Risk areas


Impregilo is active in Libya through its subsidiary Impregilo Lidco Libya General Contracting Company (Impregilo Lidco) in which it has a 60% interest. The other shareholder is Libyan.

In the past, the subsidiary had acquired important contracts for the construction of:

  • infrastructural works in Tripoli and Misuratah;
  • university campuses in Misuratah, Tarhunah and Zliten;
  • a new Conference Hall in Tripoli.

With respect to the political upheaval in Libya from February 2011 to the date of this Report, the subsidiary has always acted in accordance with the contractual terms and the investments made up until the deterioration of the country’s political situation are fully covered by the contractually provided for advances.

The works covered by the contracts agreed by the Libyan subsidiary are works of national interest which are currently expected to be continued. It is also clear that there are major problems concerning the effective capacity of the subsidiary to increase its production in line with what was agreed before the onset of the crisis and, to that end, Impregilo has ruled out the possibility of a major new increase in the production activities of their subsidiary Impregilo Lidco in the short term.

Starting in 2012 preparatory procedures were initiated for the resumption of industrial activities although the local situation remains critical and still does not guarantee completely safe conditions. However, it resumed commercial and contractual relations with the customers to open up the building sites again and restore the financial conditions originally provided  for in the related  contracts. In 2012 more  precise information was obtained concerning the economic and financial values affecting the Group consolidated financial statements. As a result, Impregilo updated the carrying amounts of the Libyan subsidiary’s assets, liabilities, revenue and expenses in its consolidated financial statements in line with its accounting policies, based on the information gathered during the year and the valuations performed by the subsidiary’s independent legal advisers. Compared to the situation presented in the group’s 2011 consolidated financial statements, which was based on the latest available figures at 31 March 2011, the subsidiary’s net assets were impaired by approximately € 40.7 million to reflect the above events in relation to contract work in progress. These losses were included in contract work in progress as the group deems them recoverable considering the renewed contacts with clients. Net cash and cash equivalents held in Libya decreased by roughly €13.9 million due to costs incurred locally in the period from 31 March 2011 to 31 December 2013.

In early 2013, the group carried out a physical count of the plant, machinery and supplies for the main building sites, recognised at € 29.9 million, although complete access to all the sites where the assets are held was not possible for safety reasons. Given that any additional costs that may arise following completion of the count would be covered by the clients as per the contractual terms for force majeure, as also assessed by the legal advisers assisting the subsidiary, the group does not believe that any new significant risks will arise from the above valuations with respect to the recovery of the company’s net assets, thanks in part to the actions taken and requests and claims presented to the client.

The group is monitoring the situation closely and it cannot be ruled out that events which cannot currently be foreseen could take place after the date of preparation of this Annual Report and could require changes to the valuations made to date.

Tax litigation - Iceland

With respect to the contract for the construction of a hydroelectric plant in Karanjukar (Iceland) that the group successfully completed in previous years, a dispute arose with the local tax authorities in 2004 about the party required to act as the withholding agent for the remuneration of foreign temporary workers at the building site. Impregilo was firstly wrongly held responsible for the payment of the withholdings on this remuneration, which it therefore paid. Following the definitive ruling of the first level court, the company’s claims were fully satisfied. Nevertheless, the local authorities subsequently commenced new proceedings over a similar issue. The Supreme Court rejected the company’s claims in its ruling handed down in February 2010, which is blatantly contrary to the previous ruling issued in 2006 on the same matter by the same judicial authority. The company had expected to be refunded both the unduly paid withholdings of € 6.9 million (at the original exchange rate) and the related interest accrued to date of € 6.0 million. Impregilo had prudently impaired the interest amount in previous years, despite a previous local court ruling and the opinion of its consultants that confirmed its grounds, and only continued to recognise the unduly paid principal. After the last ruling, the company took legal action at international level (appeal presented to the EFTA Surveillance Authority on 22 June 2010) and, as far as possible, again at local level (another reimbursement claim presented to the local tax authorities on 23 June 2010) as it deems, again supported by its advisers, that the last ruling issued by the Icelandic Supreme Court is unlawful both in respect of local legislative and international agreements which regulate trade relations between the EFTA countries and international conventions which do not allow application of discriminatory treatments to foreign parties (individuals and companies) working in other EFTA countries. On 8 February 2012, the EFTA Surveillance Authority sent the Icelandic government a communication notifying the infraction of the free exchange of services and requested the government to provide its observations about this. As a result of these proceedings, in April 2013, the EFTA Surveillance Authority issued its reasoned opinion that Icelandic law, in relation to the rules relating to the litigation described herein, does not comply with the rules governing trade relations between the member countries of the organisation and demanded that Iceland should comply with this position; the Impregilo Group has therefore called for the case to be reopened. In view of the above, it is considered that at the present time there are no objective reasons to  change the valuations made hitherto  in relation to this dispute.

Ente irriguo Umbro-Toscano - Imprepar

The group was informed that part of the sill above the surface discharge of the Montedoglio dam in the Arezzo province had been damaged on 29 December 2010. The Irrigation Body notified Imprepar  in January 2011 that “investigations and checks are being carried out to ascertain the reasons and responsibilities for the damage”. As the transferee of the “sundry activities” business unit, which includes the “Montedoglio dam” contract, Imprepar informed the body that the activities related to the damaged works were carried out by another company in 1979 and 1980, from which Impregilo (then COGEFAR) only took over the contract in 1984. The works had been tested and inspected with positive results. Imprepar specifically explained its non-liability for any damage caused by the event in its communication to the Body and does not believe that there are reasons to modify its related assessments, supported by the opinion of its legal advisors.

It should be noted that in 2012 the management of The Tuscany and Umbria Water Authority and the Works Director signed a notice to proceed concerning the request to the works contractor to immediately commence, at its own expense, preparation of the executive design and initiate the associated works. Imprepar challenged these actions in full although the amounts involved are not considered significant.

Imprepar deems it too early to be able to assess any risks arising from the Montedoglio dam contract other than those already assessed in the previous year, given the above recent developments and supported by its legal advisors.

Widening of the Panama Canal

In relation to this contract, it should be noted that, during the first stage of full-scale production, certain critical issues were encountered that, due to their specific characteristics and the importance of the works to which they related, made it necessary to revise downwards the estimates on which the early phases of the project had been based. The most critical issues relate to, inter alia, the geological characteristics of the excavation areas with respect to the raw materials necessary to produce the concrete and the processing of such raw materials during normal production activities. Additional problems were discovered as a result of the adoption by the client of operating and management procedures differing materially from those contractually agreed, with particular reference to the approval procedures for the technical and design solutions proposed by the contractor. These situations, already specifically addressed in previous financial reports drawn up by the Group, have been further protracted in 2013. In view of the persistent unwillingness of the client to reasonably implement the appropriate tools contractually provided for the management of these disputes, the Group has acknowledged the consequent  impossibility  of  the  contractor  -  and  therefore  of  the  original  contracting partners - to continue, at their own entire and exclusive risk, the construction activities required for completion of the project, with full assumption of the financial burden required for this purpose, without any concrete guarantee of specifying a mutually agreed objective with their counterparts. Against this background, therefore, at the end of 2013 the Group stated its formal intention to suspend work immediately if the client once again demonstrated its unwillingness to deal with the dispute in accordance with a contractual approach characterised by good faith and the mutual willingness of all parties to come to a reasonable agreement.

Meetings between the parties, assisted by their respective legal and contract advisers and experts lasted throughout February 2014 and on 13 March 2014 a memorandum of agreement was signed. The essential elements of the agreement provide, in return for the undertaking of the contractor to resume work and finish it by 31 December 2015, a commitment by the client and the contracting companies to providing funding for the outstanding works up to a maximum of $US 1.4 billion. This commitment will be met by the client through (i) suspension of the return of contractual advances already paid of approximately $US 800 million and (ii) the provision of additional advances of $US 100 million, while the group of contracting companies will contribute through (i) the direct provision of their own financial resources of $US 100 million and (ii) the provision of additional financial resources, through the conversion into  cash of existing  contractual guarantees, totalling $US 400 million. Repayment of the amounts allocated for the financing of the works to be carried out has been delayed in order to coincide with the pending outcome of arbitration proceedings, initiated contemporaneously, which will set out the liabilities of the parties in relation to all the extra costs incurred or remaining to be incurred as a result of the situation described. In this context, it should be remembered that in previous years, the Impregilo Group had already applied an approach to the project which was reasonably prudence-oriented and clearly supported by its legal advisers, on the basis of which it had already provided for significant final losses, at that time only partially limited by the corresponding recording of additional fees claimed from the client and based on the expectation that their payment might be considered reasonably certain. Bearing in mind that since the end of the previous year the general critical situation, far from being resolved, had become further protracted as described below, it was decided, pending finalisation of the abovementioned agreements, to update the overall economic forecasts for the whole life of the contract. In accordance and continuity with the assumptions previously made, in the face of a further increase in expected final costs, it was decided to update the valuation of the series of additional payments regarded as contractually payable and reasonably certain to be made, although deferred over time in accordance with the deadlines fixed in the agreement with the client. This activity has generated additional net residual costs which, in view of provisions made in previous years, have not assumed significant values in either absolute or relative terms and have been fully reflected in the income statement for 2013.

Bridge crossing the Messina Strait and roadway and railway connectors from Calabria to Sicily

In March 2006, as lead contractor of the joint venture created for this project (interest of 45%), Impregilo signed a contract with Stretto di Messina S.p.A. for its engagement as general contractor for the final and executive designs and construction of the Messina Strait Bridge and related roadway and railway connectors.

A bank syndicate also signed the financial documentation required in the General Specifications after the joint venture won the tender, for the concession of credit lines of € 250 million earmarked for this project.  The customer was also given performance bonds of

€ 239 million, as provided for in the contract. Reduction of the credit line to € 20 million was approved in 2010.

Stretto di Messina S.p.A. and Eurolink S.c.p.A. signed a rider in September 2009 which covered, inter alia, suspension of the project works carried out since the contract was signed and until that date. As also provided by the rider, the final design was delivered to the client. On 29 July 2011, the Board of Directors of Stretto di Messina S.p.A. approved the final plan.

Law decree no. 187 was issued on 2 November 2012 providing for “Urgent measures for the renegotiation of the contracts with Stretto di Messina S.p.A. (the customer) and for local public transport”. Following enactment of this decree and given the potential implications for its position as general contractor, Eurolink (led by Impregilo) notified the customer of its intention to withdraw from the contract under the contractual terms, also to protect the positions of all the Italian and foreign co-venturers. However, given the immense interest in constructing the works, the general contractor also communicated its willingness to review its position should the customer demonstrate its real intention to carry out the project. To date, the ongoing negotiations have not been successful despite the parties’ sincere interest in coming to an agreement. Eurolink has initiated several legal actions at national and EU level, on the one hand arguing that the provisions of the aforementioned decree are contrary to constitutional rules and EU treaties and are prejudicial to the rights legitimately acquired by Eurolink under the contractual terms and, on the other hand, seeking an order compelling Stretto di Messina to pay the amounts claimed, for various reasons, by Eurolink due to the absence of the contract for reasons beyond its control. With reference to the legal actions at EU level, in November 2013 the European Commission announced its decision to dismiss the action as there was no infringement of EU treaties, the decision being confirmed on 7 January 2014 with notification by the European Commission that the complaint had been dismissed. As a result, Impregilo Group’s order backlog as at 31 December 2012 was adjusted to reflect discontinuation of the above-mentioned contract. Considering the complex nature of the various legal proceedings initiated and although the legal advisers assisting Impregilo and the General Contractor are reasonably positive about the outcome of the proceedings and the recoverability of the remaining balance sheet assets recorded in relation to this contract, it cannot be ruled out that events which are at present unforeseeable could arise in the future and require current valuations to be revised.


Impregilo is present in Venezuela through its permanent organisation which, directly or in partnership with international partners, is carrying out various railway and hydroelectric projects. It has had an established presence over more than a decade in the local area at social, economic and industrial level.

In recent years, relations with clients, all government-sponsored, have been characterised by persistent slowness of payments. This aspect has been exacerbated over the past year as a result of the change of leadership in the government, which took place in early 2013, and the simultaneous worsening of social tensions that have accompanied this political transition.

In view of the essential stalemate existing with clients in this context, the Group has temporarily suspended production activities.

As regards the railway projects, at the beginning of February 2014 an agreement (the "Punto de Cuenta") was signed by the Chairman of the client IFE (State Railways) and the Ministry of Finance but is awaiting formal ratification by the President of the Republic. This agreement provides for the progressive payment by the end of 2014 of approximately 82% of all receivables outstanding at the end of 2013.

As regards the hydroelectric projects, carried out by the OIV Tocoma consortium, in view of the expiry of the contractual period for completion of the works - scheduled for mid- November 2013 - rescheduling of the outstanding works has been arranged at the request of the client, with a forecast resumption of work at the beginning of May 2014 and completion by the end of 2016. This proposal is still being analysed by the client, despite the legitimate claims for payment of its certified debt and definition of the future financial resources required to guarantee normal performance of the outstanding works.

The works being carried out by the Impregilo Group are highly important infrastructures from the economic, industrial and social standpoints, and although the events marking the recent political history of the country have resulted in temporary situations of uncertainty not dissimilar to the current position, these have always been positively resolved and have not generated significant liabilities. On the basis of these assumptions and with continuous and careful monitoring of the situation in the country, carried out jointly with partners, including meetings with the clients and with local government authorities aimed at safeguarding and protecting the position of the Impregilo Group, there are currently no particular problems regarding the potential realisation of the Group's net assets, except for the extension of revenue collection times, which has been adequately reflected in  the balance sheet valuations. In light of the sensitivity and complexity of the situation that has arisen  at  political  level,  it  cannot  be  ruled  out  that  events  which  cannot  currently be foreseen could take place after the date of preparation of this Annual Report and could require changes to the valuations made to date.