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Aecon starts construction on Toronto airport rail link

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by Greg Meckbach

Aecon Group Inc. (TSX:ARE) has started construction on the $128.6-million Air Rail Link in Toronto. Company officials briefed investors on the opportunities in the transportation sector for the Toronto construction and engineering firm.

Aecon Group Inc. (TSX:ARE) has started construction on the $128.6-million Air Rail Link in Toronto and company officials suggest public transit and other transportation projects are lucrative for the Toronto-based general contractor. Last December, Infrastructure Ontario reached financial close with AirLINX Transit, a joint venture between Aecon and Dufferin Construction.

“Construction has just started with completion expected third quarter of 2014,” said Mark Rivett, Aecon’s senior vice-president of transportation. “It’s a very cool project to be involved in.” Rivett made his remarks before an audience of shareholders and financial analysts at Aecon’s recent investor day in Toronto.

The Air Rail Link includes a three-kilometre elevated track that will carry trains from Lester B. Pearson International Airport to an existing rail line formerly owned by Canadian National Railway Co. and recently sold to Metrolinx, the Ontario transit agency whose operations include the GO Transit commuter train and bus services. The intent is to provide train service every 15 minutes between the airport and Union Station in downtown Toronto. Aecon has eight transportation projects worth more than $1 billion each in planning or bidding stage including light rail or subway in Vancouver, Edmonton, Ottawa, Waterloo and Toronto, chairman and chief executive officer John Beck said during his opening remarks.

In an interview with DCN after the sessions, Beck noted Aecon is involved in the Toronto-York Spadina Subway Extension and is bidding on the Ottawa Light Rail Transit project, which includes a 12.5-kilometre light rail line, a tunnel through the downtown core and 13 stations.

In Toronto, Metrolinx plans to contribute $8.4 billion towards construction of light rail routes along Eglinton, Finch and Sheppard Avenues, plus a replacement of the above-ground Scarborough rapid transit. “We will be in a position to bid on these light rail projects across Toronto,” Beck said. During his presentation, Rivett noted that different subsidiaries of Aecon are involved in the Air Rail Link.

Aecon Construction and Materials Ltd. (ACML) is involved in structures, Aecon Concessions is arranging financing, Aecon Materials Engineering is doing geotechnical engineering, AGI Traffic Technology Inc. is working on the electrical guideway and Lockerbie and Hole will do electrical work in station extensions.

In his opening remarks, Beck described Lockerbie and Hole, whose services include mechanical, electrical, instrumentation, pipe fabrication and boiler erection, as a “transformational acquisition” when Aecon acquired the firm in 2009.

Over the last couple of years, Aecon has been focusing on getting its subsidiaries working together, in a program it calls “One Aecon.”

“What this integration initiative was designed to do was to break down silos and build bridges between our business units,” chief operating officer Teri McKibbon said during his presentation.

McKibbon said administrative overhead “became burdensome,” so company officials wanted to consolidate administrative activities, improve project controls, improve accountability and give senior managers “direct line of sight” into project operations.

He explained how the size of Aecon, and the variety of services provided by its subsidiaries can be an advantage.

“When we think and act like an unconnected association of small individual construction companies, we get to perform small unconnected construction projects,” he said. “When we act like a big national fully integrated soup to nuts services company we get to perform bigger more comprehensive construction projects.”

He cited as examples two solar power construction projects in Ontario. In the case of the Lily Lake Solar Park, undertaken for Peterborough Utilities, Aecon was involved in building a 10-Megawatt solar park with more than 12,000 solar arrays. In the case of Northland Power Solar Parks, the firm is building a total of six 10-MW solar parks for Northland Power Inc. near Smiths Falls and Burk’s Falls.

“What really distinguished the Northland project from the Peterborough project is the amount of work that Aecon will self perform,” McKibbon said. “In the case of Peterborough Utilities, Aecon farmed out about 50 per cent of the work .. to sub contractors even though we had internal capabilities in other parts of Aecon … to do most of the subcontracted work.”

But with the Northland projects, Aecon is performing most of the work itself, McKibbon said.

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