Crescent Steel and Allied Products Limited announced on Friday that it has received a Letter of Intent (LOI) from China Harbour Engineering Company Limited (CHEC) for pipe coating for the K-IV project, the Greater Karachi Bulk Water Supply Scheme.
Bare pipes will be provided by the CHEC having diameters of 68 and 84 inches.
“It is in addition to the previous quantity of manufacturing and coating of pipes as disclosed through our letter with reference N CSAPL/CS-08/0903 dated 04 July 2022. The value of the contract is expected to be around Rs3.2 billion,” announced Crescent Steel in a notification to PSX.
In the previous notification on July 4, the company announced that it was negotiating with CHEC for the manufacturing and coating of pipes (Hot Rolled Coils will be provided by the client) having diameters of 68 and 84 inches for the K-IV project.
The company then announced that the contract was expected to be around Rs3.8 million.
Meanwhile, the company said on Friday that subject to the execution of the contract, the manufacturing is expected to commence in the second half of the current financial year and will be completed, ‘hopefully, by the end of the financial year 2024’.
Senior research analyst at Alpha Capital Saquib Hussain said that the company may get the two contracts of over Rs7 billion, which would positively reflect on their profitability amid low demand for steel in the country.
Another analyst at JS Research, Waqas Ghani said that the LOI and expected contract and timeline show that work is going on the K-IV project.
According to news published in Dawn in June this year, the Water and Power Development Authority (WAPDA) awarded three contracts of Rs98.5 billion for the construction of Phase-I of K-IV to supply 260 million gallons per day (MGD) of water to Karachi.
Two contracts worth Rs81.116 billion were awarded to a consortium comprising M/s China Harbour Engineering Company Limited and AL-Fajr International while the third contract of Rs17.4bn was awarded to Descon Engineering.
The second package worth Rs28.846 billion was awarded to the same consortium.
The length of the pipeline of this package is about 80 kilometres and involves pipelines of 84- and 64-inch diameters. The package has to be completed in 16 months.
The third package of Engineering Procurement & Construction (EPC) Turnkey Contract of Pumping Station 2 x 130 MGD (Civil, Electrical & Mechanical Works) was signed with Descon Engineering at a cost of Rs17.4bn.
This involves two pumping stations of 130MGD each and 12 pumps of 32.5MGD each, including four for standby arrangements.
“The afore-mentioned information has been disclosed based on a discussion with CHEC and LOI. However, the execution of the contract is conditional to receipt of the Purchase order (PO) from CHEC; finalization of the contract with CHEC; fulfillment of parent contract between CHEC and WAPDA,” the company added.
“The company is very hopeful that PO and contract will be finalised soon,” it said.
The share price of Crescent Steel jumped Rs3 from Rs37.39 to Rs40.39 when the notification came on the PSX before settling at Rs38 at the day's end showing an increase of 1.12% during the day when the overall index dropped 0.18 % or lost 75 points.