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A contracting market

01 December 2001

The changing dynamics of the US power market have hit EPC contractors hard. But the worst may be yet to come. By Jim Smith.

Read more: [project finance] [project finance] [power projects] [editor] [project financing]

If there has to be a single reason why the balance of power seems to have shifted from EPCs ? engineering, procurement and construction companies ? to power project sponsors it is that those sponsors usually are better capitalised. But that's not the end of the story.

Projects are being completed faster, requiring large EPCs with costly overhead to book more business in an environment of fewer deals and with more of the work on particular projects being taken on by project sponsors. The nature of the business has changed so that contractors often are relegated to the role of assemblers, with turbines and other integral parts of projects being provided by sponsors and brought to construction sites.

Ratings on engineering and construction companies run the gamut, with the highest rated company having an ?A+? rating, and lowest at ?B-?. I believe the median rating on the approximately 40 global construction companies...

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