United States

Market

Against a backdrop of general moderate growth of the US economy, in 2015 the infrastructure and transport sector grew 9% compared to 2014 (1), largely due to railway and airport redevelopment projects.

With respect to the road infrastructure sector, positive demand developments are expected as a result of the FAST Act (Fixing America’s Surface Transportation Act) recently approved by the US Government, which entails investments for approximately US$205 billion for roads and highways and approximately US$48 billion for other transport infrastructure which are expected to be developed in the next five years.

With regard to the water infrastructure sector, which in 2015 grew 6% over 2014 (1) , the drought that has affected large areas of the West United States, numerous fires and expected winter floods, lead us to believe that the next years will see growing investment aimed at improving the management of water resources.

Significant events in the year

In 2015, work on key existing projects for the construction of the Anacostia River Tunnel in Washington D.C. and the Gerald Desmond Bridge in Long Beach (CA) continued, and the projects for the San Francisco Metro and the Lake Mead Tunnel in Nevada were completed (incidentally), the latter project won a number of international awards for engineering excellence and the high safety standards achieved.

During works for the Anacostia River Tunnel project, subsidence above a tunnel connecting two underground shafts caused significant production delays. However, in February 2016, an agreement was reached with the Client for the rescheduling of activities and recovery of the delay accrued. Finally, in February 2015, works started for the construction of the Dugway Storage Tunnel in Cleveland, a 4.5Km-long and 8m-wide tunnel.

Group revenue in the United States in 2015 for construction projects amounted to US$139 million, with a 26.5% increase over 2014 mainly due to the start of the construction works for the Dugway Storage Tunnel and the continuation of the Anacostia River Tunnel.

The table below shows quantitative values for the main projects in the portfolio:

• Dugway Storage Tunnel - Cleveland. Awarded in November 2014 for an amount of US$153 million and a contract term of 58 months, the project involves the construction of a 4.5Km-long and 8 meter-wide tunnel and six shafts of varying diameter and depth. Revenue in 2015 amounted to around US$23 million. The percentage of completion as of December 31, 2015 was 14.6%.
• Anacostia River Tunnel - Washington D.C. In 2013, in association with the Parsons Construction Group Inc., a leading construction company in the United States, Impregilo won the tender for the design and construction of a section of the wastewater collection and treatment system in the city of Washington DC. The project, which has a high technology content, has a value of US$254 million, of which 65% was awarded to the Group. 2015 revenues amounted to around US$65 million (a US$7 million increase over the previous financial year). The percentage of completion as of December 31, 2015 was 49.5%.
• Gerald Desmond Bridge - Long Beach. The project, awarded in 2012, pertains to the construction of a cable-stayed bridge with the main span of 300 m and two 150m-high towers, to be developed in the harbor of the city of Long Beach (CA). At December 31, 2015, the value of the contract, including variants, amounted to US$781 million, with a total duration of 72 months. 2015 revenues amounted to around US$131 million (a US$45 million increase over the previous financial year). The percentage of completion as of December 31, 2015 was 36.6%.
• San Francisco Metro - San Francisco. The works, started in January 2012, were completed in April 2015. At December 31, 2015, the value of the contract, including variants, totaled approximately US$240 million. 2015 revenues amounted to around US$14 million and percentage of completion at December 31, 2015 was 99.3%.
• Lake Mead Tunnel - Las Vegas. In 2015, works were successfully completely slightly ahead of schedule and, in December, the project was officially handed over to the Contracting Agency (SNWA). 2015 revenues amounted to around US$74 million, in line with those for the same period in the previous year. The percentage of completion as of December 31, 2015 was 98.6%.

In November 2015 the Lake Mead Tunnel was nominated “Project of the Year” by the International Tunnelling Association in Switzerland, and, in December 2015, was awarded the “Project of the Year” prize by the New Civil Engineer (NCE), a prestigious organization of the British Tunneling Society.

The project also won the (Engineering Excellence Award) of the American Society of Civil Engineers (ASCE) for the State of Nevada, and is currently nominated within the top 6 projects out of which ASCE will select the engineering excellence project.

The project also received many awards from insurance companies for the high safety standards achieved, as well as the 2015 Employer for the Year award from the “Chamber of Commerce” of Boulder City (the city where it is located).

2016 outlook

The acquisition of Lane Industries Incorporated is another step undertaken by Salini Impregilo to grow in the US infrastructure sector.

The USA construction sector will become a core market for the Group, with a share of approximately 21% of total revenues.

With Lane, Salini Impregilo will be able to tender for and participate in a larger number of projects. It is estimated that the US transport infrastructure market may grow at higher rate of GNP thanks to economic recovery, demographic growth and the demand for maintenance of existing infrastructure after years of underinvestment.

To this end, noted in March 2016, the Purple Line Transit Partners Consortium, which includes Lane Construction, was selected as best bidder for the design and development of the Purple Line railway line, two billion dollar project.

The consortium, in which Lane has a 30% share (for a pro quota amount of 600 million dollars) and that includes Fluor Enterprises Inc. and Traylor Bros Inc., will start construction works by the end of 2016.