Hanwha withdraws from $10 bil. Iraqi construction project

來源: 開云體育app官方網站 時間: 2023-01-27 13:34:25

By Kim Hyun-bin

Hanwha Group has decided to withdraw from a $10 billion construction project in Iraq amid concerns that the conglomerate will have difficulty recovering its investments. Analysts say that Hanwha averted future losses by withdrawing from the project early rather than continuing the business.

Hanwha Engineering & Construction (E&C), a wholly-owned subsidiary of Hanwha Corp., notified the Iraqi National Investment Commission (NIC) of the cancellation of the Bismayah New Town and Infrastructure Construction contract, Friday.

Hanwha's headquarters in Seoul / Courtesy of Hanwha Group

"The Iraqi National Investment Commission (NIC) has been notified of the cancellation of the contract for reasons of contract violation, such as delayed payment and non-payment of advance funds," Hanwha E&C said.

The Iraq Bismayah New City Construction Project, which Hanwha E&C solely won, is a mega project costing $10.12 billion. It involves the construction of 19 infrastructure projects by the end of 2027, including 100,000 homes, schools, hospitals, and sewage treatment facilities, in the Bismayah region, 25 km southeast of Baghdad, the Iraqi capital.

From 2012 to last year, Hanwha E&C received $4.3 billion in advance and donations. This is only 43 percent of the total construction cost. The receivables for the construction are 629 million dollars.

The reason that Hanwha Group withdrew from the Bismayah project is the result of increased business risks such as NIC not paying for the construction costs on time.

"We have officially notified the cancellation of the contract because further construction or maintenance of the site could cause losses," a Hanwha E&C official said. "As they show a strong will to proceed with the project in Iraq, there is still a possibility that construction will resume through negotiations in the future."

Since 2012, Hanwha E&C has been carrying out the national housing and infrastructure construction project. As of the end of June, the progress rate of the housing construction project reached 44.83 percent and the infrastructure project 28.87 percent.

As of the end of June, the total amount of receivables and outstanding construction costs not related to the two projects was 828 billion won. Receivables are recognized as assets, but if they cannot be recovered, they are accounted for in the form of "non-operating losses."

Hanwha E&C is expected to offset receivables and unclaimed construction funds with advance payments that were received from NIC.

Hanwha Group Chairman Kim Seung-youn has been paying keen attention to the Bismayah New Town project. Kim even visited the construction site in Iraq.