Enka Construction Racks Up A Borderless Bonanza
 Enka Construction Russia’s building market is still growing for Enka. |
Istanbul-based Enka Construction & Industry Co. Inc. is Turkey’s largest construction conglomerate, reaching that pinnacle with projects almost all outside the country’s borders. Now among the world’s most international contractors, Enka is particularly well-situated some 1,800 km miles away in Moscow as one of Russia’ biggest builder-developers, a market its executives say is still going strong. “We do about $1 billion of contracts yearly there, and demand is growing,” says President Haluk Gercek. “We have about 350,000 sq meters of A+ office space in Moscow.”
Russia and other new democracies that emerged from the 1991 demise of the old USSR, Turkey’s northern neighbor, are compelling markets now for Enka in a host of growing sectors, from high-rise development to oil and gas and toll roads. Enka says it has completed more than 130 building, hospital, industrial and power projects in the former Soviet Union since first moving there in the Communist era.
That boom has boosted Enka’s own fortunes. Its total construction revenue rose 70% in 2007 to $2.25 billion, pushing the firm to No. 37 on ENR’s list of the Top 225 International Contractors (see story, p. 32.) Nearly all was gained abroad. Enka’s additional interests in energy, manufacturing, trade, retail and real estate generated $5.3 billion in total revenue last year, up $1.3 billion from 2006, according to public filings on its Website. It also reports $618 million in 2007 profit, up from $445 million the year before.
Much of Enka’s success is built on its unique niche in the post-Soviet economy. “I would say Enka is one of the biggest contractors in Russia today,” says Leonid Zborovsky, a Russian-speaking principal of New York City-based structural engineer Thornton Tomasetti Inc., which assisted the contractor on a 56-story, just-completed Moscow tower. He says Enka has some competition there from foreign contractors such as Austria’s Strabag Bau A.G. and Germany’s Hochtief A.G., both of which have new Russian billionaires as major shareholders. “We know the Turks well and we respect them,” says Hochtief CEO Herbert Lutkestratkotter.
 Peter Reina/ENR | “There are still certain risks that we don’t want to take.” —Haluk Gercek, president, Enka Construction |
But firms such as France’s Bouygues do not compete against Enka in Russia and others such as Sweden’s Skanska AB have shunned the market altogether. Skanska is now wrapping up work in Moscow and St. Petersburg, exiting when it could not make “the right profitability,” says President Johan Karlstrom. He complains about “code of conduct issues” and bureaucracy. “It is just a nightmare to get through anything,” Karlstrom adds.
Gercek is more relaxed about doing business in Moscow, having spent most of the 1990s there setting up Enka’s Russian operations. He says Russians “keep their word and fulfill contractual obligations.” Not unlike Turks themselves, Russians “are emotional...family people,” says Gercek. “There are many similarities.”
Public Yet Private
But despite the ethnic characteristics and Enka’s status as a public company, traded since 2002 on the Istanbul stock exchange, its ownership is intensely private. The firm has a $13-billion market valuation, but all but 13% of its stock is owned by its founder, Sarik Tara, now 76, and family members, including son Sinan, 49, who took over as chairman from his father at age 26. Enka’s co-founder, the late Sadi Gulcelik, was the elder Tara’s brother-in-law. The rest of Enka ownership is so dispersed that no single outside investor has enough leverage to influence decisions.
 Enka Construction Enka is set to complete this summer a 50,000-seat stadium complex in Ukraine. |
Sarik and Sinan’s good fortune landed both on Forbes’ list of global billionaires this year, the former worth $4.3 billion and the latter $1.9 billion. Sarik jumped more than 200 places on the 2008 list from the previous year. But even as the the boom benefits Enka’s financial bottom line and enriches its family owners, the company also invests in Turkey’s future, underwriting through its Enka Foundation, sports and cultural facilities and schools enrolling several thousand. The foundation sponsors two private schools, including one in Adapazan, a mid-sized industrial city ravaged by a 1999 earthquake.
Enka’s roots in Istanbul in 1957 are as a local civil and industrial contractor. The firm’s business then spread across Turkey, finally reaching overseas...
...in the 1970s with subcontracts in Libya. Competitors soon followed but many ran into trouble. “They signed a lot of contracts with unknown authorities, and they were either not paid or had other problems,” says Gercek. “Most of them quit and came back.” But Enka prospered, expanding its presence across the Middle East with large industrial, pipeline, infrastructure and power projects, he says.
Today, half of Enka’s earnings come from power generation, says Gercek. Its 3,850 MW of generating capacity, with secure sales contracts, provides a long-term base load of income. Construction is the firm’s next largest business, including specialty subcontractors. Steel fabrication, real estate and the tailings of a Russian retail business now being sold round out the Enka empire. It employs about 40,000 globally and expects revenue to grow 16% this year, says Gercek. The firm claims a $7-billion backlog.
 Enka Construction Enka is seeking to build Turkey’s first nuclear powerplant. |
Enka’s foray into Russia began in 1986 in a services-for-gas trade deal between the Turkish and Soviet governments. “There was a big competition [between] six Turkish companies,” says Gercek “It was a real bid and it was harsh.” The gas deal ended after the Soviet breakup but it gave Enka a footing in a market with little serious local competition until recently, says Gercek. “A new generation of local contractors is winning projects but they are still not significant,” he adds.
Changes in the collapsing Communist world generated substantial business for Enka in apartment and hospital construction in Russia and in Moscow real estate. “We earned a lot of money, did a good job and had a good name in the market,” Gercek says. Enka’s growing prominence was a factor in the Russian government selecting it in 1993 to restore the former parliament building in Moscow, known as the White House, that was gutted in a failed coup attempt. “They asked us to come on a negotiation basis,” he says. “They ordered us to build immediately in three months.” Enka imported thousands of Turkish workers and completed the $100-million job on time, Gercek says.
The Enka executive says most building projects in Russia’s private sector now are negotiated. “You build up a reputation that you can deliver the project on time with quality and without problems, and they start to call you,” he says. Enka’s expertise includes an in-house team of architects and engineers. “They are very good engineers,” says Zborovsky of Thornton-Tomasetti.
Long Relationships
Enka has forged an even longer relationship with another U.S. firm, San Francisco-based Bechtel Group, which dates to the 1970s when former Chairman Stephen D. Bechtel Jr. and Sarik Tara first met in Saudi Arabia.
The firms lost a bid for Turkey’s Ataturk dam in the 1980s but negotiated a design-build highway contract in Ankara in 1986. They are now working on $5 billion of road jobs in Albania and Romania, and natural-gas projects in Kazakhstan’s Tengiz field and Russia’s Sakhalin Island. “It is a real partnership in all fields at all levels,” says Gercek. Adds Bechtel President and Chief Operating Officer Bill Dudley: “Successful joint-venture partners share more than risk. They share values and trust. That has been key to the success of Bechtel-Enka projects. We want the challenge of the toughest jobs and are confident in our combined ability to deliver on time, safely and with quality.”
 Enka Construction Terminal being built by Enka at Moscow’s international airport will serve 3,800 passengers per hour and is set for completion in February. |
But Enka is still reluctant to participate in Turkey’s emerging build-operate-transfer market for civil infrastructure, including a Bosporus tunnel. “There are certain risks we do not want to take,” Gercek says. Enka has been happier with build-own-operate contracts used since the early 1990s to develop powerplants. For these, the government guarantees payments, leaving the firm to manage construction and operating risks.
Enka is now taking a leap in that sector by targeting a BOO contract for Turkey’s first nuclear powerplant, a 4,000-MW facility at Akkuyu, with Korea Electric Power Corp. leading a 60:40 joint venture. Enka plans to submit project finance proposals this year. “We hear the French, Russians and some Americans [will bid], just rumors,” Gercek says.
But Gercek is still in no hurry to take Enka’s focus off Moscow despite political uncertainties. “We don’t feel embarrassed about this,” he says, confident of continuing business. Zborovsky agrees. The firm’s market share may diminish, he says, “but I think there is plenty of work for Enka for years to come.”
