FEDERICO ÁVILA

Spain 2021 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Federico Ávila, President & CEO of Lantania, about a difficult year, recent acquisitions, and wind farms in Spain's Northwest.

How has Lantania evolved since our last conversation in 2019?

2020 was a difficult year due to the pandemic, which has seriously impacted the construction sector. We should keep in mind that this sector has been in crisis since 2008, with an accompanying drastic fall in public procurement. This hit bottom in 2012 with an 80% market contraction. It seemed that things were beginning to pick up in 2019, given growth at the time, but in March 2020 the pandemic hit and affected us both in terms of demand and profitability. In terms of demand, if we consider the public bidding figures, there has been a drop of over 30%, and if we look at the figures that were already dented across various segments such as the central administration there are drops close to 60%. This is public data from the National Construction Confederation or the Labor Foundation. The impact on the private sector is even more drastic. In a study by the real estate consultancy firm JLL, they concluded that there has been a drop of 86% compared to 2019. In addition, the construction sector is much more volatile than other sectors. In terms of profitability, I would highlight four areas. Firstly, there are the measures we have had to adopt for the health of our employees, such as schedule changes, on-site restrictions and teleworking. Secondly, there is the shortage of materials at the beginning of the pandemic. Thirdly, there are logistical issues, since many construction sites are not in the center of the cities, and even if they are, there is a displaced construction team, therefore, the closure of hotels and the limitations in mobility within the vehicles seriously affects productivity and profitability along with the paralysis of non-essential activities due to local lockdowns. This has had a negative impact on productivity and, therefore, on development. Despite this situation, at Lantania we have met all objectives set in 2019 both numerically and strategically and, for this reason, we should be extremely satisfied. We will close 2020 on growth of close to 20%, despite the pandemic. Although that was the forecast, until March 2020 we were way above this target, but in the end, our revenue has grown. near to 20%.

In 2019 we discussed the breakdown of your revenues among energy, infrastructures and water. What is the current breakdown?

We are going to close 2020 with 60% of our revenue coming from infrastructure, 10% from conservation and services, 20% from energy and 10% from water. We have grown due to the company's own growth and as a result of two acquisitions in this sector, namely the purchase of Soil Tratamiento de Aguas Industriales and of Deisa Industrial Water Solutions, which was part of the COMSA group, dedicated to industrial water activities. This has placed us in a leading position in this sector.

Three of the four founders of Lantania come from the telecommunications sector. With the pandemic we have seen the need for companies to start digitizing. Would you consider this a competitive advantage?

Without a doubt. When the pandemic hit, we were in a good situation in terms of liquidity and already had the necessary technology in place. This meant that we were able to start working remotely without affecting the activity and all the information is in the cloud. When the company was created, we immediately implemented these changes, and because we are relatively small, it was easier and faster. From the beginning, we implemented a digital document exchange tool with all our contractors and providers. We use a digital platform to verify the accuracy of all contracts and invoicing, thus eliminating inconsistencies.

Past year you acquired the Soil Group's water line, which also includes the businesses in Colombia and Morocco. What are your intentions in these markets?

Part of 2019 was dedicated to establish our internationalization strategy. We defined our target markets in three phases. The first was EU-based and involved selecting a series of markets. These included Sweden, where we are prequalified and applying for work, the Baltic corridor with Estonia, Latvia, and Lithuania, and several Balkan countries, including Bulgaria, Croatia, and Serbia, where we have a series of projects underway. In Bulgaria, we have two projects, one of which has already been signed off and is being carried out in conjunction with a local partner, and in the second case we are also in the process of signing the contract with another local partner. The second phase is Latin America, where we are entering the Colombian, Peruvian, and Chilean markets. The third phase involves the mature markets, the US and Canada, where we have already incorporated a branch.

Lantania today has four wind farms in Galicia, which will add up to an investment of Euro 146 million. What are the main characteristics of this project?

We have experience in the construction of solar and wind farms, and as Lantania in 2019 we have built 126MW of solar farms, and in 2020, 130MW. We are being pretty active in this front, with new awards like the solar photovoltaic installation in the City of Justice in Valencia. Regarding our role as developers, we have initially focused on the wind sector because there are higher entry barriers than in solar, and in Galicia because our transmission and distribution team is located there and our staff know the local distribution grid very well, as well as the orography. In addition, the administrative process of the Xunta de Galicia gives us many guarantees because it requires the submission of a detailed project and the demonstration of ample working knowledge in order for plans to be approved. There, we have a portfolio of 250MW, with 150 MW being in the pipeline, and we are performing all the required engineering and studies in order to get the projects ready for construction. We are also analyzing the possibility of developing solar projects because the regulation is changing to avoid speculation and there are now obligations both for the public administration and the developer that make us feel more comfortable with the process.

The Ministry for Ecological Transition awarded Lantania the expansion and improvement of the Wastewater Treatment Plant of Almansa, in Albacete. What does this project mean the company?

We have a very highly qualified and competitive technical team specialized in water treatment plants. This project means that we have two axes of growth in the water sector. Firstly, in the industrial sector, where we have become the third largest company in the domestic market in terms of industrial water projects, and secondly, in the public sector, where we have one of the most important hydraulic projects in Spain (the Almudevar dam, in Huesca), in addition to other developments, like the WWTP of Nerja and this new award.

What are your objectives for 2021?

Our goal in to keep our path of development and consolidation, combining our natural organic growth with other potential M&A transactions and investments, especially in the water, energy and rail markets. If I had to highlight a specific project, I would mention that we are currently working with our partner Gestilar in the largest “build-to-rent” deal in Spain, with the development and construction of more than 1,100 homes in southern Madrid.