BMI View: Our forecasts for the Czech construction and i nfrastructure sector remain steady, with marginal growth of 3. 3 % for 2015. After struggling with underfunding for many years, the transport sector is enjoying EU-driven investment into its four trans-European transport corridors, which will sustain growth, particularly in the rail sub-sector, in the medium term. Residential and non-residential construction are further bright spots, with investor sentiment improving, house prices rising and new construction starts on the rise.
Key Trends And Developments
Over the coming years we expect the EU's EUR63.4bn transport-focused Cohesion Fund to play a central role in financing Central and Eastern European (CEE) infrastructure. In late 2013, the European Council officially adopted the EU's multi-annual financial framework for 2014-2020, setting the parameters for the Cohesion Fund and Connecting Europe Facility, which will support the funding of the TEN-T transport corridors and the TEN-E energy networks. The projects included in the TEN programmes have a heavy weighting towards the less developed networks in CEE.
Czech Prime Minister Bohuslav Sobotka said a call for bids for a new unit of the country's Dukovany Nuclear Power Station will be announced by end-2016. 'The government intends to install a new unit in each of the Czech nuclear power plants - Temelin and Dukovany. Construction of the first unit will begin in Bohunice [in western Slovakia] since it is much older than Temelin,' said Sobotka (Sputnik News). Westinghouse Electric Company, Rosatom and Areva, among other firms, are expected to place their bids for the new unit.
As part of the TEN-T Orient/East-Med corridor, SZDC selected a joint venture (JV) between Mott MacDonald and Sudop Praha to carry out two studies for a high-speed line connecting Germany and the Czech Republic. The line, which will link Dresden, Germany, to Usti nad Labem and Litomerice in the Czech Republic, will pass via the Ore mountains to avoid existing railway congestion through the Elbe valley. The JV will conduct geotechnical investigations and environmental impact assessments to select a route. It will also perform preparatory works for design phases concerning technical investigation for major bridges and long tunnels.
In May 2015 overall construction grew by 11.9% y-o-y, driven by a 8% increase in the number of completed buildings. Meanwhile, civil engineering grew 23.4%, although overall construction was 19.7% down from its peak in 2008. Highlighting the outlook for commercial real estate, South Korean tyre maker Nexen Tire plans to begin construction of a new tyre plant in the town of Zatec in Q415, reports Automotive Business Review. The Czech government will invest EUR829mn (USD925.9mn) in the facility following an agreement signed with Nexen. According to the company, the plant will be strategically located near Germany, France and the UK, allowing it to address growing demand in Europe.
Moving up to second place in our Risk/Reward Index table this quarter, the Czech Republic's score has increased slightly to 64.6. The country scores well in terms of Industry Risks, owing to its competitive and open infrastructure market, as well as the presence of the world's largest construction companies. Muted growth forecasts and limited market opportunities mean the industry growth scores for the market bring down the overall Rewards score, which is still high by regional standards.
While among the larger construction markets in the CEE region, Poland stands out in terms of the scale of opportunity, the Czech Republic stands out as a safer destination for companies to target to benefit from a new wave of EU supported projects.