Impregilo Lidco Lybia General Contracting Company (Libya)
Salini Impregilo S.p.A. is present on the territory through a stable organization and a subsidiary Impregilo Lidco Libya General Contracting Company (Impregilo Lidco), active in Libya since 2009, and which is a mixed company established by Salini Impregilo with a 60% interest. A local partner owns the remaining 40%.
With regard to the orders that are dealt with by the stable organization there are no significant existing risks as activities have not yet been started, except for the Koufra Airport. Nevertheless, for this last order, the overall details are not important having already received the advance payment for the contract in 2013. Moreover, the Group is present in the project "Libyan coastal highway", which as at the date of this Financial report has not yet been opened to traffic.
With reference to Impregilo Lidco, we would like to mention that the subsidiary had acquired important contracts for the realization of:
- Infrastructure Works in the in the cities of Tripoli and Misuratah;
- University campuses in Misuratah, Tarhunah and Zliten;
- Tripoli’s new “Conference Hall.”
With regard to the political upheaval in Libya from the end of February 2011 to the date of this Report, it is worth mentioning that the subsidiary was always able to operate in accordance with contractual terms and that the investments made up until the deterioration of the country’s political situation were fully covered by contractually stipulated advances.
It is clear that the subsidiary will face significant challenges in developing the projects in accordance with the schedule planned before the crisis erupted. Accordingly, Impregilo excluded the possibility of a new phase of significant development for the activities of the Impregilo Lidco subsidiary over the near term.
The procedures necessary to restart industrial activities that the Group started in 2012, have been suspended due to fresh outbreak of conflicts in the last part of 2014. In 2012, the Group again obtained access to more accurate information about the financial and operating items that have an impact on its consolidated financial statements. Consequently, in the consolidated statement of financial position, income statement and statement of cash flows of the Impregilo Group at December 31, 2012 the asset, liability and income statement items attributable to the Libyan subsidiary were restated in accordance with Group principles, based on the evidence developed during the period and the support of assessments provided by the independent counsel that is assisting the subsidiary. Compared with the situation reported in Impregilo’s 2011 consolidated financial statements, which reflected the latest available information at March 31, 2011, the value adjustments made to reflect the gradual impairment losses suffered by the subsidiary’s net assets as a result of the events described above were estimated as totaling € 47.9 million. These charges, together with the losses accumulated by the company are included in contract work in progress, for a total amount of € 66 million, because, as better specified later, they are deemed recoverable.
In addition, early in 2013, a physical inventory was taken of plant, machinery and supplies at the main work sites, with a total carrying amount of 23.3 million Libyan dinars (equivalent to € 15,1), but not all inventory sites could be accessed for security reasons. Taking also into account the fact that costs that may arise following completion of the inventory taking procedures would be covered by customers, consistent with force-majeure contractual terms, as determined by the counsel that is assisting the subsidiary, no significant risks are deemed to exist in this context with regard to the recovery of the net assets attributable to the subsidiary, thanks in part to actions and claims filed with the customers contractually or otherwise.
In the first months of 2014 we managed to reach an important agreement with the customer, in which both parties acknowledged the intent to carry on their industrial activities as soon as the conditions to do so were safe again, with the concomitant total safeguarding of the claims for damages advanced by the subsidiary, consequently to causes of force majeure, contractually regulated and for which the activities were suspended.
To this day, even in consideration of the new disorders that have manifested during the period subject to comment in various areas of the Country, the socio-political situation remains extremely complex and characterized by significant critical situations.
Salini Impregilo is carefully following the Company's situation and, in view of the delicate and complex situation that developed at a political level, the possibility that events not currently foreseeable may arise in the future requiring an update of the existing measurements cannot be excluded.
Panama Canal expansion project
With regard to this project, certain critical issues have arisen during the first stage of full-scale production which, due to their specific characteristics and the materiality of the work to which they relate, have made it necessary to significantly revise downwards the estimates on which the early phases of the project had been based. The most critical issues relate, inter alia, to the geological characteristics of the excavation areas, specifically with respect to the raw materials necessary to produce the concrete and the processing of such raw materials during normal production activities. Additional problems arose due to the adoption by the customer of operational and management procedures substantially different from those contractually stipulated, specifically with regard to the processes for the approval of technical and design solutions suggested by the contractor. These situations, which were the subject of specific disclosures in previous financial documents published by the Group, continued in 2013. Faced with the customer’s persisting unwillingness to reasonably implement the appropriate tools available pursuant to the contract to manage such disputes, the contractor, and thus the original contractor partners, was forced to acknowledge the resulting impossibility to continue at the contractor’s full and exclusive risk the construction activities needed to complete the project, with assumption of the full financial burden required for this purpose without any guarantee of the resumption of objective negotiations with the counterparty. In this context, at the end of 2013, formal notice was given of the intention to immediately suspend work activities if the customer proved once again to be unwilling to tackle this controversy consistent with a contractual approach based on good faith and the desire of all parties to find a reasonable accommodation.
Negotiations between the parties, supported by the respective consultants and legal/contract experts, were carried out through February 2014 and, on March 13, 2014, the minutes of an agreement were signed. The key elements of the agreement included, in exchange for the contractor’s commitment to resume work activities and complete them by December 31, 2015, a commitment on the part of the customer and the contractor companies to provide the funding for the portions of the project not yet completed, for a maximum amount of about $1.4 billion. This commitment has been honoured by the customer through (i) a moratorium on the refunding of already disbursed contractual advances totalling approximately $800 million and (ii) the disbursement of additional advances amounting to $100 million, while the group of contractor companies will contribute (i) a direct contribution of their own financial resources in the amount of $100 million and (ii) a contribution of additional financial resources, through the conversion into cash of existing contractual guarantees totalling $400 million. The reimbursement of the amounts stipulated to finance the work to be performed was postponed, so as to make it compatible with the expected outcome of the arbitration proceedings, launched concurrently to determine the responsibilities of the parties for the extra costs already incurred and to be incurred due to the situation described above. In this regard, please note that, starting in previous years, the Group adopted a valuation approach for the project, which resulted in the recognition of end-of project losses, mitigated in part by the corresponding recognition of the additional consideration claimed from the customer and determined on the expectation of this consideration so that the recognition can be deemed reasonably certain, even on the basis of the opinions given by one’s legal counsel. At the end of 2014, the first instance for the independent judgement of the DAB (Dispute Adjudication Board), initiated by the parties specifically for the project at hand, recognized the right of GUPC to claim $ 244 million as compensation, of which $ 233 million to be paid during the first months of 2015 and $ 10 million to be paid by August 2015.
During the first half of 2015, the estimates of the extra costs to finish the project have been updated negatively. With regard to the existing complex legal proceedings against the Customer, the expected extra costs for these legal proceedings have also been updated (always with the support and assistance of one's technical and legal consultants).
Venezuela
The Salini Impregilo Group has been active in Venezuela through a stable organization that, directly or in association with international partners, carries out several railway and hydroelectric projects, with a presence in the local territory consolidated over a span of more than 30 years.
In recent years, relationships with customers, all government entities, were generally characterized by delays in payments. This problem became more pronounced this past year due to a change in the country’s government leadership, at the beginning of 2013, and the resulting heightened social tensions that accompanied this political transition.
In response to the virtual suspension of activity by customers in this context, the Group suffered a significant slowdown in production activities.
Insofar as railway projects are concerned, and particularly for the P.Cabello - La Encrucijada project, two agreements have been drafted, one in March and the other in May 2014, (called “Puntos de Cuenta”) both signed by the Chairman of IFE (the customer) and ratified by the President of the Republic, according to which a gradual payment was to be made equal to 85% of the accrued receivables in Bolivares and 47% in Euro, accrued in September 2013. As of today, 97.4% of the amounts to be paid in local currency and 37.8% of the amounts to be received in Euro have been made (with reference to the above-mentioned percentages).
The last payments registered are those made on the 14 January 2015 in Euro and on the 19 May 2015 for the local currency.
In this context, furthermore, an Addendum to the contract for the Puerto Cabello - La Enrcujiada Line and related to electromechanical works was signed at the end of the first half of 2014.
In spite of the collection difficulties, the works have been carried out during this first half of the year according to the timings set, even if the existence of numerous problems of a different nature (mainly the lack of iron) and all connected to the complex political, social and economic situation of the country could negatively influence the full-production of the works during the following months.
As for hydroelectric projects, built through the OIV Tocoma consortium, at the customer’s request, a new schedule was developed for the work remaining to complete the project by the end of 2017. This proposal was shared with the Customer who, also in light of legitimate requests for payment of the certified debt and the identification of the future financial resources needed to ensure the normal performance of the remaining work, proceeded to the recovery of payments in favour of the consortium and the signing of a new addendum to the contract that formalizes a replanning of the works that are to be finished and identifies the relevant costs.
Last December we undersigned an additional Addendum (no. 7) with the Customer according to which said Customer acknowledges the costs associated to the contractual period of the implementation of the works from November 2013 to November 2016, in addition to defining the payment terms of these costs and of the works to be finished.
We are currently defining with the Customer the possibility to anticipate, in a programmatic manner, the remaining works (and therefore the sums to be paid and the payment of the debt) with regard to the setting at work of turbine no. 1 by the end of 2016.
This negotiation could result in the signing of an additional Addendum (no.8).
The projects that are being developed by the Impregilo Group are infrastructures of the utmost importance, both in economic-industrial and social terms. With this in mind and based on a constant and careful monitoring of the situation in the country, carried out together with the Group’s partners and through discussions with customers and local government authorities with the aim of defending and protecting the positions of the Impregilo Group, no particular problems are apparent at this stage with regard to the realizable value of the Group’s net assets, except for the lengthening of collection time, which was duly taken into account in the measurements performed for financial statement purposes and for the issues relating to the new exchange rates adopted for the translation of the net financial assets expressed in local currency, consistently reflected in the full-life estimates of current projects.
In view of the delicate and complex situation that developed at a political level, the possibility that events not currently foreseeable may arise in the future requiring an update of the existing measurements cannot be excluded.
Nigeria
The Country is undergoing a very difficult period, in economic terms, mainly due to the reduction of the petrol prices, of which it is one of the main producers. This situation has caused a decrease in its revenues. Following the presidential elections of March 2015, with the victory of the opposing party (APC), the new government, announcing its intention to rapidly change the situation and to eradicate corruption and terrorism, has not yet demonstrated any significant political actions aimed at changing this situation.
The works undersigned by Salini Impregilo's Nigerian subsidiaries, due to the abovementioned economic situation and to this stalemate that the Country is undergoing have drastically slowed down.
The ongoing projects are fundamental for this country. The new government in the third quarter of 2015 should start to carry out important governmental actions, therefore putting this stalemate to an end, and works should start again according to current economic forecasts.
Greece
Salini Impregilo has been constantly working in Greece for many years now through its Athenian branch.
The most important ongoing projects are the Thessaloniki Metro and the Stavros Niarchos Cultural Center of Athens.
Since July 29, 2015, Greece has enforced control of all capital exiting the Country, limiting it only to essential transactions.
The Thessaloniki Metro Project is carried out and managed by a Consortium that includes AIS JV to which civil engineering works have been assigned and in which Salini Impregilo has a 42.5% share. The customer, Attiko Metro is a public entity that, obviously, is suffering due to the current political and economic/financial situation that the Country is living. All works are proceeding very slowly.
The Thessaloniki Metro Project is co-funded with European Union funds.
With regard to the “Stravros Niarchos Foundation Cultural Center” which has been commissioned by the private foundation carrying the same name, no particular issues (contractual or work related) have been reported.
Slight negative repercussions have been registered for JV Salini Impregilo - Terna that carries out the works, due to the difficulty in dealing with foreign suppliers and for the very limited possible banking operations.
Nevertheless, since the start of the project, JV actuated all possible financial precautions in order to limit, as far as possible, any risks connected to the Country's situation.
Ukraine
The Country is undergoing a very fragile political situation. Notwithstanding the declared truce, in the eastern regions there are still clashes between government forces and rebels. Even if the situation is tense, the Misnk-2 agreements to cease fire in the eastern part of the country have been in large part respected.
The persistent instability determined a strong economic recession and a progressive worsening of the Ukrainian public accounts.
As the jobsites are located near the cities of Poltava and Zhytomyr, geographically removed from the areas most affected by the current social crisis, production activities were not affected to any significant degree.
The costs and expenses incurred for the conflict and the consequent economic slowdown greatly impacted the country's public accounts, whose debts are continuously increasing.
The Group management reasonably believes to be able to assess the profitability of the contracts awarded in Ukraine with a perspective of continuity, while constantly and continuously monitoring the internal developments in the country and without excluding that in the future currently unforeseeable events may occur that may require a change in these assessments. Certificates are regularly collected. Please note that the company is not exposed to a currency depreciation risk for the local currency as contractual amounts are in EUR and USD.
The Ukranian activities are included in Todini’s assets held for sale.
Litigation
Umbria – Tuscany Irrigation Authority – Imprepar
On December 29, 2010, the Group was informed that part of the sill above the surface discharge of the Montedoglio Dam, in the Province of Arezzo, had been damaged. In January 2011, the Umbria - Tuscany Irrigation Authority informed Imprepar that “investigations and tests are being carried out to ascertain the reasons and responsibilities for the damage”. With regard to this issue, as the transferee of the “sundry activities” business unit, which includes the “Montedoglio dam” contract, Imprepar informed the Authority that the activities related to the damaged structure were carried out by a different company in 1979 and 1980, which Impregilo (then COGEFAR) replaced as the transferee of the concession contract in 1984. In addition, the structure in question had been tested and inspected in the past with positive results. In its response to the Umbria-Tuscany Irrigation Authority, Imprepar specifically explained why it was not liable for any damages caused by the event and, comforted by the opinion of its counsel, believes that, at this point, there is no reason to amend the relevant assessments.
Please note that in 2012, the management of the Umbria-Tuscany Water Authority and the Project Manager signed a service order requesting the contractor to immediately prepare executive designs and commence the related work at its own expense and under its own responsibility. Imprepar challenged these actions in their entirety, even though the amounts involved were not material.
We would like to point out that as part of a Preventive Technical Verification that was started by a third party that has filed a complaint for damages of a small entity (approximately 80,000 euros), the judge has asked for a court-appointed technical expert in order to determine the causes of the dam's failure.
Imprepar, comforted by the opinion of its counsels and considering the recent developments mentioned above, is safeguarding the correctness of its activities in every competent court.
Strait of Messina bridge and roadway and railway connectors on the Calabria and Sicily sides
In March 2006, Impregilo, in its capacity as Lead Contractor and general partner (with a 45% interest) of the Temporary Business Association established for this specific purpose, executed with Stretto di Messina S.p.A. a contract to entrust to the general contractor the final and executive design for the construction of a bridge on the Strait of Messina, with the related roadway and railway connectors.
In addition, a pool of banks signed the financial documents required by the General Specifications, after the Association won the tender, for the supply of credit lines totaling € 250 million earmarked for the services subject of the awarded project. In addition, as contractually stipulated, the customer was also given performance bonds for € 239 million. A reduction of the credit line to € 20 million was approved in 2010.
In September 2009, Stretto di Messina S.p.A. and Eurolink S.c.p.A. executed a rider that took into account the suspension of project activities from the time when the contract. As provided for by the rider, the project’s final design was also delivered to the customer. On On July 29, 2011, the Board of Directors of Stretto di Messina S.p.A. approved the final design.
Decree Law No.187, concerning “Urgent measures for the redefinition the (. contractual relationships with Stretto di Messina S.p.A. (the customer) and local public transportation issues”, was enacted on November 2, 2012. Further to the enactment of this decree and in light of the potential implications for the contractual position of the Eurolink General Contractor, of which Impregilo is the leader, Eurolink decided to send to the customer, pursuant to the contractual provisions in effect, a notice of its intention to withdraw from the contract also to protect the positions of all Italian and foreign partners in the Association. Nevertheless, given the pre-eminent interest in constructing the project, the General Contractor also communicated its willingness to review its position, should the customer demonstrate a real commitment to pursuing the project. Despite the efforts made, the negotiations carried out by the parties were unsuccessful. Eurolink commenced various legal proceedings in Italy and at the EU level, on the one hand, arguing that the provisions of the above-mentioned decree are unconstitutional and contrary to EU laws and thus injurious to Eurolink’s legally acquired rights under the contract and, on the other hand, asking that Stretto di Messina be ordered to pay the amounts claimed, under various titles by the General Contractor due to the termination of the contract for reasons for which it was not responsible. With regard to the actions filed at the EU level, it is worth mentioning that , in November 2013, the European Commission communicated its decision to suspend the lawsuit, as no treaties were violated, and 64 Half-year financial report as at 30 June 2014 confirmed it on January 7, 2014, with a communication dismissing the lawsuit. With regard to the civil national judiciary proceedings, even Salini Impregilo S.p.A. and every partner of Eurolink, indipendently, jointly and separately, have requested the payment by Stretto di Messina of the sums due, for various reasons, as the contract has ended for causes that cannot be attributed to us and to Eurolink. Consistently with what has been described, the order backlog of the Salini Impregilo Group, had been by the end of 2012 already amended in order to show that the project previously described had been eliminated. Finally, if one considers how complex the legal proceedings that have been initiated are, even if the experts and consultants that assist Salini Impregilo and the General Contractor are positive about the out-comings of the proceedings that have been initiated and with regard to the collection of the credits due in the financial statement with regard to this project, we cannot exclude the existence, in the future, of events that cannot be foreseen at this moment, which would require an update of the valuations currently carried out.
Metro Santiago - Chile
The project for the implementation of Line 6 of the Santiago Metro, has been acquired by the Salini Impregilo Group, through its subsidiary Empresa Constructora Metro 6 Limitada, during 2013, for an original value of 3.3 million Unidad de Fomento (equivalent to € 122 million). During the project's execution, various elements occurred that interfered with the works, like unexpected geological conditions that were very different from the ones presented by the Customer, variations to the engineering side of the project, archaeological findings and the Customer's prohibition to carry out night work, even if the noise level was acceptable.
These factors determined delays in the implementation timings, which have been partially acknowledged by the Works Supervision, but have never been formalised by the Customer. Even the Customer, starting from 2013, on its own initiative and with a programme different from the one agreed upon, applied penalties that have been entirely contested.
In addition to what has been mentioned above, relations with the Customer have been complex, and have brought to five requests for the extension of the delivery terms of the works and the reassessment in 2014 of the object of the works.
With respect to this situation, Empresa Constructora Metro 6 Limitada, in July 2014, presented verious claims to the Customer and a request to extend the timings, with a request that these would be valuated by the body in charge of these matters, as provided for in the contract.
The Customer, in August 2014, did not accept these requests and submitted our claim directly to an Arbitration entity of the Chamber of Commerce of Santiago, not abiding by the contractual provisions that instead requested for a prior consultation of the parties, in order to choose a sole Arbitration entity.
The first hearing was fixed for the 25 September 2014, but the Customer asked to postpone it to the 6 October 2014. Meanwhile, on the 3 October 2014, the Customer notified Empresa Constructora Metro 6 Limitada of its decision to terminate the contract in advance, motivating this decision with reasons that have been totally contested, and which are the object of the above-mentioned arbitration. Please note that the Customer has the contractual right to terminate the contract with Empresa Constructora Metro 6 Limitada, irrespective of a contractual breach.
On the 3rd of October 2014, the Customer filed a petition to the Chilean banks for the examination of the contractual guarantee (local contractual guarantees counter-guaranteed by European banks) for an overall amount of 912,174 Unidad de Fomento (equivalent to € 28.9 million). These amounts also include a total examination of the guarantee for the cash advance, even if 156,323 Unidad de Fomento (equivalent to € 5,1 million) have already been given back to the Customer through the monthly certifications (in relation to this fact, a formal complaint has been filed in Chile).
The subsidiary responded to the initiatives carried out by the Customer requesting the suspension of the examination measure of the guarantees and the re-establishment of the contractual and operational conditions existing as at the 2nd of October 2014.
The Arbitration entity has not recognized sufficient grounds for an emergency measure for the suspension of the examination of the guarantees, postponing its decision, while the works remain, as of today, currently suspended.
The amounts corresponding to the above-mentioned guarantees have been paid.
Considering the complexity of the current situation, and of the arbitration proceedings, with regard to both the legal valuations and the relations with the Customer, the management, supported by its legal counsels, judges the company's actions to be just, and that no further risk assessment different from what has already emerged from the order valuations is needed. One cannot exclude the existence in the future of events that could require modifications to the current valuations.
Ochre Solutions – United Kingdom
During 2014, the associate company Ochre Solutions - in which Impregilo International Infrastructures has 40% of shares and owner of the licensing agreement for the Oxford University Hospitals - received two Warning Notices with regard to the quality of the services offered. Some aspects of these Notices have been contested by the company; In spite of this, receiving three notices in six months would be considered a default event, according to the contractual agreements between the company and the Grantor entity. A default event would allow the Grantor to terminate the licensing agreement with the consequent transfer of all the rights deriving from the contract of which the Grantor is owner.
The administrators of Ochre Solutions are continuously communicating with the Grantor, and in July an agreement has been signed with the Grantor who, through a serious of corrective actions that will be carried out by the company and whose effects have been included in its budget will avoid the contract's resolution.
Other litigation
The Corporate functions are not currently involved in any major litigation. Except for that disclosed in greater detail later in this report with regard to the USW Campania Projects, the only other litigation arose in 2009 with the lessor of the building where the old head office was located, in connection with the relocation of the Parent Company’s head office from Sesto San Giovanni (Milan) to Milan. The dispute was decided in December 2012 by an arbitration award that upheld the lessor’s claims, ordering the Parent Company to pay rent for the entire duration of the lease expiring in July 2012. This award was promptly challenged before the relevant Milan Court of Appeals, before which the proceedings are currently pending. However, in 2012, before the expiration of the appeal deadline, the Parent Company had already recognized the impact of the arbitration award on its statement of financial position. Moreover, while the appellate proceedings were pending, the Parent Company was forced to pay the amount awarded to the lessor, reserving the right to a refund.
With regard to this dispute, please note that by virtue of the provisions of the contract executed with Immobiliare Lombarda S.p.A., in its capacity as the original lessor of the premises where the head office is currently located, Salini Impregilo S.p.A. (formerly Impregilo S.p.A.) holds the right to be held harmless from claims made by the previous lessor in excess of € 8 million, which it exercised by means of a payment injunction. The payment injunction was issued by the Court of Milan and challenged by Immobiliare Lombarda. However, while the proceedings are in progress, the opposing party paid the full amount of the claim, as the court refused to stay the enforcement of the payment injunction.
Investigation by the judiciary – Court of Milan (proceedings activated before the Court of Monza)
Further to the proceedings activated by the Public Prosecutor of the Court of Monza, in which the Chairman of the Board of Directors and the Chief Executive Officer of Impregilo S.p.A. and Imprepar S.p.A. were the targets of a preliminary investigation in connection with an alleged administrative violation related to the crimes subject of Article 25-ter, Letters a) and r), and Articles 5 and 44 of Legislative Decree No. 231/2001.
The charges against the targets of the investigation were announced by the relevant Public Prosecutor with a notice dated October 13, 2005.
The alleged charge against Impregilo is to have “prepared and implemented an organizational model unsuitable to prevent the crimes” allegedly attributed to the officers target of the investigation, from which the Company is alleged to have benefited.
The proceedings progressed through a series of interconnected and complex procedural phases, at the end of which, at a hearing held on July 12, 2007, concurring with the objections that the counsel for the defendants and the companies involved in these proceedings had raised since the preliminary hearing, the Court of Milan, ruling on a preliminary basis, declared that “the indictment issued by the Preliminary Hearing Judge at the Court of Milan on February 21, 2007, in the proceedings pursuant to Article 416 of the Code of Criminal Procedure, was null and void” and, consequently, ordered that the record of the proceedings be sent back to the Public Prosecutor at the Court of Milan.
Consequently, the Milan Public Prosecutor reactivated the proceedings and, in November 2007, filed with the Judge for Preliminary Investigations in Milan a motion to end the proceedings. On February 13, 2009, the Judge for Preliminary Investigations granted the motion of the Public Prosecutor limited to a portion of the charges, which were dismissed. As a result of this decision, the proceedings targeting Imprepar S.p.A. ended. At the same time, the judge sent the record of the proceedings back to the Public Prosecutor for a filing of charges for the portion of the motion that had not been granted. Specifically with regard to the charges that were not dismissed by the Judge for Preliminary Investigations, the Company filed a motion for summary judgement and, at a hearing held on September 21, 2009, the Public Prosecutor requested a decision dismissing the remaining charges.
On March 21, 2012, the Milan Court of Appeals, denied the appeal motion filed by the Public Prosecutor against the lower court’s decision, which found Impregilo not guilty of the charge of violating Legislative Decree No. 231/01, and fully confirmed the above-mentioned decision by the lower court judge, who found, inter alia, that the organizational model adopted by the Company was adequate. The Public Prosecutor then appealed this decision to the Court of Cassation, which on December 18, 2013 handed down Decision No. 4677/14 setting aside the decision of the Milan Court of Appeals, returning the proceedings to a different section of the same Court for a new merit. The proceedings continued at the Milan Court of Appeals, which during the hearing of the 19 November 2014, acquited the Company and confirmed the rest of the acquittal ruling of the of the Milan Public Prosecutor of the 17th of November 2009.
Other proceedings – Court of Florence
With regard to the criminal proceedings activated against the C.A.V.E.T. Consortium and certain individuals, including some former managers of the Consortium, it is worth mentioning that the appellate proceedings ended in June 2011 with a decision handed down on June 27, 2011, which reversed in full the lower court’s decision, thus reversing the convictions handed down by the lower court and finding both the Consortium and the indicted individuals not guilty of any of the charges. The Public Prosecutor of the Court of Florence appealed this decision to the Court of Cassation, which, on March 18, 2013, set aside in part the decision of the Florence Court of Appeals ordering that the case be returned to the Court of Appeals. The reinstated proceedings before the Florence Court of Appeals got under way on January 30, 2014 and, on March 21, 2014, the Court of Appeals handed down a decision by which it rejected most of the charges levied by the Public Prosecutor, but upheld them in some important cases. The decision of the Court of Appeals of Florence, whose motivations have been filed on May 29, 2014, has been contested by each defendant and by the C.A.V.E.T, as civil authority, and last September the relevant cassation appeals were filed. The Consortium, in protecting its interests, is confident that it will be able to demonstrate, again, in the subsequent courts of instance, the correctness of its actions.
Todini's Litigation
Naples, construction of a railway section for an urban railway system, Piscinola- Secondigliano segment
Construction of the civil engineering structures for the Piscinola – Secondigliano railway segment, part of a project to modernize and upgrade the Naples – Alifana railway, was suspended in the second half of 2011 due to the customer’s (Committente Metrocampania Nordest S.r.l.) failure to pay the consideration owed for the work. As a result, the only activities carried out concerned ensuring the safety of the jobsites.
The customer, while aware of the strategic significance of the project for the purpose of completing the railway system ringing the City of Naples, was unable to honor its commitments due to the financial difficulties that characterized the budget of the Campania region, which, ultimately, created a shortage of financial resources at the Metrocampania Nordest S.r.l. subsidiary, making the disbursements of the consideration owed extremely difficult.
In light of this situation, the Ministry of Infrastructures and Transportation, in accordance with the provisions of Decree Law No. 83 of June 22, 2012 (converted into Law No. 134 of August 7, 2012), appointed and ad acta Commissioner tasked with determining the amounts of the payables and receivables of the companies that operate the regional railway services, with the aim of developing a plan to cover the ascertained deficit.
At this point, the appointed Commissioner has apparently completed his task regarding the investigative and planning phase and is now expected to announce his subsequent determinations.
Considering that, in order to allow the Commissioner to carry out his activities, the abovementioned Decree Law specified that no payment enforcement actions may be activated or pursued against the companies owned by the regional administration that operate railway transportation services for 12 months from the effective date of the abovementioned Decree Law No. 83 (which deadline was extended several times), 41 Paragraph 5 of Legislative Decree 133/2014), our subsidiary Todini Costruzioni Generali S.p.A. nevertheless took all actions that it deemed necessary to obtain satisfaction of its rights, while maintaining a non confrontational relationship with its customer, who still considers completion of the railway segment in question as a priority for the effective operation of the metropolitan railway ring.
Moreover, with Act dated June 30, 2014 notified to the Customer, the Todini Costruzioni Generali S.p.A. transferred to its parent company Salini Impregilo S.p.A. all its credits acquired through unpaid invoices issued to Ente Autonomo Volturno.
During 2014, and before having formalized the Act for the transfer, the Customer arranged for the partial payment towards Todini Costruzioni Generali S.p.A., for an approximate amount of € 8,500,000.
Finally, negotiations with the Customer were initiated, so as to:
- pay the unpaid credits;
- define the claims for payment advanced as a consequence of the works not bering carried out as they should on the railway section;
- allow the works to be completed.
In the same negotiation, the Customer required that the definition of the litigation born out of the consstruction of the lot nearby of the Naples-Alifana railway (Secondigliano - Di Vittorio), contracted to an A.T.I. of which, Todini Costruzioni Generali S.p.A. is mandatee.
In relation to said second order – of which the works have never been started - the A.T.I. as trustee has filed for ordinary proceedings as its contract was terminated, claiming for damages.
A1 Milan-Naples Highway, work to upgrade the Apennine Mountains section between Sasso Marconi and Barberino di Mugello, La Quercia-Aglio segment
This project refers to the work to enlarge and modernize the A1 Highway, Base tunnel – Lot 9-11 – Valico Bypass. This order is part of a larger project being implemented by Autostrade per l’Italia S.p.A. to upgrade the A1 Highway with the construction of the Valico Bypass to improve traffic conditions and reduce travel time between Bologna and Florence. The iconic work of the Valico Bypass is the Base Tunnel: a tunnel with separate lanes (cross-section of 160 m2 and length of about 8.6 km) that will link the Emilia Romagna and Tuscany regions, connecting the future Badia Nuova rest area in the north with the new Poggiolino interchange in the south.
The works have been substantially completed with the exception of finishing work and some minor works to be carried out in the Tuscany Region.
Starting in June 2011, the Florence Public Prosecutor, at the end of an investigation launched in 2005, charged some employees/senior managers of Todini Costruzioni Generali S.p.A. with environmental crimes allegedly related to the construction of the Valico Bypass.
By a decision dated November 5, 2012, the Preliminary Hearing Judge ruled that the statute of limitations had run out on all of the crimes with which the defendants were charged regarding water control and effluent management and indicted the abovementioned defendants for the alleged crimes concerning the management of excavated soil and rocks and environmental damage.
In relation to these proceedings, on March 26, 2013, at a hearing before the Court of Florence, the Ministry of the Environment joined the proceedings as a civil plaintiff seeking damages from the civilly liable parties Todini C.G., Autostrade per l’Italia S.p.A. and other contractors involved (in addition to the defendants themselves), putting forth a damage claim “for equivalent asset value” in an amount of at least € 810 million or different amount awarded in the proceedings.
In support of its claim, the Ministry of the Environment filed a report by the I.S.P.R.A. (an institute established within the Ministry), which was deleted from the record of the proceedings at a hearing on December 9, 2013, as the Judge ruled that the introduction of this document could not be allowed because it had not been developed through an adversary process and lacked the name of the party who wrote it.
Since the civil plaintiff failed to produce documents or consultants, at this point, the damage claim is not supported by any evidence as to its amount.
The preliminary investigation began in January 2014 and is currently undergoing.
The Group denies having any responsibility for the disputed issues, emphasizing that its conduct was completely lawful and that the charges levied against it are groundless. It also objects to the outrageous amount of the damage claim filed by the Ministry of the Environment, which, in addition to being put forth without first requesting the adoption of any environmental remediation measures that might have been necessary, does not appear to be compliant with Italian law and European Directive No. 2004/35/ EC. In that regard, the European Commission activated infraction proceedings against Italy in 2007 (No. 2007/4679) confirmed on January 27, 2012 with a complementary reasoned opinion, which recently resulted in the adoption, with Law No. 97 of August 6, 2013, No. 97 of August 6, 2013, of amendments to the Uniform Environmental Code
enacted with Legislative Decree Decree No. 152 of April 3 2006 which include the elimination from the text of Article 311 of the above-mentioned Legislative Legislative Decree . 152/2006 of the reference to the damage claim “for equivalent asset value”, due to the fact that compensation for environmental damages can first of all be achieved with specific remediation measures.
In view of the foregoing considerations and comforted by the opinion of counsel, the Group believes that the above-mentioned damage claim is devoid of merit and, consequently, that the risk of the claim being granted is remote. Consequently, management did not find it necessary to recognize a provision in its financial statements.
Tax disputes
Corporate tax disputes
With regard to the dispute initiated by the Company with the Italian tax authorities (at that time, Impregilo) please note that:
- it is still pending at the Court of Cassation, following the appeal made by the counterparty concerning the notification of investigation with which it was challenged the tax treatment of the depreciations and of the capital losses detected by the Company during 2003. As already previously stated, the most significant fact concerning the transfer– made by Impregilo S.p.A. However, it should be noted that the main observation concerning the sale – made by Impregilo S.p.A. to Impregilo International NV – of the investment in the Chilean company Costanera Norte SA was dismissed by the Milan Regional Tax Commission on September 11, 2009 (Max. controlled tax € 70);
- the dispute concerning the nominal tax credit € 12.3 million acquired by third partied during previous extraordinary operations. A first class ruling was won while the second class ruling was not successful. This decision was challenged through an appeal at the Court of Cassation;
- A first class ruling is still pending for a dispute related to 2005, concerning the technical device used for the so called realignment of equity investments referred to in Article 128 of Presidential Decree No. 917/86, (Max. controlled tax € 4.2 million);
- With regard to a second dispute for the year 2005, concerning the costs incurred for a participatory association established in Venezuela, whose largest ascertained income is € 6.6 million, on May 19, 2015, the decision made by the Regional Tax Commission was filed, in which said Regional Tax Commission is totally in favour of the Company (the terms for an eventual appeal in front of the Court of Cassation are pending);
- the company received the following notices: (i) a payment invitation notice from the Agenzia delle Entrate (Italian Tax entity) that requested the collection of the Icelandic taxes for an amount equal to € 4.6 million This request for payment was promptly challenged and on 28/5/2015 the first ruling was held, but the relevant directory has not yet been filed, and (ii) for the same motive, a tax payment form, for an amount € 4.6 million was received by the company. The latter appealed and won in first and second ruling (there is a possibility to appeal in front of the Court of Cassation);
The Company, with regard to the disputes still awaiting judgement, and also with the support of its legal experts and counsels, thinks that its behaviour has been correct and has consistently considered the condition of losing party something not only not probable but also impossible.
Moreover, the Company is currently undergoing a tax investigation by the Guardia di Finanza (Italian Financial police) - Tax Police of Milan, for the IRES, IRAP and VAT taxes for the years 2011 and 2012. During the investigation, the year 2010 was also included for verification. On 8/7/2015 a Verbal Ascertainment Process, with a higher taxable base for Ires of approx € 1.0 million and for Irap pf approx. € 0,8 million. The Company also thought it appropriate to present the Agenzia delle Entrate (Italian tax entity) with a Communication of Adherence to the Verbal Ascertainment Process, pursuant to Article 5 bis of Legislative Decree June 19, 1997, No. 218.
Tax dispute – Iceland
In connection with the project, now concluded, for the construction of a hydroelectric power plant in Karanjukar (Iceland), which the Group successfully completed in previous years, please keep in mind that, in 2004, a dispute arose with the local tax authorities with regard to the party required to act as the withholding agent for the compensation of foreign temporary workers employed at the jobsite. Salini Impregilo (at the time Impregilo) was initially incorrectly held responsible for the payment of the withholdings on the abovementioned compensation, which it therefore paid. Subsequent to the final ruling in the proceedings activated in this dispute before the local lower court, the Company obtained full satisfaction of its claims. Nevertheless, the local authorities filed a new lawsuit, with a similar scope and, based on a decision handed down in February 2010 by the Icelandic Supreme Court, blatantly contradicting the previous decision issued in 2006 on the same matter by the same judicial authority, rejected the claims filed by the Company, which expected to be reimbursed both the unduly paid withholdings of € 6.9 million (at the original exchange rate). Following the latest ruling, the Company pursued all available judicial avenues, both at the international level (appeal filed with the EFTA Surveillance Authority on June 22, 2010) and, as far as possible, again at local level, in the belief, comforted by the opinion of counsel, that the decision previously handed down by the Icelandic Supreme Court was incorrect in respect of local legislation, the international agreements that govern trade relations between EFTA countries and international conventions that prohibit the adoption of discriminatory treatments for foreign entities (both individuals and companies) working in signatory countries which work in the territory of the countries with which they have an agreement. On February 8, 2012, the EFTA Surveillance Authority sent the Icelandic government a communication notifying an infraction regarding the free exchange of services and requesting the government to provide its response. In April 2013, at the conclusion of this process, the EFTA Surveillance Authority issued its reasoned opinion finding the provisions of the Icelandic legislation applied to the dispute in question to be inconsistent with the regulations governing trade relations between member countries and asking that Iceland take action consistent with this position. Consequently, the Company asked that the case be reopened, evaluating to take further decisions at an international level. In view of the above, Salini Impregilo does not believe that objective reasons currently exist to change the valuations made about this dispute.
USW Campania Projects
Introduction
The Group became involved in urban solid waste disposal projects in the province of Naples and other provinces in Campania at the end of the 1990’s through its subsidiaries FIBE and FIBE Campania.
The USW Campania Projects have been divided into the following main phases:
- a so-called “Contractual phase”: This phase began in the 2000-2001 period with the signing, by the two project companies FIBE and FIBE Campania, of the service contracts for the disposal of urban waste in the provinces of Campania and ended on December 15, 2005 with the cancellation “by power of law” of the abovementioned contracts pursuant to Decree Law . 245/2005 (converted into Law . 21 of January 27, 2006);
- and a so-called "Transitional” phase: this phase, which started with the conclusion of the Contractual phase and, lasted until the enactment of Decree Law . 90 of May 23, 2008 and Decree Law No. 107 of June 17, 2008, both converted into Law No. 123 of July 14, 2008. This last measure officially marked the Group’s exit from the waste disposal business, transferring to the Provincial Administrations title to the RDF facilities “located in their municipalities”;
- and a so-called “Current” phase that, begins with the end of the Transitional phase and is ongoing.
At the same time, the relevant issues that, starting in the 1999-2000 period, have characterized the company's activities with regard to the service contracts and that have been already fully discussed and illustrated in all financial reports that the Group has published since that period, have evolved and changed during the years, generating various litigations, some of which very significant and still ongoing. Having observed positive developments during the last years, the general situation of the ongoing litigations is still very complex and is synthetically summarized in the following paragraphs especially with regard to what concerns the situations that still present a risk.
Since FIBE Campania S.p.A. was incorporated into FIBE S.p.A. in 2009, in the rest of this chapter, unless otherwise stated, reference is made exclusively to FIBE S.p.A., even with regard to positions and events that affected the company dissolved through the merger.
Administrative litigation
Collection of the sums that FIBE had to receive from the local administrations as waste disposal fee until the contracts end
The ad acta Commissioner appointed by the Regional Administrative Court to recover the receivables owed to the former contractors by local administrations for the waste disposal services provided until December 15, 2005, filed its final report in which, it established that with regard to the entire credit to be received by Fibe for the services offered up until 15/12/2005, equal to € 138,288,117, the administration has already directly collected, without remitting it to Fibe, the sum of € 46,363,800, and still needs to collect and give Fibe the sum of € 74,317,550 and that what Fibe has already directly collected, as fee, amounts to €17,606,767.
The Administration, in addition to raising some exceptions concerning the calculation criteria and the compensability of the credit entries (also the object of other considerations), exceptions rejected by the Regional Administrative Court, filed a claim asking to consider the appeal barred from further proceedings due to the fact that as of December 31, 2009, the regulations that allowed to carry out these activities that the ad acta Commissioner did not exist anymore. With Order No. 2517/2015, the Regional Administrative Court, confirming the existence of the obligation of the Administration (and for said Administration, the Commissioner appointed for said purpose) to collect the Fibe's credits, has rejected the complaint. Contrary to said Order, the Public Administration challenged this decision in appeal to the Council of State.
Following the resignation of the ad acta Commissioner, of the subsequent appointment by the Regional Administrative Court as ad acta Commissioner of the the Commander General of the Guardia di Finanza or an executive officer specially appointed by him, considering the proposed incompatibility demonstrated by the latter, during the hearing of June, 17, 2015, the Regional Administrative Court has decided that it will opt for a new appointment
Request to FIBE for the reacquisition of the ownership of some storage areas and sites by the persons appointed by the Government Commissioner for the management of technical and operational activities
Starting in 2008, FIBE had to deal with a series of repeated initiatives with which the subjects appointed by the Government Commissioner for the management of the technical and operational activities imposed to the said FIBE the reacquisition of the ownership of some storage areas and sites, already delivered in August 2008, as they were deemed not functional for the management of the service. The Regional Administrative Court of Latium and the Council of State, on impugnment of the relevant provisions by FIBE, confirmed the functionality of these sites for the integrated waste cycle. In this context we have the initiative promoted by SAP NA SpA, a provincial company of the Province of Naples, in front of the Court of Naples, with approximately 40 hearings. The company challenged its succession as owner of some temporary and permanent storage areas and sites, asking, subordinately, for a reimbursement and to be held harmless towards FIBE S.p.A. and/or the Government Commissioner with regard to the incurred medium-length management costs and those that need to be dealt with for eventual reclamation expenses. Following the hearings at the Ordinary Court of Naples, which state the lack of jurisdiction in favour of the Administrative Court Judge, most of the litigation has been summarized by SAP NA in front of the Regional Administrative Court of Campania. The hearings concerning the first appeals have been filed in June 2015. During these hearings the Regional Administrative Court of Campania has entirely rejected all the claims advanced by SAP NA.
Administrative procedures for the recording and recognition of the costs incurred for activities carried out and the work ordered by the Administration during the transitional management
Starting from 2009, FIBE in front of the Regional Administrative Court of Latium, contested the inertia demonstrated by the Administration with regard to the completion of the administrative procedures for financial reporting and recognition of the costs for the ex-lege activities carried out by the ex trustees of the service and for the works ordered by the Administration and carried out by the companies during the transitional management.
Within the scope of these proceedings, the Regional Administrative Court appointed an auditor who as at March 31, 2014, filed his final expert opinion in which, in synthesis, he carried out a confrontation of the sums stated by FIBE for its appeal and the underlying documentation, detecting a substantial correspondence. This appeal is currently pending. A specific petition has been filed for the hearing date to be fixed.
Conveyance of waste to the Acerra waste-to-energy facility
Through a complaint notified on May 18, 2009 (RG No.4189/09), the Companies again petitioned the Regional Administrative Court of Latium, challenging Prime Minister Order No. 3748/09 insofar as it ordered that only waste produced and stored after the date of termination of the service contracts with the Companies (after December 15, 2005) could be conveyed to the Acerra waste-to-energy facility. A date for a merit hearing has yet to be set.
Payment of the Campania RDF facilities
With decision 3886 on May 5, 2011, the Regional Administrative Court of Latium granted FIBE's motion, ordering the Public Administration to pay the unamortized costs at the date of termination for the Campania RDF facilities in favour of FIBE the total sum of € 204,742,665.00 plus statutory and delinquent interest from December 15, 2005.
Following the enforced procedure promoted by FIBE and opposed by the Officer of the Prime Minister the amount of € 240,547,560.96 was awarded to FIBE in satisfaction of the actioned claim, including both principal and statutory interest, but stayed the enforcement action for the additional interest claimed. Both parties have filed a merit hearing and since the hearing held on January 19, 2015, the court has yet to hand down its decision.
With regard to the payment of the unamortized costs at December 15, 2005, for the Campania RDF facilities, the activities for collecting the VAT paid on the amount € 204,742,665.00 collected after the hearing are currently being carried out. An independent legal action has been initiated, which as at January 28, 2015, resulted in an injunction towards the Office of the Prime Minister, then challenged on March 13, 2015 and with hearing fixed for September 22, 2015.
Environmental litigation
During the various phases of the USW Campania projects, the Group had to face various administrative proceedings concerning the reclamation and the implementation of safety measures of sites of some dumps, storage areas and production plants of the RDF facilities. These proceedings have not yet come to a positive conclusion and have been suspended, awaiting the merit hearings. With regard to the proceedings concerning the characterization and the m.i.s.e. concerning the Pontericcio site, the RDF production plant of Giugliano and the Cava Giuliani temporary storage area, the Regional Administrative Court of Latium, with Decision No. 6033/2012, denied the complaints proposed by Fibe S.p.A.. The Company challenged this decision, based on contamination found at a site different to those subject of the proceedings and an appeal was made to the Council of State, denying FIBE’s precautionary motion to stay the enforcement of the decision. The parties are currently waiting for a merit hearing to be scheduled. With reference to the Cava Giuliani landfill, the Regional Administrative Court of Latium, with Decision No. 5831/2012 has stated the jurisdiction of the T.S.A.P. (Public Water Superior Court) where the appeal has been summarized and is pending with No. 36/2013. Meanwhile, without prejudice to the fact that this could in any way be an admittance of responsibility, FIBE is carrying out the characterization activities of the abovementioned sites.
Civil litigation
In May 2005, the Government Commissioner filed an action requesting compensation from FIBE, FIBE Campania and FISIA Italimpianti for alleged damages amounting to approximately € 43 million. In the course of the proceedings, the Government Commissioner increased its damage claims to over € 700 million, plus a further sum to claim for damages to its image, quantified at € 1 billion.
The Companies joined the proceedings and, in addition to disputing the claims made by the Government Commissioner, filed a counterclaim requesting compensation for damage and sundry charges determined in the initial filing at more than € 650 million, plus a further to claim for damages to their image quantified at € 1.5 billion. In the same proceeding, the banks that issued FIBE and FIBE Campania’s performance bonds to the Government Commissioner also moved for the Commissioner’s claim to be denied and, in any case, asked to be held harmless by Salini Impregilo (then Impregilo) from the commissioner’s claims. Salini Impregilo joined the proceedings contesting the request of the guarantor banks.
The Government Solicitor’s Office appealed the Decision made on April 11, 2011, in which it was found that jurisdiction rested with the administrative court and not with the ordinary court. The hearing is fixed for February 2, 2017.
On August 1, 2012, the Ministry of Justice and the Cassa Ammende reactivated, before the Court of Milan, the proceedings concerning the enforcement of sureties totalling € 13,000,000.00 provided by some large credit institutions to guarantee the performance of the orders issued by the Public Prosecutor of Naples in connection with the seizure of the RDF facilities.
With decision no. 6907/14 the Court of Milan denied the requests made by Cassa Ammende and by the Ministry of Justice against the banks, UniCredit and ABC International Bank PLC, as a result declaring the claims for recourse filed by the banks against IMPREGILO and by the latter and Fibe against the Office of the Prime Minister absorbed.
Opposing this Decision, the Ministry of Justice and the Cassa Ammende have appealed and the relative hearing, which was held at the Milan Court of Appeals, has been postponed to December, 13, 2016, in order to specify the conclusions.
Also worth mentioning, at a civil court level, are some lawsuits recently filed by public administrations that, under various titles, have standing in contesting FIBE’s activities with respect to the complex management of the receivables and payables arising from the “contractual management” period. Although these proceedings are separate from those described above, they refer to the same issues subject of the claims filed by FIBE in the administrative courts, with regard to which the activities of the ad acta commissioner is still in progress. Accordingly and comforted by the advice of the counsel that supports the Group in this complex context, the Group believes that FIBE’s fully compliant conduct during the “contractual” period can reasonably be confirmed and that the risk of a negative outcome of these proceedings is merely possible. Specifically, the Company’s counsel believes that the public administration’s claims can reasonably be resisted considering the counterclaims and the admissibility in these proceedings of a court ordered offsetting process.
Lastly, pending proceedings include a lawsuit in opposition to a payment injunction issued by FS Logistica (formerly Ecolog) against the Office of the Prime Minister for the payment of consideration owed for assignments it received from 2001 to 2008 by the then Government Commissioner for shipment of waste outside Italy. The claim, made through a summary procedure, was lodged against the Office of the Prime Minister which turned to FIBE as guarantor. FIBE, in turn, advanced a counterclaim for the payment of the excess costs incurred during the agreement. The Judge allowed a court ordered technical expert’s report only with regard to the claims advanced by FS Logistica towards the Office of the Prime Minister and the object of the injunction, postponing the hearing to 31.3.2016. .
Tax dispute
Worth of mention, in this scope, is the ongoing dispute concerning the ICI (council tax) regarding the Acerra waste-to-energy facility.
In January 2013 the subsidiary FIBE received various notices of assessment from the City of Acerra, regarding the waste-to-energy facility for the payment of the ICI council tax and the relevant sanctions for a total amount of €14.3 million for the years 2009 - 2011. The amount claimed by the City of Acerra and challenged by the Company has undergone first ad second rulings and the terms for an appeal to the Court of Cassation are pending. The original claim has been reduced by the competent Regional Tax Commission of Naples (CTR) so as to annul the tax-assessment notices already issued by the Tax Collection Agency.
Even if it thinks that its actions are legitimate, the Company supported by the opinions of its counsels with regard to the situation as at June, 30, 2015, decided to collect, abeing the situation very complex, the amount of € 4.5 million.
Criminal litigation
In September 2006, the Public Prosecutor of the Court of Naples served Impregilo S.p.A., Impregilo International Infrastructures N.V., FIBE S.p.A., FIBE Campania S.p.A., FISIA Italimpianti S.p.A. and Gestione Napoli in liquidation with a “Notice of the completion of the preliminary investigation about the administrative liability of legal entities” related to the alleged administrative violation pursuant to Article 24 of Legislative Decree within the framework of criminal proceedings against some former Directors and employees of the abovementioned companies, who were being investigated for the crimes subject of Article 640, Sections 1 and 2, No. 1, of the Italian Criminal Code in connection with the contracts for management of the urban solid waste disposal cycle in the Campania region. Following the preliminary hearing of February 29, 2008, the Preliminary Hearing Judge at the Court of Naples granted the motions for indictment made by the Public Prosecutor, consequently, declared that all filings to join the proceedings as plaintiffs seeking damages from the companies were inadmissible.
With regard to the abovementioned precautionary measure, the Preliminary Hearing Judge, with an order dated June 26, 2007, ordered the preventive attachment of the alleged “profit from the crime” quantified at about € 750 million.
The precautionary proceedings, continued for five years, before definitively ending, without any action taken against the Group, in May 2012. On November 4, 2013, the Court of Naples handed down a decision finding all defendants not guilty on all charges and in the most ample manner. In March 2014, the Naples Public Prosecutor appealed the decision. We are waiting for the hearing to be fixed at the Naples Court of Appeals.
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During 2008, as part of a new investigation by the Court of Naples into waste disposal carried out after the termination of the contracts by force of law (on December 15, 2005), the Preliminary Investigations Judge, upon a request by the Naples Public Prosecutor issued preventive measures against some managers and employees of FIBE, FIBE Campania and FISIA Italimpianti and managers in the Commissioner’s office. As part of this investigation, which in the record is described both as a continuation of an earlier investigation and as separate proceedings based on new charges, the former contractors and FISIA Italimpianti are again charged with the administrative liability attributable to legal entities pursuant to Legislative Decree No. 231/01.
During the hearing held on March 21, 2013 the Public Prosecutor asked for the indictment of all defendants and legal entities involved pursuant to ex. Legislative Decree No. 231/2001 for all of the charges in the proceedings, transferring the proceedings before the Court of Rome as a result of an acting magistrate being listed by the Public Prosecutor of Naples as being under investigation.
The Court of Rome during the hearing held on April 1, 2014, acquired the Decision of the Court of Naples - Fifth Criminal Chamber for the abovementioned “parent” case (15940/03 R.G.N.R.). This will also serve to better assess the requests of evidence that will be presented by the parties. Having carried out the demands for evidence, the process, still in the discussion phase, has been postponed to October 27, 2015, for the examination of the technical expert of the Public Prosecutor.
On December 23, 2011, FIBE S.p.A., in its capacity as the legal entity involved pursuant to Legislative Decree No. 231/01, was served with a notice of completion of the preliminary investigations related to another investigation by the Naples Public Prosecutor. The charges are based on a violation of 81, Section Two, Article 110 and Article 640, Sections 1 and 2, of the Italian Criminal Code, committed jointly and with the prior agreement of the defendants (individuals) and other parties to be identified, in connection with the management of an urban wastewater purification service based on treatment facilities.
FIBE S.p.A. is a defendant because it allegedly submitted expense reports that, among the other items related to the disposal of USW, included the cost of transporting leachate, while failing to mention the fact that the leachate was transported to facilities without the requisite proper permit and lacked the technical qualifications and residual treatment capacity.
The public prosecutor filed a motion requesting that the Judge for the Preliminary Hearing at the Court of Naples hear the case upholding the lack of functional jurisdiction ruled that it lacked jurisdiction and ordered that the record of the proceedings be forwarded to the Rome Public Prosecutor.
On April 13, 2015 the Rome Public Prosecutor requested the dismissal of all charges for all the defendants (both individuals and legal persons). The Preliminary Investigation Judge has yet to provide his decision.
As it relates to events challenged in the period after the contracts were terminated, when the companies’ activities were not solely specifically covered by Law 21/2006, but also carried out on behalf of the commissioner, the Companies of the Group are fully convinced that they acted in accordance with the law.
Assessment by the board of directors regarding the status of the USW Campania projects at June 30, 2015
Salini Impregilo Group’s situation with respect to the USW Campania Projects at June 30, 2015, still continues to be extremely complex and uncertain (as can be seen from the wealth of information above).
The rulings by the administrative courts regarding the claims put forth for the costs of the RDF facilities that had not been amortized when the service contracts were cancelled (December 15, 2005), and those that recently have been given by the proceedings of SAP.NA, as discussed earlier in this Report, are positive and extremely important factors, because they support the Group’s arguments regarding the correctness of its conduct and the resulting assessments made to date.
Taking also into account the recent rulings handed down by the administrative judges regarding the previously mentioned environmental issues, which are still pending with regard to merit and for which the risk of an unfavorable outcome was assessed, with the support of the counsel assisting FIBE in the various disputes, as being in the realm of mere possibility, at this time, an accurate timing for the end of the various pending proceedings cannot be reasonably determined.
In view of the complexity and development of the different disputes described in detail in the preceding paragraphs, the possibility that future events, unforeseeable at this point, could occur requiring changes to the assessments made thus far cannot be excluded.