the age of aquariums connecting the new berlin …files.investis.com/bb/pdfs/update_may06.pdfdesign...

The international news magazine for Balfour Beatty u April 2006

The age of aquariumsConnecting the new Berlin

Update

News review News review 3

Editorial Team: Tim Sharp, Lynn Harvey Marjorie Hooper and Helen Baker +44(0) 20 7216 6800

Written, designed andproduced by Surrey HouseCorporate Communication+44(0) 1372 460111

Balfour Beatty Update ispublished by Balfour Beattyplc, 130 Wilton Road, LondonSW1V 1LQ, for BalfourBeatty people worldwide© Balfour Beatty plc 2006

Cover picture:Just one of the amazing sightsvisitors can see at Georgia’sexciting new aquarium built byHeery. See pages 12 and 13.

North Lanarkshire chalks up first school

TWO of 24 new schools being built in a £150million PPP project in Scotland have beenhanded over to the local authority.

Under the project, which brings together BalfourBeatty, Balfour Kilpatrick, Transform Schools andNorth Lanarkshire Council, the first two new schoolshave been opened on a shared campus in the village ofCaldercruix, near Airdrie.

Glengowan and St Mary’s Primary Schools arethe first of two dozen schools being opened in NorthLanarkshire by 2008 in a project funded by the Scot-

tish Executive. In addition to the most up-to-date educational

facilities, the assembly hall and dining area can beused by the community for public meetings, recre-ational activities, shows and even wedding receptions.

An all-weather floodlit football pitch has alsobeen provided for both schools and the local commu-nity, with changing room facilities that have beendesigned to cater for adults as well as children.

Bob Anderson, Balfour Beatty ConstructionGeneral Manager in Scotland, said the completion of

From left to right, local councillorTommy Morgan and on the rightDirector of Education for NorthLanarkshire Council, MichaelO’Neill. Right, the school opensits doors for the first time.

IN BRIEFg BALFOUR Beatty Construction(BBCL) Scottish & Southern has securedits third office contract with WilsonBowden Developments in Glasgow. The£13.5 million design and build contract forBuilding 4 at Atlantic Quay followsEquinox House, in Cadogan Street, andBuilding 6.

The contract, comprises a speculativeoffice complex which will include a base-ment car park, ground and mezzaninelevels, nine upper floors and roof-top plantrooms, to be completed in June 2007.

The building’s steel and compositeflooring frame is founded on a series oflarge-diameter bored piles, with the enve-lope embracing a mixture of curtainwalling, together with rain-screen, masonryand pre-cast cladding.

gADDITIONALLY BBCL Scottish &Southern has been contracted for thedesign and construction of new educationalfacilities in Brighton on land next to thecity’s railway station.

The £26.3 million contract was secured,by a team led by Paul Smith, andsupported by Jim Falconer.

Due for completion in September 2007,it will provide new teaching facilities,student accommodation and administrativeoffices, and will bring all of Study GroupInternational’s Brighton activities underone roof.

the Caldercruix schools was a significant milestonefor the local community, and its success was beingmirrored across the project.

“The excellent collaboration between Transform

Schools, the local council and Balfour Beatty Construc-tion reflects how partnerships between public andprivate sector can significantly raise the quality of lifeand the provision of public services,” he added.

g INCREASING numbers of business units areadopting ERP – Balfour Beatty's single integratedbusiness system that covers procurement, HR,finance and accounts, project costing and payroll.

ERP – Enterprise Resource Planning – is alreadyrunning in five operating companies and two jointventures, and will roll out in more units over thenext year.

It was evolved jointly by HR, Payroll, Procure-ment, Inventory, Projects/Commercial and Finance,and has been designed to satisfy all their needs. Iteliminates incompatibility between systems,removing waste and duplication of effort, and bringsstate-of-the-art software and thinking to the manage-ment system.

Among the key benefits are:l Efficiency, control, visibility and auditability inproducing accountsl Better decision-making, thanks to a single sourceof financial and management datal Collaboration and savings across the groupthrough efficiency and better ability to negotiatewith suppliers.Design and development of ERP took until June2004, and the first company to go live was BBCL

the following October. This was followed byBBCEL, RCS, Stent and BBUL along with Birm-ingham Hospital and the Isle of Grain JV.

“As other units follow, valuable lessons learnedfrom early adopters are smoothing their way,” saidProject Manager Andrew Moore. “Instead of startingafresh, we can pinpoint gaps between currentsystems and the ERP solution.

“Then we design new or enhanced modules tobridge the gaps, test them before implementationand ensure efficient roll-out. ERP really is a newbroom sweeping away old incompatible businesssystems.”

ERP roll out rolls on

ERP will roll out inmore units over the

next year

g AFTER 40 years with the BalfourBeatty Group, the latter nine as DeputyFinance Director, John Muirhead is toretire at the end of 2006.

Duncan Magrath has joined the groupfrom Exel, where he has held a number ofsenior operational and corporate financialroles, and takes over from John in April.John, will continue to work on specificprojects as a senior member of AnthonyRabin’s team.

Anthony said he had shown “tremen-dous commitment and loyalty andperformed at the highest level” during hislong career.

g Mike Archbold, Managing Director forOperations at Balfour Beatty Capital, and afounder member of Consort, will retire inJuly after 10 years involvement in PFI.Mike joined the company in 1993, havingbeen involved for many years in large-scalebuilding projects, especially hospitals. IanRylatt, Managing Director, Balfour BeattyCapital, said that Mike had contributedgreatly to the company’s success fromtimes when there were just six staff onroads and hospital bids. Today it has 160staff and 18 major PFI concessions inhealth, education, road, water and power.

Mike will hand over to his successor,Chris Spencer in mid April. Chris waspreviously Managing Director of the SirRobert McAlpine PFI business.

News review News review4 5

IN BRIEF

THE topping-out of the new international children’s centre at London’s Moorfields EyeHospital has been celebrated in traditional style.

Balfour Beatty Construction (BBCL) is on target to complete the £15 million RichardDesmond Children’s Eye Centre by the end of this year. It is being named after thechairman of Express Newspapers, a Moorfields patient who has donated £2.5m to theproject.

The centre will provide child-focused and purpose-designed facilities for 25,000patients from around the world, including the largest and most advanced paediatricophthalmic clinical research and training centre in the world.lMinister of State for NHS Delivery Lord Warner (below) has paid a visit to Balfour

Beatty Construction’s team at the Beckenham Centre LIFT, a £24.4m project comprisingaccommodation for two GP practices and other primary care facilities such as out-patients’ department and minor injuries unit.

Phase One of the project, which also includes dentistry, pharmacy, cardiac, café andcreche facilities, is dueto be handed over inJune 2007.

Lord Warnerwanted to see a newLIFT developmentbefore joining theHealth SecretaryPatricia Hewitt topresent a White Paperon community servicessetting out a vision ofmore care and treat-ment outside tradi-tional hospitals.

Top: Moorfields Eye Hospital. Above, left to right: Richard Desmond, a Moorfields’ patient andlead donor, Lady Jacomb, Chair of the Campaign Committee, and Professor Moore, Clinical Directorof Paediatric Ophthalmology, performing the topping out ceremony.

Moorfields tops out

SPECIALIST healthcare concession companyConsort Healthcare has been named preferred bidderfor the £190 million Northern Batched Hospitalsproject in Greater Manchester, strengthening BalfourBeatty’s position as the leader in the field.

The project comprises a £130m redevelopmentand new buildings programme for Hope Hospital,Salford, under a 34-year PFI concession contract, anda £60m design and build contract for a new acute andmental facility at Tameside General Hospital.

Financial closure for the schemes is expected to beachieved early next year.

The Salford programme will include a number ofnew buildings, including an education centre, emer-gency department extension, assessment unit, criticalcare unit, new renal and urology units and residentialaccommodation for hospital staff.

In Tameside, new buildings will include a mentalhealth unit for the elderly, a ward block, a daysurgery, an endoscopy unit and extensions to theatres

Hope strengthens leading roleand radiology, diagnostic and treatment centres.

The Northern Batched Hospitals project brings Balfour Beatty’s majorPFI hospital schemes to a total of eight.

Simon Rooke, Infrastructure Business Development Manager, BalfourBeatty Capital Projects, said the company was delighted to have beenchosen to create first-class healthcare facilities for people in GreaterManchester and the staff serving them.

“They are our seventh and eighth major PFI hospital schemes,” hesaid. “We have proven skills and a first-class track record in this specialistarea and are now a clear leader in the field.”

BALFOUR Beatty Construction has won a £19.8million contract to build a new Olympic-standard swim-ming pool in Sunderland.

Located in Stadium Park, near Sunderland FC’sStadium of Light, the development for Sunderland CityCouncil will include a 50-metre swimming pool, a 25-metre training pool, a diving pool and a state-of-the-artwellness centre.

The superstructure will be housed on reinforcedconcrete foundations and ground beams, with a glulamframe to the main pool area, and a structural steel frame tothe front and rear of the building and the wellness centre.

Work was due to start on the project in April and isscheduled for completion early in 2008. Among thebodies funding the project are the City Council, theEuropean Regional Development Fund and SportEngland.

Councillor Bob Symonds, Leader of the CityCouncil, said that the appointment of Balfour Beattymarked an important date.

“Major works on the site will begin to move forwardat a pace,” he said. “Progress updates will be producedto ensure everyone feels part of this iconic regionaldevelopment, right here in Sunderland.”

Pool makes a splash in Sunderland

g MANSELL has been awarded acontract potentially worth £203 millionfrom Riverside Housing and SandwellBorough Council.

The Hawthorn Fields project willinclude the refurbishment of somecouncil homes, the demolition andrebuilding of some council homes andthe rebuilding of some homes for sale.

The contract award is a PrivateFinance Initiative that will allow River-side Housing to provide housingimprovements from 2006 to 2031.

This is considered a key regenerationscheme for Sandwell Council, looking tomeet the 2010 Decent Homes target setby national Government, and residentshave been fully informed and involvedso far and will continue to be so as theprojects continues.

Steve Davies, Regional ManagingDirector for Mansell ConstructionServices Ltd, said: “It’s fantastic to havesecured this opportunity to work inconjunction with two of our key clients,particularly following the success of ourprevious PFI project with Riverside atDonnington.”

g MANSELL has also been named asone of five contractors appointed towork on a five-year framework with theCatalyst Housing Group.

The company is eligible for work intwo categories incorporating new build,refurbishment and regeneration work –“below £2 million,” with potentially£50m of contracts to be shared amongthe five contractors, and “above £2m,”with up to £385m of work to be dividedbetween the five.

It means that the contracts could beworth £87 million to Balfour Beattyover the five years.

News review News review6 7

IN BRIEF

THE Balfour Beatty-Mouchel Parkman joint venture has won a contract from Transport Scotland to manage and maintain all trunk roads inthe north-west of Scotland. The five-year contract, which is worth £27 million a year, covers more than 1,300km of highways and 1,300 bridges– including the A9 Perth-Thurso and A82 Loch Lomond-Inverness roads and the Skye (pictured) and Kessock Bridges.

Contract seals deal in north-west

BALFOUR Beatty’s term mainte-nance business RCS has won a one-year £90 million extension to theHighways Agency management andmaintenance contract it operatesjointly with leading transport consult-ants Mott MacDonald.

The contract covers motorwaysand trunks across the agency’s Area 3network in central southern England,and is awarded on performance, effi-ciency savings, co-location and inte-gration in the service offered.

RCS and Mott MacDonald haveworked together on the contract since1997, re-winning it in 2001 for afurther five years. The latest extensiontakes the contract to August 2008.

It covers 600km of motorway,600km of trunk roads and almost1,000 structures in Surrey, Dorset,Hampshire, Wiltshire, Oxfordshireand Berkshire, and includes strategicroutes carrying high volume trafficsuch as the M3 and M4.

RCS Works Manager AndyHamilton said the contract extensionsgave the companies the chance to helpthe Highways Agency deliver itsCustomers First agenda and its aimsof safe roads, reliable journeys andinformed travellers.

RCS stays onthe road Grid work begins

WORK has begun on two Power Networks contracts to refurbish almost100km of 400kV overhead power transmission line for National Grid.

The two overhead lines are situated within East Anglia and will beupdated to include the latest technology.

This includes replacing existing four-conductor bundles with state-of-the-art aluminium alloy three-conductor bundles along the 94.6km route

Peter Taylor, Contracts Manager for Power Networks, said that aboutthree-quarters of the contract – which involves a workforce of 200 –would be completed by October this year.

The remaining part of the contract would be completed in the summerof 2007.

“We have played a major part in the construction and refurbishment ofthe UK’s overhead line transmission system for many years,” Peteradded. “These latest contracts follow our successful completion of asimilar project last year.”

Award of these two contracts was made in parallel with a similarcontract for work in the South East, which is also due to start this year.

l A major contract with Powerlink Queensland has been won by theTransmission Division of Balfour Beatty Power Networks, working in JointVenture with United Group Infrastructure Pty Ltd of Australia. The JointVenture extends from 2006 to 2010 in the southern area of Queensland andwill be worth approximately Aus$100 million (£40million) per year.

g HADEN Building Management hasbeen awarded a £6 million contract toprovide total facilities managementservices to the 100-bed IMC St David’sHospital in Cardiff. The centre includesa 25-place day hospital and four wardscaring for older people.

The contract is for an initial five-yearperiod, and involves the provision ofcatering, housekeeping, estates andground management services, as well assecurity, porterage, reception andswitchboard, laundry and post.

Mike Fellowes, Haden's ManagingDirector, said the company had beenworking with St David’s for three yearsin an M&E-related service provision,adding that he was “delighted” the rela-tionship had been extended to full FMprovision.

g BALFOUR Beatty Civil Engineering(BBCEL) has been chosen by ScottishWater as one of nine preferred bidders tohelp deliver its Quality and StandardsProgramme 2006-2010.

It will involved BBCEL’s NorthernDivision working as an AssociatedDelivery Partner in the £2.15 billionprogramme throughout Scotland, withthe possibility of a four-year extensionuntil 2014. The work could be worth£50-£80 million to BBCEL over the nextfour years.

John Hayes, Regional Director for thenorth of Scotland, has been appointedFramework Director for the commission,supported by Keith Bowman, as Frame-work Manager. The bid team was led byGrant Laing.

g GAMMON Construction, the HongKong engineering group in which BalfourBeatty has a 50 per cent interest, has beenawarded a £150 million contract to builda 70-storey office block on the easternshore of Hong Kong Island.

One Island East is a 1.5 million squarefeet Grade A development by Swire Prop-erties, and is the latest element in itscomprehensive commercial developmentthat has already attracted more than 300multinational companies.

Gammon has a long-standing relation-ship with Swire Group, and the compa-nies have jointly developed a number ofinnovative techniques to speed upconstruction and protect the environmentduring and after the project.

Work is scheduled for completion inMarch 2008, and a pioneering projectmanagement system will facilitate collab-oration across all construction disciplines.

CB&I John Brown has awarded Balfour Beatty CivilEngineering Limited and its JV partner NCCConstruction the contract for the civil works packageat the Grain Liquefied NaturalGas (LNG) Expansion Project,valued at roughly £40 million overtwo-and-a-half years.

Grain LNG Limited is currentlyconstructing an LNG importationand regasification terminal at theIsle of Grain in Kent. CB&I JohnBrown is the EPC contractor forthe project.

The work covers the construc-tion of three concrete LNG tanksmeasuring 190,000m3 each,creating a total storage capacity of770,000m3 at the Grain site.

The project also involves thecreation of civil foundations,

earthworks, roadworks, concrete building foundations,concrete tanks, concrete trenches and pits, culverts,drainage, paving and underground utility systems.

Isle of Grain tanks up for LNG

l Above, Transport Secretary Alistair Darling unveilinga plaque to mark the completion of the £148 millionproject to widen the M25 and Heathrow Terminal 5 Spurroad. The Secretary of State said “This improvementwill improve journey times and provide access toTerminal 5. It’s part of our commitment to improving theroad network.”

Highways Agency Chief Executive Archie Robertsonadded: “I wish to congratulate all those who haveworked so hard to complete this scheme ahead ofschedule and in time for the Christmas Holidays. This isa fine example of how we are committed to deliveringan improved, reliable motorway and trunk road networkfor our customers.”

Preliminary results Preliminary results8 9

Update: How would you assess your first yearas Chief Executive?

Ian Tyler: Very busy! We continued to deliver the sortof financial progress which our shareholders expect ofus and our results were well-received in the City. Butalso during the year we concluded a major strategicreview which has set the course we will take over themedium and long term, as well as confirming thepositive outlook we believe will characterise the nexttwo to three years. And we also increased the focus onour important non-financial responsibilities.

Update: What were the main features of theannual results?

Ian Tyler: Results in our building and investmentsectors were steady. In both cases, we have establishedexcellent positions from which to grow strongly infuture years. However, in 2005 we had one or twocontract setbacks in major building projects, so,despite generally improving performance, the overallbuilding result was only marginally ahead of 2004.

In investments, we added three more PFI projects

to our portfolio – two for schools and a street lightingproject – and generally our concessions performedwell. However, the big jump forward we achieved in2004, largely as a result of the Metronet LondonUnderground concessions and our 100 per centownership of Connect Roads, was not repeated.

In rail, profits actually fell year-on-year, reflectingthe loss in 2004 of our UK maintenance contracts,which Network Rail decided to take back in house,and some residual contract problems for our US railbusiness.

This leaves the engineering sector, where we madea dramatic improvement from 2004’s £16 millionprofit to £49 million last year. All the businesses inthis sector made a contribution to this result, but thebiggest influence was a welcome return to profit ofour US civil engineering business, which lost verysubstantial amounts of money in 2003 and 2004.

Update: There seemed to be a lot of excep-tional items in the accounts this year. Why wasthat?

Ian Tyler: Partly coincidence and partly as a result of

a change in accounting standards. The biggest itemwas a major credit from the administration of TXUEurope. This was money that we were owed afterTXU, which was both a customer and co-owner ofBarking Power Station, failed in 2002. The other itemswere a collection of pluses and minuses arising from avariety of technical adjustments, one-off costs andone-off gains.

Update: What is your view of our markets andhow they might move in the future?

Ian Tyler: Most of our markets remain strong andsome, like social housing, road maintenance andHong Kong infrastructure are on an upward trend.Our order books are full of quality work and we arepursuing a wide range of good, large-scale opportuni-ties in the near term.

Update: You said you had completed astrategic review in 2005. What are the mainconclusions and how do you plan to take thebusiness forward?

Ian Tyler: As I have said, we believe we can delivergood growth over the next two to three years from thebusiness mix we already have. But in the mediumterm we will have to diversify to keep our growthmomentum going. Our analysis shows us that wemake our best and most reliable profits in marketswhere we are leaders. Leadership gives us betteraccess to our customers, attracts the best managementand technical talent and gives us maximum controlover our supply chain.

We plan to concentrate our medium-term expan-sion plans into three particular areas, all of whichinvolve core skills that we, as an organisation, alreadyhave.

Update: Can you outline these three areas?

Ian Tyler: First, we intend to exploit the opportunitieswhich Balfour Beatty Capital Projects gives us. Inreflection of its developing role, this business has beenrenamed simply Balfour Beatty Capital.We now have over 150 professionals employed inBalfour Beatty Capital. The skills and experience ofthis group are significantly different from the

contracting skill-set and apply, potentially, to a muchwider range of markets and geographies.

We aim to maximise the value of these specialistresources, in part by applying their skills outside theUK. The key medium-term targets are the US, wherethe roads market is beginning to take off, and inEurope, Hong Kong and Singapore. We already havepeople working in these markets and we are looking atsome specific opportunities.

We are also well placed to look at projects whichinvolve market or regulated demand risk.

Secondly, we intend to develop our knowledgebased technical service and programme managementbusinesses.

A significant proportion of our value as a Groupderives from our relationships with a relatively smallgroup of major customers with whom we operateclosely.

Increasingly, these, and other customers, arelooking to us to provide more than construction andmaintenance services. They also want us to becomeinvolved in the design, management and operationalissues surrounding their assets.

These trends have begun to create a real differentia-

tion and have become a major growth driver for us inmany of our markets. The potential will be, I believe,even more significant going forward. To exploit thispotential further, we need to continue to increase ourskills and knowledge base.

Balfour Beatty Management was created in 2003 toprovide just these types of programme managementand technical services. We are pleased with what wehave, but we want to accelerate the development ofthis business.

A third major area is represented by our UKregional businesses.

I believe that we have not yet fully recognised thestrength and value of these businesses.

We have strong regional UK positions in a numberof markets – building, civil engineering and utilitiesfor example. Our stronger regional businesses areamongst the Group’s very best performers.The value in such businesses has been clearly demon-strated through the acquisition of Mansell and itssubsequent performance. There will be other opportu-nities – perhaps not individually on the same scale –as we aim to go on strengthening these businesses.Update: Apart from taking PFI into non-UK

The Group continued to make

good progress during 2005. Profits

and earnings continued to move

ahead. Operating cash flows

were strong and our net cash

position was maintained. Our

order books continued to expand

as we won significantly more

good-quality work both in the UK

and elsewhere. Our performance

in non-financial terms also

showed significant improvement,

with lower accident frequency

rates, better management of our

environmental impacts and an

expansion of our positive involve-

ment with the communities which

we serve. Ian Tyler spoke to

Update magazine about events

and trends in 2005.

tt

Good progress during 2005

10 11Preliminary results Preliminary results

markets, you haven’t mentionedgeographical expansion. Do youhave plans outside the UK?

Ian Tyler: The development of our engi-neering and construction businessesoutside the UK is an important strategyfor the Group in the longer-term –although not an immediate strategicpriority.

Outside the UK, we will move on thebasis of established domestic businessesin a specific national or regional market.

Any Balfour Beatty business outsidethe UK must be large enough to make asubstantial difference, operate in anacceptable business environment, itscustomers must be sophisticated enoughto need, and be prepared to pay for,superior levels of quality, safety andinnovation and we must be able toachieve a leadership position withouttaking too much risk.

Developing a successful and sustain-able business in the US, based onregional presence, is key to our long-term development. It must be based onthe principles which have made our UKbusinesses successful and we have toensure that core UK skills are sensitivelyand successfully transferred.

In Europe, Germany stands more orless alone as a potential market oflonger-term interest, although in South-East Asia our investment in Gammonwill provide a solid platform from whichto address these increasingly sophisti-cated markets.

Update: Why didn’t you pursue yourinterest in Mowlem?

Ian Tyler: Because, although it offeredgrowth potential in a number of the areaswe want to develop, the price we wouldhave had to pay would have over-valued it.Buying Edgar Allen and Charter was theright way forward for us.

Update: Is Balfour Beatty going tobid for work in the Olympics?

Ian Tyler: Yes. We have teamed up withAmec, whom we know well, and theAmerican firm, Jacobs, to bid to becomethe delivery partner for the Olympic Devel-opment Authority. This means we wouldtake on the major responsibility for deliv-ering the entire Olympic infrastructure andfor converting it into legacy facilities afterthe Games are over in 2012. We will, ofcourse, have stiff competition from otherlarge infrastructure planning and develop-ment companies.

Update: What are your hopes for2006?

IanTyler: Further profitable growth. Andin particular a continuation in the signifi-cant improvements we have been able tomake in our safety performance in recentyears. Last year we reduced our accidentfrequency rate by 23% after the reductionsof 17% and 14% in the previous two years.Keeping Balfour Beatty people and thegeneral public safe is our biggest responsibility.

Two new businessescome on board

Top CSR awardfor Balfour Beatty

2005 2004

DIVIDENDS

8.1p

6.6p

2005 2004

NET CASH

£315m £311m

2005 2004

REVENUE

£4,938m

£4,239m

2005 2004

PROFIT FROM OPERATIONS*

£115m

£94m

2005 2004

NET INVESTMENTINCOME*

£19m

£13m

2005 2004

PRE-TAX PROFITS*

£134m

£107m

2005 2004

TAXATION

35%

32%

2005 2004

EARNINGS PER SHARE*

24.1p

22.1p

EXCEPTIONALITEMS

Revenue rose by 16% in 2005, with strong growth in Mansell and a full year’s sales from Gammon in Hong Kong.

Profit from operations increased by 22% in 2005, with a substantial increase in Civils as the US civils business returned to profit. There was a reduction in Rail from the loss of UK rail maintenance profits.

Net investment income rose by 46%, largely as a result of a full year of interest earned on the proceeds from the sale of Andover Controls in July 2004.

(*Before exceptional items)

Pre-tax profits rose by 25% in 2005.


The Group’s 2005 tax charge was 35% of pre-tax pre-exceptional profits, excluding the results of joint ventures and associates. The increased tax rate followed Advance Corporation Tax credits in 2004.

As a result of the increased tax charge, adjusted earnings per share rose by a more modest 9% during the year.


The Board has recommended a final dividend of 4.6p per ordinary share, making a total dividend for the year of 8.1p, up 23%.

In 2005, there was a net exceptional profit of £4m. Our share of distributions received by Barking Power from the administrators of TXU and a gain on the sale of a 15% interest in three of Connect Roads’ PFI concessions were partially offset by a settlement in the US, adjustments to asset carrying values and exceptional finance costs.

Our year-end net cash position was £315m, excluding the borrowings of PFI concessions. Cash generated from operations was a highly satisfactory £167m and this was used to fund capital expenditure, acquisitions and investment in PFI.

tt

BALFOUR Beatty plcwas delighted to win thefirst award for CorporateSocial Responsibility(CSR) at the Construc-tion News Quality inConstruction Awards event in London recently.

Announcing the overall winner, the judges said:“There is clear evidence here that Balfour Beattyis really addressing the full range of CSR issues.”

They were particularly impressed by the open-ness and transparency of the business, includingthe Group’s series of Stakeholder Codes of Prac-tice which set out methods of working andminimum standards for the company’s interactionwith employees, customers, suppliers and thewider community. The continuous improvement inour environment and sustainable developmentprogrammes was also recognised along withcommunity initiatives.

Receiving the award, Tim Sharp, Director ofCommunications said: “The entire Group hascontributed to this award and it is fitting that theirefforts are recognised. We have set ourselvesdemanding targets and we know that all our stake-holders expect us to strive for further improve-ments in future.”

At the same time the Group has improved itsscore in the annual Business in the EnvironmentIndex for 2005 to 88 per cent from 82 per cent in2004. Our rank in the construction sector alsoimproved from sixth the previous year to thirdplace.

The Index, organised by Business in theCommunity, assesses the extent to which organisa-tions integrate environmental responsibility intotheir different business functions. These latestscores reflect the tremendous efforts made byoperating companies in recent years.

BALFOUR Beatty has acquired two new busi-nesses, Charter and Edgar Allen from Carillionfollowing their purchase of Mowlem.

Charter is a US construction managementcompany and Edgar Allen is a UK rail trackproducts manufacturer. These operations werepurchased for a combined consideration ofapproximately £20 million.

Charter, based in Texas, is a leading builder ofeducational facilities in the state. Its acquisitionwill complement Heery Inc, Balfour Beatty’s USproject and programme management specialist,which is a nationwide leader in the primary andsecondary education market. In 2004, it had salesof approximately £95 million and operatingprofits of £2 million.

The acquisition of Edgar Allen will strengthenBalfour Beatty’s leading position as a specialist inthe design, manufacture and supply of track prod-ucts through Balfour Beatty Rail Track Systems.In 2004, it had sales of £25 million and madeprofits of £2 million.

US Civil engineering: ‘Awelcome return toprofit.’

2005 2004

DIVIDENDS

8.1p

6.6p

2005 2004

NET CASH

£315m £311m

2005 2004

REVENUE

£4,938m

£4,239m

2005 2004


£115m

£94m

2005 2004


£19m

£13m

2005 2004

PRE-TAX PROFITS*

£134m

£107m

2005 2004

TAXATION

35%

32%

2005 2004

EARNINGS PER SHARE*

24.1p

22.1p

EXCEPTIONALITEMS













2005 2004

ORDER BOOK

£7.6 billion

£6.8 billion

2005 2004

DIVIDENDS

8.1p

6.6p

2005 2004

NET CASH

£315m £311m

2005 2004

REVENUE

£4,938m

£4,239m

2005 2004


£115m

£94m

2005 2004


£19m

£13m

2005 2004

PRE-TAX PROFITS*

£134m

£107m

2005 2004

TAXATION

35%

32%

2005 2004

EARNINGS PER SHARE*

24.1p

22.1p

EXCEPTIONALITEMS













2005 2004

ORDER BOOK

£7.6 billion

£6.8 billion

Balfour Beatty Capital will continueto exploit opportunities including the

provision of hospitals such as Blackburn (below) due for

completion shortly.

12 13Refurbishment Refurbishment

THE last weekend in February saw 50 of theUK’s most beautiful women compete for thecoveted crown of Miss Great Britain in the

UK’s largest ballroom. The Grosvenor House Hotelin London played host to the contest, compered byJenny Falconer and Noel Edmonds, attended by awide range of celebrities.

With style, elegance and glamour as the centralthemes of the event, the appearance of the venue isof the utmost importance – no-one wants crumblingbrickwork or rotting window frames to spoil thecontestants’ big day. But with a hotel the size of theGrosvenor, there is a seemingly never-ending list ofupgrades, repairs and renovation work needed tomaintain its world-class appearance and standing.As a result, Balfour Beatty Refurbishment (BBRL)has spent more than 90 weeks working on the hotel,both inside and out, to keep the hotel in top shape.

As Balfour Beatty Refurbishment ProjectManager, Neil Williamson observes, the projectkept everyone on their toes. “When we first startedout, the contract involved just structural repairs tothe brickwork facades which had been damaged orhad started to move because the steel behind hadrusted – what we call Regent Street Disease. At thesame time we were commissioned to overhaul2,500 timber sash windows – we cut the rot out,add in a resin and redecorate over that, as well asreplacing any cords or weights or glass.”

So far it appeared that only a little cosmeticsurgery was required, but once the team got started,it quickly became clear that the hotel managementhad plans for far more extensive work, and BBRLwere in the perfect position to carry it out. Firstthey were asked to gut six floors on the hotel’sSouth Block, which they managed despite persistentproblems with the plumbing. Then they werecommissioned to put in two lift shafts, and havingcompleted that they were asked to put in the lifts aswell. And it didn’t stop there.

“So there we were, sitting there all happy, andthen the hotel came back to us again,” said Neil.“They were concerned that the problems with thesteel frame and brickwork might re-emerge in tenyears’ time in other areas. They asked whether therewas anything we could do to prevent thishappening, and the solution we came up with was acathodic protection system. This system adds elec-trified titanium anodes at points all over the struc-ture, which prevents the rust-forming reaction fromoccurring between the steel and the water. It’s anunbelievable solution, and cutting edge technology!

“Then they announced that, where we had previ-ously just renovated the windows in the SouthBlock, they now wanted us to strip every piece ofpaint off them between floors two and eight. Backwe went, took them all out again, and stripped themto bare timber.”

The major challenge for the team, of all thisworking and re-working, was that they were trying

to operate in a working hotel on a busy dualcarriageway in London’s exclusive Mayfair area.Regular events, the needs of residents and guests andthe elastic job-list were all factors that had to betaken into consideration on a daily basis. “It was astrange job because it is an active hotel – all thefloors we were working on were occupied by resi-dents, so they would give us six rooms or an elevatorwe’d do the work and then move on,” said Neil.

“We had to work closely with the hotels when-ever they had major functions. There were certainrestrictions, such as having external scaffoldingdown for an award ceremony in June 2005, so wehad a race against time to get it off Park Lane. Thehotel is also very good at saying ‘Oh, could you justdo this…’, or ‘While you’re there we’ve just foundthat which needs fixing…’. It is a little frustrating inthat respect – it never seemed to come to an end. Atthe same time, they have been an excellent client, soyou can’t really complain.”

All work on the contract had been completed bythe end of February, in a project that had beenextended by 32 weeks. Neil hailed the success andprofessionalism of his team and the subcontractors,but said he was sorry the project had ended beforethe final of Miss Great Britain. “It’s diabolicaltiming,” he joked. “We may well have to go backand do some snagging at the weekend.”

THE extreme makeover is being taken one stepfurther on the other side of the world, however. In

Hong Kong, Balfour Beatty subsidiary GammonConstruction has been charged with the completeoverhaul of one of the city’s best loved and mostexclusive hotels – the Mandarin Oriental. Over-looking the harbour the hotel has been a favourite ofboth residents and visitors alike since 1963. NowGammon has been charged with a complete renova-tion project which will see the hotel transformed, both

inside and out, in a spectacularly short space of time.For Project Manager Martin Davies, the project

holds something of a personal appeal: “Speakingpersonally, the Mandarin Oriental opened a couple ofmonths after I was born, and I sometimes feel that Ineed a bit of restoration too,” he said. “It is a signifi-cant project because of its location, visibility andheritage. We are very conscious of the building’sheritage, and we have a duty of care to everyone,both tourists and residents, who see it as iconic. Italso presents some unprecedented challenges, and weare fortunate to have a very well balanced team whoare working well on many different fronts at once.”

The team are refurbishing all the interiors,beginning by enlarging all the guestrooms, andreducing their number from 541 to 503. The scopeof work also includes new front-of-house and back-of-house for all the rooms and associated facilities.At the same time, all the services are being upgradedto current standards, and the much-loved restaurants

are being stripped out and rebuilt. On the outsidethere will be a new curtain wall over the entirebuilding, with the existing balconies containedwithin to increase room sizes.

Several challenges have already arisen sinceconstruction work began on 1 January. Logistically,the programme is limited because work can only becarried out six days a week from 7am to 7pm. There

are also unforeseen complications with room dimen-sions, which are out of tolerance, meaning that indi-vidual components cannot be consistently sized, andthe discovery of asbestos lagging, all of which needsto be removed.

In order to meet the initial handover date of allpublic areas and half the rooms, astonishingly sched-uled for 31 July this year, more than 1,400 workerswill be active in the hotel each day at the peak of thework. The team has also instituted a new web-baseddocument management system which is helpingsignificantly to distribute information to subcontrac-tors and team members alike.

In the light of this, Martin is confident that theproject is on track for its scheduled handover,despite the many problems before him. “Providedthere are no problems outside our control, we haveevery chance of achieving what was considered to bean impossible programme, and that is a very satis-fying and rewarding thought.”

As two of the world’s top hotels undergo massive renovation projects Update explores the problems and challenges of...

“We had to work closely withthe hotels whenever they had major

functions. There were certainrestrictions, such as having

external scaffolding down for anaward ceremony in June 2005, so

we had a race against time to get itoff Park Lane.”

Keeping up appearancesThe Great Room of the

Grosvenor House Hotel.Below, The Hong Kong

Mandarin Oriental Hoteland right, Danielle Lloyd,

Miss Great Britain

14

The

age

of a

quar

ium

sTHE project was the dream of one man, Bernie

Marcus. He wanted to give something back tothe people of Georgia, in return for their

support of his Home Depot stores.His gratitude resulted in plans to build the largest

aquarium in the world, capable of housing over 500species of marine animals and included the provisionof a tank big enough to accommodate a whale shark.

“We wanted to build a world exhibit” says DavidKimmel,Vice President at Heery and projectmanager of the aquarium.

“Heery had never done anything like this before.That meant we didn’t have any preconceived ideasand everybody had input into how we were going tosolve issues.”

Some of these issues were enormous. It meantmoving power lines which fed the whole city ofAtlanta; sourcing 328 tons of acrylic glass fromJapan, employing over 2,500 people on the project, aswell as building a 6.2 million gallon tank with aviewing window 61ft tall, 27ft wide and 2ft thick.

Typically, a project of this magnitude requiresseven years to design, plan, build, stock with habitatand staff, but the project team achieved this goal forthe Georgia Aquarium in a scant 44 months.

Heery was given the task of selecting architects,designers, consultants, vendors and more to developthis project on a site which changed locations duringmid-design. Heery was also responsible for the relo-cation of on-site utilities, creation of an ownercontrolled insurance programme, negotiation ofzoning and permitting issues, financial recordmanagement and contract development in conjunc-tion with the aquarium’s attorney.

The result is a visitor experience that has farexceeded expectations using a combination oftheatre, drama and lighting in a quality building toappeal to people. Such has been the success that amillion extra visitors are now expected in the firstyear than originally projected.

“The people really made the difference,” notedDavid. “We wanted to build a show aquarium unlikeanything else – to make it fun and interactive – andHeery was the conduit that took care of every detail.”

Applauding Heery’s achievement, Bernie Marcus,Chairman, Marcus Foundation, concludes by saying:“I really don’t believe we could have finished thisprocess and built this building without Heery’sinvolvement.”

Entered in the UK’s 2006 Quality in ConstructionAward for the Best International Project, theAquarium impressed the judges and was shortlistedas one of the top five entries demonstrating Interna-tional Performance.

When Heery reeled in a project to build a $290 million aquarium in a record 44 months, the company put in a team designed to land the big one

COVER FEATURE 15

“We wanted to

build an aquarium

unlike anything else

– to make it fun and

interactive – and

Heery was the

conduit that took

care of every

detail.”

The Bottom LinesEight million gallons of waterOver 100,000 marine inhabitants500 species including rare whalesharks and beluga whalesNine acre donated site70,100,000 cubic yards of pouredconcrete4,035 valves3,200 control points10 miles of pipe25 miles of control wiring11 computers making 150 milliondecisions per second328 tons of acrylic8,000 tons of rebar12,000 sq ft of windows for thetanks – including the world’s largestsingle window

Impact185,000 visitors from 41 statespurchased annual passes within 22days of openingInfrastructure renewal for a 12-block area of urban Atlanta260,000 visitors during first monthof operation, 9,000 people a day

SafetyNo fatalitiesLost time rate accidents 60% below statistical projections

Arts Arts16 17

TWO of Balfour Beatty’s teams have proved thatactors are not the only professionals who canuse their imagination to bring a stage to life.

The teams, working on arts projects at opposite endsof England, had to overcome a daunting variety ofobstacles before they could hand their work over tothe thesps. In London’s Unicorn theatre, one teameven took over the basement when space became tootight on site.

The £13m Unicorn, which was opened inDecember 2005 by Lord Attenborough, is the UK’sfirst theatre dedicated to children and includesrehearsal spaces and education studios, as well as a340-seat main theatre. But although the theatre isalready delighting its young patrons, its constructionchallenged the ingenuity and flexibility of the men andwomen charged with meeting the scheduled openingdate.

The project is part of the expansive More Londonredevelopment along London’s busy south bank,involving many simultaneous construction projects.With nearby land rapidly being apportioned, workersquickly began to feel the squeeze, as Project ManagerMike Suell explained: “When we moved onto the sitewe had a very large area to work on. But we had onlyjust got the frame up when More London announcedthat they needed the surrounding land back. We there-fore had to vacate the north elevation to within twometres of our building. This really restricted us, butthen we found out that Thames Water had to divert a

water main as well, taking out 90 per cent of our siteaccess.”

Not only was the supply of building materials nowseverely limited, but Mike, his team and all hissubcontractors now had nowhere to operate from, astheir administration and rest-facility cabins had to beremoved. While all this could have brought the curtaindown early on the Unicorn’s magical Christmasopening, the team were quickly finding imaginativeways of working around their enclosed site.

“For the supply problem, it was a matter ofreducing the size of all material deliveries, so that theycould be brought in in small loads,” said Mike.“Earlier in the project we had hired a tower crane tospeed this process, but after 11 weeks we had toremove that as well, as we were closing up the liftshaft where it was sited. As a result, the labour contenton site was, for quite a long period, about six timesgreater than it would otherwise have been – they werepurely taking materials off lorries, carrying them upseven floors and distributing them.

“We had a great team – but while they were allorganising what was happening on the site, a greatdeal of time was taken up rescheduling, reorganisingand mitigating any delay.” No mean feat for a teamwho were unable to find any accommodation in thesurrounding area. But in the end, the solution wasfound right under their feet: “We actually movedinto the basement,” said Mike. “So while we weretrying to handle all the building problems, we were

based in it as well.“The basement was quite large – we used the

public toilets there as site toilets, the large storage areafor the canteen, the bathrooms for the sub contractors,and stored the materials wherever we could findspace. There were about 40 of us living in the buildingduring the working day for 14 weeks!”

A further artistic challenge posed by the theatre –and one crucial to its success – was the issue of soundinsulation. Each of the various rehearsal rooms,studios and auditoria had to be effectively sound-proofed – for fear of disembodied voices driftingacross the stages. After much sounding-out of theusers’ requirements, the solution hit upon was to sepa-rate the main auditorium entirely from the rest of thetheatre’s structure – creating a concrete “box-within-a-box” attached on all sides with rubber acousticmembranes to avoid contact between metal and steel.Mike explained the importance of this difficult engi-neering challenge: “We were constantly aware that wewere building more than just a theatre,” he said.“When the theatre is being used and you have peopleperforming or music playing, they don’t want noisecreeping into the peripheral education and rehearsalrooms.

“The success of the project was down to the team Ihad on site and the subcontractors who were helpingus out. At the end of the day we handed the buildingover and it opened when it should have and both chil-dren and adults seem to love it.”

Another Balfour Beattyproject which has receivedsimilarly rapturous plau-

dits from both public andperformers is the Sage Gatesheadin Newcastle-Upon-Tyne.

While Balfour Beattysubsidiary Haden Young was notresponsible for the music venue’ssweeping external shell, theyarguably played one of the mostcrucial roles of all – ensuring thesound quality of the SageGateshead could match that of anyvenue around the world.

As with the Unicorn, there wasa need to isolate the two hugeauditoria and the rehearsal hallacoustically, but the challengefacing Haden Young ProjectManager Ray Henderson was thatmechanical and electrical servicesstill needed to travel betweenthem.

“The acoustic challenges werethe greatest that we faced,” hesaid. “Because the Sage Gatesheadis an unusual shaped building, andbecause of the noise both insideand out, you have to come up withsome innovative solutions to over-

come any potential noise andvibration problems. We had fore-seen most of these problems, but ofcourse there were several thatcropped up during the construc-tion process; there was a brief andwe developed that as time wentby.”

With the mechanical and elec-trical services supplemented byaround 100km of cables for data,sound and video, broadcast andother specialist electronic theatresystems, it was imperative thateveryone involved in the projectunderstood what was required.

To achieve this, and to deal withany unforeseen problems, Ray helda number of workshops in whichhe and his foremen could discussthe solutions together. “It wasfairly simple,” he explained. “Justsitting in the cabin for about halfan hour chatting with them aboutwhich components to use whenthey encountered a certainproblem; which chart to use when,and so on.

“It was very informal and madesure that everyone was clear whatwas required. This was especially

important because this projectheld several unique aspects for us,especially with the acoustics. Itallowed us to effectively filter allthis new information downthrough the foremen, to theworkers on the site.

“The workshop system gave acertain amount of autonomy to theforemen, but it also gave themsome comfort and confidence inwhat they were doing – if they hadany questions, they could alwayscome back to us and make sureeverything was clear.”

When the venue opened inDecember 2005, the team’smethods proved to have been righton key, with both musicians andthe public acclaiming its world-class sound quality.

Ray admitted that the projecthadn’t been easy, but agreed thatthe reaction had made it worth-while: “I’ve still got the scars, butI’d say that it was a combination ofhard work and dedication byeveryone involved made the projecta success. The building does exactlywhat it should do and the musi-cians and the public all love it.”

The success of two major arts projects depended on Balfour Beatty’s flexibility and problem solving skills

Stage work takes a bowBelow, the Sage

Gateshead.

Lord Attenborough opens the Unicorn Theatre,the UK’s first theatre dedicated

to children

During the past 15 years Berlin has aptlybeen described as a building site out ofwhich have grown architectural landmarks

such as the skyscrapers in Potsdamer Platz and theultra-modern Chancellory.

Located in the government district of the city,the Hauptbahnhof (literally, main train station) isBerlin’s final post-reunification constructionproject and is hugely important. It will allowmetropolitan, regional and international trains toconverge at one central station for the first time inBerlin’s history.

A key part of this is the new 9km long ‘North-South Connection’ which includes a 3.5km tunnelunder the River Spree, linking the northernsection of Berlin’s Inner Ring Railway with theAnhalter and Dresden Railway at Papestrasse

Station in the south.One of the key benefits of this new connection is

the reduction of overall travel time betweenMunich in the south and Hamburg in the north byas much as 40minutes.

Balfour Beatty Rail – acting as Deutsche Bahn’sleading contractor – has completed the technicalinstallation work associated with the new 4-tracktunnel in just under two and a half years.

Michael Thiel, Director, Business Unit Projectswithin Balfour Beatty Rail GmbH Power Systems,is delighted that the company has successfullycompleted its Euros 45 million contract.

“The equipment was switched on for its initialtest phase in December 2005, cost-neutral and twomonths earlier than planned,” he said.

“There were many challenges along the way but

we proved our capability as general contractor,”says Michael. “This involved managing subcon-tractors, mediating and coordinating all works inthe track area as well as the tunnel section, plusguaranteeing the final completion target date.”

Architect Meinhard von Gerkan has dubbedthe new station a ‘transport cathedral’, and with itsbold, transparent design it’s easy to see why. Builton five levels with twin glass towers framing a 321-metre long glass tunnel covering the east-westtracks, some 300,000 passengers and visitors areexpected to pass through the station every day.

At ground level passengers have access to bus,tram and taxi connections, and above this on thefirst floor lies the east-west train lines of the Stad-bahn (S-Bahn) or city lines. The second floorcomprises a pedestrian level with retail and

Connecting the new BerlinWhen it opens in May this year, just in time for the 2006 FIFA World Cup, the new Hauptbahnhof railway station in Berlin will become Europe’s largest rail hub.

As general contractor, Balfour Beatty Rail has played a vital technical and commercial project management role, providing power systems for the new north-south tunnel.

catering outlets. The main station and parking issituated below ground level with the north-southtunnel below this.

Michael Thiel explained that the extremely highnumber of alterations to the project was a majorchallenge, but were necessary to facilitate the instal-lation of the most up-to-date technology possible.These changes had to be made when the construc-tion phase was already underway.

“The removal of fully installed equipmentproved to be unavoidable,” he said. “Even so, theapparatus could still be handed-over ahead ofschedule.”

A major design consideration was the provisionof fire safety and disaster prevention measuresaccording to national railway inspectorate guide-lines. Two overhead contact line voltage test mecha-

nisms were therefore installed at both ends of thenorth-south tunnel. In emergencies, this equipmentlets the rescue authorities know with absolutecertainty whether the overhead contact line is liveor dead.

The most technically demanding parts of thehigh voltage power supply equipment constructionwere at the Hauptbahnhof Station itself. For thisalone, Balfour Beatty constructed two changeoverstations from the public supply grid. Undergroundinstallations were fitted with equipment for thesupply of various services and waste disposal. In thecase of a tunnel accident or fire, the hydraulic andventilation systems open the emergency exit stair-wells and the separate fire brigade rescue routesand keep them free of smoke and fire. The emer-gency exit stairwell rescue stations were connected

with the public road system and the tunnel rescueroutes fitted with approximately 15 km of handrailsand gangways as well as luminous rescue signs aspart of the evacuation guidance system.

A total of seven pump-works are used to pumpthe tunnel free of water. Four pumps remove fireextinguishing water and water introduced bytrains, and three remove rain and operating water.

Overall this project has been a major showcasefor the project management skills of Balfour BeattyRail GmbH Power Systems.

“Our customer, Deutsche Bahn AG, is veryhappy about the project execution and the jobBalfour Beatty Rail GmbH Power Systems hasdone,” said Michael Thiel. “We have clearly demon-strated our competence in handling multi-discipli-nary projects.”

Rail round-up Rail round-up20 21

NOW nearing completion, the £50 million contract in Chile involvedthe installation of trackwork and conductor rails to form two much-needed new lines for the Santiago Metro system. Balfour Beatty Rail

Projects Project Director John Latham described the project as “probably thebiggest challenge I’ve faced in my career and certainly one of the most satis-fying. It was a ferocious learning curve.”

This is something of an understatement. Unable to speak Spanish, havingyour Brazilian joint venture partner go bankrupt, dealing with a work force of2,000 people from 14 different countries, and trying to recover months of lostwork due to delayed civil works all added up to an extraordinary set ofcircumstances for Balfour Beatty Rail Projects.

On top of this, the team had to deal with a request for part of the work tobe speeded up so an official opening could be made in one of the key suburbs.

“Not delivering the project on time just wasn’t an option,” says John.“Civil work at ground level, in tunnels and a viaduct had been held up for avariety of reasons by other contractors and we had to recover 8-14 months ofdelays in a very short time. It certainly wasn’t easy but we managed it throughhard work, careful planning and keeping everyone motivated.

“Work was completed on Line 4, which represents about 80% of the totalwork, in autumn last year - thankfully allowing the railway to open to revenueservice ten days prior to the presidential elections.”

Santiago has a population of around six million people and suffers frommajor traffic congestion and air pollution. The new Lines 4 and 4A of theMetro system are designed to allow faster, cleaner and safer access to the cityfor people in the more remote south-eastern suburbs.

Work began for the team in June 2004 and involved the construction of33km of double tracked main line. Uniquely, while the rest of the SantiagoMetro system uses a rubber-tyred vehicle system on a concrete base, the newlines have been installed to run using conventional steel wheels on a steel rail.

With Line 4 complete, all concreting has now been completed for Line 4Aand trackwork should be finished shortly. The contract also includes a two-year full trackwork maintenance period for the project, and this has been setup and is in operation.

“The client, Santiago de Metro, is delighted that Balfour Beatty RailProjects has achieved its goal,” says John.

“It’s already asked Balfour Beatty Rail Projects to tender for extensions to

On track for bigger businessWith its first ever project in South America almost completed, and a major new contract in Australia,

Balfour Beatty Rail Projects is extending its reach by taking its expertise to the southern hemisphere

Lines 1 and 5 of the system, which we’re happy to do aswe already have a well-established team in the city.”

Now in an operational management role, JohnLatham is also looking after several other overseas proj-ects, including ongoing involvement with the SantiagoMetro, giving him the opportunity to improve hisSpanish.

BY autumn 2006 passengers travelling on theWaterloo & City line – known as ‘the Drain’ – willbenefit from quicker, more comfortable journeys withfewer delays, thanks to a £25 million contract to becarried out by Balfour Beatty Rail London UndergroundServices.

Unusually for such a major project, the undergroundline will be completely closed to passengers for fivemonths between April and September this year. This isthe first time such an extensive closure has been usedunder Metronet’s PPP agreement and was deemed byLondon Underground to be the most efficient way ofachieving the capability improvements in track speedand journey times. The alternative to the full closurewas to schedule consecutive weekend possessions over18 months.

“This is the most important contract to be carriedout in the Underground network this year,” says RichardAdams, Managing Director for Balfour Beatty RailLondon Underground Services. “The complete closureof the line will allow an unprecedented way of workingthat we hope will give LUL and Metronet confidence inmore major closures being used in the future.”

Working closely with Metronet and London Under-ground from a shared office at Waterloo, Balfour BeattyRail will co-ordinate the complex logistics involved. Asthe line runs under the River Thames and is uncon-nected to the main tube network, all plant, spoil and new

materials for the works will have to be craned on to theline down a lift shaft or using the depot’s existing 5-tonne hoist. Four purpose-built battery locomotives willtransport all materials through the tunnels.

The project covers the renewal of 4.2km of trackbetween Waterloo and Bank stations, including theinstallation of 5,600 new concrete sleepers, new runningand conductor rails. A new traction power supply willalso facilitate 24-hour rolling stock maintenance aspresently this work stops at night and on Sundays due toa lack of a separate power supply to the depot lines.

As part of the contract, the line’s signalling systemwill be replaced, which will allow trains to negotiate thecrossover at Bank station at higher speed and reduceturn around time at Waterloo. In addition, BalfourBeatty Rail will work with Bombardier to install a newcentralised control system, allowing all five Waterloo &City line trains to be run during peak times.

While the trackwork is being renewed, the line’srolling stock will be removed for refurbishment. Addi-tional work includes the alignment of platform and trainfloor levels at Bank and Waterloo as well as the reloca-tion of a train washing plant to facilitate more effectiveand frequent train cleaning.

Acontract valued at £87 million has been awarded toa joint venture including Balfour Beatty Rail Projects bythe Australian Rail Track Corporation Limited (ARTC)for the upgrade of the existing rail link between Sydneyand Brisbane.

The three-year project is part of the ARTC’s majorworks to improve Australia’s interstate rail network.Scheduled for completion in 2008, the project, to becarried out in a joint venture between Balfour BeattyRail Projects and Barclay Mowlem ConstructionLimited, will increase capacity, reduce transit times and

improve reliability.The works cover more than 800km of railway and

include crossing loop extensions and upgrades, trackimprovements and associated works such as bridgestrengthening and level crossing upgrades.

The contract between ARTC and the Balfour BeattyRail Projects and Barclay Mowlem joint venture is analliancing contract and there will be an open partnershipbetween the customer and the contractor joint venture.Balfour Beatty Rail Projects has extensive experience ofpartnering and alliancing gained on similar projectscarried out in the UK.

l Balfour Beatty Rail Signalling has scored asecond SSI-based win in East London with the award ofa £6.6 million contract for signalling equipment and adepot protection system for the new Channel TunnelRail Link (CTRL) Eurostar depot at Temple Mills,Leyton.

It follows the award of the Ripple Lane signallingproject, and brings to four the number of CTRL-relatedprojects awarded to Balfour Beatty Rail this year.

The project is due to be completed in March 2007and comprises design, supply, installation and testingand commissioning of the depot’s new signallingsystem. It incorporates two SSI interlockings and amodular control system, with the supply and installingof the protection system.

Temple Mills is alongside the existing Lea Valleylines, and will provide stabling, servicing and mainte-nance of Eurostar’s fleet of trains, replacing the NorthPole International depot in West London.

It will contain all the facilities necessary to supportthe operation of international trains, with access to theCTRL by a link emerging at the new Stratford Interna-tional station.

“The biggest challenge I’ve faced in my career and certainly one of the most satisfying. It was a ferocious learning curve.”

Balfour Beatty Rail Projectsworkers installing new track

for the Santiago Metro systemin Chile.

Adam Stuart, Project Director, Balfour Beatty Rail unveils the engineering train with leftto right: Jack Carter, Metronet Programme Manager for the Waterloo and City closure,Len Lovis, Contract Implementation Executive at London Underground's ChiefProgrammes Office and Stephen Hall, Metronet Chief Programmes Officer.

Above Waterloo and City trains are inspected in situ and, right, are removed forrefurbishment.

Foundation solutions Energy report22 23

THE energy generator Barking Power lost animportant customer when TXU Europe wentinto administration in November 2002.

Balfour Beatty, as a 25.5 per cent shareholder in theBarking business, was closely involved in theprocess to agree Barking’s £179.3 million claim withTXU’s administrators.

To make things more complicated, American-owned TXU had an equity interest in Barking Power,as well as its power purchase agreement.

Following the insolvency, Barking received a firstdividend of £112.3 million in March 2005, withfurther distributions of £32.2 million and £31.7million in August 2005 and January 2006. The initialdividend from TXU generated a post-tax gain of £68million, of which Balfour Beatty’s share was £17million.

The main shareholder in Barking, with a 51 percent stake, is Thames Power (jointly owned byBalfour Beatty and ATCO). The rest of the equity is

owned by Scottish & Southern Energy and EDFEnergy which have bought out TXU’s shareholdingfrom its administrators.

TXU had held one of the Barking power station’sthree power off-take contracts, due to run 15 years toSeptember 2010. Out of the station’s 1,000-megawattcapacity, TXU was buying 275 MW.

“When TXU went into administration and thatcontract fell away, we were left with more than 27

per cent of our output unsold,” said CommercialManager Rachael Clarke. “Barking is a small playerand didn’t have the means to sell on the market inthe same way as the bigger names. So for the past 18months we’ve been marketing through a third party –a company owned by Merrill Lynch – and using theirtrading expertise.

“Making the claim against TXU involved a vastamount of work and was hugely time-consuming.Eventually a Company Voluntary Arrangement wasput in place and the funds released have made a bigcontribution at Barking.”

That is not the only way the company’s fortuneshave improved, Rachael added. Power prices werelow when TXU went into administration, but themarket is improving now.

“Prices have moved upwards in the past year orso, which has been in our favour – and the station iswell situated in the south-east, which is an area ofhigh demand in the UK.”

Energy supplier Barking Power moves ahead after TXU setback

SHIFT OF POWERFounded in 1989 in Bacup, Lancashire, and now

with regional offices in Milton Keynes,Gloucester and Stirling, Scotland, Pennine is an

acknowledged market leader in ground improvementtechnology with an impressive £16 million in sales lastyear and an operating profit of around £1.5 million.

And, according to Pennine Managing DirectorArwel Williams, the company has ambitions toincrease turnover to £30 million within five years.

“As part of the Balfour Beatty Group we nowhave the financial backing to expand our operationand grow turnover, both in the UK and overseasmarkets,” he says.

Around 85 per cent of Pennine’s business nowcomes from its contracting services, which coversdesign and installation for ground improvement andpiling systems using the company’s own specialistequipment, which can be easily transported world-wide.

“Our strategy is to enter into contracting jointventures with partners who really know the localmarkets,” says Arwel. “We’ve done this successfullyin Spain, the USA, Indonesia and China. Now we’realso exploring contracting opportunities in theMiddle East thanks to the Group’s presence inDubai.”

TTaarrggeettiinngg ggrroowwtthh

The company is also carefully targeting overseasterritories where it sees growth potential, forinstance the USA.

“The stone column market in the US is wortharound US$300 million – that’s ten times the valueof the UK market, of which we already have 48 per

cent. This represents a major opportunity for us.”Another growth market is Spain, where Pennine

has a successful joint venture with local contractorGeocisa – a partnership that should yield a turnoverthis year of £8.5 million.

“Right now we’re working on a number of majorground improvement schemes in Valencia, includingan underwater scheme in the port in preparation forthe Americas’ Cup in 2007,” says Arwel.

UUKK OOppppoorrttuunniittiieess

Back home, Pennine is well placed to exploitongoing opportunities stemming from the trend todevelop brownfield sites for residential and indus-trial use and works closely with another BalfourBeatty company, Stent Foundations.

“Graham Wren and his team have been veryhelpful, “ says Arwel. “We’ve worked on a numberof large projects together since the acquisition. Wecomplement each other well as the combinedexpertise in piling and ground improvement of ourtwo companies enables us to tackle all types of foun-dation work.”

One recent joint project with Stent was the prepa-ration of 20,000 sq. metres of ground nearGloucester docks for a new college being built byBovis Lend Lease.

“We specialise in solving problems with weaksoil, getting it ready for any sort of constructionwork,” says Arwel. “We’ve worked with BalfourBeatty companies in the past, such as the M25widening scheme, and we’re looking forward todeveloping working relationships with other parts ofthe Group. Just give us a call!”

The Pennine way

“Making the claim against TXUinvolved a vast amount of work

and was hugely time-consuming.Eventually a Company Voluntary

Arrangement was put in place andthe funds released have made a big

contribution at Barking.”

Last August Balfour Beatty acquired ground engineeringspecialist Pennine Vibropiling. Bringing innovative techniques

and capabilities, the addition of Pennine strengthens the Group’sposition in this market and enables the full range of foundation

solutions to be offered to our customers.

Arwel Williams, Pennine Managing Director

Valencia Port Extension – Pennine AquacasterGlousCat (with Stent)

THE United Arab Emirates’ answer to Manhattanis on its way in Dubai and Balfour Beatty is in at

the start.Much of the UAE’s success as a business hub can

be traced to the creek around which Dubai was built.Dubai Properties has masterminded a developmentwhich will extend this historically important body ofwater from its inland end back to the Arabian Gulf,some 13km away. A new commercial and businessdistrict will be developed at the water’s edge, whichis why the area has become known as Business Bay.

The concept is to create a new regional businesscentre that reflects old Dubai by incorporating thecreek into the city’s rapidly expanding urban devel-opment. In meeting demand for commercial andresidential waterfront property, the project follows inthe footsteps of projects such as the Palm Jumeirahand Dubai Marina.

The first phase of the Creek extension contracthas been awarded to the Dutco Balfour Beatty Group– the construction company owned jointly byBalfour Beatty and locally-based Dubai Transport

Company (Dutco). It involves constructing the initial7km section of canal from Sheikh Zayed Road toOld Metha Road.

Varying in width from 120m to 280m, the maincanal has many bends and smaller offshoot canals.The completed waterway will be five metres deep onaverage. The section currently under construction is2.5km inland. Water has been removed by auguring500mm diameter deep-wells to a level of 10m deep.The wells have been installed at 75m centres alongeach inner face of the quay walls.

The distance from the sea and the absence ofsurface drainage outlets meant that, in the earlystages, ground water had to be pumped into a seriesof temporary ponds at ground level on either side ofthe canal. As construction of the quay wallprogresses, temporary dams will be formed atstrategic locations, between completed sections ofthe canal and the working front. Pumped water willbe discharged into the section just completed.

Where possible, dams are at proposed bridgecrossings to assist future bridge construction. These

will be removed at the end of the contract, by acombination of conventional excavation andpontoon-mounted underwater dredge pumps.

About 530 people are working on site and theproject requires some 1,450 cubic metres of concreteevery day, so a precast yard and a batching planthave been set up. These are located at the canal’swidest section so operations will not be affectedwhen developers occupy plots as the quay wallprogresses.

Temporary dams have been constructed at eachend of the precast yard so that it can be excavated inthe dry at the completion of the contract.

Quay wall blocks are lifted from the precast bedsby two 60T and one 80T crawler cranes onto trailerswhich transport them to the quay wall where a pairof 100T crawler cranes place them in their finalposition.

Project Manager Andrew Watson’s senior team areCommercial Manager Muzafar Ali, Chief Engineer GJReddy and Section Managers Qazi Ahmed (earthworksand dewatering) and Anish Abraham (quay wall).

Dubai projects Dubai projects24 25

“The main challenge is the fast-track require-ment,” said Andrew. “The contract was origi-nally tendered with a 24-month duration, butthat was subsequently reduced to 16 monthsduring our negotiations with the client.”

Rapid mobilisation and training of newly-recruited labour were essential to get the projectoff to a successful start. The repetitive nature ofthe work meant that once the managementorganisation and work systems were in place, itwas a matter of extensive performance moni-toring and fine-tuning.

“We have a very experienced and highlymotivated site management team, who havereally stepped up to the mark. We’re 36 per centof the way through the contract time, but we’veplaced 40 per cent of the quay wall blocks.We’ve absorbed the initial start-up period andwe’re now pushing further ahead of programme.

“The client appears to be impressed by ourperformance so far, which is essential, as there’sextensive scope for further work in the develop-

ment. Negotiations have started for follow-onsections of the Creek, service tunnels andbridge crossings,” said Andrew.

Area Manager Henk van Es sees the projectas part of an ongoing success story.

“Dubai in 2006 is a most exciting place andwe are proud and feel privileged to be part ofit,” he said.

“Dutco and Balfour Beatty have beentogether for more than 30 years and the rela-tionship has gone from strength to strength.April 2002 was an important milestone whenall existing partner businesses were merged inone integrated group. We’ve quadrupled thesize of the core business since then. At thesame time we started two joint ventures formajor projects which equal the core businessin size.

“We’re now one of the leaders in the Dubaiconstruction scene. As such, we want to beone of the main drivers in setting higherbenchmarks for quality of work, and increating innovative approaches to meet thechallenges generated by Dubai’s constructionboom.

“This is just as vital as raising the generalawareness. It emphasises the importance ofconstantly improving health and safety stan-dards across the industry. These are funda-mental principles on which Dubai prides itself,as one of the construction hotspots of theworld.”

Other major projects

Here is just a small selection from the DutcoBalfour Beatty Group portfolio

• Dubai Shopping Mall – the largest shoppingmall in the world being built at EMAAR’sprestigious Burj Dubai development in jointventure with CCC

• Ikea and Hypermarket at Rashidiya, Dubai• First two of EMAAR’s eight planned

mosques• Green Mosque project• AX 096 GSE road east of Dubai International

Airport• Marina Heights Tower and other high-rise

projects• GCAA Building• Palm Island Interchange by Internet City on

Sheikh Zayed road

Dubai’s main waterway is being extended to create a handsome setting for a major new business district

On the waterfront

PFI initiative Arts for Health26 27

Balfour Beatty is set to bring major facilities tothe people of Birmingham, with a state-of-the-art hospital and new-look schools.

The company is part of the Consort Healthcareconsortium, which is the preferred bidder for the£552 million Birmingham New Hospitals project.

University Hospital Birmingham Trust and theBirmingham and Solihull Mental Health Trust havecreated a 40-year private-public partnership conces-sion expected to reach financial close shortly. Thecity’s first new general hospital for 70 years will have1,231 in-patient beds, and there will also be a 137-bed specialist psychiatric hospital and teachingsection, as well as local mental health facilities inSparkbrook (45 beds).

The project will bring most of south Birm-ingham’s key medical facilities onto a single, state-of-the-art site – and address the Trust’s ambitions forgreater efficiency, more space and improved patientcare.

Balfour Beatty is likely to take a stake of about£22 million in the scheme. The construction will be ajoint venture between Balfour Beatty Construction,the Group’s building arm, and Haden Youngproviding the M&E services.

Facilities management for ‘hard’ services will beprovided by another Balfour Beatty subsidiary, HadenBuilding Management, under an arrangement whichcould yield approximately £300 million over the totallife of the concession.

Ian Woosey, Bid Director and General Managerfor Consort said: “The scheme is the largest PFIhealthcare project outside of London and, with therumoured changes in Department of Health policytowards procurement of smaller PFI healthcareschemes in the future, this is an ideal opportunity forthe Balfour Beatty organisation to demonstrate itskey skills in the delivery of large and complex proj-ects.”

John Charlton, Chairman of University HospitalBirmingham NHS Trust, called it “one of the mostexciting developments ever seen in healthcare”.

“We’ll have the most up-to-date hospital facilitiesin Europe, if not the world,” he said.

These will feature the best in contemporarydesign and dynamic areas able to respond to ever-changing patient needs. Public consultation will assistthe choice of interior design and artworks.

The hospital should be able to offer its first acutecare services towards the end of 2009. By 2011

Birmingham will have an internationally recognisedcentre of excellence for adult healthcare and inte-grated mental health services, as well as training andresearch.

Meanwhile, Balfour Beatty is also part of Trans-form Schools, the consortium Birmingham CityCouncil has appointed for the £75 million Birm-ingham Schools PFI concession. The project reachedfinancial close in March, and will provide the citywith 12 new schools – two secondary, nine primaryand one early years centre.

“We’re delighted to have been chosen to rede-velop Birmingham’s schools and provide a muchenhanced environment,” said Mike Hudson, ChiefExecutive, Transform Schools. “This brings our PFIschools portfolio to five and was the third schoolsproject in just a year.”

Birmingham education chief Councillor LesLawrence said: “We want teachers and pupils to havethe best environment for teaching and learning. Ourfirst public-private partnership has been successful,with 10 schools rebuilt or refurbished, and we hopethis scheme will be equally successful.”

The first schools will be handed over in 2007 andthe remainder completed in the following two years.

Group subsidiaries Balfour Beatty Constructionand Balfour Kilpatrick have entered a 30-year joint

venture with Transform Schools, while anothersubsidiary, Haden Building Management, iscontracted for more than £40-million-worth of facili-ties management during that period.

Only the best for BirminghamPrivate Finance Initiatives bring world-class hospital and schools to the Midlands

That’s more than entertainment

World class: a flagship hospital for Birmingham

Light and enlightenment: how the library willlook at Hobmoor Primary School in Yardley

Arden Primary School in Sparkhill will involve a new buildas well as an existing classroom block

PEOPLE’S state of mind is importantwhen it comes to dealing with illness –whether they are patients, health profes-sionals or family and friends. That is thethinking behind the Arts for Health initia-tive at University Hospital North Durham(UHND).

The PFI hospital is run by ConsortHealthcare, a consortium whose membersinclude Balfour Beatty. Durham has expe-rienced one of several Arts for Healthschemes that Consort is promoting aroundthe country.

“The aim was to provide an opportunityfor all UHND employees, patients andvisitors to spend time together, engage inarts activities and to generate a discussionamong health professionals about the bene-fits of arts in the healthcare world,” saidJuliet Fraser, Community EngagementManager at Balfour Beatty CapitalProjects.

Five activity days were held over threeweeks last summer, with storytelling, livemusic, singing, dance and visual arts.Fifty-eight artists were involved in 35hours of activity, taking in 10 wards, acci-dent and emergency, outpatients and thehospital’s main reception and restaurant.More than 100 patients and 50 clinicalstaff, along with other hospital staff andvisitors, took part in five activity days.

On the visual arts side, the projectproduced two permanent murals andceramic signs for the main entrance andTreetops Ward, as well as a framed collageto display in the hospital and a photo-graphic exhibition in the intensive therapyunit.

The storytelling day brought shadowpuppets and traditional tales, while themusic day ranged from Tabitha Tuckett’swandering minstrels to jazz singerMargaret Frayne and ‘sound sculptures’

with chime bars. The minstrels returned fora singing day, which also included acommunity choir singalong. And the seriesended with a family arts day, with t’ai chi,Southern Asian dance, street dance, a teadance and corridor art displays.

“The Arts for Health events have beenvery welcome at the Trust, improving theexperience of patients on the wards, andthe general hospital environment for staff,patients and visitors,” said Marion Dilley,Associate Director, Nursing and Quality, atCounty Durham and Darlington AcuteHospitals NHS Trust.

“We’re delighted to be working withConsort Healthcare to continue this impor-tant project at University Hospital of NorthDurham.”

The initial £10,000 scheme was fundedby Consort Healthcare, whose OperationsDirector, Kevin Walker, said: “During theoperation of the Consort Hospitals it’sbecome apparent just how positive theeffect of bright, well designed and main-tained hospitals can be on the wellbeing ofthose using and working in the buildings.Although over and above our contractualcommitment to the NHS Trust in Durham,we felt the Arts for Health programmeembodied the many positive aspects thatwe can bring to the hospital setting.

“The programme was evaluated by theUniversity of Durham, who are carryingout research into the benefits that arts canbring to patient care, and this perspectiveappeared to be borne out by the positiveparticipation of patients and staff intomany of the events.”

Juliet Fraser added: “This projectdemonstrated the valuable role of arts inthe healthcare setting. It opened up thediscussion of incorporating arts activityinto the plans at UHND for years tocome.”

Wonderwall: the art corridor

Something fishy: the sound sculptures makemusic from the breeze

Transport hub28

London’s King’s Cross and St Pancras mainlinestations and their London Underground(LUL) infrastructure are set to become a

showpiece transport hub. Passengers arriving from Europe will be able to

connect with the Tube and national rail services in astate-of-the-art interchange. Channel Tunnel RailLink (CTRL) high-speed commuter services,expected to launch in late 2009, will also bring asignificant increase in passenger numbers.

Balfour Beatty Management is playing a key rolein LUL’s programme of upgrades. The Departmentfor Transport (DfT) funds the scheme, which itstarted with LUL in 1999. LUL appointed consult-ants to develop the design – and, in April 2003,contracted Metronet Rail SSL Ltd (MRSSL) to takecharge of procurement and project management forredeveloping ticket halls and carrying out Under-ground station works.

MRSSL placed the programme managementcontract with ABBT, a joint venture between Atkins,Thames Water and venture leader Balfour BeattyManagement. ABBT’s team – currently numberingjust over 100 – plans, procures and manages thecontracts for the LUL works, which are due to becomplete by 2010.

The first of the two phases provides a new

western ticket hall adjacent to St Pancras mainlinestation, as well as enhancing the King’s Cross Tubeticket hall. Access and the platform area for theMetropolitan and Circle Lines are being improvedand the scheme includes sub-surface link passagesand external works to roads and pedestrian areas.

Phase I is nearing completion, with the westernticket hall and the enhanced Tube ticket hall due toopen in the spring. Electrical and communicationssystems for a state-of-the-art railway operation mustbe linked to existing facilities, while keeping passen-gers flowing. The Underground station and platformrefurbishments are due to be finished by the end ofthe year.

Phase II is under way. Its main components are anew sub-surface northern ticket hall and tunnellingto accommodate escalator, stair, lift and subwaylinks to the deep Northern, Piccadilly and VictoriaTube lines.

Network Rail will build a new concourse on thetop slab of the northern ticket hall, which must becompleted in 2011 ahead of the Olympic Games. Itis essential that ABBT gives Network Rail access tothis slab by September 2008.

“We have challenging objectives in a highly regu-lated environment,” said project manager DavidDarcy. “We have to work under railway operating

regulations, as well as maintaining pedestrian andtraffic movements in a very busy hub. Safety isgiven prime importance and our record is very good.

“Many stakeholders are involved, including theDfT, Network Rail, Argent (developer for 67 acresbounding to the north of King’s Cross), PFI contrac-tors working on the Underground. There are also theLondon Boroughs, English Heritage (St Pancras is alisted building), railway companies, Transport forLondon, British Transport Police, retailers and othertenants in the stations. We have a lot of contact withall of them for consents, approvals and interfaces.”

During Phase II, Network Rail and LUL will startother King’s Cross projects and there will be acombined workforce of more than 1,000. Argent’slarge-scale development will also be starting. Roadsin the area tend to be congested anyway, so trafficmanagement is vital. Equally crucial is worksiteplanning for such a physically constrained situation.

“This project is high-profile,” said David. “It’simportant for London Underground and for the DfT,particularly with the Olympic Games coming toLondon. It’s also important for ABBT, and forBalfour Beatty Management as a growing BalfourBeatty Company. We’re determined and confident todeliver these major works successfully in allrespects.”

All change at King’s CrossBalfour Beatty Management leads a major public transport hub project for London

“This project is high-profile. It’s important for London Underground and for the DfT, particularly with the Olympic Games coming to London.”

Back row, left to right, Dave Cockle, Chris Field, VicWrightam, Rob Wrightam, Alan Bassett, Zen Nichols

Front row, left to right, John McIlhagga, NigelQuelch, Ian Simpson, David Darcy

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