June 17 (Bloomberg) — Leighton Holdings Ltd., Australia’s largest construction company, and a developer of tourism-related buildings in Abu Dhabi abandoned a venture that was expected to generate revenue of at least $1.5 billion within five years.
Leighton, a Sydney-based company controlled by Hochtief AG of Germany, and the Tourism Development & Investment Co. agreed to create the venture in December 2007. TDIC is the development arm of Abu Dhabi’s tourism authority.
“After a strategic review of TDIC’s business model and due to the changing economic climate, it became more commercially viable for TDIC to retain the flexibility to work with different contractors,” Lee Tabler, TDIC’s chief executive officer, said in an e-mailed statement today. “Therefore the joint venture was never progressed.”
Since the venture was announced, the worst financial crisis in more then 70 years has prompted developers in Abu Dhabi and the rest of the United Arab Emirates to cancel or delay construction projects. Leighton scrapped a 4.9 billion dirham ($1.3 billion) venture to build an additional concourse at Dubai airport in April after failing to reach an agreement with Dubai’s Department of Civil Aviation.
“The market has changed,” TDIC spokesman Bassem Terkawi said by telephone today. “The prices of materials are lower and contractors are more desperate for work, so TDIC and other developers are reacting to that and looking for the best return on investment.”
Leighton, with operations across Asia and the Gulf region, last month cut its full-year profit forecast by 10 percent because of the slump in the industry.
The company is working on 3 billion dirhams worth of projects for TDIC, according to Chris Gordon, Leighton’s spokesman in Dubai. They include Angsana and Eastern Mangroves and the Saadiyat Island Link, Gordon said today by telephone.
The company will have to bid for any other contracts, he said.