Risk areas of the industry


The country is going through a phase of social and geopolitical turmoil caused by the decision of the Ukrainian government to suspend the drafting of the Association Agreement with the EU.

The unrest, initially confined to Maidan square, in the centre of Kiev, has spread out of the square and the capital reaching several other areas, and specifically the Crimean peninsula, making the situation lapse into an international crisis.

The subsidiary Todini Costruzioni Generali operates in Ukraine both with a stable organization that has been awarded the project for the rehabilitation of the motorway along the M03 axis, and through a JV with Salini S.p.A. and its local partner Akkord, which has upgraded the M06 axis.

Considering the location of the work sites in the vicinity of the city of Poltava and Zhytomyr, geographically distant from the areas most affected by the social crisis, there have been no significant impacts on the safety of production activities.

However, the instability of the new political class and the uncertainty about the country’s near future, together with substantial debt with neighbouring Russia for the supply of natural gas, have resulted in a deep financial crisis that only intervention by the international community can solve.

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.


The subsidiary Impregilo operates in Libya through its subsidiary Impregilo Lidco Libya General Contracting Company (Impregilo Lidco), a joint enterprise incorporated by Impregilo, with a share of 60%, and a local partner holding the remaining 40%.

In the past, Impregilo Lidco had acquired significant contracts for the construction of:

  • Infrastructure projects in the cities of Tripoli and Misuratah;
  • University centres in the cities of Misuratah, Tarhunah and Zliten;
  • New “Conference Hall” of Tripoli.

In relation to the political events in Libya since the end of February 2011 to present, the subsidiary has always operated in accordance with the provisions of the contract and that the investments made until the date of the collapse of the country’s political situation were fully covered by advances provided for in the contracts.

The work covered by the contracts signed by the Libyan subsidiary, moreover, are works of national interest for which, at present, it is not reasonable to abandon them. Clearly, there are critical issues currently relating to the actual capacity of Lidco to carry out production in accordance with the obligations undertaken before the breakout of the crisis. Therefore, the possibility of a significant new development of its activities has been ruled in the short period.

During 2012, preliminary procedures were started to resume industrial activity, although the local context remains critical and complete safety cannot be guaranteed yet. However, commercial and contractual relationships have been resumed with the awarding authorities aimed at restarting construction and restoring the economic terms originally laid down in the relevant contracts. Within this general framework, more precise information has become available once again about the balance sheet and income statement items that impact the consolidated financial statements of the Group. In the statement of financial position, statement of income and financial position at 31 December 2012, the assets, liabilities, profits and losses of the Libyan subsidiary were updated in accordance with the Group’s standards, based on  the data of  the period and with  the support of  the assessments made by the subsidiary’s independent legal advisors. Compared to the consolidated situation of Impregilo for the year 2011, which included the most recent data available at 31 March 2011, value adjustments progressively made to the values reported in the assets net of the subsidiary as a result of the events described above resulted in expenses of about €40.7 million. These expenses were included in the work in progress, as these are deemed recoverable in view of the relations that have been recently resumed with the clients. Net cash held in Libya was also reduced to a total of €13.9 million as a result of expenses incurred locally in the period from 31 March 2011 to 31 December 2013. 

In the first part of 2013, the physical inventory of plants, equipment and supplies in stock was taken, amounting to a total of €29.9 million, although, security conditions did allow full access to all the sites where these are located. Since any additional expenses that may be potentially reported in this area at the completion of the inventory procedures, could be attributable to the responsibility of the clients under conditions of force majeure according to the contractual provisions, as also assessed by the subsidiary’s legal advisors, at present it is deemed that there are no new significant risks concerning the recovery of the net assets of the company, also through contractual and extra-contractual actions and claims vis-à-vis the client.

Lastly, the country’s situation is followed very closely and it cannot be ruled out that, after the reporting date of this Annual Report, events may occur that are unforeseeable at present and liable of resulting in changes to the assessments made to date.

Tax litigation – Iceland

With respect to the contract for the construction of a hydroelectric plant in Karanjukar (Iceland) that the group successfully completed in previous years, a dispute arose with the local tax authorities in 2004 about the party required to act as the withholding agent for the remuneration of foreign temporary workers at the building site. The subsidiary Impregilo was firstly wrongly held responsible for the payment of the withholdings on this remuneration, which it therefore paid. Following the final ruling of the court of first instance, the company’s claims were fully satisfied. Nevertheless, the local authorities subsequently commenced a new proceeding for exactly the same issue. The Supreme Court rejected the company’s claims in its ruling handed down in February 2010, which is blatantly contrary to the previous ruling issued in 2006 on the same matter by the same judiciary authority. The company had expected to be refunded both the unduly paid withholdings of €6.9 million (at the original exchange rate) and the related interest accrued to date of €6.0 million. The company had prudently impaired the interest amount in previous years, despite a previous local court ruling and the opinion of its consultants that confirmed its grounds, and only continued to recognise the unduly paid withholdings. After the last ruling, the company took legal action at international level (appeal filed with the EFTA Surveillance Authority on 22 June 2010) and, as far as possible, again at local level (another reimbursement claim filed with the local tax authorities on 23 June 2010) as it deemed, again supported by its advisors, that the last ruling issued by the Icelandic Supreme Court was unlawful in respect of local legislation, international agreements regulating trade relations between EFTA countries and international conventions which do not allow application of discriminatory treatments to foreign parties (individuals and companies) working in other EFTA countries. On 8 February 2012, the EFTA Surveillance Authority sent the Icelandic government a communication notifying the infraction concerning the free exchange of services and requested the government to submit its observations in this regard. In April 2013, the EFTA  Surveillance Authority issued its documented opinion finding the Icelandic legislation to be inconsistent with the regulations covering trade relations between the member countries with respect to the regulations for the above dispute. It requested that Iceland take steps to comply with these regulations. Accordingly, the Group requested the case to be re-examined. Based on the above considerations, it is deemed that to date there are no objective reasons to change the assessments made about this dispute.

Ente irriguo Umbro-Toscano - Imprepar

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 on 29 December 2010. The Umbria- Tuscany Irrigation Body notified Imprepar in January 2011 that “investigations and inspections are being carried out to ascertain the reasons and responsibilities for the damage”. As the transferee of the “sundry activities” business unit, which includes the “Montedoglio dam” contract, Imprepar informed the Body that the activities related to the damaged works had been carried out by another company in 1979 and 1980, from which Impregilo (then COGEFAR) took over the contract in 1984 only. The works had already been tested and inspected with positive results. In its reply to the Umbria-Tuscany Irrigation Body, Imprepar specifically explained its non-liability for any damage caused by the event and does not believe that there are reasons to modify its related assessments, supported by the opinion of its legal advisors.

During the period, the managers of Ente Acque Umbre Toscane and the works manager signed a service order requesting the contractor to immediately prepare executive designs and commence the related works at its own expense and under its own responsibility. Imprepar challenged all these acts. However, the amounts involved are negligible.

The subsidiary, supported by its legal advisors, deems it too early to be able to assess any risks arising from the Montedoglio dam contract other than those already assessed the year before, given the above recent developments. 

Widening of the Panama Canal

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 revise downwards the estimates on which the early phases of the project had been based. The most critical issues relate to, inter alia, the geological characteristics of the excavation areas with respect to the raw materials necessary to produce the concrete and the processing of such raw materials during normal production activities. Other issues also arose when the client adopted a series of operating and management procedures that differed substantially from the those provided for in the contract, with specific regard to the process for the approval of technical and design solutions proposed by the contractor. Such situations already specifically addressed in previous financial reports drawn up by the Group further continued in 2013. Given the persistent unwillingness of the client to reasonably set up the appropriate instruments provided for in the contract for the management of these disputes, it became impossible for the contractor - and the original contracting partners - to continue the construction activities required for the completion of the project at their own risk, bearing the entire financial burden required for this purpose without any concrete assurance of starting an objective discussion with the counterparty. In this context, at the end of 2013, a formal notice was sent to the client to inform him of the intention to suspend works immediately if the client continued to refuse to address the dispute in accordance with a contractual approach marked by good faith and the common will of all parties to reach a reasonable agreement.

The talks between the parties, assisted by their advisers and legal/contract experts lasted throughout the month of February 2014, and on 13 March 2014 the relevant agreement was signed. The key elements of the agreement include that the contractor undertake to resume works and complete them by 31 December 2015, while the client and contracting companies undertake to provide financial support for the works to be finished up to a maximum value of about US$1.4 billion. This commitment will be fulfilled by the client through a moratorium on the repayment of contractual advances already paid for about US$800 million, and the payment of US$100 million in further advances, while the group of contracting companies will contribute US$ 100 million directly with their own financial resources and additional financial resources,  through  the conversion  into  cash  of existing contractual guarantees, totalling US$400 million. The repayment of the amounts granted for the financing of the works to be carried out has been postponed until the outcome of the arbitration proceedings, initiated simultaneously, which will set out the responsibilities of the parties in relation to the extra costs incurred and yet to be incurred as a result of the situation described. In this context, already in previous financial years, the Impregilo Group had applied a reasonably prudent assessment approach to the project, articulately supported by its legal advisers on the basis of which they had already recognised significant losses to complete the contract, only partially limited at the time by the corresponding recognition of additional claims vis-à-vis the client determined based on the expectation that recognition could be considered reasonably certain. Considering that by the end of the previous financial year, the general critical situation observed, far from being resolved, continued as described below, pending the finalisation of the arrangements illustrated above, it was decided to update the overall economic forecasts for the entire life of the contract. Consistently and in continuity with the previous assumptions and in view of a further increase in the expected costs to complete the contract, it was decided to update the assessment of all the additional payments whose realisation is contractually corroborated and reasonably certain, though prudently deferred over time consistently with the deadlines provided for in the understanding with the client. This effort revealed additional net expenses over the entire life of the contract, which, while negligible compared to those estimated in previous years, were fully recognised in the income statement for year 2013. 

Bridge crossing the Strait of Messina and roadway and railway connections to and from Calabria and Sicily

In March 2006, as lead contractor of the joint venture created for this project (interest of 45%), Impregilo signed a contract with Stretto di Messina S.p.A. for its engagement as general contractor for the final and executive designs and construction of the bridge over the Strait of Messina and the related roadway and railway connections.

A bank syndicate also signed the financial documentation required in the General Specifications after the joint venture won the tender, for the concession of credit lines of €250 million allocated for this project. The client was also given performance bonds of €239 million, as provided for in the contract. Reduction of the credit line to €20 million was approved in 2010.

Stretto di Messina S.p.A. and Eurolink S.c.p.A. signed a rider in September 2009 which covered, inter alia, suspension of the project works carried out up to then since the contract was signed. As provided for by the rider, the final designs were delivered to the client whose Board of Directors approved them on 29 July 2011.

Decree Law 187 was issued on 2 November 2012 providing for “Urgent measures for the renegotiation of the contracts with Stretto di Messina S.p.A. (the client) and for local public transport”. Following enactment of this decree and given the potential implications for its position as general contractor, Eurolink notified the client of its intention to withdraw from the contract under the contractual terms, also to protect the positions of all the Italian and foreign  partners.  However,  given  the  huge  interest  in  building  the  works,  the  general contractor also communicated its willingness to review its position should the client prove its intention to actually carry out the project. To date, the ongoing negotiations have not been successful despite the efforts made. Eurolink has commenced various legal proceedings in Italy and the EU, arguing that the provisions of the above decree are contrary to the Constitution and EU laws and that they damage Eurolink’s legally acquired rights under the contract. It has also requested that Stretto di Messina be ordered to pay the amounts requested by the general contractor due to the termination of the contract for reasons not attributable to it. As a result, Impregilo’s order backlog at 31 December 2012 was adjusted to reflect discontinuation of the contract. Considering the complex nature of the various legal proceedings and although the legal advisors assisting Impregilo and the general contractor are reasonably confident about the outcome of the proceedings and the recoverability of the remaining assets recognised for this contract, it cannot be excluded that events not currently foreseeable may arise in the future which would require the current assessments to be revised. 


The subsidiary Impregilo is present in Venezuela through its permanent organisation, which directly or through international partners, is engaged in various railway works and in the construction of hydroelectric plants, with a presence established over more than a decade in the local area at both a social level and an economic and industrial level.

In recent years, relations with clients, all government-sponsored, were characterized by slowness in payments. This aspect has worsened over the past year as a result of the change in the country’s leadership, which took place in early 2013, and of the simultaneous intensification of social tensions that have accompanied the political transition. 

In view of the substantial deadlock with clients in this context, the Group has temporarily suspended production activities.

As for the railway works, at the beginning of February 2014, an agreement (called “Punto de Cuenta”) was drawn up and signed by the IFE President (the client) and the Ministry of the Treasury. However, it is still waiting for formal validation by the President of the Republic. This agreement provides for the gradual payment of approximately 82% of the total outstanding receivables at 31 December 2013 by the end of 2014.

As for hydroelectric projects realised by the OIV Tocoma consortium, in view of the expiry of the contractual deadline for the completion of the works - scheduled for mid-November 2013 - the works to be completed were rescheduled at the client’s request, with the resumption of works in May 2014 and a target completion date by the end of 2016. This proposal is still being analysed by the client, especially in light of the legitimate claims for the payment of the certified receivables and the allocation of future financial resources to ensure the normal course of the works to be finished.

The works being carried out by the Group are facilities of great significance, in economic, industrial and social terms, and in the past, due to the events that have characterised the country’s recent political history, there have been temporary situations of uncertainty not critically dissimilar from the current situation. However, these have always been resolved positively without giving rise to any significant liabilities. With these assumptions, and on the basis of continuous and careful monitoring of the country’s situation, carried out jointly with its partners, including through meetings with the clients and local government authorities aimed at safeguarding and protecting the Group’s positions, it is unlikely that there are significant critical issues regarding the possibility of realising its net assets, except for the extension of the time of collection that has been adequately taken into account in the assessments of the financial statements. Given the country’s delicate and complex situation at a political level, it cannot be ruled out that, after the reporting date of this Annual Report, events may occur that are unforeseeable at present and liable of resulting in changes to the assessments made to date.