Russia’s building market is still growing for Enka.
Istanbul-based Enka Construction & Industry Co. Inc. is Turkey’s largest construction conglomerate, reaching that pinnacle with projects almost all outside the country’s borders. Now among the world’s most international contractors, Enka is particularly well-situated some 1,800 km miles away in Moscow as one of Russia’ biggest builder-developers, a market its executives say is still going strong. “We do about $1 billion of contracts yearly there, and demand is growing,” says President Haluk Gercek. “We have about 350,000 sq meters of A+ office space in Moscow.”
Russia and other new democracies that emerged from the 1991 demise of the old USSR, Turkey’s northern neighbor, are compelling markets now for Enka in a host of growing sectors, from high-rise development to oil and gas and toll roads. Enka says it has completed more than 130 building, hospital, industrial and power projects in the former Soviet Union since first moving there in the Communist era.
That boom has boosted Enka’s own fortunes. Its total construction revenue rose 70% in 2007 to $2.25 billion, pushing the firm to No. 37 on ENR’s list of the Top 225 International Contractors (see story, p. 32.) Nearly all was gained abroad. Enka’s additional interests in energy, manufacturing, trade, retail and real estate generated $5.3 billion in total revenue last year, up $1.3 billion from 2006, according to public filings on its Website. It also reports $618 million in 2007 profit, up from $445 million the year before.
Much of Enka’s success is built on its unique niche in the post-Soviet economy. “I would say Enka is one of the biggest contractors in Russia today,” says Leonid Zborovsky, a Russian-speaking principal of New York City-based structural engineer Thornton Tomasetti Inc., which assisted the contractor on a 56-story, just-completed Moscow tower. He says Enka has some competition there from foreign contractors such as Austria’s Strabag Bau A.G. and Germany’s Hochtief A.G., both of which have new Russian billionaires as major shareholders. “We know the Turks well and we respect them,” says Hochtief CEO Herbert Lutkestratkotter.
|“There are still certain risks that we don’t want to take.” |
—Haluk Gercek, president, Enka Construction
But firms such as France’s Bouygues do not compete against Enka in Russia and others such as Sweden’s Skanska AB have shunned the market altogether. Skanska is now wrapping up work in Moscow and St. Petersburg, exiting when it could not make “the right profitability,” says President Johan Karlstrom. He complains about “code of conduct issues” and bureaucracy. “It is just a nightmare to get through anything,” Karlstrom adds.
Gercek is more relaxed about doing business in Moscow, having spent most of the 1990s there setting up Enka’s Russian operations. He says Russians “keep their word and fulfill contractual obligations.” Not unlike Turks themselves, Russians “are emotional...family people,” says Gercek. “There are many similarities.”
Public Yet Private
But despite the ethnic characteristics and Enka’s status as a public company, traded since 2002 on the Istanbul stock exchange, its ownership is intensely private. The firm has a $13-billion market valuation, but all but 13% of its stock is owned by its founder, Sarik Tara, now 76, and family members, including son Sinan, 49, who took over as chairman from his father at age 26. Enka’s co-founder, the late Sadi Gulcelik, was the elder Tara’s brother-in-law. The rest of Enka ownership is so dispersed that no single outside investor has enough leverage to influence decisions.
Enka is set to complete this summer a 50,000-seat stadium complex in Ukraine.
Sarik and Sinan’s good fortune landed both on Forbes’ list of global billionaires this year, the former worth $4.3 billion and the latter $1.9 billion. Sarik jumped more than 200 places on the 2008 list from the previous year. But even as the the boom benefits Enka’s financial bottom line and enriches its family owners, the company also invests in Turkey’s future, underwriting through its Enka Foundation, sports and cultural facilities and schools enrolling several thousand. The foundation sponsors two private schools, including one in Adapazan, a mid-sized industrial city ravaged by a 1999 earthquake.
Enka’s roots in Istanbul in 1957 are as a local civil and industrial contractor. The firm’s business then spread across Turkey, finally reaching overseas...