|Genesis Worldwide enters into licensing agreement to open 3 light steel frame manufacturing plants|
|Saudi Arabia - 2008 August 19|
Genesis Worldwide Inc., a leading provider of “green” structural building technology using light gauge steel aimed at the residential, commercial and institutional building markets, is pleased to announce that, as stated in the Company’s press release dated August 6, 2008, it has entered into a license and services agreement (the “Agreement”) with Sawabeh International Group (“Sawabeh”) of Riyadh, Saudi Arabia, a diversified technology and construction group of companies.
The Agreement calls for the construction of three light steel panel manufacturing facilities within the Kingdom of Saudi Arabia (“KSA”). The first plant will be commissioned in Riyadh by July 2009, with two other plants to be built within the licensed territory in the KSA by July 2011 and July 2012, respectively. Genesis will earn initial revenue of approximately USD2.2 million from licensing the Genesis technology, the sale of industrial equipment and hardware, and various training and consulting services required for the commissioning of the first plant. Genesis will earn similar revenue from the commissioning of each of the two additional plants, with revenue recognized at the time the plants are commissioned. Genesis will also earn a minimum of USD3.5 million in royalty fees over the next five years. Sawabeh will be the exclusive provider of Genesis' building systems in the Kingdoms of Saudi Arabia and Bahrain, and will maintain exclusivity as long as annual minimum gross sales targets are achieved.
The term of this Agreement is for a five-year period and will automatically renew for an additional ten years.
Part of the backdrop of this announcement is the strategic plan developed by the government of Saudi Arabia to reinvest in its economy by using its budgetary surplus—the result of record high oil prices—in the development of new ‘economic cities’. Through the development of these ‘cities’, the Saudi economy will continue to be integrated into the world economy. The goal, which has generated much foreign interest, is to be diversified away from an ‘oil-only’ based economy. Economic diversification through investment in urban development and construction will be vitally important.
Based on information from the Saudi Arabian General Investment Authority (SAGIA), these new ‘cities’ will contribute $150 billion to the country’s GDP by the year 2020. The ‘cities’ are also expected to provide job opportunities for 1.3 million people and an increase in per capital GDP to SR125,625 (USD33,500) for those living in the ‘cities’.
According to the CIA World Factbook, nearly 40% of the Saudi population is under 15 years of age. Recognizing that Saudi Arabia’s youthful and burgeoning population will soon be demanding modern residences, Sawabeh turned to Genesis as its building partner.
Using the Genesis Solution, a turn-key solution which includes leading-edge software, industrial equipment, hardware, processes and engineering services, the Sawabeh plant will produce light steel structural panels. The proprietary Genesis technology platform will be used to build residential and commercial structures using recycled light-steel building materials, in lieu of the more expensive concrete or masonry block construction, which has traditionally been used in Saudi Arabia.
Waleed S. Abalkhail, President of Sawabeh, said Genesis was the perfect fit for Sawabeh’s needs. “We were very interested in what Genesis could offer right from the start. There isn’t a lot of infrastructure or light steel frame building expertise in place in Saudi Arabia. The Genesis turn-key Solution, which amounts to a “business in a box” approach that enables us to acquire all needed know-how to produce light gauge steel residences quickly and very efficiently, addresses our needs perfectly.”
Mag Mostafa, Genesis’ Vice President, Business Development, said that, for its part, Genesis is fully prepared to participate in this growth opportunity within the thriving Saudi economy. “We developed a comprehensive five-year business plan, conducted preliminary market research for Saudi Arabia, and ran a cost simulation for Sawabeh to illustrate different cost scenarios based on steel prices from lowest to highest, in order to provide a comfort zone for them. They recognized that the savings were significant and also saw all the additional benefits that we offer. They are already working on projects and developing a sales pipeline while establishing the new plant. This announcement solidifies our growth and expansion opportunities in a very important part of the world nowadays.”
Mostafa added that Saudi construction methods historically utilized concrete (which continues to rise in price), while it still uses steel rebar to build. Building with light gauge steel, which can be adapted to the different types of buildings without the additional expense of concrete, is much less expensive.
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