January 2016
Lane Industries Incorporated
On 4 January 2016, the acquisition of 100% of Lane Industries Incorporated (“Lane”) was finalised.
The consideration is roughly USD455 million. Salini Impregilo financed the acquisition with a bridge financing of €400 million, to be repaid in May 2017, obtained from a syndicate of five major international banks. It subsequently repaid the financing through a new bond issue redeemable in 2021.
Lane is one of the major highway contractor and top private asphalt producer in the United States. It is a family-owned business with more than 100 years of experience specialised in heavy civil construction and in the transportation infrastructure sector with 53 active projects in more than 20 states in the US and roughly 5,000 employees.
The company has three divisions: asphalt production, road projects and other infrastructure projects, in both domestic and international markets. Thanks to its strong track record, technical experience and the strategic location of its materials plants, Lane is participating in some of the largest and most complex projects in the US, such as the construction of a highway in Florida, the I-4 Ultimate, an approximate USD2.3 billion contract, in which Lane has a 30% stake.
Lane’s acquisition represents another step in Salini Impregilo’s expansion into the US infrastructure market.
With Lane, Salini Impregilo will be able to access a much larger pool of projects. The US infrastructure and transportation market is expected to grow at a faster rate than GDP on the back of a recovering economy, a positive demographic trend and the demand for significant upgrades and expansions of existing infrastructure (source: www.worldbank.org; PwC & Oxford Economics, “Future infrastructure spending in the US”, 2015). Lane’s entry into the Group will bring significant growth opportunities, while increasing the diversification of the portfolio and improving the balance of its exposure between developed and developing markets.
S7 Expressway - Poland
On 20 January 2016, the Group was awarded a €117 million contract to build a section of S7 Expressway south of Krakow near the border with Slovakia.
The customer is the General Directorate of National Roads and Motorways (GDDKiA).
This contract increases the value of Salini Impregilo’s order backlog in the country and consolidates the Group’s leadership in the infrastructure sector in which the following roads are under construction: the S3 Nowa Sol - Legnica, the S8 Warsaw Bypass, the S7 Chęciny - Jędrzejów section and the A1 lot F, near Katowice.
High speed/capacity Verona-Padua Railway Project
With its communication of 28 January 2016, Ansaldo STS S.p.A. informed its consortium partners of its intention to transfer its entire investment in Consorzio Iricav Due to Salini Impregilo S.p.A. and Astaldi S.p.A..
The transaction, which will allow Salini Impregilo to increase its share by 8.12%, is subject to the approval of the consortium’s members and the issue of the required authorisation by the customer, R.F.I. S.p.A., without prejudice to the other consortium members’ right of first option at the same conditions and in line with their current investments in the consortium.
March 2016
Purple Line transit system in Maryland (USA) worth USD2 billion
The Purple Line Transit Partners joint venture, which includes Lane Construction, was selected as the best bidder for the design and construction of the Purple Line transit system worth USD2 billion. The contract includes the construction of 21 stations along a 16-mile alignment through Montgomery and Prince George’s counties in Maryland. The joint venture, in which Lane has a 30% share (for approximately USD600 million), includes Fluor Enterprises Inc. and Traylor Bros Inc. and will begin construction work before the end of 2016 for a slated completion date in 2022. In addition, Lane acquired a number of other contracts, including the South Carolina Port Access Road, as a joint venture with Fluor Enterprises Inc., worth approximately USD220 million during the period.
April 2016
Sale of Todini Costruzioni Generali S.p.A.
On 4 April 2016, the parent sold its investment in Todini Costruzioni Generali to Prime System Kz Ltd. for roughly €51 million (see the subsequent section on the “Initial considerations on the comparability of data” for more information).
Perth rail contract worth AUD1,176 billion
On 28 April 2016, Salini Impregilo signed a 10-year contract worth approximately €790 million (AUD1.2 billion) to design, construct and maintain an underground passenger rail line, which will connect the Forrestfield airport with central Perth (Australia). Salini Impregilo and NRW Pty Ltd, the two partners, signed the contract with the Government of Western Australia (WA).
The rail network’s total length will be 8.5 km, 8.0 km of which will be underground. Salini Impregilo and its partner will build the three stations, twin tunnels for virtually the entire length of the line, car parks and service structures for the buses. The joint venture, in which Salini Impregilo is the lead contractor with an 80% stake, will complete the works in 2020.
May 2016
2016 - 2019 business plan
On 20 May 2016, the parent’s board of directors approved the new business plan for the period from 2016 to 2019. Its aim is to consolidate Salini Impregilo’s leadership position in the complex large-scale infrastructures sector, confirming its number one place in the water cycle segment and continuing to develop its exceptional track record in the transport segment, specifically as regards metros, railways and roads. The plan focuses on cash generation. Growth is guaranteed by an order backlog that will provide roughly 70% of total revenue and 80% of the gross operating profit in the next four years. These forecasts are based on the medium to long-term macroeconomic situations in the various geographical areas in which the Group is present and the expected development of the infrastructure sector, estimated to show an average growth rate of above 3%, to be worth roughly USD8,000 billion. The book to bill ratio is forecast to be in the range of 1.1 or higher. The new contracts will mostly be carried out in developed areas with better risk profiles and returns. Profitability will continue its excellent trend seen in the last two years, despite the rise in the costs necessary to benefit from the opportunities in the infrastructure market and the Group’s commitment to strengthen Lane’s organisational structure. The target gross operating profit margin for 2019 is above 10%. The new business plan’s success hinges on the Group maintaining a sound financial position, with the intention of improving the debt/EBITDA ratio, expected to be around 2/2.5x in 2019. Cash generation (cash flows before dividends) is essential for the successful achievement of the business plan’s objectives. Moreover, the Group’s acquisition of Lane at the start of 2016 provides it with a new base for development in more stable areas, which will assist growth in less risky markets.
Koysha dam €2.5 billion contract in Ethiopia
On 24 May 2016, Salini Impregilo won a new contract worth approximately €2.5 billion to build the Koysha dam awarded by Ethiopian Electric Power (EEP). This includes a hydroelectric plant with installed capacity of 2,200 MW and construction of a dam with a reservoir capacity of 6,000 million cubic metres and annual energy generation of 6,460 Gwh.
This important project, to be performed entirely by Salini Impregilo, together with GIBE III and GERD (the Grand Ethopian Renaissance Dam) on the Blue Nile, will enable Ethiopia to become Africa’s leader in terms of energy production.
June 2016
USD955 million contract in Kuwait
On 17 June 2016, Kuwait’s Public Authority for Housing Welfare assigned the contract for the construction of primary urbanisation works to build a new residential area in a 12 thousand hectares site located 40 km northwest of Kuwait City as part of the South Al Mutlaa Housing Project. The project, to be carried out by a consortium led by Salini Impregilo with a 55% stake, includes, inter alia, the construction of 150 km of roads and related structures and numerous other works. The Kuwaiti parliament has approved a 2016-2020 development plan which includes investments totalling more than USD100 billion in infrastructure projects in the country, including the construction of thousands of homes, metro and railway networks and new refineries and industrial facilities.
Placement of new five-year bond issue
On 24 June 2016, Salini Impregilo communicated its intention to issue bonds with a total nominal amount of approximately €428 million and a fixed rate coupon of 3.75% to institutional investors. It placed the bonds on the Irish Stock Exchange in Dublin on 24 June 2016. Some of the bonds (nominal amount of roughly €128 million) were assigned to the holders of the “€400.000.000 6.125% notes due 1 August 2018” that adhered to the parent’s exchange offer. The related exchange ratio for the existing bonds was 109.75%. After this exchange, the outstanding amount of the “€400.000.000 6.125% notes due 1 August 2018” was approximately €283 million. The parent used the proceeds from the newly issued bonds (€300 million), to be redeemed on 24 June 2021 and not exchanged, to repay the bridge financing taken out to acquire Lane. This transaction extended the Group’s average debt repayment dates and increased the component of fixed rate debt.
The section on the “Events after the reporting period”, to which reference is made, describes the placement of another bond issue with a total nominal amount of approximately €172 million with institutional investors.
Salini Impregilo delivers the new Panama Canal
The contract is one of the largest and most important civil engineering projects ever to take place. It involved the construction of two new series of locks, one on the Atlantic side and the other on the Pacific side, which will allow an increase in commercial traffic through the Canal and better meet developments in the sea freight market with ships nearly three times bigger and with more tonnage than the ships that can currently use the existing locks (the Post Panamax ships).
During the period, all the civil and electromechanical works were finalised. On 31 May, the project was functionally completed, as confirmed by the customer, and the new Canal was officially opened on 26 June.
The project carried out by the joint venture led by Salini Impregilo hinged on unique technical and design solutions, such as, for example, a complex system of locks with sluice gates that allow the ships to rise 27 metres above sea level to enter Gatún Lake, one of the largest artificial lakes in the world. After crossing the lake, the set of locks on the other side of the Canal brings the ships back down to sea level so that they can exit the Canal.