Spotlight on Webuild, the frontrunner for a railway project in Zambia

(Il Sole 24 Ore Radiocor) Buying interest in Webuild, which is trading 1.5 per cent higher on the Milan Stock Exchange. Yesterday, the company led by Pietro Salini announced that a consortium comprising Webuild and Odebrecht (a Brazilian E&C group) has been selected as the preferred bidder for the construction of the new Zambia–Lobito railway. The project involves 830 km of new track to link Zambia’s Copperbelt to the Angolan rail network and the port of Lobito. The infrastructure forms part of the strategic initiatives supported by the Mattei Plan for Africa, promoted by the Italia Government. Once completed, the project will reduce the time taken to transport goods from the Copperbelt to international markets from 16 to 7 days, generating estimated economic benefits of around 3 billion dollars for Zambia and Angola. ‘Given the geography, we believe it is essential that the project be backed by adequate international guarantees to mitigate risk, as well as counterpart and implementation financing,’ write the analysts at Equita. From this perspective, “the project forms part of the wider Lobito Corridor, a strategic initiative supported by the US, the EU and Italia (the $320 million Mattei Plan), as well as by international financial institutions”, the brokers point out. Mediobanca, whilst noting that we are subject to operational restrictions regarding Webuild, as Mediobanca acts as Trevi’s financial adviser, emphasises that ‘the contract comprises the construction, under an EPC (Engineering, Procurement and Construction) formula, of a railway line stretching from the border with Angola to Chingola, in the heart of Zambia’s Copperbelt province, an important mining region’. Furthermore, they write, ‘the project is being developed and promoted by the Africa Finance Corporation (AFC), an African multilateral financial institution that has worked closely with the governments of Angola and Zambia to coordinate key authorisations, align priorities and facilitate the project’s progress towards the construction phase’. The initiative also benefits “from the support of international development partners”, although the value of the potential contract has not been disclosed. In this regard, analysts at Banca Akros write in a report that “according to various sources, the total cost of the project could amount to around $5 billion”. The experts confirm their ‘Buy’ rating on the share.