Swedish construction company to double its surety bond capacity

Although unstable market conditions have detrimentally impacted the construction industry’s vitality, some opportunities still allow contractors to make money in the fledgling market. According to the U.S. Bureau of Labor Statistics:

“As energy costs have risen, some companies are finding it necessary to build or renovate buildings that are not energy efficient. ‘Green construction’ is an area that is increasingly popular and involves making buildings as environmentally friendly and energy efficient as possible by using more recyclable and earth-friendly products.”

The opportunity for growth in America’s green building market has encouraged Skanska, a Swedish construction company that places a special emphasis on sustainability and green building practices, to nearly double its surety bond capacity so it can work on larger construction projects. Contracting firms that offer high bonding capacities have the ability to win bids for expensive, high-scale projects.

In a Wall Street Journal article by Niclas Rolander, Skanska CFO Peter Wallin said:

“We are preparing to be able to take on larger volumes. One reason for that is that we want to be able to take advantage of the great possibility we see for expansion on the west coast. For that, we need to expand our surety lines, and we are currently expanding them significantly.”

The article explained that Skanska looks to increase its bonding capacity by

  • stepping up investments
  • taking its net cash position down to zero
  • excluding net pension liabilities and construction credits in residential development co-ops

“Skanska is one of the biggest buyers of surety bonds in the U.S. market, and its solid balance sheet puts it in a good position to insure projects on favorable terms,” Rolander said.

Government agencies all over the world use surety bonds to help regulate their industries. The U.S. has one of the biggest surety bond markets out there, especially when it comes to the construction industry and contract bonds.

According to Commercial Surety Fundamentals, a publication produced by the National Association of Surety Bond Producers, the contract bond market

“generates approximately two-thirds of the total surety industry written premium.”

Surety providers aren’t making large premiums on contract bonds without cause. Getting in on the the U.S. construction market can be extraordinarily viable for foreign contracting firms.