Pedemontana Lombarda Highway
The work calls for the final construction design and the construction of the first section of the Como and Varese Bypasses, and the link between the A8 and A9 highways (from Cassano Magnago to Lomazzo), with the construction of approximately 26 km of highway and secondary roads, including about 7 km of tunnels.
During fiscal year 2010, the final design was approved and Contract Amendment No. 1 was entered into in February. The Amendment not only sets the total contractual amount at €880 million, it also calls for and governs the advance construction of certain works and executive design portions without including any contractually specified completion times. In December 2010, not only was the executive plan approved, an addendum to Contract Amendment No. 1 was entered into (which effectively increased the activities defined as advance works), and partial delivery of the work took place on December 7, 2010.
Starting with fiscal year 2011, however, and continuing into fiscal year 2012, the client experienced growing issues with its ability to meet its contractual financial commitments. In spite of these difficulties, the general contractor continued with construction according to the work schedule defined with the client, while initiating the contractually specified procedures provided for its own protection in connection with these issues. By the early part of fiscal year 2013, the client had largely overcome these financial difficulties and activities continued normally according to the program time line over the remainder of the fiscal year. In particular, on November 30, 2013, the link between the A8 and A9 highways reached substantial completion, as called for in the contractual documents.
On March 6, 2014, the Company signed Contract Amendment no. 3, the related Addendum and the delegation of payment of the Grantor CAL. These acts mainly involved:
- the determination of the new contract value of €922 million;
- confirmation of substantial completion of the A8 – A9 road link on November 30, 2013;
- extension of the deadline for the substantial completion of the Como and Varese Bypasses to June 30, 2014;
- the definition of the following new procedures for pre-financing payment arrangements: €128 million by March 30, 2014 through the delegation of payment of the grantor CAL, €32 million no later than 30 days before the substantial completion of the bypasses through the delegation of payment of the grantor CAL, €40 million, with interest, by January 31, 2015, by the client APL.
On December 11, 2014, Contract Amendment no. 4 was signed, which:
- redefined the total value of the contract as €930 million;
- acknowledged the substantial completion of Varese bypass and the Como bypass on October 31, 2014.
- set January 31, 2015 as the final deadline for the completion of the finishing, restoration and dismantling works on all sections.
Further, on December 11, 2014, a contract was signed with the Client for the executive design, plus associated works, to build the facilities necessary for implementing a toll-paying system for journeys using the "Free – Flow" system along section A – the first lot of the Como and Varese bypasses, for a total value of approximately €10 million.
Having delivered the works early, the Varese bypass was opened to traffic on January 24, 2015, and the A8 – A9 road link was opened on January 26, 2015.
Lastly, on March 6, 2015, a contract was signed with the Client for the planning and associated works to install a dynamic toll-paying system without barriers on the metal gateways of the A8 – A9 section and the 1st lot of the Como and Varese bypasses, for a total value of approximately €19 million.
The percentage of completion as of December 31, 2014 was 95.9%.
Line 4 of the Milan Metro
Impregilo, leader and lead contractor of a joint venture, was definitively awarded the tender called by the City of Milan for the selection of a private partner in a public/private partnership, which will be granted a concession for the engineering, construction and subsequent operation of Line 4 of the Milan Metro. The new line, which will be fully automated (there will be no engineer on board), will encompass a total of 15.2 km along the Linate-Lorenteggio section. The project calls for the final detailed design and construction of two single-track tunnels, one in each direction, with 21 stations and 32 structures (ventilation shafts, safety exits, and a depot/workshop).
The total value of the investment – consisting primarily of civil engineering works, providing technological services, and mechanical – is approximately €1.7 billion, with about two thirds of the funding coming from public State and City contributions.
In order to coordinate works activities, Salini Impregilo S.p.A. created the MM4 Consortium (EPC Contractor) together with builder partners only. The Consortium in turn assigned the civil engineering and non-system facilities, for a total of approx. €960 million, to consortium members, which are in turn equal partners in Metroblu S.c.r.l.
On June 20, 2013, the Addendum to the Ancillary Agreement was signed between SP M4 ScpA (a project company under ATI consisting of the same participating companies) and the Client. This Addendum redefined the work schedule, focusing solely on the work for the "EXPO Section" and, among other things, increased the total investment to approximately €1.8 billion.
On December 16, 2014, the mixed company M4 SpA – the operator – was formed between Municipality of Milan (66.67%) and the Private Members (33.33%); Salini Impregilo holds 9.67% of the capital.
On December 22, 2014, M4 SpA and the Municipality of Milan signed the Concession Agreement, and M4 SpA and CMM4 Consortium signed the Engineering Procurement and Construction (EPC) Contract for the entire project. The Project Financing Agreement was signed on the same date between the operator and the lending banks.
The percentage of completion as of December 31, 2014 was 11.0%.
Port of Ancona
On September 12, 2013, Salini Impregilo as head of a consortium was definitively awarded the contract for the construction and operation under concession of the road link between the Porto di Ancona, the A14 motorway and the SS 16 trunk road (the "Adriatica"). The value of the project is approximately €480 million and the concession period is 30 years from completion of the work. The initiative under concession anticipates a total revenue of about €2,540 million over the infrastructure management period. The project financing proposal submitted by the grouping of companies was declared of public interest by the ANAS Board of Directors in April 2008.
On December 2, 2013, the operator company, the concession-holding company Passante Dorico SpA was incorporated, in which Salini Impregilo has 47.00% equity.
Passante Dorico SpA and the Ministry of Infrastructure and Transport signed the Concession Agreement on December 18, 2013.
By a letter dated February 27, 2015, the Ministry of Infrastructure and Transport informed the operator of the successful outcome of the approval process of the Agreement and its validity.
Consequently, the necessary actions began for the completion of the final design for the project.
Construction work on the new infrastructure will begin in late 2015, upon completion of the procedure for designing and approving the final design, and will be completed within five years. The new roadway will be about 11 km long, including main and linking roads, and will represent a strategic undertaking aimed at optimizing traffic flow between the Port of Ancona, the city, and the major roadway consisting of the A14 highway, allowing for adequate growth of the Ancona logistics system based on the port, intermodal freight terminal and airport.
Milan-Genoa High Speed/Capacity Railway Line Project
This project involves construction of the Milan to Genoa High Speed/Capacity railway line, which was awarded to the CO.C.I.V. Consortium as the general contractor with a TAV (as operator of the State Railways)/CO.C.I.V. Agreement dated March 16, 1992. Impregilo is the project leader.
As we know, the project underwent a complex, articulated pre-contractual phase which evolved on a number of fronts from 1992 to 2011, many of which were contentious.
The contract for work on the Giovi Third Railway Crossing - Milan-Genoa High Speed/High Capacity Line, was signed in November 2011. The total value of the works awarded to the General Contractor CO.C.I.V., led by Salini Impregilo with 68.25%, comes to approximately €4.8 billion. The first and second lots of the project, already under way, include construction works and activities for €1,047 million. On September 13, 2014, Decree Law 133/2014 ("The Unblock Italy Decree"), converted by Law 164/2014, allotted funding of €200 million to the ‘Terzo Valico dei Giovi’ high-speed railway between Milan and Genoa. Law 190/2014 ("The Stability Law"), which came into force on January 1, 2015, allotted an additional €400 million in financing for the project. The above financial resources are destined to be used to begin the third construction lot, expected to become effective shortly.
Toward the end of the first half of 2013, arbitration proceedings started in previous years were successfully concluded; these concerned payment to the Consortium of fees owed to it in relation to activities carried out prior to the entry into force of the aforementioned Decree Law 112/2008 in relation to which the Consortium had recorded only the item relating to the costs actually incurred. In addition, upon conclusion of the aforementioned arbitration proceedings, the Consortium’s obligation to return the contractual advance which it had cashed, including eligible late payment charges, went into effect. This obligation was fulfilled early in the third quarter of 2013 by offsetting with the amounts owed to the Consortium according to the aforementioned arbitration proceedings, in keeping with the provisions of the Addendum to the November 2011 Agreement.
Lastly, the Salini Impregilo Group’s share in the CO.C.I.V. Consortium was increased to 64% as a result of the finalization of the agreements signed with the partner Tecnimont S.p.A. in September 2013. An additional 4.25% was indirectly acquired through the subsidiary CIV S.p.A. in the first half of 2014.
The percentage of completion of the Active Lots (1 and 2) was approximately 22.4% as of December 31, 2014.
Salerno-Reggio Calabria Highway Project: Lots 5 and 6
The project involves the improvement and modernization of the last section of the Salerno-Reggio Calabria Highway in the stretch between the cities of Gioia Tauro and Scilla (Lot 5), and between Scilla and Campo Calabro (Lot 6). The Group is involved in the project with a 51% share.
With regard to Lot 5, which involved serious disputes with the client which ultimately came to a positive resolution, new critical situations were encountered starting with the second half of 2012. These are due to both the difficulty of obtaining the desired levels of productivity and to the social and environmental conditions that remain critical in the entire area of operation of the work sites, and have led to the need to revise the corresponding estimates in the quotation covering the entire life of the contract, resulting in losses, which were already fully reported in the income statement for the year 2012. In this regard, no new significant critical elements requiring that changes be made to past measurements arose in 2014. The signing of contract amendment no. 5 set a new deadline for the completion of the works at November 30, 2015. The percentage of completion of the work on lot 5 as of December 31, 2014 was 96.2%.
With reference to lot 6, the terms of a new survey are currently being defined, which will result in the deadline for the completion of works being moved to September 30, 2015. The percentage of completion as of December 31, 2014 was 93.5%.
Ionica State Highway
At the end of 2011, the Group, in partnership with other major sector companies, won the ANAS competitive bidding for construction work on the third maxi-lot of the Ionica State Highway ("SS-106") to be assigned to a general contractor. The value of the new contract is about €791 million (of which 40% for Salini Impregilo). The new infrastructure involves the
development of a total of 38.0 km from the junction with state road 534 (SS-534) to Roseto Capo Spulico (Cs). The contract includes the construction of about 13 km of tunnels, 5 km of viaducts and 20 km of embankments as the main works. The overall duration of the work is expected to be about 7 years and 8 months, including 15 months to develop the design (final and construction) and to prepare for the start of work, with the remaining 6 years and 5 months for the construction phase.
The percentage of completion as of December 31, 2014 was 2.4%.
Third lane of Venice-Trieste A4 Highway (Quarto d’Altino – San Donà di Piave)
In November 2009, the grouping of companies led by Impregilo S.p.A. as agent won the competitive bidding for the executive design and construction of the extension to the third lane of the Venice-Trieste A4 Highway in the section between the cities of Quarto d’Altino and San Donà di Piave (VE). The total value of the contract is €224 million.
The works include widening the highway over a distance of 18.5 km with construction of a third lane, and, in particular, construction of two new viaducts over the Piave River for a total length of about 1.4 km, construction of 4 bridges, 9 overpasses, 4 highway underpasses, and refurbishing of the San Donà di Piave highway junction.
The percentage of completion as of December 31, 2014 was 93.4%, with completion expected within the first half of 2015 – six months ahead of the contractual deadline.
Verona - Padua High Speed/Capacity Railway Line Project
The IRICAV DUE consortium, of which Salini Impregilo holds 27.28% interest, is the general contractor of RFI S.p.A. for the design and construction of the Verona - Padua line, under the agreement dated October 15, 1991; role confirmed by the arbitration award of May 23-26, 2012, res judicata.
By resolution no. 94 passed on March 29, 2006, the CIPE had already approved the preliminary project for the first phase of the High Speed HS/High Capacity HC Verona - Padua line from Verona to Montebello Vicentino and from Grisignano di Zocco to Padua, rendered functional by the requirements and recommendations proposed by the Ministry of Infrastructures and Transportation and implemented by the CIPE which ensures the connection from Montebello to Grisignano through Vicenza station.
Article 1, para 76 of the 2014 Stability Law (Law no. 147/2013), establishes that the aforementioned Verona - Padua line is to be constructed: «with the procedures laid down by the letters b) and c) of section 232 and sections 233 and 234 of Article 2 of the Law of December 23, 2009, no. 191, "adding that, CIPE may approve the preliminary project" even if the financing of the construction phase, and the related final design is pending provided that there are sufficient funds to finance the first construction lot worth not less than 10 percent of the total cost of the works. To that end, spending through direct payment has been authorized for €120 million for each year from 2015 to 2029. The above contributions are not permitted for financial transactions with expenses borne by the State».
The Verona - Montebello and Grisignano di Zocco-Padua sections are both functional. Specifically, the construction of the Padua - Grisignano section, quadrupling the existing line by about 17 km and worth approximately €400/500 million, was repeatedly called for by the Veneto region as it would allow for a further expansion of the Regional Metropolitan
Railway System (Sistema Ferroviario Metropolitano Regionale - SFMR), toward Vicenza, thus resulting in stronger support of the territory and local authorities.
On December 23, 2014, the agreement for the final design of the Verona-Padua section of the High-Speed/High Capacity railway line was signed, regarding the first subsection of Verona-Vicenza. The signed agreement calls for the delivery of the final design for the first Verona–Vicenza subsection by May 15, 2015, leading to the start of works by the end of December 2015.
The Verona-Vicenza subsection – the subject of the signed agreement – has already been financed with €1.5 billion under the Stability Law 2015 and €369 million set aside under the Stability Law 2014. The works will cover around 50 km in an area that spans the provinces of Verona and Vicenza.
On December 31, 2014, Salini Impregilo and Lamaro Appalti – a member of the Consorzio IRICAV DUE with an interest of 6.82% – signed a “Preliminary Agreement” for the transfer of the interest held by Lamaro Appalti in the consortium to Salini Impregilo. The validity of the Agreement – whose capital, income-related and financial impacts will become effective December 31, 2014 – is subject a series of conditions in line with the bylaws of the consortium and the agreement with RFI, which must be satisfied by June 30, 2015, although this date may be extended to December 31, 2015.
Lastly, in relation to this project and the fact that the Group was represented in it, even before the merger between Salini and Impregilo by shares held separately by the companies in the consortium, the period prior to that reviewed in this report reflected the portfolio value limited to the portion attributable to the former parent. This circumstance, which took account of the substantial standstill of the dispute with the client prior to the events described below, as well as the different assumptions made in previous years in relation to the probability of restoring the correct contractual situation of the consortium, was considered to have passed in the light of these events and the portfolio value was presented in a homogeneous manner, including all of the shares attributable to the Group, currently estimated to be approximately €1,200 million.
Rome Metro Line B
On June 13, 2012 – having passed static testing and obtained all authorizations – the new section of line B1 connecting Piazza Bologna to Piazza Conca d’Oro was put into operation, with the Mayor of Rome and the city’s top dignitaries in attendance.
Temporary acceptance was completed in February 2013, while legal proceedings started for the recognition of the reserves posted in the final account.
As regards the Jonio section, the work was substantially completed at December 31, 2014, except for the external areas, and several works which require permission from third-party entities for it to be performed. This section is expected to open by April 30, 2015. Also for the Conca d’Oro – Jonio section legal proceedings were initiated for the recognition of the reserves posted until IPC no. 12.
The Group was also awarded the contract for extension of Rome Metro line B for the Rebibbia-Casal Monastero section. The project, commissioned by Roma Metropolitane to a
grouping of companies including Vianini and Ansaldo, will be carried out partly through the technique of real estate development, and its value is set at approximately €948 million.
The main works will be the Rebibbia shunting neck, the stations of S. Basilio and Torraccia/Casal Monastero, with about 3.8 km of tunnels, an interchange, and parking for 2,500 cars. On December 21, 2012, the Service Conference for approval of the final design and variants put forth during the competitive bidding phase was completed.
On December 31, 2012, the commissioner’s ordinance was issued in which the Mayor approved the preliminary integrated design, defined the purpose of the areas, and approved the expropriation plan in connection with the work project.
In January 2013, the grantor Roma Metropolitane provided a provision for a simultaneous start of the final and construction design.
In June 2013, the grantor Roma Metropolitane ordered the suspension of the executive design, requiring that further work be carried out on the final design already submitted.
On August 8, 2013, the final design was delivered to grantor Roma Metropolitane, revised according to the provisions received from Roma Capitale; its approval is currently pending.
The urban development variants, which are required in order to start the work, have not been adopted by the Municipal Administration. For this reason a letter was sent to the Grantor on July 24, 2014, with formal notice to comply, subject to termination for damages.
Given the lack of reply from Roma Metropolitane, on September 16, 2014 a further request was sent, without prejudice to the final deadline for the Grantor to comply (September 22, 2014).
Roma Metropolitane replied to the notice by letter on September 22, 2014, inviting MetroB S.r.l. to a meeting to attempt to prevent the start of litigation. Negotiations between the parties were, therefore, suspended in view of the forthcoming conclusion of the administrative proceedings brought by the temporary association of companies CMB to challenge the award of the concession in question to the Salini Impregilo temporary association, the hearing for which was set to take place November 18, 2014 before the Council of State. The CMB temporary association’s appeal was rejected in the court of first-instance.
Most recently, through a judgment issued on March 3, 2015, the Council of State confirmed the findings of the first-instance judge, confirming the legitimacy of the definitely award of the contract to the Salini Impregilo temporary association and, therefore, MetroB S.r.l.’s entitlement to the concession.