As Iranian companies promoting large-scale projects have difficulties in raising finance due to the United States' economic sanctions against Iran, South Korean construction companies are also suffering from large construction deals being terminated.
Hyundai Engineering & Construction Co. (Hyundai E&C) announced on Oct. 29 that it has scrapped a 594.7 billion won (US$520.75 million) deal with Iran's Ahdaf Investment Co. (AHDAF) to build a petroleum refining facility in Iran. The figure accounts for 3.09 percent of Hyundai E&C's consolidated sales in 2015.
In March 2017, Hyundai Engineering Co. (Hyundai ENG) and Hyundai E&C jointly won the US$3.2 billion (3.65 trillion won) deal from the AHDAF. Depending on the proportion of construction, Hyundai ENG and Hyundai E&C were expected to ring up 3.1 trillion won (US$2.71 billion) and 600 billion won (US$525.39 million) in sales from the deal. It was the largest single deal received by domestic companies in Iran but it ended up in cancellation.
The industry believes that the Iranian company abandoned the deal as its ability to fund it had been hit by the prospect of U.S. economic sanctions against Tehran. In general, a client pays 15 percent of construction costs in advance and raises finance for the rest. However, the deal is off as AHDAF is having trouble financing.
An official from the construction industry said, “The companies haven’t suffered a loss at the moment because they haven’t put money into construction yet. However, they must be devastated internally over the drop in order backlog."
Daelim Industrial Co. also canceled a contract worth 2.23 trillion won (US$1.95 billion) for a refinery project in Iran because of U.S. economic sanctions.