Can SK E&C win new orders after Laos dam collapse?

Lao Villagers evacuate after the Xepian-Xe Nam Noy hydropower dam collapsed in Attapeu Province, Tuesday (local time). / Reuters-Yonhap

By Nam Hyun-woo

SK E&C Vice Chairman Cho Ki-haeng

SK E&C will have an extremely hard time in winning new overseas projects, following the collapse of a dam it was building in Laos, analysts said Wednesday.

They are expressing concerns that the incident could raise serious doubts over trustworthiness of not only SK E&C, but also other Korean builders that are looking to secure contracts for construction projects in Asia and other parts of the world.

According to SK E&C and other sources, dozens of people were feared dead and hundreds remain unaccounted for after the Xepian-Xe Nam Noy hydropower dam in Attapeu Province in southeastern Laos collapsed on Monday.

SK E&C initially said the reason for the collapse was that the river “overflowed” sweeping away houses and flooding villages. The company said it has “discovered the upper part of the dam's structure had been missing” at least 24 hours before the water began flooding villages.

Though the cause and whether SK E&C is responsible for the accident is yet to be determined. The company, which is the leading construction consortium with a 26 percent stake, may face difficulties in winning projects in Laos.

“With the cause of the accident yet to be determined, the most urgent task for SK E&C will be damage relief,” an industry analyst said. “SK's moves in covering the damage will determine its fate in overseas project.”

The analyst said if SK E&C is responsible, it may face tangible penalties in future projects in Laos, depending on the content of contract.

SK E&C has been raising its reliance on overseas projects in recent years.

According to the ICAK, SK E&C has won overseas orders worth $2.52 billion in the first quarter of this year, which includes a $2 billion coal-fired power plant in the Philippines and a $737 million project building the Almaty Circular Road in Kazakhstan.

Since the mid-2000's, SK E&C has been focusing on overseas projects and its overseas orders peaked at $6.66 billion in 2014 and logged $4.32 billion in 2015.

But the orders nosedived to $212 million in 2016 due to declining demand in the Middle East and in North America. Thus, the solid numbers in the first quarter was regarded as a sign of recovery for SK E&C.

“It remains to be seen whether SK E&C is responsible for the tragedy,” an official at a Seoul-based builder said. “Since it was an accident which took lives, the tangible and intangible damage to SK E&C's overseas projects will be huge if it is found to be responsible.”

As the outlook for SK E&C's overseas projects becomes bleak, according to analysts, the incident is feared to adversely affect the reputation of other Korean builders looking for opportunities in adjacent countries.

“It will be obvious to bring a negative impact on the reputation of Korean constructors,” an official at another construction firm said. “Though Laos has been an unfamiliar market for Korean constructors, they have their footings in nearby countries, including Thailand and Cambodia, and stage fierce competition with rivals from China and Japan.”

“Given that such an accident will deal a blow to the trustworthiness of Korean builders, the most important thing is the cause of the accident,” he said.

SK E&C said the company is actively working on personnel recovery and damage relief with the Laotian government, and is making its utmost efforts on determining the cause of the accident.