Analysis of Impregilo group’s and parent’s financial position and results of operations for the year

This section includes the Group’s and parent’s reclassified income statement and reclassified statement of financial position, as well as a breakdown of their net financial position at 31 December 2013. It also includes a summary of the main changes in the consolidated income statement, compared with those for the previous year, and in the statement of financial position, in comparison with the related figures for the previous year.

Unless indicated otherwise, figures are provided in millions of Euros and those shown in brackets relate to the previous year.

The paragraph “Alternative performance indicators” in the “Other information” section gives a definition of the financial statements indicators used to present the group’s and parent’s financial position and results of operations for the year.

In line with the process of realising the non-core assets of the Group, which was begun in October 2012, at the end of 2013 the Impregilo Group sold the 50% shareholding held by its subsidiary Impregilo International Infrastructures N.V. in the Chinese company Shanghai Pucheng Thermal Power Energy Co. Ltd. (hereinafter 'Shanghai'), which is active in the field of waste treatment, for approximately € 65 million (at the exchange rate on the date of sale).

In the same period, Impregilo finalised the sale of its holdings in the companies Tangenziali Esterne di Milano S.p.A. (“TEM”) amounting to 3.74% of its share capital, for € 4.7 million, and Tangenziale Esterna S.p.A. (“TE”) equal to 17.77% of its share capital for € 39.1 million, selling both holdings to Itinera S.p.A. (Gavio Group). This agreement also provided for realisation of the share of works for about € 23.2 million, through the sale of Impregilo's holdings in the Costruttori TEEM Consortium for approximately € 13.4 million, and in Lambro S.c.a.r.l. for approximately € 9.8 million.

With reference to the Campania urban solid waste projects, it should also be noted that in April 2013, the Court of Cassation definitively rejected the appeal of the Regional Government against the decision of the Council of State relating to the former waste- derived fuel plants. With this decision, the decision at first instance of the Regional Administrative Court of Lazio - already ratified by the Council of State on 20 February 2012 - by which the Regional Government had been ordered to pay the Group subsidiary FIBE approximately € 204 million plus legal costs and interest from 15 December 2005, corresponding to the costs incurred by FIBE for the construction of the plants and not yet amortised at that date, has become definitively enforceable. The total amount of € 240 million was received on 1 August 2013. As a result of this latest development, total proceeds of € 84 million were received after tax, and classified in the results for discontinued operations. More complete information regarding the complex litigation surrounding this decision is provided in subsequent sections of this Annual Report.

Lastly, since the last half of 2013, events that have characterised the Group's operations to widen the Panama Canal and which have already been covered specifically in previous Group financial documentation, have undergone significant developments, in particular an unexpected deterioration in contractual relations with the client. In this context, which is examined in greater detail in subsequent sections of this Annual Report, the group of international companies awarded the contract in which Impregilo is participating, (which has in previous years already suffered major crises and increased costs due to causes largely attributable to the sphere of responsibility of the client) has found itself unable to continue construction activities. It was only recently possible to stabilise this development, which resulted from the repeated refusal of the client to collaborate in pursuing contractually agreed procedures governing the rights of the parties, by reaching an agreement under which it has been possible to resume construction activities. Inter alia, this agreement provided for resumption of the works and their completion by 31 December 2015 on the following basis: (i) joint financing by the client and the contractor of the remaining works, with particular reference to the extra costs incurred compared with the original estimates, and (ii) postponement of the refund of contractual advance payments, with a schedule compatible with the final allocation of all the extra costs between the parties on completion of the arbitration proceedings commenced at the same time. In this regard it should be noted that already in previous years, the Impregilo Group, following a reasonably prudence-oriented approach and supported by the opinions of independent experts, had updated its own estimates relating to this order and recorded a significant final loss. On this assumption, following an evaluation approach which is consistently established and takes account of recent events, it was decided to update the evaluations previously carried out and consequently record additional net residual costs even though the overall amount is not particularly significant.