Street has been licking its chops. On Thursday, Fluor hit a 52-week high of $53, up 37.5 cents in heavy trading. When the Persian Gulf War shooting began Jan. 16, its stock was at $36.125.

The company, which has been riding high on a recent turnaround, also has a long history of doing business in the Middle East. Just last summer it landed a multibillion-dollar contract to manage an oil facility expansion program in Saudi Arabia.

“You can make some assumptions that Fluor as well as other large engineering and construction companies will participate,” said Kathy Maag, energy service analyst with Duff & Phelps in Chicago.

Thus far, one of Fluor’s major competitors appears to have the inside track in Kuwait. San Francisco-based Bechtel Corp., the nation’s second-largest heavy construction company, said this week that it signed a letter of intent with Kuwait Petroleum Co. to manage the rebuilding of the petroleum industry there.

But analysts said there is plenty of work to go around. Estimates on the cost of restoring Kuwait range from $40 billion to $100 billion. Bechtel will have to parcel out much of that work to subcontractors, and Fluor is a likely choice. Still the company is circumspect.

“Until we have a contract, we are not going to speculate on what our role could be,” said Fluor spokesman Rick Maslin. But, he added, “we have had a longtime presence in the Middle East, and it is no secret we have the capabilities to do a lot of the work that is necessary.”

In June, Fluor announced that it had landed a huge contract to help Saudi Aramco upgrade its aging petroleum facilities. Some analysts estimated the contract to be worth up to $6 billion. Fluor cautioned that much of the work would be shared with other companies.

About 100 Fluor employees were deployed to Saudi Arabia to begin work on that project before the Iraqi invasion of Kuwait. The company has since been reluctant to talk about its Middle Eastern work, concerned about terrorism and the safety of its employees.

Analysts agree that Fluor’s historic links to the Middle East are important. They said the company’s recent expansion of its capability to tackle a wide variety of non-petroleum engineering and construction projects is evidence of its potential to play a major role in helping to rebuild Kuwait.

In an interview earlier this month, Les McCraw, Fluor’s chief executive officer, confirmed that the company was involved in discussions with the Kuwaiti government. But he said he didn’t expect an agreement to be reached until the war had ended and full damage could be assessed. McCraw could not be reached for comment Thursday.

Bechtel’s tentative agreement with the Kuwaitis is not seen by analysts as too troublesome.

“Obviously, it would have been more positive for Fluor to have signed that letter of intent,” Maag said. But she added that Bechtel probably will contract with Fluor and other construction firms that originally helped to build Kuwait’s oil facilities and have a working knowledge of them, to speed up repairs.

Maag said Fluor may have lost the opportunity to be the managing partner on the petroleum work because it hasn’t done much business with Kuwait since 1968, when it completed construction of a refinery in Shuaiba. By contrast, Bechtel built a variety of petroleum and industrial projects in Kuwait throughout the ‘80s.

David Bartlett, senior vice president of First Hanover Securities in New York, agreed that there will be plenty of work to go around for Fluor and its competitors.

“It will take a decade of work to replace what has been ripped asunder,” he said. “You are looking at the decade of work for engineering and construction firms.”

Bartlett noted that Fluor is fortunate that a slump in the world oil industry in the mid-1980s forced the company to diversify beyond the building of petroleum mega-projects, such as refineries and pipelines, to general industrial work, ranging from construction of plastics plants to museums and prisons.

As a result, Bartlett said, Fluor is poised to benefit from “a splurge of spending (in the Middle East) that will dwarf the Marshall Plan” to rebuild and repair everything from desalination and sanitation plants to shipping docks and utilities. (The Marshall Plan was the massive program to rebuild Europe’s economy after World War II.)

Fluor suffered large losses after the collapse of its mainstay petrochemical business in the early 1980s. Through diversification it staged a strong comeback, showing earnings of $146.9 million in 1990 on $7.5 billion in revenues.

The company, which employs 50,000 workers worldwide, had a $9.6-billion work backlog at the end of 1990, which was more than double its backlog of $4.3 billion in 1986.