Tvrtko Zlopaša (Dalekovod): Our Employees Do Not Feel the Need to Seek Other Jobs

After years of difficulties, it seems that bright times are ahead for Dalekovod. Its offer for electrical installation work on the section CB Dockasberg – Rissuden was selected by the Swedish investor Svenska kraftnät, the national electricity transmission company, as the most favorable before Christmas. This involves electrical installation work on a new power line in northern Sweden at a voltage level of 400 kilovolts, with a total length of 85 kilometers as part of the ‘Aurora Line’ project. A little earlier, Dalekovod signed a contract with the Norwegian investor Statnett, an electricity transmission company, for the construction of a new 420-kilovolt power line on the section Skaidi – Hyggevatn, with a total length of 54 kilometers. This project continues from the successfully completed section between the substations Skillemoen and Skaidi and is specific in that it will be built in arctic weather conditions due to its position in the far north of Norway.

This was the reason for a conversation with Tvrtko Zlopaša, a member of the Management Board of Dalekovod, who recently received the annual award from Svenska kraftnät in the field of health and safety on behalf of his company in Stockholm, which was awarded for the first time this year.

We learned that the mentioned new contracts are just the beginning of similar projects. Namely, similar projects worth tens of billions of euros have been announced in Scandinavia and Germany over the next 15 years. In addition, Dalekovod will be engaged in the electrification of railways over the next decade, which is its second niche. Companies within the Dalekovod Group are also performing well – the main ones are Metal Structures Production, Suspension and Connection Equipment Production, Dalekovod EMU, which includes a calibration laboratory in Korčula, and Dalekovod Project, and we should also mention Dalekovod Ljubljana and Dalekovod Mostar. The effects of the recapitalization from a year and a half ago are showing as it has been a tailwind for Dalekovod. However, changes in Dalekovod’s ownership structure have also been announced as changes are expected in the largest individual shareholder – the company Advanced Energy Solutions (NER), which has a stake of 75.16 percent. Namely, at the end of October, it was announced on the Zagreb Stock Exchange that NER’s co-owner Končar Investments accepted an offer from another co-owner – Construction Line Limited based in Malta (owned by Pavo Vujnovac) to sell its ownership stake, and Končar Investments will become the sole owner of the company Advanced Energy Solutions. If this is realized, and there are no indications that it will not, Končar will have a 75.16 percent ownership stake in Dalekovod. Regardless, nothing should change for Dalekovod as it has a book of contracts worth over 300 million euros.

On the other hand, precisely because of the value of such contracts, the company will introduce some changes in its business policy. Namely, like others, it has maximally utilized human resources, so Zlopaša announces an adjustment of the business model – greater engagement of cooperators and subcontractors than before, while retaining all nearly 1100 people currently employed by the Dalekovod Group.

What is the value of contracts in Scandinavia?

The value of contracted work in Scandinavia exceeds several tens of millions of euros, but besides the financial aspect, we see the value of such work in strengthening the image of Dalekovod, which stands out even more with each new project in an extremely demanding and dynamic market.

What is the actual amount? Companies usually do not hide this.

Amounts can change during project realization, especially in recent years. However, the truth is that these are not things to hide, quite the opposite. Given that these are certainly publicly disclosed contract value data published by investors – public procurers, we can summarize that currently, it is about a total of contracted work in Dalekovod’s order book worth over 300 million euros. In any case, we are facing an extremely active and positive period, in which we plan to take advantage of the opportunities that the market creates. We are aware that with opportunities come challenges, considering that there are more and more jobs that need to be executed in the same or very short time, but Dalekovod has successfully coped with its experienced and valuable employees and quality partner companies in the most challenging situations so far, so we believe in exceptional success in the time to come.

What exactly do you mean?

Our strategic business development, in line with the dynamics of market changes, requires an adjustment of the business model. Until now, we have mainly realized most projects with our own resources, and to a lesser extent using subcontractor companies, but with the new numerous projects planned almost simultaneously in different markets, we plan to additionally engage stronger capacities of cooperators and subcontractors alongside all our capacities to complete everything within the agreed deadlines and required quality.

Do you not have enough workers?

Currently, we do, however, we are aware that we will need to continuously strengthen ourselves given that it is a highly skilled but still labor-intensive activity and considering the expected intensity of active projects and the volume of expected work planned in all markets over the next few years. Building power lines is specific and requires various skills, which is why we train new workers ourselves. Working on power line poles, for example, like those in Germany that are 80 meters high, is not exactly simple and for everyone. Our company is one of the largest in Europe in power line construction in terms of the number of workers, i.e., installers. Quality and capable people are a key prerequisite for successful project realization, and that is why their well-being and satisfaction are our top priority.

Where will the subcontractors come from? From Scandinavia?

To a lesser extent, we have been collaborating with partners in all the markets we operate in for years, so in the period ahead, we expect additional strengthening of that cooperation, but perhaps also the opening of new opportunities. It is a common business model for a certain part of activities to be carried out by cooperators and subcontractors, but it is also an expected change for our company since we have recently predominantly used our own workforce in project realization.

You mentioned that new projects are announced in Scandinavia.

Yes, indeed, the plans of our traditional investors in Sweden and Norway are significantly larger in the coming years compared to this and last year. I believe that, unlike the construction industry, where unfortunately a decline in activity is expected, especially in high-rise construction, which has already occurred in Germany and Sweden, there are significant plans in energy related to the green and digital transition. Recently, I attended a conference in Oslo where plans for the construction of new wind farms, solar parks, and battery factories in Scandinavia that need to be connected to the energy grid were presented. Specifically, we successfully completed the Skaidi – Hyggevatn project in the far north of Norway, we have just contracted the continuation of that project, and the announcement of the third phase is already planned, so there will be plenty of work. Scandinavia and Germany will invest the most in the grid. This involves tens of billions of euros in investments over the next 15 years. In recent years, our group has achieved an average of just under 200 million euros in annual revenue, so there are enormous growth opportunities.

So, work in Scandinavia is a good opportunity for them to earn better.

It certainly brings some new circumstances, but thanks to the continuity of large, multi-year projects in Scandinavia, our people feel security and stability. There is no idle time and uncertainty, so employees do not feel the need to seek other jobs, and given the contracted work and expected activities, we see that this will also be the case in the future.

What are the reasons for such investment?

The industry in which Dalekovod Group competes expects a significant boom in the future period for several key reasons: a relatively old transmission network that requires renewal; a shift towards renewable energy sources and the general trend of transitioning from energy produced from traditional fossil sources to electricity produced from renewable sources, as well as the implementation of tenders postponed in previous periods due to the COVID-19 pandemic. In addition, besides power line construction, we are also active in another niche – railway electrification, which will see significant investment over the next decade.

So you are rubbing your hands in satisfaction?

We can say that the outlook is very good, but we need to execute all of this, especially since we are in a business where timelines are crucial, and delays must not occur – power outages are on the day, shifting deadlines is very demanding or impossible, and there is no room for error. I can boast that our qualities on projects in all markets where Dalekovod actively operates have been recognized and highly valued by our investors.

Is the order for jobs there public procurement or are they private investors?

Given that it is predominantly about investments in high-voltage power lines and substations, it is national critical energy infrastructure, so the investors are national operators of transmission or distribution systems, i.e., public procurers. In Norway, this is mainly the national transmission system operator Statnett, and in Sweden, we work for several investors, but currently mostly with the transmission system operator Svenska kraftnät.

Besides Scandinavia, what other markets are you in?

Two years ago, we returned to the German market, where we expect continuity and growth of activities in the coming years. We also operate in our region: in Slovenia, Bosnia and Herzegovina, North Macedonia, and Albania, as well as Ukraine, and our manufacturing companies supply their products to other markets such as the countries of the Arabian Peninsula, Pakistan, etc.

I assume that the construction of power lines accounts for the largest part of your revenue.

That is correct. In traffic infrastructure, we have a different type of work, so we are mainly engaged in projects in the Croatian market, but the slow dynamics of public tenders poses a problem for us. The tenders are large, a large number of bidders appear, and thus complaints arise during the bidding phase, extending the entire process to more than a year. Therefore, it is not easy for us to plan resources and rely more on such projects, although they are also extremely important to us. Given the investment plans in traffic infrastructure, we expect greater activity in the future.

How do you operate in the Croatian market?

The Croatian market has strongly activated thanks to the NPOO, so we currently have several active contracts for domestic clients, primarily HOPS. We have already completed some projects from the NPOO, and we plan to participate in expected projects in the upcoming period. In previous years, we generated about 75 percent of our revenue abroad, and the remaining 25 percent in the domestic market.

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