Country risk

Impregilo Lidco Lybia General Contracting Company (Libya)

Salini Impregilo S.p.A. operates in Libya through a permanent establishment and a subsidiary, Impregilo Lidco Libya General Contracting Company (Impregilo Lidco), which has been active in Libya since 2009 and is 60% owned by Salini Impregilo with the other 40% held by a local partner. The directors do not deem that significant risks exist with respect to the permanent establishment’s contracts as work thereon has not started, except for the Koufra airport project. However, the Group’s exposure is not material as it has collected the contractual advance. The Group is also involved in the Libyan Coastal Highway project, which had not yet been started at the reporting date. Impregilo Lidco won 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 the end of February 2011 and the steadily deteriorating situation up to the date of this Report, the subsidiary has always acted in accordance with the contractual terms. The investments made up until the deterioration of the country’s political situation are fully covered by the contractually provided for advances.

It is clear that there is considerable doubt about the subsidiary’s effective ability to carry out the contracts and, accordingly, the parent does not expect to see new large developments in the subsidiary’s production in the foreseeable future.

Impairment losses on net assets and costs incurred starting from the 2012 financial statements until the reporting date approximate €71 million, which was fully included in the contract work in progress since, as described in detail below, the subsidiary expects to recover the amounts as due to force majeure.

Impregilo Lidco collected contractual advances in previous years, amounting to €179.7 million at the reporting date.

Moreover, any additional expense that may arise in this regard, consistent with the contractual terms, would be covered by the customers under the force majeure clause. The subsidiary’s legal advisors agree with this approach. Accordingly, no new significant risks are deemed to exist for the recovery of the net assets attributable to the subsidiary, thanks in part to actions and claims filed against the customers contractually or otherwise.

To date and given the new unrest in various areas of the country in the reporting period, the country’s social and political situation continues to be extremely complex and marked by significant critical conditions.

Salini Impregilo is monitoring the situation closely and it may not be excluded that events which cannot currently be foreseen may take place after the date of preparation of this report that require changes to the assessments made to date.


Salini Impregilo Group has been active in Venezuela through its permanent organisation, which directly or in association with international partners, carries out railway and hydroelectric projects with a solid base constructed in the country over more than 30 years.

In recent years, relationships with customers, which are all government agencies, have been characterised by delays in payments. This issue became more acute in 2015 due to the rapid fall in oil prices, which is Venezuela’s main source of hard currency, and social tensions that have intensified as a result of the lack of basic foodstuffs and medicines.

With respect to the railway works and especially the P. Cabello - La Encrucijada project, the last considerations collected were in January 2015 for hard currency, whereas local currency collections took place in line with the contractual schedule. Moreover, approximately 70% of the progress billings in local currency was collected in 2015, demonstrating the customer’s interest in continuing the works.

Despite the collection difficulties and the existence of many other issues, such as the lack of raw materials, linked to the country’s complicated political-economic situation, works continued in line with budget forecasts during the period.

Given that the country’s situation continues to deteriorate, despite the efforts and costs incurred to maintain the desired production speed, there is a risk that the latter may be negatively impacted by the events of future months, such as the early end of the government’s mandate.

With respect to the hydroelectric works carried out through the OIV Tocoma Consortium, the customer requested that they be rescheduled, with the expected commissioning of the first turbine by the end of 2016. This proposal was agreed by the customer that, also in light of legitimate requests for payment of the certified debt and the definition of the future financial resources needed to ensure normal performance of the remaining work, recommenced making payments in favour of the consortium and signed a new addendum to the contract under which the work to be completed and the related outlays have been rescheduled. In 2015, Corpoelec made payments of over USD242 million as well as approximately VEF2.8 billion.

Despite the commitments taken on by the parties with the afore-mentioned addendum, works slowed down starting from the end of 2015 as a result of delays in the latest payments (about USD80 million and VEF1.2 billion scheduled for the last quarter of the 2015). However, in October 2015, the important milestone of the filling of the dam’s reservoir to the planned level was reached in line with the works schedule. In addition, Venezuela’s Central Bank abolished the official exchange rate and the SIMADI on 10 March 2016 and introduced two new rates:

  • DIPRO (fixed), only to be used for imports of basic necessities (i.e., medicines, food staples, etc.);
  • DICOM (floating), applicable to all other commercial transactions. This rate has depreciated by more than 300% since its introduction.

There has been a concurrent explosion in inflation with forecasts hovering around an annual 700%, leading to a drop in consumption and a large loss in purchasing power. The continued social-economic-political uncertainty and oil price levels are having a dramatic influence on the country’s entire production system.

The projects that are being developed by Salini Impregilo Group are priority infrastructures of the utmost importance, both in economic-industrial and social terms. Accordingly, and based on the constant and careful monitoring of the country’s situation, carried out together with the Group’s partners and through discussions with customers and local government authorities to monitor and protect the Group’s positions, the assumptions about the recoverability of the Group’s net assets can be confirmed.

However, in view of the delicate and complex uncertain situation that has developed at political level, the possibility that events not foreseeable at the date of this report may arise in the future that may require changes to the assessments made to date cannot be excluded.


This country has found itself in the grips of an economic crisis for the last two years. In addition to the drop in oil prices, which Nigeria bases its profit-earning capacity on, there is internal strife between different political and tribal fractions which has limited once again the country’s ability to meet its cash requirements and encourage development.

The current government is in extreme distress and has limited interlocutory capacity and is unable to respond to emergencies with decisive measures. It has continued to request foreign aid, mainly from China, increasing its debt without adding value to the country’s internal growth. In addition, in June, the country’s central bank announced a new monetary policy, replacing its long-term strategy of maintaining a fixed rate to convert the local currency, the Naira, with the US dollar. It authorised the Nigerian currency’s depreciation which lost about 40% against the Euro in just a few days. The effects of this depreciation are reflected in the condensed interim consolidated financial statements at 30 June 2016.

The construction segment is practically stagnant and most of the general contractors have suspended production activities, especially after approval of the government’s 2016 budget, which includes inadequate funds for the ongoing projects, not to mind new opportunities.

The Group’s current projects are also penalised by the limited funds made available by the customers, thus making it difficult to foresee a rapid recovery in production, apart from the Adiyan contract, which consists of the construction of a water treatment plant for Lagos. This is an undisputed priority and is being funded by the local administration rather than Nigeria’s federal government.

In view of the present critical political and economic situation, it cannot be excluded that events not foreseeable at the date of this report may arise in the future requiring changes to the assessments made to date.


Despite internal political tension and the serious public order situations in certain areas which culminated with the coup d’état foiled in July 2016, Turkey showed its considerable ability to deal with the critical external and internal issues during the period. Moreover, with its letter dated 15 March 2016, the customer Statkraft communicated the termination of the contract for alleged non-compliance of the contractor (Salini Impregilo - Salini Insaat - NTF joint venture), without disclosing that this represents, in the joint venture’s opinion, comforted by its legal advisors, a unilateral decision by Statkraft to withdraw from the contract as a result of the serious public order situation that had emerged in the location where the works are expected to be executed, which is obviously completely unrelated to the contractor. The joint venture, therefore, opposed the customers’ decision and initiated the contractual procedure for dispute resolution. At the end of May 2016, the site personnel had all been transferred.

Negotiations with the customer are in place to settle the dispute. Specifically, the customer requested the bank guarantees of approximately €34 million given on Salini Impregilo’s behalf be enforced. The Milan Court ordered the enforcement be blocked with its ex-parte ruling of 13 June 2016 and set the date of 14 July 2016 for the related hearing. Subsequently, the measure was confirmed with the order of 23 July 2016, whereby the Judge recognised the contractor’s fumus boni iuris, holding that both enforcement of the guarantees and termination of the contract are not due to the joint venture’s default but to the customer’s unilateral decision, due to the very serious public order issues at the work site.

It cannot be excluded that events not currently foreseeable may take place after the date of this report which would make it necessary to modify the assessments made to date.

With respect to the other contract, Gaziantep, located in a “critical” area, the province and city of Gaziantep, which is an important busy industrial hub for the country, are protected by a large Turkish security force assisted by NATO. There is a heightened risk of possible isolated terrorist actions, especially against government sites.


This country’s political and economic situation is still extremely difficult. The continued instability has led to a serious economic recession and steady worsening in Ukraine’s public finances.

Given the location of the Group’s construction sites near the cities of Poltava, for the Capital Repair M03 Kiyv- Kharkiv-Dovzhanskiy contract, and Zhytomyr, for the M06 Kiev-Chop Road Rehabilitation contract, which are far away from the areas most affected by the ongoing armed conflict in the south east, the safety of production activities has not been significantly affected. The Group is not exposed to currency depreciation risk since the contractual amounts are expressed in Euros and US dollars.

The burden of the conflict and the economic slowdown have also negatively impacted the country’s public debt, but the Group deems it reasonable to assume that the contracts awarded in Ukraine are profitable and will be able to be continued, while constantly and continuously monitoring the internal developments in the country.

The unstable institutional and governmental situation has affected the customer’s organisation (the Ukraine State Agency of Automobile Roads - Ukravtodor), which has recently seen the introduction of new senior managers.

These changes and the parent’s recent sale of Todini Costruzioni Generali (which had been awarded both contracts in this country) made intensive communication with the customer necessary to avoid possible misunderstandings. Specifically, Ukravtodor is currently investigating the sale of Todini, although this transaction has not affected the works in Ukraine as they will be carried out entirely by Salini Impregilo.

Progress on the Capital Repair M03 Kiyv-Kharkiv-Dovzhanskiy was severely affected by the local situation during the period. The delayed certification of the works has made relationships with some suppliers increasingly difficult as they are affected by the above-mentioned financial difficulties.

Moreover, it cannot be excluded that currently unforeseeable events may arise in the future which would require changes be made to these assessments.