You have several divisions in the company, what is the share of each in the total of operations, are you concentrated in one of the divisions in particular?
Tecnoconsult was established in 1967 and basically it was a power and electric company. In the late seventies and eighties we concentrated on engineering services for the oil sector because it was the market in the country. Then our next step was going into the construction services, specialized in construction management to finally assume construction responsibility. Thus, Tecnoconsult has gone from an engineering firm to an EPC contractor.
We have two additional activities, one being operation and maintenance company which is a rather new activity since we started it about two years ago. The other is business development, where we are acting as promoter.
Summarizing, we work in the activities of engineering, procurement, construction, operation and maintenance. In addition to this, there are business development, where we take the idea from beginning and develop the feasibility analysis, equity investment and financing structuring and then design and build the project facilities. Thus, in some cases we go in as major investors, other times we look for partners. I would say that this activity compliments the services we offer. One of the companies in the Group, Tecnopetroleo, acts as project developer and equity investor in Oil and Gas business. Right now we have a project in the refinery's downstream currents where we are majority shareholders.
What is the most important area you see in the future?
In Venezuela , for the short term, it is the engineering and the EPC work (engineering, procurement and construction work).. The most important area I see in the future aside from the EPC is the operation and maintenance of industrial facilities and infrastructure. More and more we see that outsourcing has reached our country, and we in Tecnoconsult are active in this area. We are now operating two docks in the Jose area; we just got a contract in a joint venture with Oiltanking for the operation and maintenance of the petrochemical dock at Jose.
Our readers would like to know some figures, shareholders, stocks, structure, number of employees and perhaps your turnover as well?
Tecnoconsult is a private company. The founder of the company is Mr. Francisco Gonzalez who still is closely related to the company. There are some other stockholders; most of them once worked for the company. The turnover is around one hundred and fifty million dollars per year, including the construction work. This figure is for Venezuelan projects . We have made the decision to work abroad and we are very active pursuing this objective.
Can you describe your financial position? You describe yourself as a private company, do you plan to go public and what would be the circumstances that would lead you to such a decision?
We have considered that and we would like to do it eventually. One of the problems we have in Venezuela is that the Venezuelan capital market does not have the size and deep for being a practical funding alternative to companies like Tecnoconsult. Sometime in the future it could be a possibility to become a public company abroad, but not on the short term. Nevertheless, we have debentures in the local market. Just yesterday we issued two billion bolivares in corporate bonds. This has been done successfully several times .
Are you also targeting international investors in this occasion?
At this moment not really (for company's equity). We do not feel the need to do so. We are looking for projects outside of the country. We are open and actively looking for investors for certain projects in the country, where additional project equity and financing is required.
Besides those two projects that you mentioned you have also been involved in a project called "Lomas de Niquel" is that already accomplished?
The Loma de Niquel project has just been finished. The owner of the project is a local company called ANSA, which is a partnership between Anglo American and some local partners as minority shareholders. What we did there was the engineering and some procurement and construction management assistance. We were not responsible for the EPC work on that project. We still have around thirty people working construction management activities.
There are two areas that are traditionally controlled by the government - which are gas and oil - who is now keenly interested in their opening? What would you like your participation to be in these sectors?
We have been for long time working in Oil and Gas in Venezuela and of course are looking for projects concerning these areas. We are considering going into the new projects in the gas sector where equity participation is required. There several gas projects taking place in the near future. One is the so-called SERCOGAS (gas compression facilities around the country), some pipelines for gas and several projects related to gas field exploration and production. For the last ones we are planning to participate into the gas field's bidding process that the Venezuelan government will open to private investors. For this purpose we are in conversation with local and foreign companies in order to enter into joint ventures for those projects. Also, we are part of the ACCRO III and IV project, which is a large gas-liquid separation project where w are participating as a minority shareholder and we are the EPC contractor in a joint venture with a foreign company.
What would be the profile of the international partner you would consider working with?
First of all it has to be a partner that is willing to come to Latin America and invest into a project equity, because we are talking about Venezuela and the surrounding countries. They also must be clear on the sort of business they are coming into. It is not about investing in a project and then pulling out before the projects end or even in the short. It must be a partner that want to invest in the project; not like the capital market where one can go in or out at will. We would like to find someone who is interested in the energy sector like oil and gas or electric power generation since at these sectors is where we foresee projects in the near future. They have to be compatible with what we are looking at, when considering the country risk for the evaluation of the investment. Many believe we do not have a choice and should not worry about this issue because we are already in the country, but that is not true, like a foreign investor we could always go elsewhere with our own investment and work. We always have the alternative in becoming an international company. We have chosen to stay and invest in Venezuela as well as look for work abroad.
You have mentioned your plans to expand your activity in other countries, where exactly? Alone or with other financial partners and what is the overall strategy?
Our medium term objective is to have a significant portion of our revenue from operations abroad. It is not because we do not believe in Venezuela, but we feel that the Venezuelan market is not large enough. If we want to grow and expand ourselves we have to look outside the country. The other reason is to achieve a balance; our business will always have ups and downs and we must be preqared to cope with this characteristic of the business. We have to increase and decrease the manpower, our main assets: our people. One must accommodate and follow the markets. When you diversify to other markets you achieve better stability as well as more opportunities for healthy growth.
| In Colombia we have an office since last year. We are looking for EPC projects and also considering the development of oil field. Also, we have worked in the Caribbean, Dominican Republic, and Central America countries like Honduras. At present we are bidding for two projects in the Dominican. It should be pointed out that we look for local partners wherever we bid our services abroad.
What do you appreciate most of the local partners you are working with in other countries, is there contact with local expertise?
To achieve having a presence in any country, local knowledge is important. One must know the local approach on how to do business. It allows you to have better credibility and probability of success when you arrive in a new country. We do know that in order to do successful business in a country different to yours, a local partner is needed. The same happens when a company comes to Venezuela from another country. They need Venezuelan expertise and we have been able to provide them with the necessary assistance. Thus, we will not go anywhere by ourselves without local participation.
Everyone in Venezuela is aware of the tight competition that exists in the construction sector, how do you stand out in this competitive environment? What are the comparative advantages of Tecnoconsult here in Venezuela?
I feel that right now there are a couple of things that make us stand out. We have proven that we have very strong management ability. Our organization procedures and systems are well in place and proved in many successful projects. We do deliver; if we do something and it has to be modified, we do it. There is a highly professional approach in all our work. We do work under competitive terms and have been very creative when bidding and latter executing major projects. We have also diversified as much as possible. It must be also pointed out that Tecnoconsult is the financially healthiest Venezuelan Company in the engineering and construction sector. We have an A3 qualification for issuing of debentures in the local capital market, being the only EPC Company with such a financial rating.
The construction sector has gone through a recession period, nevertheless you have managed to keep your position in the forefront of this sector, what were the key factors behind this?
There are several factors for this; one of them being the reasonable risk management police we apply to define the level of risk for the amount of business we have. We have a healthy balance sheet, and a lot is related with the cash flow forecast and the corresponding planned debt level for the company. We had done very good projects in the past that serves as credentials.. We were about twelve hundred people one year ago. Now we are around a thousand because we had to adjust the staff, these amounts do not include construction labor but just the home office and staff personnel. We cannot keep the people in the company when there is not work for them, that is part of doing business in engineering and construction. It is not a pleasant thing to do, but it is the only way to survive when a downturn cycle happens.
How do you foresee the construction sector and how do you see the Venezuelan economy follow?
Economy recovery start with engineering work followed by construction. In the last months we are getting more requests of quotes for services related to the engineering stage of projects, we have also received requests for construction work. This is a sign that the country is really beginning to step out of the recession.
How do you see your company in the next four to five years?
Tecnoconsult will consolidate as a company for operations and maintenance services. We will also develop our activity outside of Venezuela, like in Colombia where we are expanding based in having a lot more experience in the Oil and Gas Sector than Colombian companies. Of course, we will continue to be one of the strongest EPC contractors in Venezuela. We are committed to become a well-known international company in the Latin American area and overseas.
Even though this country seems to have so many potentials, the investors lack the confidence of investment here, how would you encourage foreign investors to come in Venezuela?
The main factors are the commodities we have in our country. We have the resources: energy, manpower, and professionals. We are going through a major transition. The government now has a different approach and they are learning to work with new parameters. The construction and manufacturing industry will grow. The electric power sector is and must expand very fast. The raw materials, energy and manpower are here. It is just a matter of time before things get on track. There has been a lack of confidence in the direction of the country under the new government management. It takes some time before investors realize that things are stable and worth to invest in Venezuela when compared with alternative developing countries.
President Chavez and his government are trying to get the private sector involved, what would be the commitment of Tecnoconsult in the development of the country?
We are and will continue to participate in the development of Venezuela. Our company will stay here longer than any government will. We are not looking for short-term business, one must learn to work around the crisis and difficult events like the current situation in our country. We do believe in Venezuela. I think next year will be better than the present one. We have gone through a very difficult period as a country and as a company, but I believe that this is about to change.
We would like to know a bit about your professional background, how you got started in engineering and construction, how do you see yourself growing in Tecnoconsult?
I see myself stepping aside in the near future and letting someone else take over. We have very capable people inside the company. I am an electrical engineer graduated fromUniversidad Central De Venezuela, and did a master in electric power systems in United Kingdom. My first job was in La Electricidad de Caracas , the Caracas city electric utility. In 1973 I moved into Tecnoconsult as project manager, from then on I grew with the company. After many years I tried to work outside of the company but then I decided to come back. My role in the company now is building up the team that makes all the difference in our business; helping my people to develop their managerial abilities; so they will successfully take over the larger and international company we will be in a very short time.. I am sure this can be done within the next three years.
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Junta Directiva de Technoconsult