Engineering and EPCM

ESG is driving corporate strategy and M&A growth

M&A in the engineering and consulting space has continued at pace in recent years, and in 2020, companies that specialize in areas of environmental, social and corporate governance (ESG) were acquired by multinational firms on the back of the incremental rise in demand for ESG-related services.

In December 2020, Canadian multinational services firm WSP entered into an agreement to acquire Golder Associates, a global engineering and consulting firm that provides earth science and environmental services.

In a statement, WSP announced that the acquisition, due to be completed in the first half of 2021, ideally positions the company’s strategic environment platform to capitalize on ESG trends.

WSP has completed more than 120 M&A deals globally since 2006, and Gonzalo Covarrubias, general manager of WSP Peru, explained that adapting to the culture of the acquired companies, without affecting their essence, is key to a successful business integration.

On the Golder transaction he stated: “The acquisition provides us with the ability to become the leading firm in the environmental earth science sector, which is part of our long term strategy. We are going to be the largest environmental and earth science team globally, consisting of around 14,000 employees in the world.”

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“We hope the trend Yanacocha is starting with their large underground sulfides project will be replicated by other big mining companies in Peru. These projects often have fewer environmental impacts which facilitates community acceptance and permitting.”

Alberto Coya, General Manager – Peru & Regional Manager – LatAm, Stantec

In 2017, multi-national EPCM company Ausenco acquired Canadian environmental consultancy Hemmera, which has been working with the Ausenco’s South American business to implement the latest environmental practices and technologies, according to Alexandra Almenara, the company’s VP of environment and sustainability for South America. Zimi Meka, Ausenco’s co-founder and CEO, affirmed that this area of the business is a target for further M&A: "We will be looking to grow our consulting business, in particular in environmental services, and we are looking closely at potential acquisitions."

Considering the lack of major greenfield projects in Peru’s pipeline, engineering firms are also focusing on project optimization to take advantage of robust metals prices. Ausenco recently completed the design and construction of Mina Justa, and is now transitioning to support Minsur in the startup of the operation, revealed Florencio Castro, Ausenco’s general manager in Peru. Castro explained the next steps after the commissioning phase: “In the operation phase we have a group in charge of asset optimization and management of maintenance plans. We also have our own specialized software called Orien, which is a cloud-based management solution that helps to operate and maintain mining assets efficiently.”

Franco Pedraz, Worley’s country manager for Peru, related that the company is currently working on nine projects in Peru, ranging from definitive feasibility studies for greenfield copper projects, to the expansion of onsite and offsite infrastructure. Pedraz asserted his intention to enhance Worley’s sustainability-focused services in Peru and emphasized the importance of establishing professional development in mining regions. “We must continue to observe that Peru is an emerging economy and the relationship between the mining sector and communities is key to the success of an operation,” he said, elaborating: “There will be the implementation of critical automation, but not all operations will become completely digitized as we still need the human element for a lot of mining processes, as well as job creation.”

Alberto Coya, Stantec’s general manager for Peru and regional manager for LatAm, suggested that the expected increase in larger underground mining project, embodied by Yanacocha’s planned transition from oxides to sufides, could help the country’s mining industry from a social standpoint. “We hope the trend Yanacocha is starting with their large underground sulfides project will be replicated by other big mining companies in Peru,” said Coya, adding: “These projects often have fewer environmental impacts which facilitates community acceptance and permitting.”

Remote studies and local expertise for brownfield expansions

The majority of the mining value chain suffered during lockdown in 2020, but certain sub sectors were more able to adapt than others. In the engineering space, the move to remote work was more seamless than for boots-on-the-ground contractors, as a laptop-based workforce quickly adapted to home office conditions. In fact, for those familiar with rush-hour Lima traffic, the transition to remote operations came as a welcome development.

“BISA has moved from a large office in Lima to a work-from-home policy, which we have found has really helped the productivity of our workforce,” said Federico Schwalb, CEO of BISA Ingeniería de Proyectos (BISA), who revealed that the Peruvian engineering company has decided it will not go back to a large office environment, but will use a co-working facility with a smaller capacity in the future.

“Even though our revenue dropped 5% in 2020, our EBITDA (Earnings Before Interests, Tax, Depreciation and Amortization) increased 40% in the same timeframe due to increased productivity and reduced costs,” added Schwalb.

Companies with a strong local presence also benefited from having in-country expertise, as travel restrictions prompted mining companies to contract engineers that could conduct site visits without having to bring in workers from abroad.

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“The idea to grow BISA’s PMO (Project Management Office) service came from our experience at Newmont’s Yanacocha project. There used to be a large project team with many disciplines at the mine, but we still needed to contract extra help in what we called a “salt and pepper” operation, with the mining company and contractor working together.”

Federico Schwalb, CEO, BISA Ingeniería de Proyectos

One such case was Peruvian copper producer Southern Peaks Mining, which awarded a contract to BISA to provide engineering, supervision, project controls and procurement for its Condestable mine expansion, having previously worked on the project with an international firm.

A lack of major greenfield projects on the horizon after Quellaveco, in part due to the permitting difficulties and social issues faced by miners in Peru in recent years, has placed a greater emphasis on brownfield work such as the Condestable expansion. It has also prompted engineering houses to offer a wider range of services, such as the Project Management Office (PMO) that BISA has renewed for a third year running with Antamina. A PMO helps provide guidance, raise flags, control costs, and utilize technology to monitor the progress and performance of an operation, explained Schwalb, allowing the mining company to focus on its core business of production optimization.

Denys Parra, general manager of Peruvian engineering firm, Anddes, which also has offices in Argentina, Brazil and Chile, spoke of the demand for Engineer of Record (EoR) services. An EoR requires a professional engineering firm to seal drawings, reports or documents for a project, and Anddes has been providing such services for Minsur, Glencore and Pan American Silver in Peru. Parra described how EoR services help implement solutions for the sustainability of operations, noting how they can allow mining companies to operate and monitor their facilities properly, including guaranteeing the safety of tailings dams in the medium and long-term by minimizing the risk associated to critical facilities.

Image courtesy of Image courtesy of MMG-Las Bambas