U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20132016
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number001-35991
GRAÑA Y MONTERO S.A.A.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Republic of Peru
(Jurisdiction of incorporation or organization)
Av. Paseo de la República 4667
Surquillo
Lima 34, Peru
(Address of principal executive offices)
Claudia Drago Morante,Daniel Urbina Pérez, Chief Legal Officer
Tel.011-51-1-213-6565
Av. Paseo de la República 4667
Surquillo
Lima 34, Peru
(Name, telephone,e-mail and/or facsimile number and address of company contact person)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Shares, par value
each representing five Common Shares | New York Stock Exchange* New York Stock Exchange |
* | Not for trading purposes, but only in connection with the registration on the New York Stock Exchange of the American Depositary Shares representing those common shares. |
Securities registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
At December 31, | 660,053,790 shares of common stock |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨☐ No x☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨☐ No x
Note- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☐ No ¨☒
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every interactive data filed required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 203.405 of this chapter) during the preceding 12 months (or for such other period that the Registrant was required to submit and post such files) Yes ¨☐ No ¨☐ Note: Not required for Registrant.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a non-accelerated filer.an emerging growth company. See definitiondefinitions of “large accelerated filer,” “accelerated filer,” and large accelerated filer”“emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | Non-accelerated filer | Emerging growth company ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | International Financial Reporting Standards as issued by the International Accounting Standards Board | Other |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow. Item 17 ¨☐ Item 18 ¨☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ¨☐ No x☒
Explanatory Note
This is the company’s annual report on Form20-F for the year ended December 31, 2016. As the company disclosed on a Form6-K furnished on May 17, 2017, the company was previously unable to file this annual report on Form20-F within the prescribed time period because the company was carrying out additional procedures in connection with the finalization of its consolidated financial statements and the assessment of its internal control over financial reporting as of and for the year ended December 31, 2016 related to its association with affiliates of Odebrecht S.A. in certain projects in Peru. Additionally, on January 24, 2017, the Peruvian government terminated the concession of Gasoducto Sur Peruano S.A., a consortium controlled and operated by Odebrecht affiliates in which the company held a minority investment, due to a failure of the consortium to obtain the required project financing by the stipulated deadline. The termination of the concession, despite the government compensation contemplated under the concession contract, has had a material impact on the consolidated financial results and backlog of the company, which has been under review due to the complexity in the accounting for the concession and expected government compensation.
In addition, as the company disclosed on Form6-Ks furnished on October 5, 2017 and November 3, 2017, the company and its former auditor determined that the former auditor was not independent of the company with respect to the fiscal year 2016 as a consequence ofnon-audit services provided by it to the company beginning in the fourth quarter of fiscal year 2016. The services relate to the company’s testing of internal controls in accordance with the Sarbanes-Oxley Act. As a result, the company and its former auditor mutually agreed on October 4, 2017 to the company’s dismissal of the former auditor with respect to the company’s consolidated financial statements for the fiscal year 2016. A shareholders’ meeting of the company held on November 2, 2017 appointed Moore Stephens SCAI S.A. (“Moore Stephens”) as the new independent auditor for the fiscal year 2016.
Subsequently, on or about March 23, 2018, the former auditor informed the company that it would not authorize the use of its 2015 audit opinion without conducting substantial additional procedures, which represented a difference in understanding from what the company had since October 2017 when the company dismissed the former auditor as the company’s auditor for the 2016 fiscal year. The former auditor could not give any assurance as to when it could complete such additional procedures. To avoid further delay in filing this annual report, on April 17, 2018, the Audit and Process Committee of the company appointed Moore Stephens tore-audit the 2015 fiscal year, and the shareholders’ meeting of the company held on May 14, 2018 ratified the appointment. The previously issued consolidated financial statements of the company for the 2015 fiscal year (and the related audit opinion) included in the company’s annual report on Form20-F for the year ended December 31, 2015 should not be relied upon. The restatement of the 2015 fiscal year has resulted in certain significant changes to the company’s consolidated financial statements. For more information on the effects of the restatement, see note 2.30 to the company’s consolidated financial statements included in this annual report.
These changes of auditor and the subsequentre-audit and audit of the company’s consolidated financial statements for the fiscal years 2015 and 2016, respectively, caused further delay in the filing of this annual report.
For more information, see “Item 5.A. Operating and Financial Review and Prospects—Recent Developments” and “Item 16.F. Change in Registrant’s Certifying Accountant” of this annual report.
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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 5 | |||
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A. Consolidated Statements and Other Financial | 158 | |||
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | ||||
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ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | ||||
B. Management’s Annual Report on Internal Control Over Financial Reporting | ||||
C. Attestation Report of the Registered Public Accounting Firm | ||||
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INTRODUCTION
Certain DefinitionDefinitions
All references to “we,” “us,” “our,” “our company,” “the group” and “Graña y Montero” in this annual report are to Graña y Montero S.A.A., a publicly-held corporation (sociedad anóanónima abierta) organized under the laws of Peru. In this annual report, we refer to our principal subsidiaries, joint operations, joint ventures and associated companies as follows: (i) in our Engineering and Construction (E&C) segment: GyM S.A. as “GyM”; Stracon GyM S.A. as “Stracon GyM”; Ingeniería y Construcción Vial y VivesVives—DSD S.A. as “Vial y Vives”Vives—DSD”; and GMI S.A. as “GMI”; Morelco S.A.S. as “Morelco”; (ii) in our Infrastructure segment: Norvial S.A. as “Norvial”; Survial S.A. as “Survial”; Concesión Canchaque S.A. as “Canchaque”; GyM Ferrovías S.A. as “GyM Ferrovías”; Concar S.A. as “Concar”; Concesionaria La Chira S.A. as “La Chira”; and GMP S.A. as “GMP”; Gasoducto Sur Peruano S.A. (investee) as “GSP”; Concesionaria Chavimochic S.A.C. (investee) as “Chavimochic”; (iii) in our Real Estate segment: Viva GyM S.A. as “Viva GyM”; Inmobiliaria Almonte S.A.C. as “Almonte”; and (iv) in our Technical Services segment, GMD S.A. as “GMD”; Concar S.A. as “Concar”; and CAM Chile S.A. as “CAM.“CAM”; Adexus S.A. as “Adexus.” We discuss GSP and Chavimochic in our Infrastructure segment in this annual report, however, as investees, their results are not presented within the Infrastructure segment in our consolidated financial statements. For more information on our subsidiaries, joint operations, joint ventures or associated companies, see notes 5a, 5c and 15 to our audited annual consolidated financial statements included in this annual report.
The GSP gas pipeline concession was terminated on January 24, 2017, and as a result, we recognized impairment with respect to our investment in GSP and our participation in the related construction consortium (Consorcio Constructor Ductos del Sur). Additionally, on April 24, 2017 we sold our interest in Compañía Operadora de Gas del Amazonas (“COGA”), and on June 6, 2017, we sold our interest in GMD S.A. (“GMD”). On April 11, 2018, we sold our interest in Stracon GyM. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.” Beginning on April 1, 2017, we have transferred Concar from our Technical Services segment to our Infrastructure segment.
The term “U.S. dollar” and the symbol “US$” refer to the legal currency of the United States; the term “nuevo sol”“sol” and the symbol “S/.” refer to the legal currency of Peru; the term “Chilean peso” and the symbol “CLP” refer to the legal currency of Chile; and the term “Colombian peso” and the symbol “COP” refer to the legal currency of Colombia.
Financial Information
Our consolidated financial statements included in this annual report have been prepared in nuevos soles and in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). Our annual consolidated financial statements for the years ended December 31, 2011, 20122015 and 20132016 have been audited by Dongo, Soria, Gaveglio y Asociados S.C. de R.L., a member firm of PricewaterhouseCoopersMoore Stephens in accordance with the standards of the Public Company Accounting Oversight Board (United States). We have also included in thisOur annual report certainconsoldiated financial informationstatements for the years prior to 2010 whichended December 31, 2012, 2013 and 2014 have been preparedaudited by Gaveglio, Aparicio y Asociados S.C. de R.L., a member firm of PricewaterhouseCoopers. For more information, see “Item 16.F. Change in accordance with generally accepted accounting principles in Peru (“Peruvian GAAP”). In accordance with Peruvian law, we were required to present our financial statements under IFRS beginning with ourRegistrant’s Certifying Accountant.”
Our consolidated financial statements for the year ended December 31, 2010. Peruvian GAAP differs2015 included in this annual report have been restated. The previously issued consolidated financial statements of the company for the 2015 fiscal year (and the related audit opinion) included in the company’s annual report on Form20-F for the year ended December 31, 2015 should not be relied upon. The restatement of the 2015 fiscal year has resulted in certain respects from IFRS. Accordingly, oursignificant changes to the company’s consolidated financial statements. For more information, presentedsee note 2.30 to the company’s consolidated financial statements included in accordance with Peruvian GAAP is not directly comparable to our financial information prepared in accordance with IFRS.this annual report.
We manage our business in four segments: Engineering and Construction (E&C); Infrastructure; Real Estate; and Technical Services. For information on our results of operations per our business segments, see note 67 to our audited annual consolidated financial statements.
We have requested that the staff of the U.S. Securities and Exchange Commission (the “SEC”) grant relief from the financial statement filing requirements of Rule3-09 of RegulationS-X pursuant to Section 2430 of the Division of Corporation Finance Financial Reporting Manual, with respect to our investment in GSP. We have requested this relief because we believe the burden of producing financial statements of GSP as of and for the year ended December 31, 2016 would outweigh their limited utility to the company’s investors. In particular, such financial statements would not provide additional material information to our investors that is not already included in our own consolidated financial statements as of and for the year ended December 31, 2016. This request for relief is pending.
Non-IFRS Data
In this annual report, we present Adjusted EBITDA, anon-GAAP financial measure. Anon-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows but excludes or includes amounts that would not be so adjusted in the most comparable IFRS measure. We present Adjusted EBITDA because we believe it provides readers with a supplemental measure of the financial performance of our core operations that facilitatesperiod-to-period comparisons on a consistent basis. Furthermore, we regularly present EBITDA in our filings with the Lima Stock Exchange in Peru. Our management uses Adjusted EBITDA, among other measures, for internal planning and performance measurement purposes. AdjustedWe believe that EBITDA is useful in evaluating our operating performance compared to other companies operating in our sectors because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. EBITDA should not be construed as an alternative to net profit or operating profit, as an indicator of operating performance, as an alternative to cash flow provided by operating activities or as a measure of liquidity (in each case, as determined in accordance with IFRS). Adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies. For our definition Adjustedof EBITDA and a reconciliation of Adjusted EBITDA to the most directly comparable IFRS financial measure, see “Item 3.A. Key Information—Selected FinancialData—Non-GAAP Financial Measure and Reconciliation.”
Currency Translations
Our consolidated financial statements are prepared in soles. For a description of our translation of amounts in currencies other than soles in our consolidated financial statements, see note 2.4 to our audited annual consolidated financial statements.
We have translated some of the nuevos soles amounts contained in this annual report into U.S. dollars and some U.S. dollars amounts contained in this annual report into soles, for convenience purposes only. Unless otherwise indicated or the context otherwise requires, the rate used to translate nuevos soles amounts to U.S. dollars and U.S. dollars amounts into soles was S/.2.796.3.36 to US$1.00, which was the exchange rate reported for December 31, 20132016 by the Peruvian Superintendency of Banks, Insurance and Private Pension Fund Administrators
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(Superintendencia (Superintendencia de Banca, Seguros y AFPs, or “SBS”). We present our backlog in U.S. dollars. For contracts denominated in nuevos soles or other local currencies, amounts have been converted into U.S. dollars based on the exchange rate published by the SBS on December 31 of the corresponding year. When we present our ratios of backlog and revenues in this annual report, we similarly convert our revenues, which are reported in nuevos soles, into U.S. dollars based on the exchange rate reported for December 31 of the corresponding year. For conversions of macroeconomic indicators (particularly in “Item 5.D. Operating and Financial Review and Prospects—Trend Information” in this annual report), average annual exchange rates for the currencies of each of the countries addressed are used. The Federal Reserve Bank of New York does not report a noon buying rate for nuevos soles. The U.S. dollar equivalent information presented in this annual report is provided solely for convenience of the reader and should not be construed as implying that the nuevos soles or other currency amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Item 3.A. Key Information—Selected Financial Data—Exchange Rates” for information regarding historical exchange rates of nuevos soles to U.S. dollars.
Rounding
Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be arithmetic aggregations of the figures that precede them.
Backlog
This annual report includes our backlog for our Engineering and Construction, Infrastructure, Real Estate and Technical Services segments. We do not include backlog in this annual report in our Infrastructure segment for: (i) our Norvial toll road concession because its revenues from the concession are derived from toll fees charged to vehicles using the highway, and, as a result, such revenues are dependent on vehicular traffic levels; and (ii) our Energy line of business because: (a) its revenues from hydrocarbon extraction services are dependent on the amounts of oil and gas we produce and market prices, which fluctuate significantly; (b) our revenues from our gas processing plant are dependent on the amount of gas we process and market prices for natural gas liquids, which fluctuate significantly; and (c) our revenues from our fuel storage terminal operation partially depend on the volume of fuel dispatched, such revenues aredispatched; and (iii) COGA, which is not material to our consolidated results of operationsbecause it was jointly controlled, and the concession for such services is scheduled to terminate in August 2014.which we sold on April 24, 2017. When we present backlog on a segment basis, we do not include eliminations that are included in our consolidated backlog. Backlog is not a measure defined by IFRS, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog. Backlog is not audited. For our definition of backlog, see “Item 4.B. Information on the Company—Business Overview—Backlog.” See also “Item 3.D. Key Information—Risk Factors—Risks Related to our Company—Our backlog and our ratio of historical backlog to revenues may not be reliable indicators of future revenues or profit.”
The GSP gas pipeline concession was terminated on January 24, 2017, which had a significant impact on our backlog for our E&C and our consolidated backlog. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
Reserves Estimates
This annual report includes our estimates for proved reserves in Blocks I and V, where GMP provides hydrocarbon extraction services to, and Blocks III and IV, where GMP extracts hydrocarbon under license agreements with, Perupetro S.A. (“Perupetro”). These reserves estimates were prepared internally by our team of engineers and have not been audited or reviewed by any independent external engineers. For further information on these reserves estimates, see “Item 3.D. Key Information—Rights Relating to Our Company – Additional Risks Related to our Infrastructure Business” and “Item 4.B. Information on the Company—Business Overview—Infrastructure—Principal Infrastructure Lines of Business—Energy—Oil and Gas Production—Estimated Proved Reserves.Production.”
Market Information
We make estimates in this annual report regarding our competitive position and market share, as well as the market size and expected growth of the engineering and construction, infrastructure, real estate and technical services industries in Peru and elsewhere in Latin America. We have made these estimates on the basis of our management’s knowledge and statistics and other information, which we believe to be the most recently available as of the date of this annual report, from government agencies, industry professional organizations, industry publications and other sources. WeWhile we believe these estimates to be accurate as of the date of this annual report. Ourreport, we have not independently verified the data from third-party sources and our internal data has not been verified by any independent source. In addition, our former director, Hugo Santa María Guzmán, is a partner in APOYO Consultoría, and Roberto Abusada Salah, a director of our subsidiaries GMDthe company, GMP and GMP,GyM, is a director of the Peruvian Economy Institute. We paid Great Place to Work® Institute (“Great Place to Work”), a human resources consulting, research and training firm, for our employees to participate in their market survey referenced in this annual report (Copyright©2013 2016 Great Place to Work® Institute, Inc. All rights reserved.).
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In this annual report we present gross domestic product (“GDP”) both on a nominal and real basis. Real GDP is nominal GDP adjusted to exclude the effect of inflation. Unless otherwise indicated, references to GDP are to real GDP.
Measurements and Other Data
In this annual report, we use the following measurements:
In this annual report, we use the term accident incident rate with respect to our E&C segment, which is calculated as the number of injuries divided by the total number of hours worked by all full-time employees of our E&C segment during the relevant year divided by 200,000 (which reflects 40 hours worked per week in a50-week year by 100 equivalent full-time workers).
Forward-Looking Statements
This annual report contains forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. These statements involve known and unknown risks, uncertainties and other factors, including those listed under “Item 3.D. Key Information—Risk Factors,” which may cause our actual results, performance or achievements to differ materially from the forward-looking statements that we make.
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Forward-looking statements typically are identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “project,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions. Any or all of our forward-looking statements in this annual report may turn out to be inaccurate. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including, among others:
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The forward-looking statements in this annual report represent our expectations and forecasts as of the date of this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this annual report.
Item 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not applicable.
Item 2. | OFFER STATISTICS |
Not applicable.
Item 3. | KEY INFORMATION |
The following selected consolidated financial data should be read together with “Part I. Introduction — Financial Information,” “Item 5. Operations and Financial Review and Prospects” and our consolidated financial statements included in this annual report.
The following selected financial data as of December 31, 20122015 and 20132016 and for the years ended December 31, 2011, 20122014, 2015 and 20132016 have been derived from our audited annual consolidated financial statements included in this annual report. The following selected financial data as of December 31, 20102012, 2013 and 20112014 and for the yearyears ended December 31, 20102012 and 2013 have been derived from our audited annual consolidated financial statements not included in this annual report. Our annual consolidated financial statements for the years ended December 31, 2010, 2011, 20122015 and 20132016 have been audited by Dongo, Soria, Gaveglio y Asociados S.C. de R.L., a member firm of PricewaterhouseCoopers,Moore Stephens in accordance with the standards of the Public Company Accounting Oversight Board (United States). We applied the accommodation provided by the U.S. Securities and Exchange Commission (“SEC”)For more information, see “Item 16.F. Change in respect of first-time application of IFRS and the following information is limited to our selectedRegistrant’s Certifying Accountant.” Our consolidated financial information for 2010, 2011, 2012 and 2013. Prior to 2010, we prepared our financial statements in accordance with Peruvian GAAP. Under Peruvian law, we were required to present our financial statements under IFRS beginning with our financial statements for the year ended December 31, 2010. Peruvian GAAP differs2015 included in this annual report have been restated. The previously issued consolidated financial statements of the company for the 2015 fiscal year (and the related audit opinion) included in the company’s annual report on Form20-F for the year ended December 31, 2015 should not be relied upon. The restatement of the 2015 fiscal year has resulted in certain aspects from IFRS.
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Year ended December 31, | Year ended | |||||||||||||||||||||||||||||||||||||||||||
2010 | 2011(1) | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 Restated | 2016(1) | 2016(1) | ||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | (in millions of S/.) | (in millions of US$)(3) | |||||||||||||||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||||||||||||||||||
Revenues | 2,502.7 | 4,241.3 | 5,231.9 | 5,967.3 | 2,134.2 | 5,231.9 | 5,967.5 | 7,008.7 | 7,815.5 | 6,469.6 | 1,925.5 | |||||||||||||||||||||||||||||||||
Cost of sales | (2,057.8 | ) | (3,609.5 | ) | (4,519.8 | ) | (4,962.7 | ) | (1,774.9 | ) | (4,519.8 | ) | (4,963.4 | ) | (6,057.1 | ) | (7,165.5 | ) | (5,866.2 | ) | (1,745.9 | ) | ||||||||||||||||||||||
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Gross profit | 444.8 | 631.7 | 712.1 | 1,004.7 | 359.3 | 712.1 | 1,004.1 | 951.6 | 650.0 | 603.4 | 179.6 | |||||||||||||||||||||||||||||||||
Administrative expenses | (123.2 | ) | (199.6 | ) | (257.2 | ) | (361.8 | ) | (129.4 | ) | (257.2 | ) | (361.8 | ) | (421.4 | ) | (413.4 | ) | (399.4 | ) | (118.9 | ) | ||||||||||||||||||||||
Other income and expenses(3) | 2.7 | 4.3 | 75.9 | 26.0 | 9.3 | |||||||||||||||||||||||||||||||||||||||
Profit from sale of investments | 75.0 | 4.8 | — | 5.7 | 2.0 | |||||||||||||||||||||||||||||||||||||||
Other (losses) gains, net | 0.2 | (2.8 | ) | (0.3 | ) | (0.7 | ) | (0.3 | ) | |||||||||||||||||||||||||||||||||||
Gain from business combination(3) | — | 45.2 | — | — | — | |||||||||||||||||||||||||||||||||||||||
Other income and expenses, net (4) | 75.9 | 26.0 | 15.2 | 57.4 | (12.6 | ) | (3.8 | ) | ||||||||||||||||||||||||||||||||||||
Profit (losses) from sale of investments | — | 5.7 | — | (8.3 | ) | 46.3 | 13.8 | |||||||||||||||||||||||||||||||||||||
Other (expenses) income, net | (0.3 | ) | (0.7 | ) | (0.1 | ) | (0.1 | ) | (0.7 | ) | (0.2 | ) | ||||||||||||||||||||||||||||||||
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Operating profit | 399.5 | 483.6 | 530.6 | 673.9 | 241.0 | 530.6 | 673.4 | 545.3 | 285.6 | 237.1 | 70.6 | |||||||||||||||||||||||||||||||||
Financial (expense) income, net(4) | (10.0 | ) | (6.2 | ) | (10.3 | ) | (113.6 | ) | (40.6 | ) | ||||||||||||||||||||||||||||||||||
Share of the profit and loss obtained by associates under the equity method of accounting | 11.5 | 0.2 | 0.6 | 33.6 | 12.0 | |||||||||||||||||||||||||||||||||||||||
Financial (expense) income, net(5) | (10.3 | ) | (112.4 | ) | (91.4 | ) | (138.7 | ) | (210.8 | ) | (62.7 | ) | ||||||||||||||||||||||||||||||||
Share of the profit and loss obtained from associates and joint ventures under the equity method of accounting | 0.6 | 33.6 | 53.4 | 7.7 | (589.7 | ) | (175.5 | ) | ||||||||||||||||||||||||||||||||||||
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Profit before income tax | 401.0 | 477.6 | 520.8 | 595.0 | 212.8 | 520.8 | 594.5 | 507.4 | 154.6 | (563.4 | ) | (167.7 | ) | |||||||||||||||||||||||||||||||
Income tax | (124.3 | ) | (141.4 | ) | (154.6 | ) | (182.4 | ) | (65.2 | ) | (154.6 | ) | (182.3 | ) | (146.2 | ) | (99.0 | ) | 111.8 | 33.3 | ||||||||||||||||||||||||
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Net profit | 276.7 | 336.2 | 366.3 | 412.6 | 147.6 | 366.3 | 412.1 | 361.2 | 55.6 | (451.6 | ) | (134.4 | ) | |||||||||||||||||||||||||||||||
Net profit attributable to controlling interest(5) | 252.8 | 289.1 | 290.0 | 320.4 | 114.6 | |||||||||||||||||||||||||||||||||||||||
Net profit attributable to non-controlling interest(5) | 23.9 | 47.1 | 76.3 | 92.2 | 33.0 | |||||||||||||||||||||||||||||||||||||||
Net profit (loss) attributable to controlling interest(6) | 290.0 | 320.0 | 299.7 | 7.1 | (509.7 | ) | (151.7 | ) | ||||||||||||||||||||||||||||||||||||
Net profit (loss) attributable tonon-controlling interest(6) | 76.3 | 92.1 | 61.5 | 48.5 | 58.1 | 17.3 |
(1) | For the effects on our results of operations for 2016 resulting from the termination of the GSP gas pipeline concession, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.” |
(2) | Includes the results of operations of |
Calculated based on an exchange rate of S/ |
In 2013, 2014, 2015 and 2016 we had higher exchange losses due to the depreciation of the |
We consolidate the results of our subsidiaries in our financial statements and we reflect the profit corresponding to the minority interests in our subsidiaries under “net profit attributable tonon-controlling interests” in our income statement. With respect to our joint operations, we recognize in our consolidated financial statements the revenue and expenses, including our share of any asset, liability, revenue or expense we hold jointly with partners. We reflect the results of our associated companies under the equity method of accounting in our consolidated financial statements under the line item “share of the profit and loss in associates” in our income statement. See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Factors Affecting Our Results of Operations—Acquisitions,” “—General—Accounting for Subsidiaries, Joint Operations, Joint Ventures and Associated Companies” and note 2.2 to our audited annual consolidated financial statements included in this annual report. |
As of December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||
Total current assets | 2,502.3 | 3,017.2 | 3,900.1 | 1,394.9 | ||||||||||||
Cash and cash equivalents | 658.2 | 780.1 | 959.4 | 343.1 | ||||||||||||
Accounts receivables | 855.2 | 930.8 | 1,158.9 | 414.5 | ||||||||||||
Outstanding work in progress | 393.8 | 525.3 | 971.7 | 347.6 | ||||||||||||
Inventories(2) | 546.3 | 747.4 | 762.8 | 272.8 | ||||||||||||
Total non-current assets | 1,191.5 | 1,982.9 | 2,412.8 | 863.0 | ||||||||||||
Long-term accounts receivables(3) | 75.2 | 393.4 | 630.1 | 225.3 | ||||||||||||
Property, plant and equipment | 686.9 | 938.1 | 952.6 | 340.7 | ||||||||||||
Intangible assets(4) | 317.8 | 505.1 | 406.4 | 145.3 | ||||||||||||
Total current liabilities | 1,741.4 | 2,618.1 | 2,416.3 | 864.2 |
6
As of December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Short-term borrowings | 231.0 | 452.8 | 486.1 | 173.9 | ||||||||||||
Accounts payables(5) | 1,313.6 | 1,995.2 | 1,762.1 | 630.2 | ||||||||||||
Total non-current liabilities | 499.3 | 598.8 | 699.7 | 250.3 | ||||||||||||
Long-term borrowings | 298.9 | 392.7 | 309.7 | 110.8 | ||||||||||||
Capital Stock | 390.8 | 558.3 | 660.1 | 236.1 | ||||||||||||
Shareholders’ equity(6) | 1,189.0 | 1,392.2 | 2,765.8 | 989.2 | ||||||||||||
Non-controlling interest | 264.1 | 391.0 | 431.1 | 154.2 |
As of December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016(1)) | 2016(1) | |||||||||||||||||||
Balance Sheet Data: | (in millions of S/.) | (in millions of US$)(2) | ||||||||||||||||||||||
Total current assets | 3,017.2 | 3,903.5 | 4,623.9 | 5,200.4 | 4,328.7 | 1,288.3 | ||||||||||||||||||
Cash and cash equivalents | 780.1 | 959.4 | 818.4 | 554.0 | 607.0 | 180.7 | ||||||||||||||||||
Accounts receivables | 930.8 | 1,162.4 | 1,768.6 | 2,143.3 | 1,862.5 | 554.3 | ||||||||||||||||||
Outstanding work in progress | 525.3 | 971.7 | 1,161.8 | 1,278.2 | 680.9 | 202.6 | ||||||||||||||||||
Inventories(3) | 747.4 | 762.8 | 833.6 | 1,159.2 | 1,104.3 | 328.7 | ||||||||||||||||||
Totalnon-current assets | 1,982.9 | 2,412.6 | 3,106.8 | 3,699.6 | 4,718.0 | 1,404.2 | ||||||||||||||||||
Long-term accounts receivables(4) | 393.4 | 630.1 | 580.0 | 621.8 | 667.5 | 198.7 | ||||||||||||||||||
Investments in associates and joint ventures | 37.4 | 88.0 | 229.6 | 637.0 | 389.8 | 116.0 | ||||||||||||||||||
Property, plant and equipment | 938.1 | 952.9 | 1,147.0 | 1,111.8 | 1,113.6 | 331.4 | ||||||||||||||||||
Intangible assets(5) | 505.1 | 407.5 | 778.7 | 878.3 | 960.3 | 285.8 | ||||||||||||||||||
Total current liabilities | 2,618.1 | 2,416.3 | 3,794.9 | 4,092.3 | 4,537.0 | 1,350.3 | ||||||||||||||||||
Short-term borrowings | 452.8 | 486.1 | 1,425.5 | 1,228.0 | 1,961.0 | 583.6 | ||||||||||||||||||
Accounts payables(6) (7) | 1,995.2 | 1,762.1 | 2,268.4 | 2,779.6 | 2,453.1 | 730.1 | ||||||||||||||||||
Totalnon-current liabilities | 598.8 | 703.1 | 762.1 | 1,725.8 | 2,019.9 | 601.2 | ||||||||||||||||||
Long-term borrowings | 392.7 | 309.7 | 326.1 | 553.3 | 419.4 | 124.8 | ||||||||||||||||||
Capital stock(8) | 558.3 | 660.1 | 660.1 | 660.1 | 660.1 | 196.5 | ||||||||||||||||||
Shareholders’ equity | 1,392.2 | 2,765.4 | 2,691.7 | 2,558.8 | 1,980.4 | 589.4 | ||||||||||||||||||
Non-controlling interest | 391.0 | 431.3 | 482.5 | 523.1 | 509.3 | 151.6 |
(1) | For the effects on our financial condition as of December 31, 2016 resulting from the termination of the GSP gas pipeline concession, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.” |
(2) | Calculated based on an exchange rate of S/ |
Includes investments for the purchase of land by our Real Estate segment. These investments in land are recorded at |
Includes payments required to be made by the Peruvian government for the amounts we invest to purchase trains and other infrastructure for the Lima Metro. See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Results of Operations—General—Infrastructure” and note 10 to our audited annual consolidated financial statements included in this annual report. |
We recognize our investments in the construction of the highway of our Norvial concession as intangible assets. See note |
Includes S/ |
Includes our US$52.5 million payable to Chubb Insurance Company relating to the termination of the GSP gas pipeline concession. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments” and “—Liquidity and Capital Resources—Indebtedness.” |
(8) | Reflects as of December 31, 2013, 2014, 2015 and 2016 our initial public offering of American Depositary Shares (“ADSs”) in the United States, which was consummated on July 29, 2013. |
As of and for the year ended December 31, | As of and for the year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2010 | 2011(1) | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 (Restated) | 2016(1) | 2016(1) | ||||||||||||||||||||||||||||||||||
(in millions of S/., except as indicated) | (in millions of US$, except as indicated)(2) | (in millions of S/.) | (in millions of US$)(3) | |||||||||||||||||||||||||||||||||||||||||
Other Data: | ||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA(3) | 572.8 | 674.3 | 800.9 | 1,030.7 | 368.6 | |||||||||||||||||||||||||||||||||||||||
EBITDA(4) (in millions of S/. or US$) | 775.6 | 967.2 | 858.8 | 599.7 | (64.4 | ) | (19.2 | ) | ||||||||||||||||||||||||||||||||||||
Gross margin | 17.8 | % | 14.9 | % | 13.6 | % | 16.8 | % | 16.8 | % | 13.6 | % | 16.8 | % | 13.6 | % | 8.3 | % | 9.3 | % | 9.3 | % | ||||||||||||||||||||||
Adjusted EBITDA margin(4) | 22.1 | % | 15.6 | % | 14.8 | % | 17.3 | % | 17.3 | % | ||||||||||||||||||||||||||||||||||
EBITDA margin(5) | 14.8 | % | 16.2 | % | 12.3 | % | 7.7 | % | (1.0 | %) | (1.0 | %) | ||||||||||||||||||||||||||||||||
Outstanding shares | 558,284 | 558,284 | 558,284 | 660,054 | 660,054 | 558,284 | 660,054 | 660,054 | 660,054 | 660,054 | 660,054 | |||||||||||||||||||||||||||||||||
Profit per share (in S/.or US$) | 0.50 | 0.60 | 0.66 | 0.57 | 0.20 | 0.66 | 0.62 | 0.55 | 0.08 | (0.68 | ) | (0.20 | ) | |||||||||||||||||||||||||||||||
Profit attributable to controlling interest per share (in S/.or US$) | 0.45 | 0.52 | 0.52 | 0.53 | 0.19 | 0.52 | 0.53 | 0.45 | 0.01 | (0.77 | ) | (0.23 | ) | |||||||||||||||||||||||||||||||
Dividend per share (in S/.or US$) | 0.05 | 0.10 | 0.16 | 0.16 | 0.06 | 0.16 | 0.17 | 0.16 | 0.05 | — | — | |||||||||||||||||||||||||||||||||
Net debt/ Adjusted EBITDA ratio | (0.6 | )x | (0.2 | )x | 0.1x | (0.2 | )x | (0.2 | )x | |||||||||||||||||||||||||||||||||||
Backlog (in millions of US$)(6) | 1,313.2 | 2,493.9 | 4,165.9 | 3,935.0 | 3,935.0 | |||||||||||||||||||||||||||||||||||||||
Backlog/revenues ratio(6) | 1.7x | 1.7x | 2.2x | 1.9x | 1.9x | |||||||||||||||||||||||||||||||||||||||
Net debt(8)/ EBITDA ratio | 0.1x | (0.2 | )x | 1.0x | 3.4x | (42.6 | ) | (42.6 | ) | |||||||||||||||||||||||||||||||||||
Backlog (in millions of US$) (Unaudited)(9) | 4,165.9 | 3,935.0 | 3,765.4 | 4,037.8 | 3,137.4 | 3,137.4 | ||||||||||||||||||||||||||||||||||||||
Backlog/revenues ratio (Unaudited)(9) | 2.2x | 1.9x | 1.6x | 1.8x | 1.6x | 1.6x |
(1) | For the effects on our results of operations and backlog for 2016 resulting from the termination of the GSP gas pipeline concession, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.” |
(2) | Includes the results of operations of |
Calculated based on an exchange rate of S/ |
For further information on the definition of |
Reflects |
Reflects as of December 31, 2013, 2014, 2015 and 2016 our initial public offering of ADSs in the United States, which was consummated on July 29, 2013. |
7
Payment of dividends for the year’s profit. |
(8) | Net debt is calculated as total borrowings (including current andnon-current borrowings) less cash and cash equivalents. |
(9) | For further information on our backlog, see “Item 4.B. Business Overview—Backlog.” Does not include, in our Infrastructure segment, our Norvial toll road |
The following tables set forth summary financial data for each of our business segments. For more information on the results of operations of our segments, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Results of Operations” and note 6 to our audited annual consolidated financial statements included in this annual report. The effects of the termination of the GSP gas pipeline concession are reflected in Corporate (the Parent Company Operations) and, with respect to the related construction consortium (Consorcio Constructor Ductos del Sur), in our E&C segment. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments” and note 7 to our audited annual consolidated financial statements.
1. Engineering & Construction
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Revenues | 3,524.6 | 4,075.3 | 5,035.7 | 5,829.4 | 4,159.5 | 1,237.9 | ||||||||||||||||||
Cost of sales | (3,116.6 | ) | (3,515.2 | ) | (4,500.3 | ) | 5,516.7 | (3,934.9 | ) | (1,171.1 | ) | |||||||||||||
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Gross profit | 408.0 | 559.5 | 535.4 | 312.8 | 224.6 | 66.8 | ||||||||||||||||||
Administrative expenses | (159.8 | ) | (217.9 | ) | (258.6 | ) | (289.1 | ) | (258.6 | ) | (77.0 | ) | ||||||||||||
Other income and (expenses), net | (1.9 | ) | 10.8 | (9.8 | ) | 30.8 | (9.2 | ) | (2.7 | ) | ||||||||||||||
Other (losses) gains, net | 1.3 | — | — | (0.2 | ) | — | — | |||||||||||||||||
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Operating profit | 247.6 | 352.4 | 267.0 | 54.2 | (43.2 | ) | (12.9 | ) | ||||||||||||||||
Financial (expense) income, net | 19.7 | (26.6 | ) | (62.4 | ) | (118.5 | ) | (53.9 | ) | (16.0 | ) | |||||||||||||
Share of the profit or loss in associates under the equity method of accounting | 9.2 | 42.0 | 48.2 | (2.2 | ) | 16.5 | 4.9 | |||||||||||||||||
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Profit (loss) before income tax | 276.4 | 367.7 | 252.8 | (66.5 | ) | (80.6 | ) | (24.0 | ) | |||||||||||||||
Income tax | (87.9 | ) | (111.2 | ) | (59.3 | ) | (55.4 | ) | (12.8 | ) | (3.8 | ) | ||||||||||||
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Net profit (loss) | 188.5 | 256.5 | 193.6 | (121.8 | ) | (93.4 | ) | (27.8 | ) | |||||||||||||||
Net profit attributable to controlling interest | 165.1 | 211.6 | 164.1 | (131.2 | ) | (87.7 | ) | (26.1 | ) | |||||||||||||||
Net profit (loss) attributable tonon-controlling interest | 23.4 | 44.9 | 29.5 | 9.3 | (5.7 | ) | (1.7 | ) |
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenues | 1,700.5 | 2,784.2 | 3,524.6 | 4,075.1 | 1,457.5 | |||||||||||||||
Cost of sales | (1,469.6 | ) | (2,454.9 | ) | (3,116.6 | ) | (3,515.0 | ) | 1,257.2 | |||||||||||
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Gross profit | 230.9 | 329.3 | 408.0 | 560.1 | 200.3 | |||||||||||||||
Administrative expenses | (82.5 | ) | (104.4 | ) | (159.8 | ) | (217.9 | ) | (77.9 | ) | ||||||||||
Other income and expenses | (1.5 | ) | 4.8 | (1.9 | ) | 10.8 | 3.8 | |||||||||||||
Other (losses) gains, net | 3.0 | (2.2 | ) | 1.3 | — | — | ||||||||||||||
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Operating profit | 149.8 | 227.5 | 247.6 | 352.9 | 126.2 | |||||||||||||||
Financial (expense) income, net | 2.7 | 5.3 | 19.7 | (26.6 | ) | (9.5 | ) | |||||||||||||
Share of the profit or loss in associates under the equity method of accounting | 7.7 | 5.1 | 9.2 | 42.0 | 15.0 | |||||||||||||||
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Profit before income tax | 160.2 | 237.9 | 276.4 | 368.2 | 131.7 | |||||||||||||||
Income tax | (49.0 | ) | (71.5 | ) | (87.9 | ) | (111.3 | ) | (39.8 | ) | ||||||||||
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Net profit | 111.2 | 166.4 | 188.5 | 256.9 | 91.8 | |||||||||||||||
Net profit attributable to controlling interest | 104.1 | 153.1 | 165.1 | 211.9 | 75.8 | |||||||||||||||
Net profit attributable to non-controlling interest | 7.1 | 13.3 | 23.4 | 45.0 | 16.1 |
As of December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Total current assets | 1,547.4 | 1,858.0 | 2,676.6 | 3,157.1 | 1,910.9 | 568.7 | ||||||||||||||||||
Cash and cash equivalents | 423.3 | 265.8 | 285.4 | 172.1 | 93.5 | 27.8 | ||||||||||||||||||
Accounts receivables | 555.8 | 737.7 | 1,092.9 | 1,526.4 | 1,060.5 | 315.6 | ||||||||||||||||||
Outstanding work in progress | 417.1 | 735.0 | 1,145.4 | 1,260.5 | 648.9 | 193.1 | ||||||||||||||||||
Other current assets | 151.2 | 119.6 | 152.9 | 198.1 | 108.0 | 32.1 | ||||||||||||||||||
Totalnon-current assets | 875.8 | 931.1 | 1,250.0 | 1,118.4 | 1,328.0 | 395.2 | ||||||||||||||||||
Long-term accounts receivables | 11.3 | — | 6.2 | 0.5 | 42.7 | 12.7 | ||||||||||||||||||
Property, plant and equipment | 539.0 | 534.1 | 651.2 | 606.2 | 592.2 | 176.3 | ||||||||||||||||||
Othernon-current assets | 325.6 | 397.0 | 592.6 | 511.7 | 521.4 | 155.2 | ||||||||||||||||||
Total current liabilities | 1,587.0 | 1,633.6 | 2,500.2 | 2,846.3 | 2,101.5 | 625.4 | ||||||||||||||||||
Short-term borrowings | 120.0 | 195.1 | 629.6 | 653.0 | 582.3 | 173.3 | ||||||||||||||||||
Accounts payables(2) | 1,356.5 | 1,321.5 | 1,799.3 | 2,174.0 | 1,482.1 | 441.1 | ||||||||||||||||||
Totalnon-current liabilities | 260.8 | 385.6 | 445.2 | 629.2 | 471.8 | 140.4 | ||||||||||||||||||
Long-term borrowings | 180.9 | 127.1 | 144.1 | 376.0 | 246.3 | 73.3 |
As of December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||
Total current assets | 1,252.9 | 1,547.4 | 1,854.6 | 663.3 | ||||||||||||
Cash and cash equivalents | 400.5 | 423.3 | 265.8 | 95.1 | ||||||||||||
Accounts receivables | 539.2 | 555.8 | 734.2 | 262.6 | ||||||||||||
Outstanding work in progress | 218.7 | 417.1 | 735.0 | 262.9 | ||||||||||||
Other current assets | 94.6 | 151.2 | 98.1 | 35.1 | ||||||||||||
Total non-current assets | 452.7 | 875.8 | 931.3 | 333.1 | ||||||||||||
Long-term accounts receivables | 2.3 | 11.3 | — | — | ||||||||||||
Property, plant and equipment | 329.6 | 539.0 | 533.8 | 190.9 | ||||||||||||
Other non-current assets | 120.7 | 325.6 | 397.5 | 142.2 | ||||||||||||
Total current liabilities | 1,114.6 | 1,587.0 | 1,633.6 | 584.3 | ||||||||||||
Short-term borrowings | 70.4 | 120.0 | 195.1 | 69.8 | ||||||||||||
Accounts payables(2) | 931.9 | 1,356.5 | 1,321.5 | 472.6 | ||||||||||||
Total non-current liabilities | 155.0 | 260.8 | 382.2 | 136.7 | ||||||||||||
Long-term borrowings | 136.6 | 180.9 | 127.1 | 45.4 | ||||||||||||
Other long-term liabilities | 18.4 | 80.0 | 255.1 | 91.2 | ||||||||||||
Shareholders’ equity | 406.3 | 472.11 | 623.2 | 222.9 | ||||||||||||
Non-controlling interest | 29.8 | 103.3 | 146.8 | 52.5 |
As of December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Other long-term liabilities | 80.0 | 258.5 | 301.1 | 253.3 | 225.5 | 67.1 | ||||||||||||||||||
Shareholders’ equity | 472.11 | 622.9 | 817.8 | 639.2 | 551.7 | 164.2 | ||||||||||||||||||
Non-controlling interest | 103.3 | 147.0 | 163.4 | 160.8 | 113.9 | 33.9 |
2. Infrastructure
8
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Revenues | 524.5 | 681.0 | 884.8 | 1,018.3 | 912.1 | 271.5 | ||||||||||||||||||
Cost of sales | (351.8 | ) | (494.2 | ) | (639.2 | ) | (833.5 | ) | (746.0 | ) | (222.0 | ) | ||||||||||||
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Gross profit | 172.6 | 186.8 | 245.6 | 184.8 | 166.1 | 49.4 | ||||||||||||||||||
Administrative expenses | (30.5 | ) | (31.0 | ) | (40.3 | ) | (39.4 | ) | (41.2 | ) | (12.3 | ) | ||||||||||||
Other income and (expenses), net | (0.8 | ) | (3.1 | ) | (3.2 | ) | 1.5 | 1.1 | 0.3 | |||||||||||||||
Other (losses) gains, net | (1.6 | ) | 0.3 | — | (0.1 | ) | (0.5 | ) | (0.1 | ) | ||||||||||||||
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Operating profit | 139.7 | 153.0 | 201.9 | 146.8 | 125.6 | 37.4 | ||||||||||||||||||
Financial (expense) income, net | (17.3 | ) | (44.6 | ) | (25.5 | ) | (18.7 | ) | (9.8 | ) | (2.9 | ) | ||||||||||||
Share of the profit or loss in associates under the equity method of accounting | — | 1.6 | — | 0.9 | 1.6 | 0.5 | ||||||||||||||||||
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| |||||||||||||
Profit before income tax | 122.3 | 109.9 | 176.5 | 129.1 | 117.4 | 34.9 | ||||||||||||||||||
Income tax | (38.4 | ) | (35.4 | ) | (57.4 | ) | (35.1 | ) | (33.1 | ) | (9.9 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net profit | 84.0 | 74.5 | 119.1 | 94.0 | 84.2 | 25.1 | ||||||||||||||||||
Net profit attributable to controlling interest | 66.7 | 59.9 | 102.2 | 72.7 | 60.1 | 17.9 | ||||||||||||||||||
Net profit attributable tonon-controlling interest | 17.3 | 14.5 | 16.9 | 21.3 | 24.2 | 7.2 |
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenues | 354.7 | 404.2 | 524.5 | 681.0 | 243.6 | |||||||||||||||
Cost of sales | (222.4 | ) | (258.0 | ) | (351.8 | ) | (494.2 | ) | (176.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross profit | 132.3 | 146.2 | 172.6 | 186.8 | 66.8 | |||||||||||||||
Administrative expenses | (19.8 | ) | (25.6 | ) | (30.5 | ) | (31.0 | ) | (11.1 | ) | ||||||||||
Other income and expenses | 2.2 | (0.2 | ) | (0.8 | ) | (3.1 | ) | (1.1 | ) | |||||||||||
Profit from the sale of investments | — | 17.0 | — | — | — | |||||||||||||||
Other (losses) gains, net | (2.8 | ) | (2.1 | ) | (1.6 | ) | 0.3 | 0.1 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating profit | 128.9 | 118.3 | 139.7 | 153.0 | 54.7 | |||||||||||||||
Financial (expense) income, net | (10.7 | ) | (6.0 | ) | (17.3 | ) | (44.6 | ) | (16.0 | ) | ||||||||||
Share of the profit or loss in associates under the equity method of accounting | 0.4 | 0.2 | — | 1.6 | 0.6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Profit before income tax | 118.6 | 112.5 | 122.3 | 109.9 | 39.3 | |||||||||||||||
Income tax | (30.5 | ) | (30.8 | ) | (38.4 | ) | (35.4 | ) | (12.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net profit | 88.1 | 81.8 | 84.0 | 74.5 | 26.6 | |||||||||||||||
Net profit attributable to controlling interest | 73.6 | 68.2 | 66.7 | 59.9 | 21.4 | |||||||||||||||
Net profit attributable to non-controlling interest | 14.5 | 13.6 | 17.3 | 14.5 | 5.2 |
As of December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Total current assets | 319.1 | 376.9 | 426.8 | 497.3 | 677.4 | 198.6 | ||||||||||||||||||
Cash and cash equivalents | 149.7 | 122.3 | 167.3 | 221.8 | 288.0 | 85.7 | ||||||||||||||||||
Accounts receivables | 118.9 | 145.7 | 213.0 | 219.2 | 296.4 | 88.2 | ||||||||||||||||||
Outstanding work in progress | 26.8 | 78.1 | 16.4 | 17.7 | 32.1 | 9.6 | ||||||||||||||||||
Other current assets | 23.8 | 30.8 | 30.0 | 38.6 | 50.9 | 15.1 | ||||||||||||||||||
Totalnon-current assets | 826.8 | 1,082.6 | 1,260.0 | 1,480.2 | 1,751.7 | 521.3 | ||||||||||||||||||
Long-term accounts receivables(3) | 349.3 | 603.9 | 602.3 | 670.7 | 915.1 | 272.4 | ||||||||||||||||||
Property, plant and equipment | 211.3 | 201.5 | 209.5 | 200.6 | 177.9 | 52.9 | ||||||||||||||||||
Othernon-current assets | 266.2 | 277.3 | 412.2 | 526.7 | 611.0 | 181.8 | ||||||||||||||||||
Total current liabilities | 486.0 | 892.9 | 1,034.7 | 354.7 | 327.7 | 97.5 | ||||||||||||||||||
Short-term borrowings | 38.7 | 85.7 | 570.4 | 156.5 | 82.1 | 24.4 | ||||||||||||||||||
Accounts payables | 439.3 | 781.2 | 450.0 | 153.8 | 188.4 | 56.1 | ||||||||||||||||||
Totalnon-current liabilities | 190.5 | 108.1 | 120.3 | 992.1 | 1,397.8 | 416.0 | ||||||||||||||||||
Long-term borrowings | 146.3 | 96.1 | 100.4 | 83.3 | 80.5 | 24.0 | ||||||||||||||||||
Other long-term liabilities | 44.2 | 12.0 | 19.9 | 908.8 | 1,317.3 | 392.1 | ||||||||||||||||||
Shareholders’ equity | 355.5 | 385.5 | 451.8 | 532.0 | 580.7 | 172.8 | ||||||||||||||||||
Non-controlling interest | 113.9 | 73.0 | 80.0 | 98.7 | 112.8 | 33.6 |
As of December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||
Total current assets | 302.4 | 319.1 | 376.9 | 134.8 | ||||||||||||
Cash and cash equivalents | 64.9 | 149.7 | 122.3 | 43.7 | ||||||||||||
Accounts receivables | 117.4 | 118.9 | 145.7 | 52.1 | ||||||||||||
Outstanding work in progress | 105.4 | 26.8 | 78.1 | 27.9 | ||||||||||||
Other current assets | 14.7 | 23.8 | 30.8 | 11.0 | ||||||||||||
Total non-current assets | 466.0 | 826.8 | 1,082.6 | 387.2 | ||||||||||||
Long-term accounts receivables(3) | 41.0 | 349.3 | 603.9 | 216.0 | ||||||||||||
Property, plant and equipment | 192.5 | 211.3 | 201.5 | 72.1 | ||||||||||||
Other non-current assets | 232.4 | 266.2 | 276.2 | 98.8 | ||||||||||||
Total current liabilities | 129.5 | 486.0 | 881.4 | 315.2 | ||||||||||||
Short-term borrowings | 33.4 | 38.7 | 85.7 | 30.7 | ||||||||||||
Accounts payables | 75.7 | 439.3 | 781.2 | 279.4 | ||||||||||||
Total non-current liabilities | 134.2 | 190.5 | 108.1 | 38.7 | ||||||||||||
Long-term borrowings | 127.1 | 146.3 | 96.1 | 34.4 | ||||||||||||
Other long-term liabilities | 7.0 | 44.2 | 12.0 | 4.3 | ||||||||||||
Shareholders’ equity | 402.6 | 355.5 | 397.0 | 142.0 | ||||||||||||
Non-controlling interest | 102.1 | 113.9 | 73.0 | 26.1 |
3. Real Estate |
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenues | 218.6 | 152.3 | 240.1 | 313.7 | 112.2 | |||||||||||||||
Cost of sales | (185.3 | ) | (106.9 | ) | (153.4 | ) | (200.0 | ) | (71.5 | ) | ||||||||||
|
|
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|
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|
|
|
|
| |||||||||||
Gross profit | 33.3 | 45.3 | 86.7 | 113.7 | 40.6 | |||||||||||||||
Administrative expenses | (6.8 | ) | (10.1 | ) | (17.4 | ) | (21.0 | ) | (7.5 | ) | ||||||||||
Other income and expenses | 0.2 | (0.4 | ) | (1.7 | ) | (0.7 | ) | (0.3 | ) | |||||||||||
Other (losses) gains, net | — | — | — | (1.0 | ) | (0.4 | ) | |||||||||||||
Profit from the sale of investments | — | — | — | 3.2 | 1.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating profit | 26.7 | 34.9 | 67.6 | 94.2 | 33.7 | |||||||||||||||
Financial (expense) income, net | (0.1 | ) | (0.5 | ) | (2.3 | ) | (13.8 | ) | (4.9 | ) | ||||||||||
Share of the profit or loss in associates under the equity method of accounting | — | — | — | 0.1 | 0.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Profit before income tax | 26.6 | 34.4 | 65.3 | 80.5 | 28.8 | |||||||||||||||
Income tax | (8.7 | ) | (10.2 | ) | (20.0 | ) | (21.4 | ) | (7.7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net profit | 17.9 | 24.1 | 45.3 | 59.0 | 21.1 | |||||||||||||||
Net profit attributable to controlling interest(4) | 8.5 | 6.1 | 12.4 | 19.2 | 6.9 | |||||||||||||||
Net profit attributable to non-controlling interest(4) | 9.4 | 18.1 | 32.9 | 39.9 | 14.3 |
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Revenues | 240.1 | 313.7 | 224.6 | 215.8 | 411.5 | 122.5 | ||||||||||||||||||
Cost of sales | (153.4 | ) | (200.0 | ) | (162.1 | ) | (164.0 | ) | (275.0 | ) | (81.8 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Gross profit | 86.7 | 113.7 | 62.4 | 51.8 | 136.5 | 40.6 | ||||||||||||||||||
Administrative expenses | (17.4 | ) | (21.0 | ) | (21.1 | ) | (20.5 | ) | (28.4 | ) | (8.5 | ) | ||||||||||||
Other income and expenses, net | (1.7 | ) | (0.7 | ) | (0.8 | ) | 1.8 | 0.8 | 0.2 | |||||||||||||||
Other (losses) gains, net | — | (1.0 | ) | — | — | — | — | |||||||||||||||||
Profit from the sale of investments | — | 3.2 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating profit | 67.6 | 94.2 | 40.5 | 33.0 | 108.9 | 32.4 | ||||||||||||||||||
Financial (expense) income, net | (2.3 | ) | (13.8 | ) | (14.7 | ) | (10.9 | ) | (11.6 | ) | (3.5 | ) | ||||||||||||
Share of the profit or loss in associates under the equity method of accounting | — | 0.1 | 12.2 | 14.9 | 6.8 | 2.0 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
| |||||||||||||
Profit before income tax | 65.3 | 80.5 | 38.0 | 37.0 | 104.2 | 31.0 | ||||||||||||||||||
Income tax | (20.0 | ) | (21.4 | ) | (11.5 | ) | (7.6 | ) | (27.1 | ) | (8.1 | ) | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Net profit | 45.3 | 59.0 | 26.5 | 29.3 | 77.2 | 23.0 | ||||||||||||||||||
Net profit attributable to controlling interest(4) | 12.4 | 19.2 | 9.5 | 12.4 | 22.1 | 6.6 | ||||||||||||||||||
Net profit (loss) attributable tonon-controlling interest(4) | 32.9 | 39.9 | 17.0 | 17.0 | 55.1 | 16.4 | ||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Total current assets | 636.0 | 672.6 | 760.8 | 1,109.3 | 1,117.1 | 332.5 | ||||||||||||||||||
Cash and cash equivalents | 73.0 | 43.0 | 54.3 | 74.5 | 58.9 | 17.5 | ||||||||||||||||||
Accounts receivables | 37.7 | 36.4 | 75.6 | 114.4 | 111.2 | 33.1 | ||||||||||||||||||
Other current assets(5) | 525.3 | 593.2 | 631.0 | 920.4 | 947.0 | 281.8 | ||||||||||||||||||
Totalnon-current assets | 71.4 | 76.5 | 117.4 | 91.7 | 113.6 | 33.8 | ||||||||||||||||||
Long-term accounts receivables | 6.8 | 11.8 | 9.7 | 14.7 | 17.9 | 5.3 | ||||||||||||||||||
Property, plant and equipment | 4.5 | 5.6 | 7.3 | 11.3 | 13.0 | 3.9 | ||||||||||||||||||
Investment property | 36.0 | 36.9 | 36.2 | 34.7 | 49.4 | 14.7 | ||||||||||||||||||
Othernon-current assets | 24.2 | 22.1 | 64.1 | 30.9 | 33.3 | 9.9 | ||||||||||||||||||
Total current liabilities | 263.6 | 217.6 | 266.6 | 555.1 | 515.8 | 153.5 | ||||||||||||||||||
Short-term borrowings | 43.2 | 77.9 | 144.3 | 224.4 | 206.5 | 61.5 | ||||||||||||||||||
Accounts payables | 211.8 | 136.6 | 121.1 | 330.7 | 291.2 | 86.7 | ||||||||||||||||||
Totalnon-current liabilities | 62.6 | 97.8 | 138.9 | 159.6 | 104.2 | 31.0 | ||||||||||||||||||
Long-term borrowings | 49.7 | 52.3 | 16.4 | 27.6 | 16.5 | 4.9 | ||||||||||||||||||
Other long-term liabilities | 12.9 | 45.4 | 122.5 | 132.0 | 87.6 | 26.1 | ||||||||||||||||||
Shareholders’ equity | 147.1 | 152.7 | 157.3 | 158.6 | 234.4 | 69.8 | ||||||||||||||||||
Non-controlling interest(4) | 234.2 | 281.0 | 315.4 | 327.6 | 376.3 | 112.0 |
94. Technical Services
As of December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||
Total current assets | 450.7 | 636.0 | 672.6 | 240.6 | ||||||||||||
Cash and cash equivalents | 49.3 | 73.0 | 43.0 | 15.4 | ||||||||||||
Accounts receivables | 19.5 | 37.7 | 36.4 | 13.0 | ||||||||||||
Other current assets(5) | 381.9 | 525.3 | 593.2 | 212.1 | ||||||||||||
Total non-current assets | 46.1 | 71.4 | 76.5 | 27.4 | ||||||||||||
Long-term accounts receivables | 0.0 | 6.8 | 17.4 | 4.2 | ||||||||||||
Property, plant and equipment | 5.0 | 4.5 | 5.6 | 2.0 | ||||||||||||
Investment property | 36.5 | 36.0 | 36.9 | 13.2 | ||||||||||||
Other non-current assets | 4.5 | 24.2 | 22.1 | 7.9 | ||||||||||||
Total current liabilities | 197.5 | 263.6 | 217.6 | 77.8 | ||||||||||||
Short-term borrowings | 41.6 | 43.2 | 77.9 | 27.8 | ||||||||||||
Accounts payables | 146.7 | 211.8 | 136.6 | 48.9 | ||||||||||||
Total non-current liabilities | 96.4 | 62.6 | 97.8 | 35.0 | ||||||||||||
Long-term borrowings | 16.5 | 49.7 | 52.3 | 18.7 | ||||||||||||
Other long-term liabilities | 79.8 | 12.9 | 45.4 | 16.3 | ||||||||||||
Shareholders’ equity | 50.1 | 147.1 | 152.7 | 54.6 | ||||||||||||
Non-controlling interest(4) | 152.8 | 234.2 | 281.0 | 100.5 |
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Revenues | 1,083.3 | 1,169.1 | 1,208.2 | 1,152.5 | 1,401.8 | 417.2 | ||||||||||||||||||
Cost of sales | (979.4 | ) | (989.9 | ) | (1,065.8 | ) | (974.2 | ) | (1,229.9 | ) | (366.0 | ) | ||||||||||||
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|
|
|
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|
|
|
|
|
|
| |||||||||||||
Gross profit | 103.9 | 179.2 | 142.3 | 178.3 | 171.8 | 51.1 | ||||||||||||||||||
Administrative expenses | (105.4 | ) | (132.5 | ) | (122.5 | ) | (115.0 | ) | (119.0 | ) | (35.4 | ) | ||||||||||||
Other income and expenses, net | 73.6 | 24.7 | 5.9 | 15.2 | 4.5 | 1.3 | ||||||||||||||||||
Gain from business combination | — | — | — | 0.2 | — | — | ||||||||||||||||||
Other (losses) gains, net | — | — | (2.1 | ) | — | (0.2 | ) | (0.1 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating profit | 72.2 | 71.4 | 25.7 | 70.3 | 57.1 | 17.0 | ||||||||||||||||||
Financial (expense) income, net | (5.1 | ) | (15.9 | ) | (25.6 | ) | (30.1 | ) | (26.8 | ) | (8.0 | ) | ||||||||||||
Share of the profit or loss in associates under the equity method of accounting | — | 1.1 | 0.6 | 0.6 | 0.4 | 0.1 | ||||||||||||||||||
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|
|
|
|
|
| |||||||||||||
Profit before income tax | 67.1 | 56.6 | 0.7 | 40.8 | 30.7 | 9.1 | ||||||||||||||||||
Income tax | (5.6 | ) | (16.7 | ) | (5.8 | ) | 6.1 | (15.8 | ) | (4.7 | ) |
Net profit (loss) Net profit (loss) attributable to controlling interest Net profit (loss) attributable tonon-controlling interest Year ended December 31, 2012 2013 2014 2015
(Restated) 2016 2016 (in millions of S/.) (in millions of
US$)(1) 61.5 39.9 (5.1 ) 46.9 14.8 4.4 50.6 34.3 (5.3 ) 40.3 15.9 4.7 10.8 5.6 0.3 6.6 (1.1 ) (0.3 )
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenues | 285.0 | 977.0 | 1,083.3 | 1,169.1 | 418.1 | |||||||||||||||
Cost of sales | (223.9 | ) | (867.3 | ) | (979.4 | ) | (989.9 | ) | (354.1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross profit | 61.0 | 109.7 | 103.9 | 179.2 | 64.1 | |||||||||||||||
Administrative expenses | (23.0 | ) | (72.1 | ) | (105.4 | ) | (132.5 | ) | (47.4 | ) | ||||||||||
Other income and expenses | (0.1 | ) | 6.2 | 73.6 | 24.7 | 8.8 | ||||||||||||||
Gain from business combination | — | 45.2 | — | — | — | |||||||||||||||
Other (losses) gains, net | — | 0.4 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating profit | 37.9 | 89.4 | 72.2 | 71.4 | 25.5 | |||||||||||||||
Financial (expense) income, net | (1.8 | ) | (8.5 | ) | (5.1 | ) | (15.9 | ) | (5.7 | ) | ||||||||||
Share of the profit or loss in associates under the equity method of accounting | — | — | — | 1.1 | 0.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Profit before income tax | 36.1 | 80.9 | 67.1 | 56.6 | 20.2 | |||||||||||||||
Income tax | (11.3 | ) | (19.8 | ) | (5.6 | ) | (16.7 | ) | (6.0 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net profit | 24.7 | 61.1 | 61.5 | 39.9 | 14.3 | |||||||||||||||
Net profit attributable to controlling interest | 23.9 | 53.9 | 50.6 | 34.3 | 12.3 | |||||||||||||||
Net profit attributable to non-controlling interest | 0.8 | 7.2 | 10.8 | 5.6 | 2.0 |
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 (Restated) | 2016 | 2016 | |||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(1) | (in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||||||||||
Total current assets | 513.0 | 495.5 | 585.2 | 209.3 | 495.5 | 585.2 | 616.6 | 532.0 | 730.7 | 217.5 | ||||||||||||||||||||||||||||||
Cash and cash equivalents | 73.4 | 85.3 | 46.5 | 16.6 | 85.3 | 46.5 | 134.7 | 60.2 | 53.5 | 15.9 | ||||||||||||||||||||||||||||||
Accounts receivables | 276.7 | 259.6 | 312.0 | 111.6 | 259.6 | 312.0 | 421.2 | 398.7 | 591.9 | 176.2 | ||||||||||||||||||||||||||||||
Outstanding work in progress | 69.8 | 81.4 | 158.7 | 56.8 | 81.4 | 158.7 | — | — | — | — | ||||||||||||||||||||||||||||||
Other current assets | 93.2 | 69.2 | 68.0 | 24.3 | 69.2 | 68.0 | 60.7 | 73.1 | 85.3 | 25.4 | ||||||||||||||||||||||||||||||
Total non-current assets | 183.7 | 192.2 | 197.8 | 70.8 | 192.2 | 197.8 | 252.4 | 257.8 | 411.2 | 122.4 | ||||||||||||||||||||||||||||||
Long-term accounts receivables | 30.1 | 24.3 | 12.3 | 4.4 | 24.3 | 12.3 | 4.9 | 0.5 | 39.6 | 11.8 | ||||||||||||||||||||||||||||||
Property, plant and equipment | 96.8 | 109.3 | 114.1 | 40.8 | 109.3 | 114.1 | 166.3 | 170.7 | 217.7 | 64.8 | ||||||||||||||||||||||||||||||
Other non-current assets | 56.8 | 58.7 | 71.5 | 25.6 | 58.7 | 71.5 | 80.3 | 86.6 | 153.9 | 45.8 | ||||||||||||||||||||||||||||||
Total current liabilities | 412.4 | 489.4 | 475.0 | 169.9 | 489.4 | 475.0 | 434.7 | 411.7 | 679.7 | 202.3 | ||||||||||||||||||||||||||||||
Short-term borrowings | 85.0 | 96.0 | 126.9 | 45.4 | 96.0 | 126.9 | 80.5 | 91.4 | 158.2 | 47.1 | ||||||||||||||||||||||||||||||
Accounts payables | 275.5 | 354.2 | 316.8 | 113.2 | 354.2 | 339.6 | 339.9 | 299.5 | 511.3 | 152.2 | ||||||||||||||||||||||||||||||
Total non-current liabilities | 168.5 | 74.4 | 160.1 | 57.3 | 74.4 | 160.1 | 216.1 | 180.0 | 213.5 | 63.5 | ||||||||||||||||||||||||||||||
Long-term borrowings | 14.6 | 12.4 | 31.4 | 11.2 | 12.4 | 31.4 | 63.1 | 66.5 | 76.1 | 22.6 | ||||||||||||||||||||||||||||||
Other long-term liabilities | 153.9 | 61.9 | 128.7 | 46.0 | 61.9 | 128.7 | 153.0 | 113.5 | 137.4 | 40.9 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 91.7 | 103.0 | 125.7 | 45.0 | 103.0 | 125.7 | 128.4 | 162.6 | 210.5 | 62.6 | ||||||||||||||||||||||||||||||
Non-controlling interest | 24.1 | 20.9 | 22.2 | 8.0 | 20.9 | 22.2 | 89.8 | 35.5 | 38.2 | 11.4 |
(1) | Calculated based on an exchange rate of S/ |
10
(2) | Includes advance payments, which reflects advance payments made by our clients in connection with our E&C and Operation and Maintenance of Infrastructure Assets contracts. See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Results of Operations—General—Engineering and Construction” and “—Technical Services” and note |
(3) | Includes |
(4) | The net profit attributable to controlling interests of our Real Estate segment is significantly affected by the financing and commercial arrangements we use to purchase land and to develop real estate projects. Depending on the level ofnon-controlling interests used to finance our real estate projects, our Real Estate segment tends to have significant net profit attributable tonon-controlling interests. See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Results of Operations—General—Real Estate.” |
(5) | Includes inventories, which includes investments for the purchase of land by our Real Estate segment. These investments in land are recorded at book value and are notmarked-to-market for changes in fair value. See note 14 to our audited annual consolidated financial statements included in this annual report. |
Non-GAAP Financial Measure and Reconciliation
In this annual report, we present Adjusted EBITDA, anon-GAAP financial measure. Anon-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows but excludes or includes amounts that would not be so adjusted in the most comparable IFRS measure. We define Adjusted EBITDA as net profit plus: financial (expense) income, net; income tax; and depreciation and amortization; and certain other adjustments described below.
Our Adjusted EBITDA includes the following other adjustments: (i) in our Infrastructure segment, in Mass Transit, we add back to net profit the components of our tariff for the Lima Metro that relate to the Peruvian government’s repayment of the amounts we invest to purchase trains and other infrastructure, since we do not amortize these investments, and the interest we charge the Peruvian government in connection with the amounts we invest for such purposes. For a description of the components of our tariff for the Lima Metro, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Factors Affecting our Results of Operations—Infrastructure;” and (ii) in our Real Estate segment, we add back to net profit the portion of our costs of sales related to our cost to purchase land, as we recognize land purchases as inventory and, accordingly, do not mark-to-market or depreciate the value of our land.amortization.
We present AdjustedEBITDA, anon-GAAP financial measure. Anon-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows but excludes or includes amounts that would not be so adjusted in the most comparable IFRS measure. We present EBITDA because we believe it provides readers with a supplemental measure of the financial performance of our core operations that facilitatesperiod-to-period comparisons on a consistent basis. Furthermore, we regularly present EBITDA in our filings with the Lima Stock Exchange in Peru. Our management uses Adjusted EBITDA, among other measures, for internal planning and performance measurement purposes. AdjustedWe believe that EBITDA is useful in evaluating our operating performance compared to that of other companies operating in our sectors because the calculation of EBITDA and
EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. EBITDA should not be construed as an alternative to net profit or operating profit, as an indicator of operating performance, as an alternative to cash flow provided by operating activities or as a measure of liquidity (in each case, as determined in accordance with IFRS). Adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies. The following table sets forth the reconciliation of our net profit to Adjusted EBITDA on a consolidated basis.
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016(1) | 2016(1) | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Net profit (loss)(3) | 366.3 | 412.1 | 361.2 | 55.6 | (451.6 | ) | (134.4 | ) | ||||||||||||||||
Financial expense | 310.7 | 569.6 | 460.1 | 604.0 | 993.4 | 295.7 | ||||||||||||||||||
Financial income | (300.4 | ) | (455.9 | ) | (368.8 | ) | (465.3 | ) | (782.6 | ) | (232.9 | ) | ||||||||||||
Income tax | 154.6 | 182.3 | 146.2 | 99.0 | (111.8 | ) | (33.3 | ) | ||||||||||||||||
Depreciation and amortization | 244.5 | 259.1 | 260.0 | 306.4 | 288.3 | 85.8 | ||||||||||||||||||
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EBITDA | 775.6 | 967.2 | 858.8 | 599.7 | (64.4 | ) | (19.2 | ) |
The following table is the reconciliation of the EBITDA for our four segments, Parent company operations and elimination:
11
Year ended December 31, | ||||||||||||||||||||
2010 | 2011(1) | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||
Net profit | 276.7 | 336.2 | 366.3 | 412.6 | 147.6 | |||||||||||||||
Financial expense (income), net | 10.0 | 6.2 | 10.3 | 113.6 | 40.6 | |||||||||||||||
Income tax | 124.3 | 141.4 | 154.6 | 182.4 | 65.3 | |||||||||||||||
Depreciation and amortization | 142.9 | 178.2 | 244.5 | 259.1 | 92.7 | |||||||||||||||
Other adjustments (described above) | 18.9 | 12.3 | 25.2 | 62.9 | 22.5 | |||||||||||||||
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Adjusted EBITDA | 572.8 | 674.3 | 800.9 | 1,030.7 | 368.6 |
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016(1) | 2016(1) | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Engineering and construction | 387.9 | 546.0 | 459.5 | 220.1 | 106.1 | 31.6 | ||||||||||||||||||
Infrastructure | 207.5 | 218.8 | 272.5 | 233.0 | 210.8 | 62.7 | ||||||||||||||||||
Real state | 70.5 | 97.9 | 56.5 | 52.8 | 121.4 | 36.1 | ||||||||||||||||||
Technical services | 111.6 | 109.6 | 63.5 | 113.3 | 117.5 | 35.0 | ||||||||||||||||||
Parent company operations | 258.8 | 307.9 | 252.3 | (35.6 | ) | (1,026.4 | ) | (305.5 | ) | |||||||||||||||
Eliminations intercompany | (260.6 | ) | (312.0 | ) | (245.4 | ) | 16.2 | 406.2 | 120.9 | |||||||||||||||
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EBITDA(5) | 775.6 | 967.2 | 858.8 | 599.7 | (64.4 | ) | (19.2 | ) |
The following tables set forth the reconciliation of our net profit to Adjusted EBITDA for each of our business segments and certain of our lines of business or subsidiaries within these segments. The effects of the termination of the GSP gas pipeline concession are reflected in Corporate (the Parent Company Operations) and, with respect to the related construction consortium (Consorcio Constructor Ductos del Sur), in our E&C segment. For more information, see note 7 to our audited annual consolidated financial statements.
1. Engineering & Construction
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016(1) | 2016(1) | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Net profit (loss)(3) | 188.5 | 256.5 | 193.6 | (121.8 | ) | (93.4 | ) | (27.8 | ) | |||||||||||||||
Financial expense | 179.1 | 318.4 | 256.9 | 433.3 | 560.1 | 166.7 | ||||||||||||||||||
Financial income | (198.8 | ) | (291.8 | ) | (194.5 | ) | (314.8 | ) | (506.2 | ) | (150.7 | ) | ||||||||||||
Income tax | 87.9 | 111.2 | 59.3 | 55.4 | 12.8 | 3.8 | ||||||||||||||||||
Depreciation and amortization | 131.1 | 151.2 | 144.2 | 168.1 | 132.8 | 39.5 | ||||||||||||||||||
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EBITDA(4) | 387.9 | 546.0 | 459.5 | 220.1 | 106.1 | 31.6 |
2. Infrastructure
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||
Net profit | 111.2 | 166.4 | 188.5 | 256.9 | 91.9 | |||||||||||||||
Financial expense (income), net | (2.7 | ) | (5.3 | ) | (19.7 | ) | 26.6 | 9.5 | ||||||||||||
Income tax | 49.0 | 71.5 | 87.9 | 111.3 | 39.8 | |||||||||||||||
Depreciation and amortization | 60.8 | 82.4 | 131.1 | 151.2 | 54.1 | |||||||||||||||
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Adjusted EBITDA (3) | 218.3 | 315.0 | 387.9 | 546.0 | 195.3 |
2.1 Full Segment
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | ||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | (in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||||||||||||||||||||
Net profit | 88.1 | 81.8 | 84.0 | 74.4 | 26.6 | 84.0 | 74.5 | 119.1 | 94.0 | 84.2 | 25.1 | |||||||||||||||||||||||||||||||||
Financial expense (income), net | 10.7 | 6.0 | 17.3 | 44.7 | 16.0 | |||||||||||||||||||||||||||||||||||||||
Financial expense | 76.1 | 97.5 | 89.5 | 69.1 | 97.2 | 28.9 | ||||||||||||||||||||||||||||||||||||||
Financial income | (58.8 | ) | (52.6 | ) | (64.0 | ) | (50.4 | ) | (87.4 | ) | (26.0 | ) | ||||||||||||||||||||||||||||||||
Income tax | 30.5 | 30.8 | 38.4 | 4.5 | 12.7 | 38.4 | 35.4 | 57.4 | 35.1 | 33.1 | 9.9 | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 61.8 | 57.6 | 67.9 | 64.0 | 22.9 | 67.9 | 64.0 | 70.5 | 85.2 | 83.6 | 24.9 | |||||||||||||||||||||||||||||||||
Other adjustments (described above) | — | — | 4.8 | 25.6 | 9.2 | |||||||||||||||||||||||||||||||||||||||
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Adjusted EBITDA | 191.1 | 176.1 | 212.3 | 244.3 | 87.4 | |||||||||||||||||||||||||||||||||||||||
EBITDA | 207.5 | 218.8 | 272.5 | 233.0 | 210.7 | 62.7 |
2.22.2(a) All Toll Roads
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | ||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | (in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||||||||||||||||||||
Net profit | 25.5 | 21.4 | 29.4 | 40.5 | 14.5 | 29.4 | 40.5 | 43.0 | 53.5 | 44.9 | 13.4 | |||||||||||||||||||||||||||||||||
Financial expense (income), net | 9.8 | 5.9 | 5.2 | 4.4 | 1.6 | |||||||||||||||||||||||||||||||||||||||
Financial expense | 16.5 | 22.4 | 19.0 | 10.8 | 14.9 | 4.4 | ||||||||||||||||||||||||||||||||||||||
Financial income | (11.4 | ) | (18.0 | ) | (9.5 | ) | (14.8 | ) | (9.6 | ) | (2.9 | ) | ||||||||||||||||||||||||||||||||
Income tax | 8.7 | 5.8 | 12.5 | 15.0 | 5.4 | 12.5 | 15.0 | 16.2 | 18.8 | 15.5 | 4.6 | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 27.9 | 21.3 | 24.5 | 10.0 | 3.8 | 24.5 | 10.0 | 11.4 | 10.9 | 11.1 | 3.3 | |||||||||||||||||||||||||||||||||
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Adjusted EBITDA | 72.0 | 54.5 | 71.5 | 69.9 | 25.0 | |||||||||||||||||||||||||||||||||||||||
EBITDA | 71.5 | 69.8 | 80.1 | 79.2 | 76.8 | 22.9 |
2.2(a)2.2(b) Norvial
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||
Net profit | 19.4 | 26.4 | 27.2 | 30.2 | 10.8 | |||||||||||||||
Financial expenses (income), net | 6.2 | 4.8 | 3.8 | 9.5 | 3.4 | |||||||||||||||
Income tax | 6.1 | 7.8 | 11.6 | 10.3 | 3.7 | |||||||||||||||
Depreciation and amortization | 27.7 | 21.1 | 24.2 | 9.8 | 3,5 | |||||||||||||||
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Adjusted EBITDA | 59.4 | 60.1 | 66.7 | 59.6 | 21.3 |
12
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Net profit | 27.2 | 30.2 | 31.1 | 40.9 | 47.3 | 14.1 | ||||||||||||||||||
Financial expense | 10.2 | 13.3 | 9.7 | 4.1 | 4.9 | 1.5 | ||||||||||||||||||
Financial income | (6.4 | ) | (3.8 | ) | (0.4 | ) | (0.4 | ) | (1.6 | ) | (0.5 | ) | ||||||||||||
Income tax | 11.6 | 10.3 | 10.9 | 13.6 | 16.3 | 4.9 | ||||||||||||||||||
Depreciation and amortization | 24.2 | 9.8 | 11.0 | 10.8 | 10.9 | 3.2 | ||||||||||||||||||
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EBITDA | 66.7 | 59.6 | 62.3 | 68.9 | 77.7 | 23.1 |
2.3 Mass Transit
Year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||
Net profit(4) | (8.5 | ) | (11.0 | ) | (13.1 | ) | (4.7 | ) | ||||||||
Financial expense (income), net | (1.9 | ) | 4.0 | 26.0 | 9.3 | |||||||||||
Income tax | (4.7 | ) | (3.6 | ) | (0.6 | ) | (0.2 | ) | ||||||||
Depreciation and amortization | 0.1 | 0.5 | 0.6 | 0.2 | ||||||||||||
Other adjustments (described above) | — | — | 25.6 | 9.2 | ||||||||||||
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Adjusted EBITDA | (15.0 | ) | (10.2 | ) | 38.6 | 13.8 |
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Net profit (loss)(5) | (11.0 | ) | (13.1 | ) | 12.1 | 18.8 | 23.9 | 7.1 | ||||||||||||||||
Financial expense | 28.0 | 46.5 | 39.8 | 7.9 | 20.5 | 6.1 | ||||||||||||||||||
Financial income | (24.0 | ) | (20.3 | ) | (35.3 | ) | (4.9 | ) | (25.8 | ) | (7.7 | ) | ||||||||||||
Income tax | 3.6 | 0.5 | 10.8 | 8.1 | 10.9 | 3.2 | ||||||||||||||||||
Depreciation and amortization | 0.5 | 0.6 | 0.9 | 0.1 | 0.1 | 0.0 | ||||||||||||||||||
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EBITDA | (10.2 | ) | 13.2 | 28.3 | 30.0 | 29.6 | 8.8 |
2.4 Energy
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | ||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | (in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||||||||||||||||||||
Net profit | 62.6 | 69.1 | 63.4 | 45.0 | 16.1 | 63.4 | 45.0 | 62.7 | 20.2 | 12.0 | 3.6 | |||||||||||||||||||||||||||||||||
Financial expense (income), net | 0.9 | 1.9 | 1.8 | 14.3 | 5.1 | |||||||||||||||||||||||||||||||||||||||
Financial expense | 25.0 | 28.5 | 30.6 | 50.3 | 61.7 | 18.4 | ||||||||||||||||||||||||||||||||||||||
Financial income | (23.3 | ) | (14.3 | ) | (19.2 | ) | (30.5 | ) | (52.0 | ) | (15.5 | ) | ||||||||||||||||||||||||||||||||
Income tax | 21.8 | 29.7 | 28.5 | 20.1 | 7.2 | 28.5 | 20.1 | 29.8 | 7.7 | 5.3 | 1.6 | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 33.9 | 36.1 | 42.8 | 53.4 | 19.1 | 42.8 | 53.4 | 58.1 | 74.2 | 72.5 | 21.6 | |||||||||||||||||||||||||||||||||
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Adjusted EBITDA | 119.1 | 136.8 | 136.4 | 132.8 | 47.5 | |||||||||||||||||||||||||||||||||||||||
EBITDA | 136.4 | 132.8 | 162.0 | 121.8 | 99.5 | 29.6 |
3. Real Estate
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Net profit | 45.3 | 59.0 | 26.5 | 29.3 | 77.2 | 23.0 | ||||||||||||||||||
Financial expense | 14.5 | 27.0 | 30.4 | 47.7 | 65.1 | 19.4 | ||||||||||||||||||
Financial income | (12.2 | ) | (13.2 | ) | (15.6 | ) | (36.8 | ) | (53.5 | ) | (15.9 | ) | ||||||||||||
Income tax | 20.0 | 21.4 | 11.5 | 7.6 | 27.1 | 8.1 | ||||||||||||||||||
Depreciation and amortization | 2.9 | 3.6 | 3.8 | 4.9 | 5.6 | 1.7 | ||||||||||||||||||
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EBITDA | 70.5 | 97.9 | 56.5 | 52.8 | 121.4 | 36.1 |
4. Technical Services
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||
Net profit | 17.9 | 24.1 | 45.3 | 59.0 | 21.1 | |||||||||||||||
Financial expense (income), net | 0.1 | 0.5 | 2.3 | 13.8 | 4.9 | |||||||||||||||
Income tax | 8.7 | 10.2 | 20.0 | 21.4 | 7.7 | |||||||||||||||
Depreciation and amortization | 0.7 | 2.6 | 2.9 | 3.6 | 1.3 | |||||||||||||||
Other adjustments (described above) | 18.9 | 12.3 | 20.4 | 37.3 | 13.3 | |||||||||||||||
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Adjusted EBITDA | 46.4 | 49.8 | 90.9 | 135.2 | 48.3 |
4.1 Full Segment
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||||||||||||||||||||||
Net profit (loss) | 61.5 | 39.9 | (5.1 | ) | 46.9 | 14.8 | 4.4 | |||||||||||||||||||||||||||||||||||||
Financial expense | 29.1 | 35.2 | 39.9 | 45.7 | 57.6 | 17.1 | ||||||||||||||||||||||||||||||||||||||
Financial income | (24.0 | ) | (19.4 | ) | (14.3 | ) | (15.6 | ) | (30.9 | ) | (9.2 | ) | ||||||||||||||||||||||||||||||||
Income tax | 5.6 | 16.7 | 5.8 | (6.1 | ) | 15.8 | 4.7 | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 39.4 | 37.2 | 37.2 | 42.3 | 60.1 | 17.9 | ||||||||||||||||||||||||||||||||||||||
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EBITDA | 111.6 | 109.6 | 63.5 | 113.3 | 117.5 | 35.0 | ||||||||||||||||||||||||||||||||||||||
4.2 Concar(6) | ||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||||||||||||||||||||||
Net profit (loss) | 12.6 | 7.9 | (26.5 | ) | 18.5 | 14.0 | 4.2 | |||||||||||||||||||||||||||||||||||||
Financial expense | 3.4 | 6.2 | 12.0 | 9.1 | 4.5 | 1.3 | ||||||||||||||||||||||||||||||||||||||
Financial income | (4.1 | ) | (6.3 | ) | (7.2 | ) | (5.0 | ) | (4.6 | ) | (1.4 | ) | ||||||||||||||||||||||||||||||||
Income tax | 6.2 | 4.6 | (0.8 | ) | 11.4 | 6.7 | 2.0 | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 5.1 | 5.6 | 7.1 | 5.3 | 6.4 | 1.9 | ||||||||||||||||||||||||||||||||||||||
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EBITDA | 23.2 | 18.0 | (15.3 | ) | 39.3 | 27.0 | 8.0 | |||||||||||||||||||||||||||||||||||||
4.3 GMD | ||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
2010 | 2011(1) | 2012 | 2013 | 2013 | 2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | ||||||||||||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | (in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||||||||||||||||||||
Net profit | 24.7 | 61.1 | 61.5 | 39.9 | 14.3 | 11.3 | 8.5 | 6.0 | 5.2 | 7.9 | 2.4 | |||||||||||||||||||||||||||||||||
Financial expense (income), net | 1.8 | 8.5 | 5.1 | 15.9 | 5.7 | |||||||||||||||||||||||||||||||||||||||
Financial expense | 5.5 | 12.8 | 8.2 | 13.8 | 16.4 | 4.9 | ||||||||||||||||||||||||||||||||||||||
Financial income | (3.6 | ) | (7.8 | ) | (3.7 | ) | (5.5 | ) | (6.6 | ) | (2.0 | ) | ||||||||||||||||||||||||||||||||
Income tax | 11.3 | 19.8 | 5.6 | 16.7 | 6.0 | 5.3 | 5.8 | 5.3 | 3.1 | 7.5 | 2.2 | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 15.9 | 32.2 | 39.4 | 37.2 | 13.3 | 15.9 | 15.4 | 18.6 | 22.4 | 25.7 | 7.6 | |||||||||||||||||||||||||||||||||
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Adjusted EBITDA | 53.8 | 121.6 | 111.6 | 109.6 | 39.2 | |||||||||||||||||||||||||||||||||||||||
EBITDA | 34.5 | 34.8 | 34.4 | 38.9 | 50.8 | 15.1 |
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4.2 Concar
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||
Net profit | 17.5 | 34.9 | 12.6 | 7.9 | 2.8 | |||||||||||||||
Financial expense (income), net | (0.2 | ) | (0.5 | ) | (0.6 | ) | (0.1 | ) | (0.0 | ) | ||||||||||
Income tax | 8.0 | 15.2 | 6.2 | 4.6 | 1.6 | |||||||||||||||
Depreciation and amortization | 5.1 | 4.0 | 5.1 | 5.6 | 2.0 | |||||||||||||||
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Adjusted EBITDA | 30.4 | 53.6 | 23.2 | 18.0 | 6.4 |
4.3 GMD
Year ended December 31, | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2013 | ||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||
Net profit | 7.2 | 9.1 | 11.3 | 8.5 | 3.1 | |||||||||||||||
Financial expense (income), net | 2.1 | 0.5 | 1.9 | 5.0 | 1.8 | |||||||||||||||
Income tax | 3.3 | 4.8 | 5.3 | 5.8 | 2.1 | |||||||||||||||
Depreciation and amortization | 10.8 | 17.2 | 15.9 | 15.4 | 5.5 | |||||||||||||||
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Adjusted EBITDA | 23.4 | 31.6 | 34.5 | 34.8 | 12.4 |
4.4 CAM
Year ended December 31, | ||||||||||||||||
2011(1) | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||
Net profit | 17.1 | 37.5 | 23.5 | 8.4 | ||||||||||||
Financial expense (income), net | 8.5 | 3.8 | 11.0 | 3.9 | ||||||||||||
Income tax | (0.2 | ) | (5.9 | ) | 6.2 | 2.2 | ||||||||||
Depreciation and amortization | 10.9 | 18.5 | 16.3 | 5.8 | ||||||||||||
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Adjusted EBITDA | 36.4 | 53.9 | 56.9 | 20.4 |
Year ended December 31, | ||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||||||||||
Net profit (loss) | 37.5 | 23.5 | 15.5 | 23.3 | (3.0 | ) | (0.9 | ) | ||||||||||||||||
Financial expense | 20.1 | 16.2 | 19.6 | 22.8 | 28.2 | 8.4 | ||||||||||||||||||
Financial income | (16.3 | ) | (5.3 | ) | (3.4 | ) | (5.1 | ) | (16.2 | ) | (4.8 | ) | ||||||||||||
Income tax | (5.9 | ) | 6.2 | 1.2 | (20.6 | ) | 3.5 | 1.0 | ||||||||||||||||
Depreciation and amortization | 18.5 | 16.3 | 11.5 | 14.7 | 19.5 | 5.8 | ||||||||||||||||||
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EBITDA | 53.9 | 56.9 | 44.4 | 35.1 | 31.9 | 9.5 |
(1) | For the effects on our results of operations for 2016 resulting from the termination of the GSP gas pipeline concession, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.” |
(2) | Calculated based on an exchange rate of S/3.36 to US$1.00 as of December 31, 2016. |
(3) | Includes the results of operations of |
Our E&C segment |
In |
(6) | Beginning on April 1, 2017, we have transferred Concar from our Technical Services segment to our Infrastructure segment. |
Exchange Rates
The Peruvian nuevo sol is freely traded in the exchange market. Current Peruvian regulations on foreign investment allow foreign equity holders of Peruvian companies to receive and repatriate 100% of the cash dividends distributed by these companies.Non-Peruvian equity holders are allowed to purchase foreign currency at free market currency rates through any member of the Peruvian banking system and transfer such foreign currency outside Peru without restriction. Peruvian law in the past, however, has imposed restrictions on the conversion of Peruvian currency and the transfer of funds abroad, and we cannot assure you that Peruvian law will continue to permit such payments, transfers, conversions or remittances without restrictions.
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The following table sets forth, for the periods indicated, certain information regarding the exchange rates for nuevos soles per U.S. dollar, as published by the SBS. The Federal Reserve Bank of New York does not report a noon buying rate for nuevos soles.
High | Low | Average | Period end | |||||||||||||
2009 | 3.259 | 2.853 | 3.012 | 2.891 | ||||||||||||
2010 | 2.885 | 2.787 | 2.826 | 2.809 | ||||||||||||
2011 | 2.834 | 2.694 | 2.755 | 2.697 | ||||||||||||
2012 | 2.710 | 2.551 | 2.640 | 2.551 | ||||||||||||
2013 | 2.820 | 2.741 | 2.785 | 2.796 | ||||||||||||
2013: | ||||||||||||||||
October | 2.787 | 2.756 | 2.769 | 2.769 | ||||||||||||
November | 2.804 | 2.776 | 2.798 | 2.801 | ||||||||||||
December | 2.805 | 2.764 | 2.785 | 2.795 | ||||||||||||
2014: | ||||||||||||||||
January | 2.824 | 2.798 | 2.809 | 2.821 | ||||||||||||
February | 2.825 | 2.800 | 2.813 | 2.800 | ||||||||||||
March | 2.814 | 2.798 | 2.807 | 2.809 | ||||||||||||
April (through April 22) | 2.813 | 2.768 | 2.789 | 2.783 |
High | Low | Average | Period end | |||||||||||||
2012 | 2.710 | 2.551 | 2.639 | 2.551 | ||||||||||||
2013 | 2.820 | 2.541 | 2.704 | 2.796 | ||||||||||||
2014 | 2.990 | 2.761 | 2.840 | 2.989 | ||||||||||||
2015 | 3.413 | 2.983 | 3.186 | 3.413 | ||||||||||||
2016 | 3.537 | 3.249 | 3.375 | 3.360 | ||||||||||||
2017 | 3.392 | 3.231 | 3.261 | 3.241 | ||||||||||||
November 2017 | 3.251 | 3.233 | 3.241 | 3.233 | ||||||||||||
December 2017 | 3.289 | 3.231 | 3.246 | 3.241 | ||||||||||||
January 2018 | 3.229 | 3.207 | 3.215 | 3.216 | ||||||||||||
February 2018 | 3.269 | 3.212 | 3.248 | 3.260 | ||||||||||||
March 2018 | 3.271 | 3.217 | 3.252 | 3.227 | ||||||||||||
April 2018 | 3.249 | 3.216 | 3.231 | 3.249 | ||||||||||||
May (through May 11, 2018) | 3.291 | 3.260 | 3.276 | 3.260 |
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
Risk Relating to Recent Developments
Our reputation has been adversely affected by our association with Odebrecht’s affiliates in Peru
We have participated in consortia with Odebrecht affiliates in Peru. Our reputation has been adversely affected as a result of the plea agreements and criminal convictions of Odebrecht and certain key persons related to Odebrecht in connection with corruption, money laundering and criminal organization. Peruvian authorities have initiated congressional inquiries and criminal investigations into the dealings of Odebrecht’s affiliates in Peru, the scope of which include certain consortia in which we participated. Moreover, as a result, our company and certain of our former directors and executive officers have been the subject of congressional and criminal investigations related to corruption investigations. These investigations are ongoing.
Our reputation is a key factor in our clients’ evaluation of whether to engage our services, key industry players’ willingness to partner with us, financial institutions’ willingness to provide us credit, and recruiting and retaining talented personnel to our company. The impact on our business reputation related to our association with Odebrecht and the alleged actions of our former board members and executive officers has had, and is likely to continue to have, a material adverse effect on our business, financial condition and results of operation.
Investigations regarding potential corruption or other illegal acts could have a material adverse effect on our business, financial condition and results of operations
TheLava Jato commission of the Peruvian congress has undertaken congressional inquiries into the company and other construction companies in Peru, which have included certain of the company’s former board members and executive officers.
Peruvian prosecutors have included José Graña Miró Quesada, the former Chairman of the company, in an investigation for the crime of collusion, and Hernando Graña Acuña, a former board member of the company, for the crime of money laundering against the Peruvian government, each in connection with the IIRSA South project concession (tranches II and III), in which we participated with Odebrecht. Gonzalo Ferraro Rey, the former Chief Infrastructure Officer of the company, has also been included in an investigation for the crime of money laundering in connection with the same project.
In connection with investigations relating to the IIRSA South project concession (tranches II and III), the Peruvian criminal prosecution has moved to charge the company and our construction subsidiary, GyM, as criminal defendants in connection with the projects. Separately, a Peruvian Ad Hoc Prosecutor appointed by the Peruvian executive branch to investigate matters of corruption (the “Ad Hoc Prosecutor”) has moved to directly include the company as a civilly-responsible third party. In response, the Peruvian First National Preparatory Investigation Court (Primer Juzgado de Investigación Preparatoria Nacional) notified us of its decision to formally include the company and GyM in its criminal investigation. We have appealed the court’s decision to include the company and GyM in the criminal investigation. A decision from the Peruvian judiciary on whether our company constitutes a civilly-responsible third party remains pending. We cannot assure you that our position in these proceedings will prevail.
The Ad Hoc Prosecutor has also moved to directly include our subsidiary, GyM, as a civilly-responsible third party in the investigation relating to Tranches 1 and 2 of Line 1 of the Lima Metro. A decision from the Peruvian judiciary regarding these matters remains pending, and we cannot assure you that our subsidiary will not be included or that our position would ultimately prevail.
We cannot assure you that other of our former or current board members and executive officers will not be included in the foregoing proceedings as criminal defendants or civilly-responsible third parties as well, or that the company will not be included in other investigations.
A conviction of corruption or settlements with government authorities could lead to criminal and civil fines as well as penalties, sanctions, injunctions against future conduct, profit disgorgement, disqualifications from directly and indirectly engaging in certain types of business, the loss of business licenses or permits or other restrictions. Moreover, our alleged involvement in corruption investigations, and any findings of wrongdoing in such investigations, could further damage our reputation and have a material adverse impact on our ability to compete for business. Such investigations may also adversely affect our ability to pursue strategic projects, and could potentially result in the termination or modification of certain existing contracts or relationships. In addition, investigations could continue to divert management’s attention and resources from other issues facing our business.
There is substantial uncertainty with regard to the amount, timing and manner in which the payment for the termination of the GSP gas pipeline concession will be paid
There is substantial uncertainty with regards to the payment contemplated under the GSP gas pipeline concession contract as a result of the termination of the gas pipeline concession, including with respect to the amount, timing and manner in which the payment will be made or if it will be made at all.
Although the concession contract provides that payment must be made within one year of termination, the Peruvian Ministry of Energy and Mines has not made payment or, to our knowledge, initiated the payment process or the auction process for a new concessionaire. As a result, we may be forced to assert our rights against the Peruvian government in judicial or arbitration proceedings, which may place us in an adversarial position with the Peruvian government and/or our partners. We cannot assure you that we will pursue any such claims, or that any such claims would ultimately prevail in a timely manner, or at all.
To initiate arbitration against the Peruvian government, we need the approval of all three shareholders of GSP. We have sought such approval on two occasions but have not succeeded. We cannot assure you that we will acquire the consent needed to initiate legal proceedings in the short term. Moreover, Enagás International, S.L. (“Enagás”) has initiated separate international proceedings against the Peruvian government pursuant to international treaties, which may affect GSP’s ability to initiate proceedings against the Peruvian government.
In 2016, in connection with efforts to restructure or sell Odebrecht’s participation in GSP, due to the corruption scandal surrounding Odebrecht, Odebrecht contractually agreed to subordinate its claims under the concession to the other project partners, Enagás and ourselves. On January 2, 2018, we received a notification that Odebrecht commenced arbitration proceedings against us and Enagás, seeking to invalidate the contractual subordination and to negotiate a direct sale with the Peruvian government. While we believe that the subordination arrangement with respect to Odebrecht’s claims in connection with the anticipated payment is enforceable, we cannot assure you that our position will prevail. See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
In addition, we have made certain estimates in our consolidated financial statements with respect to the expected payment for the termination of the GSP contract. If our assumptions and estimates are incorrect, our actual results could differ significantly from those reflected in our consolidated financial statements. Failure to receive the expected payment on a timely basis, or at all, would have a material adverse effect on our business, financial condition and results of operations.
We are in default under certain of our debt instruments and may not reach agreement with our creditors to amend or waive the covenants
We are currently in default under certain of our debt instruments and are initiating the process of renegotiating with our creditors under such instruments. See “Item 13. Defaults, Dividend Arrrearages and Delinquencies.” Failure to successfully renegotiate new payment terms could force us to precipitate the sale of assets, including on unfavorable terms, to repay these debt instruments. Moreover, if we are not able to renegotiate the terms of these debt instruments or repay them promptly, our ability to obtain financings, including performance guarantees or similar financings required under many of our business contracts, would be impaired, which may have a material adverse effect on our business, financial condition and results of operations.
We may not be able to sell assets on favorable terms or at all
As part of our strategic action plan, our board of directors has approved the sale of certainnon-strategic assets, to make payments in respect of debt related to the termination of the GSP gas pipeline concession. We cannot assure you that we will be able to sell assets on favorable terms or at all. If we are not able to sell assets on a timely basis, our ability to address our liquidity needs could be adversely affected and we may breach our payment obligations under our debt related to the termination of the GSP gas pipeline concession.
Conversely, if we sell significant assets, our business and results of operations will be diminished.
If we cannot sell assets, we may not comply with the terms of our outstanding debt
We renegotiated with our creditors the terms of certain debt instruments related to the GSP project. We have agreed, among other things, to sell assets to repay certain such debt instruments. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments—Strategic Action Plan—Negotiations with Creditors.” If we are unable to sell assets in a timely manner, we may be forced to renegotiate these debt instruments on unfavorable terms.
A class action civil lawsuit in the United States may adversely affect our company
A securities class action civil lawsuit has been filed against the company and certain of our former and current executive officers in the United States. The suit is in early stages, and we cannot assure you that our position will prevail. If our position does not prevail, the case may have substantial adverse effects on our business, financial condition and results of operations.
We may be unable to access credit that we need to operate our business
Due to ongoing regulatory uncertainty, including with respect to Section II of Law 30737, our creditors and other banks operating in the Peruvian market have placed restrictions on our ability, and the ability of other construction companies, to acquire future credit lines or other financings.
This may affect our ability to obtain financing for new or existing projects on favorable terms or at all, and also may render us unable to compete for or win new projects.
Our business and financial condition could be materially and adversely affected if the Peruvian prosecutor requires that we place an excessive amount of assets in trust
On February 13, 2017, the President of Peru issued an emergency decree (decreto de urgencia N°003-2017), prohibiting groups that have been, or whose officers or representatives have been convicted of, or have admitted to, corruption, money-laundering or similar crimes (whether in Peru or elsewhere) from, among other things, transferring or selling any assets related to investments in Peru, including the proceeds of asset or equity sales, or sending money abroad without a governmental authorization. Section II of Law 30737, promulgated on March 12, 2018 to replace the aforementioned emergency decree, includes companies that have been consortium partners of groups that have been, or whose officers or representatives have been, convicted of, or have admitted to, corruption, money-laundering or similar crimes. Our company and our subsidiary GyM are two such companies. The law requires that these companies: suspend money transfers abroad; implement a compliance program and disclose information to competent authorities; and create a trust of assets to guarantee eventual compensation in favor of the Peruvian government. A Peruvian prosecutor will indicate the amount of such guarantee, pursuant to Law 30733. On May 9, 2018, Supreme Decree No.096-2018-EF was passed, which provides guidelines for such determination. Nevertheless, we cannot assure you of the amount of this guarantee, nor can we assure you that the Company will have sufficient assets to include in the required trust. Furthermore, we cannot assure you that these laws will not be expanded, or that subsequent laws will not be passed, that impose further obligations or restrictions on the company and our subsidiaries.
Changes in key personnel could affect our future business
Our success depends significantly on the services of our senior management, board of directors and other key personnel. On February 27, 2017, our former chairman of the board, our former CEO and board member, and our former board member and the former chairman of our subsidiary GyM resigned from their positions at our company. Effective March 2, 2017, we appointed a new CEO, and on March 31, 2017, our shareholders at the annual shareholders’ meeting appointed a new board of directors, replacing all but two of our existing directors. Moreover, other senior managers that have recently left the company.
While most of these officers have already been replaced, the replacement of existing directors and senior management is likely to have an impact on our business and results of operations. Moreover, we cannot assure you that we will be able to continue to attract and retain senior management, qualified engineers and other key personnel.
INDECOPI and Peruvian prosecutors have initiated investigations in response to a news report alleging that certain construction companies in Peru, Brazil and Spain, including our company, colluded to receive public contracts
In July 2017, media reports alleged that certain construction companies in Peru, Brazil and Spain, including our company, colluded as a “construction club” to receive public contracts. As a result of these reports, the Peruvian National Institute for the Defense of Free Competition and the Protection of Intellectual Property (“INDECOPI”) has initiated an investigation regarding the anti-competitive activities of construction companies in Peru, including our company, and have included a former employee of GyM in an investigation for collusion. In July 2017, INDECOPI conducted a search of our facilities related to these allegations. To date, there is no pending investigation of the company.
We cannot predict what the outcome of the investigations will be, the timing of any resolution, or how the resulting consequences, if any, may impact our business, financial condition and results of operations.
Risks Related to Our Company
Global economic conditions could adversely affect our financial performance
The global financial crisis and ensuing global recession in 2008 and 2009 had a significant adverse effect on the development of large-scale infrastructure and real estate projects worldwide. The sovereign crisisMore recently, global economic conditions, including slower growth in Europe, coupled withChina, declines in global commodity, in particular oil and gas prices, the slow economic recovery inappreciation of the United States,U.S. dollar against foreign currencies, the withdrawal of investments from emerging markets and continued concerns about the U.S. and European economies, has generated economic uncertainty which could adversely affect private- and public-sector investments. The United Kingdom voted to exit the European Union on June 23, 2016. As of the date hereof, the actions to be taken by the United Kingdom to effectively exit the European Union and the duration of this process are uncertain. The results of the referendum in the United Kingdom have caused, and are expected to continue to cause, volatility in financial markets, which in turn could have substantial adverse effects on our business, financial condition and results of operations. On November 8, 2016, Mr. Donald J. Trump was elected president of the United States. President Trump has espoused an inclination to consider greater restrictions on free trade and limitations on immigration. Changes in social, political, regulatory and economic conditions in the United States or in laws and policies governing foreign trade could create uncertainty in the international markets and could have a negative impact on emerging market economies, including the Peruvian economy, which in turn could have a negative impact on our operations. Future global economic conditions, in particular fluctuations in commodity prices and financings costs, may impact our clients’ investment decisions. Should our clients choose to postpone or suspend new investments or delay or cancel the execution of existing projects as a result of global economic conditions, demand for our products and services, including our backlog, would decline, which may result in a decline in revenues and in under-utilization of our capacity. In addition, our business may be impacted by adverse economic developments even after economic conditions have improved because of the lag time between when investments decisions are made and when the projects are executed. Furthermore, financial difficulties suffered by our clients, joint operation partners, subcontractors or suppliers due to global economic conditions could result in payment delays or defaults, or increase our costs or adversely impact our project execution. Accordingly, a global economic downturn could have a material adverse effect on our financial performance.
We may not be able to continue the historic growth of our business
We have experienced rapid growth in our operations in recent years and our strategy is to continue to grow our operations, including through international expansion. However, we may not be able to continue to grow our business at the same pace as in recent years, or at all. While our organic revenues grew at a CAGR of 27.5% from 2010 to 2013 (under IFRS), from 2004 to 2009 our organic revenues grew at a CAGR of 19.1% (under Peruvian GAAP). The pace at which we are able to grow our business could be adversely affected by numerous factors, some of which are beyond our control, including, among others, a slowdown in Peru’s recent rapid economic growth and its substantial investment in infrastructure, increased competition, and our capacity to increase scale and manage growth in our company.
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Growth can place significant demands on our management and operating structure, and too rapid growth may overwhelm our operating capacity. In addition, sustained growth will require us to recruit a large number of talented professionals and we cannot assure you that we will be able to hire sufficient engineers or other personnel with the expertise and experience we require. Nor can we assure you that as our company continues to grow we will be able to maintain our performance standards and corporate values across our entire organization. Failure to manage our growth effectively could adversely affect the quality of our products and services, which would have a material adverse effect on our business.
We face significant competition in each of our markets
Each of the markets in which we operate is competitive. We compete on the basis of, among other factors, price, performance, product and service quality, skill and execution capability, client relations, reputation and brand, and health, safety and environmental record. We face significant competition from both local and international players. Some of these competitors may have greater resources than us or specialized expertise in certain sectors. In addition, a portion of our business is derived from open bidding processes which can be highly competitive. Certain of our markets are highly fragmented with a large number of companies competing for market share. Our competitors may be more inclined to take greater or unusual risks or accept terms and conditions in a contract that we might not deem acceptable. Moreover, we cannot assure you that we will not face new competition from industry players entering or expanding their operations in our markets. If we are unable to compete effectively, our ability to continue to grow our business or maintain our market share would be affected. In addition, because one of the factors on which we generally compete is price, increased competition could impact our operating margins. Accordingly, our business and financial performance could be adversely affected by competition in our markets.
A major change in Peruvian government policies could affect our business
Our business is significantly affected by national, regional and municipal government policies and regulation,regulations, including with respect to infrastructure concessions or similar contracts to the private sector, public spending in infrastructure investment and government housing subsidies, among others. Any adverse change in government policies with respect to these matters could result in a material adverse effect on our business and financial performance.
Social conflicts may disrupt infrastructure projects
Despite Peru’s ongoing economic growth and stabilization, high levels of poverty and unemployment and social and political tensions continue to be pervasive problems in the country. Peru has, from time to time, experienced social and political turmoil, including riots, nationwide protests, strikes and street demonstrations. In 2011, 2012 and 2013,recent years, certain regions experienced strikes and protests related mainly to the environmental impact of mining activities, which resulted in commercial disruptions.disruptions, including in the departments of Cajamarca and Arequipa. These protests ledmay lead to the suspension of certain mining projects, including the suspension of a large mining project in the northern region of Cajamarca. We provided construction services in the initial phase of this project before it was suspended and intend to bid for future E&C service contracts if the project progresses.projects. Social conflicts may disrupt, delay or suspend infrastructure projects in the future, which could have a material adverse effect on our business and financial performance.
New projects may require the prior approval of local indigenous communities
In September 2011, Peru enacted Law No. 29,785, regarding the Prior Consultation Right of Local Indigenous Communities, in accordance with the International Labor Organization Convention No. 169 (Ley del Derecho a la Consulta Previa a los Pueblos Indígenas y Originarios, Reconocido en el Convenio 169 de la Organización Internacional del Trabajo). This law establishes a prior consultation procedure (procedimiento de consulta previa) that the Peruvian government must carry out with local indigenous communities, whose rights may be directly affected by new legislative or administrative measures, including the granting of certain permits or new concessions or similar contracts, such as for mining, energy and oil and gas projects. Local indigenous communities do not have a veto right; upon completion of this prior consultation procedure, the Peruvian government retains the discretion to approve or reject the applicable legislative or administrative measure. We cannot assure you that these consultation procedures will not adversely affect new projects and concessions. On October 25, 2013, the Peruvian Ministry of Culture published the first official list of 52 indigenous groups in the national territory, indicating this
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list is meant to be updated every 15 days. However, as of the date of this annual report, there is no information on the specific areas where these indigenous groups are located. Moreover, as of the date of this annual report, the Ministry of Culture has undertaken only one consultation process. Accordingly, our business and financial performance may be materially and adversely affected.
We may not be able to successfully expand outside of Peru
One of our key strategies is to continue to expand our operations outside of Peru, particularly in Chile and Colombia, and we expect that our international operations will become a more significant part of our consolidated business in future. We cannot assure you that we will be able to replicate our success in Peru in other countries. Our international expansion is subject to additional challenges, including: our ability to assimilate cultural differences and practices; our limited familiarity with local laws, regulators and contractors; our ability to attract and manage foreign personnel; the absence of a local workforce formed in our corporate values and familiar with our operations; competition in foreign markets, including from industry players with significantly greater local experience and reputation; and other risks specific to these countries. Many countries in Latin America have suffered significant economic, political and social crises in the past, and these events may occur again in the future. If we are unable to overcome these challenges, we may not be able to successfully expand internationally.
We may not be able to make successful acquisitions
Part of our strategy is to evaluate strategic acquisition opportunities to expand our operations and geographic footprint, especially in Chile and Colombia. We may not be able to identify appropriate acquisition opportunities, or, if we do, we may overpay for these acquisitions or may not otherwise be able to negotiate terms and conditions that are acceptable to us. We may also face difficulties obtaining financing to pay for acquisitions. In addition, we may not be able to obtain regulatory approvals, including antitrust approvals, required to consummate acquisitions. Furthermore, even if we are able to successfully consummate an acquisition, we may encounter challenges in integrating the acquired business effectively and profitably into our operations. The integration of an acquisition involves a number of factors that may affect our operations, including diversion of management’s attention, difficulties in retaining personnel and entry into unfamiliar markets. Acquired businesses may not achieve the levels of productivity anticipated or otherwise perform as expected. Acquisitions may bring us into businesses we have not previously conducted and expose us to additional business risks that are different from those we have traditionally experienced, including new geographic, market, operating and financial risks. Moreover, acquisitions involve special risks, including the potential assumption of unanticipated liabilities and contingencies. Even if such liabilities are assumed by the sellers, we may have difficulties enforcing our rights, contractual or otherwise. We cannot assure you that future acquisitions will meet our strategic objectives.
Our backlog and our ratio of historical backlog to revenues may not be reliable indicators of future revenues or profit
Our backlog amount is subject to revision over time and our ability to realize revenues from our backlog is subject to a number of uncertainties. Cancellations, scope adjustments or deferrals may occur, from time to time, with respect to contracts reflected in our backlog and could reduce the amount of our backlog and the revenue and profits that we actually earn. Contracts may also remain in our backlog for an extended period of time and poor performance could also impact our profit from the contracts in our backlog. In addition, our backlog is expressed in U.S. dollars based onperiod-end exchange rates while a significant portion of our contracts are payable in nuevos soles or other local currencies. As a result, any depreciation of local currency would diminish the amount of revenues eventually earned relative to backlog. Three contracts in particular comprise 25.3%As of December 31, 2016, one client, Ecopetrol, concentrated 33.5% of Morelco’s backlog, and another client, Rio Alto, concentrated 44.9% of Stracon’s backlog. Moreover, the termination of the GSP gas pipeline concession on January 24, 2017 has reduced our backlog as of December 31, 2013, and the termination2016 by US$855 million, 30.2% of any of these three contracts would significantly reduce our E&C backlog and future revenues21.4% of our total backlog. For more information, see “Item 5.A. Operating and profits. Accordingly, theFinancial Review and Prospects—Operating Results—Recent Developments.” The amount of our backlog is not necessarily indicative of future revenues or profits related to the performance of the related contracts.
Our backlog may not grow at recent historic rates and may decline.decline further. We cannot assure you that we will be able to continue obtainingobtain sufficient contracts in the future in number and magnitude to continue to grow our backlog. Additionally, the amount of new contracts signedthat we obtain can fluctuate significantly from period to period due to factors that are beyond our control.
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The ratio of our historical backlog to revenues earned in subsequent years is volatile and substantially affected by a number of factors, some of which are outside our control, including levels of contract scope adjustments and our ability to enter into new contracts (which are substantially influenced by general economic conditions), delays and cancellations, foreign exchange rate movements and our ability to increase the scale of our operations to expand the amount of work we carry out beyond that previously contracted. Accordingly, historical correlations between backlog and revenues may not recur in future periods. In particular, you should not assume that the ratio of our future E&C segment revenues for 2014 and 20152018 to backlog as of December 31, 20132017 that is currently expected to be realized in each of those yearsthat year will be comparable to our historic ratios shown in “Item 4.B. Information on the Company—Business Overview—Backlog—E&C Backlog.”
Our success depends on key personnel
Our success depends, to a significant degree, upon the services of our senior management, board of directors and other key personnel (including, among others, our Chairman and our Chief Executive Officer).personnel. Members of our management team are not subject to long-term employment agreements ornon-competition agreements with us. We cannot assure you that we will be successful in retaining our current senior management or members of our board of directors, nor can we assure you that, in such event, we would be able to find suitable replacements. The loss of the services of some of our senior management or members of our board of directors could have a material adverse effect on our business and financial performance. In addition, the success of our business depends on our ongoing ability to attract, train and retain qualified engineers and other personnel. In recent years, the availability in Peru of qualified personnel who have the necessary expertise and experience has been lower than demand and, therefore, competition for human resources has become intense. We cannot assure that we will be able to hire and retain the number of qualified personnel required to meet the needs of, or to grow, our business. If we are unable to attract, train and retain the qualified personnel that we require at reasonable cost, our business and financial performance could be adversely affected.
Our success depends, to a large extent, on our reputation for the quality, reliability, timely delivery and safety of our products and services
We believe our track record and reputation are key factors in our clients’ evaluation of whether to engage our services and purchase our products, encouraging key industry players to partner with us, and recruiting and retaining talented personnel to our company. Our reputation is based, to a large extent, on the quality, reliability, timeliness and safety of our products and services. If our products do not meet expected standards or we fail to meet our deadlines, our relationship with our clients and partners could suffer, the reputation of our company could be adversely affected, we may not be invited to new bidding processes and our ability to capture new business could be severely diminished.
The nature of our business exposes us to potential liability claims and contract disputes
We may be subject to a variety of legal or administrative proceedings, liability claims or contract disputes. The government, clients and other third parties may present claims against us for injury or damage caused, directly or indirectly, by our operations, for example for alleged failures in our engineering and construction, the operation of our infrastructure concessions (such as our toll roads or the Lima Metro), and real estate developments we sell. Although we have adopted a range of insurance, risk management and risk avoidance programs designed to reduce potential liabilities, a catastrophic event resulting from the services we have performed or products we have provided could result in significant professional or product liability, warranty or other claims against us as well as reputational harm, especially if public safety is impacted. We may in the future be named as a defendant in legal proceedings where our clients or third parties may make a claim for damages or other remedies with respect to our projects or other matters. Any liability not covered by our insurance, or in excess of our insurance limits, could result in a significant loss for us, which may affect our financial performance. Moreover, certain of our clients have executed the performance guarantees that we were required to deliver in connection with their project in order to gain leverage, we believe, in the negotiation of contract disputes with us.
We are susceptible to operational risks that could affect our business and financial performance
Our business is subject to numerous industry-specific operational risks, including natural disasters, adverse weather conditions, operator error or other accidents, mechanical and technical failures, explosions and other events, many of which are beyond our control. Such occurrences could result in injury or loss of life, severe damage to and
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destruction of property and equipment, business interruption, pollution and other environmental damage,clean-up responsibilities, regulatory requirements, investigations and penalties, and potential liability claims and contractual disputes. In addition, such occurrences could materially impact our reputation. Although we maintain comprehensive insurance covering our assets and operations at levels that our management believes to be adequate, our insurance coverage will not be sufficient in all circumstances or to protect against all hazards. The occurrence of such an operational risk could have a material adverse effect on our business and financial performance.
Deterioration in our safety record could adversely affect our business and financial performance
Our ability to retain existing clients and attract new business is dependent on our ability to safely operate our business. Existing and potential clients consider the safety record of their services providers to be of high importance in their decision to award service contracts. Some of our activities, in particular in our E&C segment, as well as our electricity networks services line of business, can be high risk by their nature. If one or more accidents were to occur at a site, the affected client may terminate or cancel our contract and may be less likely to continue to use our services. We cannot assure you that we will not experience accidents in the future, causing our safety record to deteriorate. Accidents may be more likely as we continue to grow, particularly if we are required to hire less experienced employees due to shortages of skilled labor. Moreover, often times we do not perform these activities by ourselves and accidents can happen due to errors committed by partners and subcontractors over whom we have no control. Because many of our clients require us to report our safety metrics to them as part of the bidding process and because a substantial part of our client base is comprised of major companies with high safety standards, a general deterioration in our safety record could have a material adverse impact on our business including our ability to bid for new contracts.
Any safety incidents or deterioration in our safety record could adversely impact our ability to attract and retain qualified employees. In addition, we could also be subject to liability for damages as a result of accidents and could incur penalties or fines for violations of applicable safety laws and regulations.
Increases in the prices of energy, raw materials, equipment or wages could increase our operating costs
Our business requires significant purchases of energy, raw materials and components, including, among others, large quantities of fuel, cement and steel, as well as purchases or leases of equipment. Certain of these inputs used in our operations are susceptible to significant fluctuations in prices, over which we may have little control. The prices of some of these inputs are affected to a significant extent by the prices of commodities, such as oil and iron. Global oil prices in particular have declined significantly in recent years, although they increased in 2016 and subsequently, and we cannot assure you that oil prices will not continue to increase in the future (although increased oil prices would benefit revenues in our Energy line of business. Substantial increases in the prices of such commodities generally result in increases in our suppliers’ operating costs and, consequently, lead to increases in the prices they charge for their products. Moreover, we do not have long-term contracts for the supply of our key inputs, and, as a result, if prices increase significantly or if we are required to find alternative suppliers, our costs to procure these inputs may increase significantly. In addition, growing demand for labor, especially when coupled with shortages of qualified employees in the countries where we operate, may result in significant wage inflation. To the extent that we are unable to pass along to our clients increases in the prices of our key inputs or increases in the wages that we must pay, our operating margins could be materially adversely impacted.
We may not be able to obtain financing on favorable terms
Our ability to undertake large investments (particularly in our Infrastructure and Real Estate segments) or consummate significant acquisitions will depend on the availability of equity and debt financing. We cannot assure you that we will be able to obtain new financings in the future on favorable terms or at all. Our ability to obtain financings will depend in part upon prevailing conditions in credit and capital markets, which are beyond our control. In 2008 and 2009, global markets suffered turmoil, which significantly constrained the availability of new financings. In addition, our ability to obtain new financing, or refinance existing debt, may at certain times be adversely affected by the cyclicality of our business, particularly our E&C segment, as has occurred in the past. Furthermore, in response to the ensuing global economic recession in 2009, many countries, in particular the United States as well as the countries where we operate, have maintained target interest rates at very low levels, and we cannot assure you that theselevels. However, more recently, the U.S. Federal Reserve began to increase target interest rates will notin the United States. Most emerging markets have been affected by this change in the U.S. monetary policy, resulting in a withdrawal of investments and increased volatility in the value of their currencies. If interest rates rise significantly in the future, whichUnited States, emerging market economies, including Peru, could find it more difficult and expensive to borrow capital and refinance existing debt. Higher interest rates globally or in Peru would in turn impact our costs of funding. If adequate funds are not available, or are not available on favorable terms, we may not be able to make future investments or take advantage of acquisitions or other opportunities.
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We may not be able to recover on claims against clients for payment
If a client fails to pay our invoices on time or defaults in making its payments to us, we could incur significant losses. We occasionally bring claims against clients, principally the government, for delayed payments, additional costs that exceed the contract price or for amounts not included in the original contract price, including change orders. These types of claims can occur due to matters such as owner-caused delays or changes from the initial project scope, and, occasionally, they can be the subject of lengthy proceedings. When these types of events occur and unresolved claims are pending, we may invest significant working capital in projects to cover cost overruns pending the resolution of the relevant claims. Moreover, we have recently encountered difficulties collecting on claims, even following successful arbitration awards, particularly against the government. A failure to promptly recover on these types of claims and change orders could have a material adverse effect on our financial performance.
If we are unable to enter into joint operationsconsortia or other strategic alliances, our ability to compete for new business may be adversely affected
We may join with other companies to form joint operations or other strategic alliances to compete for a specific concession or contract, including with partners that contribute expertise in a specific field. Because a joint operationconsortium or alliance can often offer stronger combined qualifications than a company on a stand-alone basis, these arrangements can be important to the success of a particular bid. If we are unable to enter into joint operationsconsortia or other strategic alliances, our ability to compete for new business may be adversely affected.
Our joint operationsconsortia and other strategic alliances may be affected by disputes with, or the unsatisfactory performance by, our partners
Joint operationsConsortia and other strategic alliances that we enter into as part of our business, including arrangements where operating control may be shared with unaffiliated third parties, may involve risks not otherwise present when we operate independently, including: sharing approval rights over major decisions; responsibility for our partners’ unpaid obligations or liabilities; and inconsistencies in our and our partners’ economic or business interests or goals. Any disputes between us and our partners may result in delays, litigation or operational impasses. We may also incur liabilities as a result of action taken by our partners. In addition, if we participate in joint operationsconsortia or other strategic alliances where we are not the controlling party, we may have limited control over operation decisions and actions and the success of the joint operationconsortium or other strategic alliance will depend largely on the performance of our partners. These risks could adversely affect our ability to transact the business that is the subject of such joint operationconsortium or other strategic alliance, and could result in the termination of the applicable concession or contract. Under these circumstances, we may be required to make additional investments and provide additional services to ensure adequate performance and delivery. These additional obligations could result in reduced profits or, in some cases, increased liabilities or significant losses for us. In addition, failure by a partner to comply with applicable laws or regulations could negatively impact our business and, in the case of government contracts, could result in fines, suspension or even debarment from participating in bidding processes. As a result, our business and financial performance could be adversely affected by disputes involving our joint operationconsortia or other strategic alliances. We have recently been involved in ongoing disputes, including arbitration proceedings, with our minority partner in Adexus. These disputes could result in disruptions in Adexus’ operations.
We are dependent upon third parties to complete many of our contractual obligations
We rely on third-party suppliers to provide mucha significant amount of the materials and equipment used in our businesses. A portion of the work performed under our infrastructure concessions and, to a lesser extent, other contracts is performed by third-party subcontractors. As a result, the timely completion and quality of our projects may depend on factors beyond our control, including the quality and timeliness of the delivery of materials supplied for use in the project and the technical skills of subcontractors hired for the project. If we are unable to find qualified suppliers or hire qualified subcontractors, our ability to meet our contractual obligations could be impaired. In addition, if the amount we are required to pay for supplies, equipment or subcontractors exceeds what we have estimated, we may suffer losses under our contract. If a supplier or a subcontractor fails to provide supplies, equipment or services as required under a negotiated arrangement for any reason, or provides supplies, equipment or services that are not of an acceptable quality, we may be required to source those supplies, equipment or services on a delayed basis or at a higher price than anticipated, which could impact our financial performance. In addition, faulty materials or equipment could result in claims against us for failure to meet contractual specifications, and failure by suppliers or subcontractors to comply with applicable laws and regulations could negatively impact our reputation and our
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business and, in the case of government contracts, could result in fines, suspension or even debarment from participating in bidding processes. These risks may be intensified during economic downturns if these suppliers or subcontractors experience financial difficulties. As a result, our business and financial performance may be adversely affected by our dependence on third partythird-party providers.
Debarment from participating in government bidding processes would have a material adverse effect on our business and financial performance
We would face debarment from participating in government bidding processes for one to three years if we were found to have violated certain provisions of the Peruvian State Contracting Law (Ley de Contrataciones del Estado). We are required to comply with a large number of contractual obligations with the government in our business, and we cannot assure you that we will be in full compliance at all times. Moreover, such a debarment would affect the ability of our entire company (including any of our subsidiaries), and not just the line of business where the alleged violation took place, to participate in government bids under the Peruvian State Contracting Law. In December 2011, SUNAT (Superintendencia Nacional de Aduanas y Administración Tributaria), the Peruvian tax and customs authority, provided us with notice that they had terminated one of GMD’s contracts in our Technical Services segment, which resulted in the elimination of approximately US$4.2 million from our backlog as of such date, alleging a number of service deficiencies. In response to SUNAT’s contract termination, we initiated an arbitration against SUNAT and SUNAT counterclaimed for the payment of performance bonds in an aggregate amount of S/.1.6 million. A negative outcome in this arbitration, if we do not resolve the dispute with SUNAT, would also affect our company’s, including any of our subsidiaries’, participation in government bidding processes under the Peruvian State Contracting Law. Additionally, in April 2013, Perupetro initiated an administrative proceeding against a subsidiary in our E&C segment, claiming that the subsidiary had submitted a bid to provide engineering services while not being in compliance with certain technical requirements. We lost the administrative proceeding atas well as the endfirst and second instances of 2013 andthe judicial proceeding we immediately commenced judicial actionhad initiated to contest this decision.such administrative proceeding. We appealed the adverse judgment and are currently in annulment proceedings. Although we believe that the likelihood of an adverse outcome in this proceeding is remote, an adverse outcome would affect our company’s, including any of our subsidiaries’,that particular subsidiary’s participation in government bidding processes under the Peruvian State Contracting Law. Furthermore, in March 2014,Subsequently, we canceled the road maintenance services contract because the regional government of Cusco provideddid not pay any valuations (January, February and March of 2014) and did not give us with a notice that they had terminated one of Concar’s toll road operation and maintenance contracts, representing a backlog loss of US$48.4 million. We believe this termination is invalid, since we had previously terminated the contract due to a lack of payment and failure to provide access to the entire stretch of the related road. A significant partWe have initiated an action against the regional government of Cusco for an amount of S/.97.4 million, and the government has filed a counterclaim for S/.403 million. All these proceedings remain pending as of the date of this annual report, and we cannot assure you that our position will prevail.
During 2016, 11% of our revenues on a consolidated basis iswas derived from public sector contracts in Peru.Peru (excluding public infrastructure concessions). As a result, if our company is debarred from participating in government bidding processes, our business and financial performance would be materially and adversely affected.
We may not be able to successfully expand outside of Peru
One of our long term strategies has been to continue to expand our operations outside of Peru, particularly in Chile and Colombia, and we expect that our international operations could become a more significant part of our consolidated business in future. We cannot assure you that we will be able to replicate our success in Peru in other countries. Our international expansion is subject to additional challenges, including: our ability to assimilate cultural differences and practices; our limited familiarity with local laws, regulators and contractors; our ability to attract and manage foreign personnel; the absence of a local workforce formed in our corporate values and familiar with our operations; competition in foreign markets, including from industry players with significantly greater local experience and reputation; and other risks specific to these countries. Many countries in Latin America have suffered significant economic, political and social crises in the past, and these events may occur again in the future. If we are unable to overcome these challenges, we may not be able to successfully expand internationally.
We may not be able to make successful acquisitions
Part of our long-term strategy has been to evaluate strategic acquisition opportunities to expand our operations and geographic footprint, especially in Chile and Colombia. We may not be able to identify appropriate acquisition opportunities, or, if we do, we may overpay for these acquisitions or may not otherwise be able to negotiate terms and conditions that are acceptable to us. We may also face difficulties obtaining financing to pay for acquisitions. In addition, we may not be able to obtain regulatory approvals, including antitrust approvals, required to consummate acquisitions. Furthermore, even if we are able to successfully consummate an acquisition, we may encounter challenges in integrating the acquired business effectively and profitably into our operations. The integration of an acquisition involves a number of factors that may affect our operations, including diversion of management’s attention, difficulties in retaining personnel and entry into unfamiliar markets. Acquired businesses may not achieve the levels of productivity anticipated or otherwise perform as expected. Acquisitions may bring us into businesses we have not previously
conducted and expose us to additional business risks that are different from those we have traditionally experienced, including new geographic, market, operating and financial risks. Moreover, acquisitions involve special risks, including the potential assumption of unanticipated liabilities and contingencies. Even if such liabilities are assumed by the sellers, we may have difficulties enforcing our rights, contractual or otherwise. We cannot assure you that future acquisitions will meet our strategic objectives.
Failure to comply with, or changes in, laws or regulations could have a material adverse effect on our business and financial performance
We operate in highly regulated industries. Our business and financial performance depends on our and our clients’ ability to comply on a timely and efficient basis with extensive national, regional and municipal laws and regulations relating to, among other matters, environmental, health and safety, building and zoning, labor, tax and other matters. The cost of complying with these laws and regulations can be substantial. In addition, compliance with these laws and regulations can cause scheduling delays. Although we believe we are in compliance with all applicable concessions, other similar contracts, laws and regulations in all material respects, we cannot assure you we have been or will be at all times in full compliance. Failure by us or our clients to comply with our concessions, similar contracts or these laws and regulations could result in a range of adverse consequences for our business, including subjecting us to significant fines, civil liabilities and criminal sanctions, requiring us to comply with costly restorative orders, the shutdown of operations and revocation of permits and termination of concessions or similar contracts. In addition, we cannot assure you that future changes to existing laws and regulations, or stricter interpretation or enforcement of existing laws and regulations, will not impair our ability to comply with such laws and regulations or increase our compliance costs. Accordingly, existing or future regulation in our markets could have a material adverse effect on our business and financial performance.
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We may be held liable for environmental damage caused by our operations
The nature of certain of our operations requires us to assume risks of causing environmental and other damages. We may be held liable for the environmental damage we cause, including the incidental consequences of human exposure to hazardous substances or other environmental damage. We may be subject to clean up costs or penalties in the event of certain discharges into the environment and/or environmental contamination and damage. Our environmental liability insurance may not be sufficient or may not apply to certain types of environmental damage. Any substantial liability for environmental damage could have a material adverse effect on our financial performance.
New environmental regulation as a result of climate change could impact our business and financial performance
Growing concerns about climate change could result in the imposition of additional or more stringent environmental requirements or regulations. For example, there are ongoing international efforts to address greenhouse emissions, such as the Kyoto Protocol or the more recent Paris Agreement, which are in various stages of negotiation and implementation. If more stringent environmental regulation is adopted in the countries where we operate, we may be obliged to incur higher expenditures than anticipated, adversely affecting our financial performance. In addition, future remediation requirements in the event that we are found responsible for environmental damage may be substantial, which could impact our financial condition. Moreover, more stringent environmental regulation could increase the costs of projects for our clients or, in some cases, prevent a project from going forward, thereby potentially reducing the demand for our services. Accordingly, new environmental regulation could have a material adverse effect on our business and financial performance.
We may not be able to effectively protect ourselves against financial market risks
Our operations are exposed to financial market risks, such as risks related to exchange rates, commodity prices and, to a lesser extent, interest rates. Fluctuations in currency, commodity prices or interest rates could adversely affect our financial performance. We cannot assure you that derivative financial instruments will protect us from the adverse effects of financial market risks. While hedging transactions are intended to reduce market risks, such transactions may expose us to other risks, such as counterparty risk. We may not be able to adequately protect ourselves against financial market risks and may not ultimately realizeachieve an economic benefit from our hedging strategy.
The loss of a key client in some of our lines of business may affect our business and financial performance
In some of our lines of business, such as our Infrastructure and Technical Services segments, a substantial amount of the revenue we receive is concentrated among a limited number of clients, including the Peruvian government. If one or more of these major clients fail or delay in paying our fees, or if there is a significant reduction or cancellation of business by one or more of these major clients, our business and financial performance may be adversely affected. In particular we cannot assure you that Enel, which acquired Enersis from(from whom we acquired our electricity networks services line of business in 2011,2011), will not reduce its use of our services. If we are not able to capture new clients to replace the loss of business from existing key clients, our financial performance may be adversely affected.
Our use of thepercentage-of-completion method of accounting for our Engineering and Construction segment could result in a reduction of previously recorded profits
In accordance with IFRS, we measure and recognize a large portion of our revenues under thepercentage-of-completion accounting methodology. This methodology allows us to recognize revenues ratably over the life of a contract, without regard to the timing of receipt of cash payments, by comparing the amount of the costs incurred to date against the total amount of costs expected to be incurred. The effect of revisions to estimated costs, and thus revenues, is recorded when the amounts are known and can be reasonably estimated. These revisions can occur at any time and could be material. On a historical basis, we believe that we have made reasonably reliable estimates of the progress towards completion on our long-term contracts. However, given the uncertainties associated with these types of contracts and inherent in the nature of some of the industries in which we operate, it is possible for actual costs to vary from estimates previously made, which may result in reductions or reversals of previously recorded profits.
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Labor unrest could adversely affect our financial performance
All of our manual laborers and a portion of our employees are members of labor unions. Our practice is generally to extend benefits we offer our unionized employees tonon-unionized employees. In our E&C segment, collective bargaining agreements are negotiated at two levels, on an annual basis between the Peruvian National Federation of Civil Construction and the Peruvian Chamber of Construction, without our direct involvement, and on a per project basis directly between the unions and us in accordance with such annual agreement. We also have collective agreements with our employees in certain of our business segments, which are also negotiated periodically. Although we consider that our relationship with unions are currently positive, we cannot assure you that we will not experience work slowdowns, work stoppages, strikes or other labor disputes in the future, which could result in the interruption or delay of our operations. Such interruptions or delays could have an adverse impact on our business, including on the cost of our projects and our ability to make timely delivery. Moreover, our operations may also be affected by labor unrest in our clients’ or our partners’ workforce.
The proceeds from our insurance policies may not be sufficient and we may not be insured against all risks
We maintain insurance coverage both as a corporate risk management strategy and in order to satisfy the requirements under certain regulations and contracts. We cannot assure you that proceeds from our insurance policies, however, will be sufficient to cover the damages resulting from any event covered by such policies. Certain risks are not covered under the terms of our insurance policies, such as interruption of operations. In such event, we may incur significant expenses to rebuild our facilities, repair or replace our equipment, or cover other damages. In addition, if any of our third partythird-party insurers fail, abruptly cancel our coverage or otherwise cannot satisfy their insurance requirements to us, then our overall risk exposure and operational expenses could be increased. Moreover, we may not be able to renew our insurance policies on favorable terms, or at all. Although we have in the past we have been generally able to cover our insurance needs, we cannot assure you that we will be able to secure all necessary insurance in the future.
An increase in import duties and controls may have a material adverse effect on our financial performance
Our future success depends in part on our ability to select and purchase quality mechanical instruments and equipment at attractive prices. While we have historically been able to do so, such instruments and equipment may become subject to higher import taxes than currently apply. In addition, the Peruvian antitrust authority (Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual, or “INDECOPI”) is currently conducting an investigation regarding potential dumping of Chinese imports, which may result in new anti-dumping laws. We cannot assure you that there will not be further increases in import taxes, changes in laws related to imports or the imposition of quotas by countries from which we import mechanical instruments and equipment, which could have a material adverse effect on our business.
The government may declare the nullity of public bidding processes after we have been awarded a project or concession
Even if we win the public bidding for a project or concession, the government may subsequently declare the process void for political, budgetary or other reasons and may cancel or terminate the project or concession awarded to us. For example, in June 2014, we were determined the winner of a public bidding for a concession to operate the fare collection system of Lima’s integrated transportation system for a period of 16 years. However, in January 2015, the Municipality of Lima notified us that the board of directors of the Instituto Metropolitano Protransporte de Lima – Protransporte had declared the nullity of the public bidding process, based on a report issued by the Peruvian Ministry of Economy and Finance, which concluded that the Ministry should have pronounced itself with respect to the concession prior to the bidding process instead of afterwards. We initiated a judicial proceeding in July 2015 to challenge such declaration of nullity, which proceedings are currently under way.If upheld by the courts, the declaration of nullity of projects or concessions awarded to us could affect our future results of operations. Moreover, the uncertainty that results from these type of decisions may adversely impact investor confidence in Peru and our business.
Additional Risks Related to our Engineering and Construction Business
We are vulnerable to the cyclical nature of theend-markets we serve
Demand for our engineering and construction services is dependent on conditions in theend-markets we serve, which include, among others, the mining, power, oil and gas, transportation, real estate and other infrastructure sectors in Peru, as well as the mining sector in Chile.Chile and the energy sector in Colombia. Consequently, our engineering and construction business is closely linked to the performance and growth of these sectors, and it is exposed to many of the risks faced by our clients operating in these sectors, over which we have no control. These industries tend to be cyclical in nature and, as a result, although downturns can impact our entire company, our engineering and construction business has historically been subject to periods of very high and low demand. For example, between 2000 and 2003, there was a significant decline in activity in the Peruvian real estate and construction sectors, which consequently affected our and our competitors’ business and financial performance during that time. Factors that can affect these sectors include, among others, macroeconomic conditions, climate conditions, the level of private and
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public investment, the availability of credit, changes in laws and regulations and political and social stability. The mining and oil and gas sectors, in particular, are also driven by worldwide demand for the underlying commodities, including, among others, silver, gold, copper, oil and gas, which can be affected by such other factors as global economic conditions and geopolitical affairs. AThe decline in recent years in prices for minerals, or oil and gas can havehas had a significant impact on our clients’ exploration and production activities and, as a result, on their demand for our engineering and construction services. Accordingly, continuing adverse developments in theend-markets served by our engineering and construction business could have a material adverse effect on our financial performance.
Decreases in capital investments by our clients may adversely affect the demand for our services
Our engineering and construction business is directly affected by changes in private-sector and, to a lesser extent, public-sector investments for large-scale infrastructure projects. In addition, our engineering and construction business is directly affected by the availability and cost of financings for these projects. In the markets where we operate, investments and financings for large-scale projects have historically been influenced by macroeconomic and other factors which are beyond our control, including in the case of public-sector investment, government spending levels. As a result, we cannot assure you that clients will not choose to limit or not undertake new projects or delay, suspend or cancel existing projects. ReductionsFurther reductions in anticipated capital investments or available financing for large-scale projects could have a material adverse effect on our financial performance. Public and private investment in Peru, Colombia and Chile slowed significantly during 2016 and 2017 as a result of market conditions and, in the case of Peru, as a result of corruption investigations and political uncertainty.
Our revenues may fluctuate based on project cycles, which we may not control
The substantial majority of the revenues from our engineering and construction business is generated from project awards, the timing of which may be unpredictable and outside of our control, especially considering the highly competitive bidding processes and complex and lengthy negotiations they involve. These processes can be impacted by a wide variety of outside factors including governmental approvals, financing contingencies and overall market and economic conditions. Moreover, because a significant portion of our revenues is generated from large-scale projects, our results of operations can fluctuate quarterly or yearly depending on whether and when project awards occur and the commencement and progress of work under awarded contracts. As a result, we are subject to the risk that revenues may not be derived from awarded projects as quickly as anticipated.
Our business may be adversely affected if we incorrectly estimate the costs of our projects
We conduct our engineering and construction business under various types of contractual arrangements where costs are estimated in advance. In some of our contracts (i.e.,lump-sum, unit price and EPC), we bear the risk of some or all unanticipated cost overruns, including due to inflation or certain unforeseen events. Risks under contracts which could result in cost overruns include: difficulties in performance of our subcontractors, suppliers, or other third parties; changes in laws and regulations or difficulties in obtaining permits or other approvals; unanticipated technical problems; unforeseen increases in the cost of inputs, components, equipment, labor, or the inability to obtain these on a timely basis; delays caused by weather conditions; incorrect assumptions related to productivity or scheduling estimates; and project modifications that create unanticipated costs or delays. These risks tend to be exacerbated for longer term contracts since there is increased risk that the circumstances under which we based our original bid could change. In many of our contracts, we may not be able to obtain compensation for additional work performed or expenses incurred. Our failure to estimate accurately the resources and time required to complete a project could adversely affect our profitability. Even under our cost-plus contracts, our inability to complete projects within the estimated budget could affect our relationship with our clients and negatively impact awards of future contracts. As a result, if we incorrectly estimate the costs of our projects, our business and financial performance could be adversely affected.
We may be unable to deliver our services in a timely manner
The success of our engineering and construction business depends on our ability to meet the standards and schedules required by our clients. Significant delays that prevent us from providing our services on agreed time frames could adversely affect our client relations and reputation. Delays may occur for a number of reasons, including as a result of our inability to adequately foresee the needs of our clients; delays caused by our joint operation partners, subcontractors or suppliers; insufficient production capacity; equipment failure; shortage of qualified workers; changes to customs regulations; and natural disasters. Failure to finish construction by the
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contractual completion date set forth in the contract could result in costs that reduce our projected profit margins, including a requirement to pay daily penalties and damages. If we are unable to meet deadlines, either due to internal problems or as a result of events over which we have no control, we may lose the trust of our clients and, therefore, experience a decrease in the demand for our services. In such event, our business and financial performance could be adversely affected.
We may not be able to obtain compensation for additional work or expenses incurred as a result of client-requested change orders
Clients often determine, after commencement of the project, to change various elements of the project. Some of our contracts may also require that clients provide us with design or engineering information or with equipment or materials to be used on the project, and, in some cases, the client may provide us with deficient design or engineering information or equipment or materials or may provide the information or equipment or materials to us later than required by the project schedule. Our project contracts generally require the client to compensate us for additional work or expenses incurred due to client requested change orders or failure of the client to provide us with specified design or engineering information or equipment or materials. Under these circumstances, we generally negotiate with the client with respect to the amount of additional time required to make these changes and the compensation to be paid to us. We are subject to the risk that we are unable to obtain, through negotiation, arbitration, litigation or otherwise, adequate amounts to compensate us for the additional work or expenses incurred by us due to client-requested change orders or failure by the client to timely provide required items. A failure to obtain adequate compensation for these matters could require us to record an adjustment to amounts of revenue and gross profit that were recognized in prior periods. Any such adjustments, if substantial, could have a material adverse effect on our financial performance.
We may have difficulty obtaining performance bonds that we require in the normal course of our operations
In our engineering and construction business, it is industry practice for customers to require performance bonds or other forms of credit enhancement to secure, among other things, bids, advance payments and performance. We cannot assure you that in the future we will not encounter difficulties in obtaining such performance bonds or credit enhancements. The Peruvian market for these types of credit instruments is small; moreover, under Peruvian banking regulations, lenders are required to impose limits on the amount of credit they extend to a group of affiliated companies. Failure to provide performance bonds or credit enhancements on terms required by clients may result in our inability to compete for or win new projects.
Additional Risks Related to our Infrastructure Business
A substantial or extended decline in oil prices may adversely affect our financial performance
A substantial part of the revenues of our infrastructure business depends upon prevailing prices for oil. Historically, oil prices and markets have been volatile and are likely to continue to be volatile in the future. Moreover, global oil prices have declined significantly in recent years, with the average Brent crude prices declining from US$111.65 in 2012, US$108.64 in 2013 and US$99.02 in 2014 to US$52.46 per barrel in 2015 and US$43.55 per barrel in 2016. During 2017, the average Brent crude price was US$52.84 per barrel.Oil is a commodity and its price is subject to wide fluctuations in response to relatively minor changes in supply and demand for oil, market uncertainty, and a variety of additional factors beyond our control. Those factors include, among others: global demand and supply; political developments in producing regions; weather conditions; governmental regulations; international conflicts and acts of terrorism; the price and availability of alternative sources of energy; and overall local and global economic conditions. Moreover, lower oil prices may not only decrease our revenues on a per unit basis, but may also reduce the amount of oil we can produce economically, if any, and, as such, may have a negative impact on the reserves of the fields in which we operate. As result, our financial performance could be materially and adversely affected by declines in oil prices.
Our reserves estimates depend on many assumptions that may turn out to be inaccurate and are not subject to review by independent reserve auditors
The process of estimating oil and gas reserves is complex, although the fields where we produce oil and gas are mature (Block I has been in production for over 100 years, Block III for approximately 100 years, Block IV for approximately 95 years and Block V for over 50 years). In order to prepare theour reserves estimates presented in this annual report, we must project production rates and timing of development
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expenditures as well as analyze available geological, geophysical, production and engineering data, and the extent, quality and reliability of this data can vary. The process also requires economic assumptions about matters, such as oil prices,
drilling and operating expenses, capital expenditures, taxes, and availability of funds. Therefore, estimates of reserves are inherently imprecise. Moreover, theour reserve estimates included in this annual report have been prepared internally by our team of engineers, and have not been audited or reviewed by independent engineers. Actual future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable reserves will most likely vary from the estimates presented in this annual report, and those variances may be material. Any significant variance could materially affect the estimated reserves of the fields in which we operate.
Our return on our investment in our concessions may not meet estimated returns
Our return on any investment in a concession is based on the terms and conditions of the concession, its duration and the amount of capital invested as well as the amount of revenues collected, debt service costs, payment of penalties and other factors. For example, traffic volume at toll roads may be affected by a number of factors beyond our control, including security conditions; general economic conditions; demographic changes; fuel prices; reduction in commercial or industrial activities in the regions served by the roads; and natural disasters. Decreased traffic at Norvial could adversely affect our financial performance. Although some of our concessions allow for adjustments based on economic conditions, certain concessions provide that adjustment requests be approved only if certain limited events specified in our concession contracts have occurred. If a request of adjustment is not granted, our financial performance could be affected. Given these factors and the possibility that governmental authorities could implement policies that affect our contractual return on investment in a way that we did not anticipate, we cannot assure you that our return on any investment under any concession will meet our estimates.
Governmental entities may terminate prematurely our concessions and similar contracts under various circumstances, some of which are beyond our control
Our ability to continue operating our concessions and similar public-sector contracts depends on governmental authorities, which may revoketerminate the agreement for certain reasonsconcession or contract pursuant to the provisions set forth therein or in the relevant documentation contract and inaccordance with applicable legislation, including the failure to comply with any contractual terms (including the concessionaire’s default on debt) or applicable law. Moreover, the relevant governmental authority may terminate and/or repossess a concession at any time, if, in accordance with applicable law, itthe governmental authority determines that it is in the public interest to do so. The relevant governmental authority may also assume the operation of a concession in certain emergency situations, such as war, public disturbance or threat to national security. In addition, in the case offorce majeure, the relevant governmental authority may require us to implement certain changes to our operations. If the government terminates any of our concessions, under Peruvian law, it is generally required to compensate us for the amount of our unrecovered investment, unless the concession is revoked pursuant to applicable law or the terms of the concession which would imply a serious breach of the concession’s terms by us. Such compensation process is likely to be time consuming and the amount paid to us may not fully compensate us. We cannot assure you that we would receive such compensation on a timely basis or in an amount equivalent to the value of our investment in a concession plus lost profits.
We are exposed to risks related to the operation and maintenance of our concessions and similar contracts
The operation and maintenance requirements under our concessions could encounter delays or cause us to exceed our budgeted costs for such projects, which could limit our ability to realize the expected return on these projects, increase our operating or capital expenses and adversely affect our business and financial performance. In addition, our operations may be adversely affected by interruptions or failures in the technology and infrastructure systems that we use to support our operations, including toll road collection and traffic measurement systems. The Lima Metro in particular may be susceptible to outages due to power loss, telecommunications failures and similar events. The failure of any of our technology systems may cause disruptions in our operations, adversely affecting our profitability. While we have business continuity plans in place to reduce the adverse impact of information technology system failures on our operations, we cannot assure you that these plans will be effective. Furthermore, accidents and natural disasters may also disrupt the construction, operation or maintenance of our projects and concessions, which could adversely affect our business and financial performance.
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We may not be successful in obtaining new concessions
The market for infrastructure concessions in Peru is competitive. We compete with Peruvian and foreign companies for infrastructure concessions in Peru, some of whom may have greater financial and other resources or particular expertise pertinent to a specific concession. Moreover,Additionally, our public-sector clients may face budget deficits that may prohibit the development of infrastructure concessions, which could affect our business. We may also not be able to obtain additional concessions if the government decides not to award new concessions, due to budget constraints or policy changes or because alternative financing mechanisms are used. Recently, the awarding of concessions and the use of public-private associations in Peru have stalled, due in part to concerns related to the corruption scandal surrounding Odebrecht and its potential effect on government officials in the country. Our inability to bid for or obtain new concessions may adversely affect our business and financial performance.
The
Our contract with Petroperú S.A. (“Petroperú”) for our fuel storage at the South terminal business expiresis currently scheduled to expire in August 2014. During 2013, our fuel storage terminal business generated revenues of US$48.7 million, Adjusted EBITDA of US$16.7 million and US$17.8 million in gross profit (we are entitled to 50% of the joint operation revenues, Adjusted EBITDA or gross profit). Our results of operations will be adversely affected if this contract is not extended or renewed.2018. Moreover, we cannot assure you whether or when we will undertake any of the projects that have been awarded to us but for which contract negotiations are ongoing or stalled, in particular the concessionconcessions for theVia Expresa Sur and Via Expresa Javier Prado. We may not be able to negotiate contracts terms that are favorable to us or at all. In addition, these projects may suffer long delays or suspension as a result of political considerations or other factors.
Additional Risks Related to our Real Estate Business
We are exposed to risks associated with the development of real estate
Our real estate business is subject to the risks that generally affect the real estate industry, such as availability and prices of suitable land, environmental and zoning regulations, interruptions in supply and volatility of the prices of construction materials and equipment, and changes in the demand for real estate. Our real estate business is specifically affected by the following risks: macroeconomic conditions in Peru that may impact the growth of the real estate sector as a whole, particularly in the residential market, including an increase in unemployment or a decrease in wage levels; an increase in prevailing interest rates or lack of available credit; changes in government subsidies for affordable housing; unfavorable real estate market conditions, such as an oversupply of residential units or scarcity of suitable land in particular areas; the level of customer interest in our new projects or the sales price per unit necessary to sell the unit may be lower than expected; customer perception of the security, convenience and attractiveness of our projects and the areas in which they are located; cost overruns, many of which may be beyond our control, that exceed our estimates and affect our profit margins, including the price of labor, land, insurance, taxes and public charges; the construction and sale of units may not be completed on schedule; bankruptcy or significant financial difficulties of large industry players, which cause a loss of confidence in the industry; and restrictions on real estate development imposed by local, regional and national laws and regulations. Recently, real estate sales have slowed due to modifications by the government to a program (Bono de Buen Pagador) that encourages social interest housing sales as well as less access to credit. The occurrence of any of the above events may have a material adverse effect on our business and financial performance.
Real estate prices may not continue to rise and may decline
Real estate prices in Peru have risen significantly over the last decade. We cannot assure you that this increase in real estate prices does not represent a bubble. Real estate prices in Peru may not continue to rise or may decline significantly, particularly if financing costs rise or consumer confidence in the real estate market erodes. If real estate prices decline significantly, our business and financial performance could be materially and adversely affected.
Our business may be adversely affected if we are not able to obtain the necessary licenses and/or authorizations for our developments in due time
Real estate development requires obtaining certain licenses, authorizations and registrations. In Peru, local authorities are responsible for issuing most of the licenses that are required during the development stage, including zoning, demolition and construction licenses, among others. Currently, we have approximately 2522 real estate projects in various stages of development. WeFor some of these projects, we have not yet initiated the administrative processesproceedings before the
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appropriate authorities, or such proceduresproceedings are pending approval, for nine of these developments, including our Cuartel San Martín multi-use development project, as they are still in the early stages of development. approval.A denial or an extended delay by applicable administrative authoritiesin issuing licenses, authorizations or registrations may render land unsuitable for development, or delay the completion of planned projects, increase our costs and adversely affect our business and financial performance.
Scarcity of financing and/or an increase in interest rates could decrease the demand for real estate propertiesproperties.
The scarcity of financing and/or an increase in interest rates may adversely affect the ability or willingness of prospective buyers to purchase our real estate properties. In most cases, the purchasers of our residential or commercial properties finance at least part of the purchase price with mortgage loans. In 2013, 79%2016, approximately 95% of our residential units was sold to purchasers who received government subsidies to finance the purchase homes. An increase in interest rates, whether as a result of market conditions or government action or otherwise, may cause a decrease in the demand for our residential and commercial properties and for land development, as well as an increase of our own financing costs, which may adversely affect our business and financial performance.
We may experience difficulties in finding desirable land and increases in the price of land may increase our cost of sales and decrease our earnings
The continued growth of our real estate business depends in large part on our ability to continue to acquire land and to do so at a reasonable cost. As more developers enter or expand their operations in the Peruvian real estate sector, land prices could rise significantly and suitable land could become scarce due to increased demand or decreased supply. A resulting rise in land prices may increase our cost of sales and decrease our earnings. We may not be able to acquire suitable land at reasonable prices in the future, which may have a negative impact on our financial performance.
Changing market conditions may adversely affect our ability to sell home inventories in our land and at expected prices
There is a lag between the time we acquire land and the time that we can bring the developed properties to market. Lag time varies on aproject-by-project basis. As a result, we face the risk that demand for real estate may decline or that other developments may occur during this period that affect market conditions, and that we will not be able to dispose of developed properties or undeveloped land at expected prices or profit margins or within anticipated time frames or at all. Significant expenditures associated with investments in real estate, such as maintenance costs, construction costs and debt payments, cannot generally be reduced if changes in market conditions cause a decrease in expected revenues from our properties. Moreover, the market value of home inventories and undeveloped land can fluctuate significantly because of changing market conditions. As a result of these and other factors beyond our control, we may be forced to sell properties or land at a loss or for prices that generate lower profit margins than we anticipate.
Determinations by INDECOPI may adversely affect our ability to enforce binding contracts
In resolving consumer protection complaints in the real estate and insurance sectors, INDECOPI has made determinations against real estate developers resulting in the modification of contractual provisions applicable to purchasers, including one determination against Viva GyM, which we are currently challenging in court. Moreover, some purchasers of our real estate properties have recently filed complaints against us before INDECOPI and/or made public claims through the media seeking to obtain compensation for alleged deficiencies in housing construction as well as the modification of the terms of their contracts, which may have a negative impact on our real estate business. An increase in consumer complaints and consumer protective measures, particularly those resulting in the modification of contractual terms, may affect our ability to enforce our contracts under their original terms if we are not able to counter such claims, which in turn may have a negative impact on our real estate business.
Additional Risks Related to our Technical Services Business
Our engagements with clients may not be profitable or may be terminated or not renewed
The pricing and other terms of many of our client contracts in our technical services business necessarily require us to make estimates and assumptions at the time we enter into these contracts that could differ from actual results. These estimates reflect our best judgments regarding the nature of the engagement and our expected costs to provide the contracted services. Because of the competitive nature of the markets in which we operate, particularly in IT services, the risks related to errors in these estimates are heightened. Any increased or unexpected costs of unanticipated delays or complications in connection with the performance of these engagements, including delays caused by factors outside our control, could make these contracts less profitable or not profitable, which would have an adverse effect on our profit margin. Our exposure to this risk increases generally in proportion to the scope of services provided under a contract.
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In addition, the success of our technical services business is dependent on our ability to retain our clients. In our electricity networks services line of business in particular, Enel, which acquired Enersis from(from whom we acquired control of the business in 20112011) remains a key client; however, we cannot assure you that they will continue to use our services in the future. Also, in our IT services business in particular, we may lose clients due to their conversion toin-house service providers. We are also vulnerable to reduced volumes from our clients due to business downturns or for other reasons, which can reduce the scope and price of services we provide. A contract termination by a major client could cause us to experience a higher than expected number of unassigned employees, which would affect our profitability until we are able to reduce or reallocate our personnel. We may not be able to replace any client that elects to terminate or not renew its contract with us, and the termination ornon-renewal of a significant number of our agreements, or of our most important contracts, may adversely affect our business and financial performance. In addition,non-compliance on a contract with a public-sector client may lead to debarment from participating in government bidding processes and, consequently, inability to contract with other public-sector clients, not just for the line of business where the alleged violation took place, but also for all of our other businesses.
We may not be successful in obtaining new government contracts
We compete to provide services to the Peruvian government, and some of our competitors may have greater financial and other resources or particular expertise pertinent to a specific contract. In addition, we may not be able to obtain additional government service contracts if the government decides not to award additional public-sector road contracts or, to a lesser extent, contracts for the provision of IT and electrical networks services, due to budget constraints, policy changes or otherwise. Our inability to obtain new government contracts may adversely affect our business and financial performance.
We face risks related to the delivery of products and services by our suppliers
In the course of our IT services and electricity networks services, we depend on technology providers that may commit errors or omissions related to the delivery or the quality of equipment, services or products that are essential to our business. A significant error or failure to deliver such equipment, products or services made by one of our suppliers, particularly in our IT services business where we may have an exclusive arrangement with a specific supplier for a client, may adversely affect our business and financial performance.
Our IT security measures may be breached or compromised and we may sustain system outages
We rely on encryption, authentication technology and firewalls to provide security for confidential information, including personal data, transmitted to and by us over the internet. A breach of our network security measures could result in the misappropriation of proprietary or personal information or cause interruptions in our IT services or operations, could damage our reputation and harm our ability to deliver services to our clients. This may result in client dissatisfaction and a loss of business. Our security measures may be inadequate to prevent security breaches, and we may be required to expand significant capital and other resources to protect against the threat of security breaches and to alleviate problems caused by breaches as well as by any unplanned unavailability of our IT systems caused by other reasons, which may adversely affect our business and financial performance.
Our services may infringe upon the intellectual property rights of others
Our IT services, or third-party products we offer our clients, may infringe the intellectual property rights of third parties, and we may have infringement claims asserted against us. These claims may harm our reputation, increase our costs and prevent us from offering certain services or products. Any claims or litigation relating to intellectual property, even if ultimately decided in our favor, could be time-consuming and costly, injure our reputation or require us to enter into royalty or licensing arrangements. Any limitation on our ability to provide a service or product could result in our loss of revenue-generating opportunities and require us to incur additional expenses to develop new or modified solutions for future projects, which may adversely affect our business and financial performance.
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Risks Relating to Peru
Economic, social and political developments in Peru could adversely affect our business and financial performance
The substantial majority of our operations are conducted in Peru and depend on economic and political developments in the country. As a result, our business may be materially and adversely affected by economic downturns, currency depreciation, inflation, interest rate fluctuation, government policies, regulation, taxation, social instability, political unrest, terrorism and other developments in or affecting the country, over which we have no control. In the past, Peru has experienced periods of severe economic recession, large currency devaluation and high inflation. We cannot assure you that Peru will not experience similar adverse economic developments in the future. In addition, Peru has experienced periods of political instability that has included a succession of regimes with differing economic policies and programs. Previous governments have imposed controls on prices, exchange rates, local and foreign investments and international trade, restricted the ability of companies to dismiss employees, expropriated private-sector assets and prohibited the remittance of profits to foreign investors. We cannot assure you that the Peruvian government will continue to pursue business-friendly and open-market policies that stimulate economic growth and social stability.
Moreover, investigations against former or current government officials relating to bribery payments made by Odebrecht have, and may continue to, result in political uncertainty in Peru. On March 22, 2018, President Pedro Pablo Kuczynski presented his resignation, due to allegations of corruption for vote-buying in connection with the impeachment proceeding against him. On March 23, 2018, the Congress accepted his resignation and his first vice president, Martín Vizcarra, was sworn in as acting president. We cannot assure you whether President Vizcarra will remain in office for the remainder of the presidential term, which ends in July 2021. If President Vizcarra and the current second vice president both resign, the president of the Congress would become acting president and the Congress would call for new elections. The political instability caused by these events could affect macroeconomic conditions in the country, including currency volatility, as well as have a negative effect on our business.
A separate criminal investigation and extradition order has been initiated against former President Alejandro Toledo. An investigation has also been initiated against former President Ollanta Humala, who is currently being held by Peruvian authorities in preventive detention pending investigation.
Fluctuations in the value of the nuevo sol could adversely affect financial performance
Fluctuations in the value of the nuevo sol relative to the U.S. dollar could adversely affect Peru’s economy. In addition, fluctuations in the value of the nuevo sol to the U.S. dollar can materially adversely affect our results of operations. In 2013, 31.6%2016, 46% and 59.8%33% of our revenues were denominated in nuevos soles and U.S. dollars, respectively, whereas 67.2%55% and 24.2%22% of our costs of sales were denominated in nuevos soles and U.S. dollars, respectively. In the past, the exchange rate between the nuevo sol and the U.S. dollar has fluctuated significantly. We cannot assure you that the value of nuevo sol against other currencies will not fluctuate significantly in the future, which could adversely affect the Peruvian economy and our business, financial condition and results of operations.
In addition, although Peruvian law currently imposes no restrictions on the ability to convert nuevos soles to foreign currency and transfer foreign currency outside of the country, in the 1980s and early 1990s, Peru imposed exchange controls, including controls affecting the remittance of dividends to foreign investors. We cannot assure you that exchange controls in Peru will not be implemented in the future. The imposition of exchange controls could have an adverse effect on the economy and on your ability to receive dividends from us as a holder of ADSs.
Inflation could adversely affect our financial performance
In the past, Peru has suffered through periods of hyperinflation, which have materially undermined the Peruvian economy and the government’s ability to create conditions that support economic growth. A return to a high inflation environment would also undermine Peru’s foreign competitiveness, with negative effects on the level of economic activity and employment.
As a result of reforms initiated in the 1990s, Peruvian inflation decreased significantly from four-digit inflation during the 1980s. The Peruvian economy experienced annual inflation of 2.1% in 2010, 4.7% in 2011, 2.6% in 2012, and 2.9% in 2013, 3.2% in 2014, 4.4% in 2015, 3.2% in 2016 and 1.4% in 2017, as measured by the Peruvian Consumer Price Index (Í(Índice de Precios al Consumidor del Perú).
If Peru experiences substantial inflation in the future, our costs of sales and administrative expenses could increase which could affect our operating margins. Inflationary pressures may lead to governmental intervention in the economy, including the introduction of government policies that may adversely affect the overall performance of the Peruvian economy. For example, in response to increased inflation, the Peruvian Central Bank, which sets the Peruvian basic interest rate, may increase or decrease the basic interest rate in an attempt to control inflation or foster economic growth.
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Changes in tax laws may increase our tax burden and, as a result, negatively affect our financial performance
The Peruvian congress and government regularly implement changes to tax laws that may increase our tax burden. These changes may include modifications in our tax rates and, on occasions, the enactment of temporary taxes that in some cases have become permanent taxes. Tax reforms related to the Peruvian income tax, value added tax and tax code have recently been approved, but we are unable to estimate the impacts that these reforms may have on business. The effects of any tax reforms that could be proposed in the future and any other changes that result from the enactment of additional reforms have not been, and cannot be, quantified. However, any changes to our tax regime may result in increases in our overall costs and/or our overall compliance costs, which could negatively affect our financial performance.
Earthquakes, severe weather and other natural disasters could adversely affect our business and financial performance
Peru is located in an area that experiences seismic activity and occasionally is affected by earthquakes. For example, in 2007, an earthquake with a magnitude of 7.9 on the Richter scale struck the central coast of Peru, severally damaging the region south of Lima. Such conditions may result in physical damage to our properties and equipment, closure of one or more of our project sites and infrastructure concessions, inadequate work forces in our markets and temporary disruptions in the supply of construction materials. In addition, Peru has also experienced adverse climate conditions (due to climate change or otherwise) and adverse weather patterns, such as El Niño, an oceanic and atmospheric phenomenon that causes a warming of temperatures in the Pacific Ocean, resulting in heavy rains off the coast of Peru and potentially flooding. Poor weather conditions can have significant adverse effects on our engineering and construction activities as well as on our operation and maintenance of infrastructure assets business. Any of these factors may materially adversely affect the Peruvian economy and our business and financial performance.
A resurgence of terrorism in Peru could adversely affect the Peruvian economy and, as a result, our business and results of operations
In the past, Peru experienced severe terrorist activity that reached its peak of violence against the government and private sector in the late 1980s and early 1990s. In themid-1990s, terrorist groups suffered significant defeats, including the arrest of leaders, resulting in considerable limitations in their activities. Despite the suppression of terrorist activity, we cannot assure you that a resurgence of terrorism in Peru will not occur, or that if there is such a resurgence, it will not disrupt the economy of Peru and our business.
The Peruvian economy could be affected by adverse economic developments in regional or global markets
Financial and securities markets in Peru are influenced, to varying degrees, by economic and market conditions in regional or global markets. Although economic conditions vary from country to country, investors’ perceptions of events occurring in one country may adversely affect cash flows and securities from issuers in other countries, including Peru. For example, the Peruvian economy was adversely affected by the political and economic events that occurred in several emerging economies in the 1990s, including in Mexico in 1994, the Asian crisis in 1997, the economic crisis in Russia in 1998, the Brazilian currency devaluation in 1999 and the
Argentine crisis in 2001, which affected the market value of securities issued by companies from markets throughout Latin America. In addition, Peru’s economy continues to be affected by events in the economies of its major regional partners and in developed economies that are trading partners or that affect the global economy. The 2008-2009 global economic recession, principally driven by the subprime mortgage market in the United States, substantially affected the international financial system, including Peru’s securities market and economy. Additionally,More recently, global economic conditions, including slower growth in China, low global commodity prices, in particular oil and gas prices, and the sovereign crisis in Europe, coupled withappreciation of the slowU.S. dollar against foreign currencies have generated economic recovery in the United States,uncertainty which may reduce the confidence of foreign investors, which may causecausing volatility in the securities markets and affectaffecting the ability of companies to obtain financing globally. Any interruptionThe United Kingdom voted to exit the recoveryEuropean Union on June 23, 2016. As of the developed economies,date hereof, the continued effectsactions to be taken by the United Kingdom to effectively exit the European Union and the duration of this process are uncertain. The results of the recent global crisis,referendum in the United Kingdom have caused, and are expected to continue to cause, volatility in financial markets, which in turn could have substantial adverse effects on our business, financial condition and results of operations. On November 8, 2016, Mr. Donald J. Trump was elected president of the United States. President Trump has espoused an inclination to consider greater restrictions on free trade and limitations on immigration. Changes in social, political, regulatory and economic conditions in the United States or in laws and policies governing foreign trade could create uncertainty in the international markets and could have a negative impact on emerging market economies, including the Peruvian economy, which in turn could have a negative impact on our operations. The worsening of the current crisis in Europeglobal conditions or a new economic or financial crisis could affect Peru’s economy, and, consequently, materially adversely affect our business and financial performance.
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Risks relating to Chile, Colombia and other Latin American Countries
We face risks relating to our operations outside of Peru
Latin American economic, political and social conditions may adversely affect our business. Our financial performance may be significantly affected not only by general economic, political and social conditions in Peru but also in other markets where we operate or intend to operate, including Chile and Colombia.
These countries have suffered significant economic, political and social crises in the past, and these events may occur again in the future. We cannot predict whether changes in current administrations will result in changes in governmental policy and whether such changes will affect our business. Instability in the region has been caused by many different factors, including: significant governmental influence over local economies; substantial fluctuations in economic growth; high levels of inflation; changes in currency values; exchange controls or restrictions on expatriation of earnings; high domestic interest rates; wage and price controls; changes in governmental economic or tax policies, including retroactive changes; imposition of trade barriers, including import duties on information technology equipment; electricity rationing; liquidity of domestic capital and lending markets; unexpected changes in regulation; expropriations; and high levels of organized crime, terrorism and social conflicts, as well as overall political, social and economic instability. More recently, tax and other governmental reforms in Chile have led to concerns about potential negative effects on the Chilean economy, and the decline in global oil prices has also led to concerns about potential negative effects on the Colombian economy.
Risks Relating to our ADSs
We have identified material weaknesses in our internal control over financial reporting, and if we cannot maintain effective internal controls or provide reliable financial and other information in the future, investors may lose confidence in the reliability of our consolidated financial statements, which could result in a decrease in the value of our ADSs
Based on the assessment of our internal control over financial reporting as of December 31, 2016, management has concluded that, as of such date, our internal control over financial reporting was not effective at the reasonable assurance level due to control deficiencies that constituted material weaknesses. These material weaknesses consisted of:
These material weaknesses resulted in adjustments to the accounting for revenue and accounts receivable and a significant number of adjustments and reclassifications in other accounts receivable owed to dismissed personnel, prepaid expenses, acquired assets and liabilities as part of a step acquisition, the classification calculation of the exchange gains/losses related to loans with related entities, and intercompany transactions. Additionally, these material weaknesses could result in other misstatements in our financial results and disclosures, which could result in a material misstatement to our annual or interim consolidated financial statements not being prevented or detected. Because of these material weaknesses, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2016, based on criteria in Internal Control-Integrated Framework (2013) issued by the COSO.
For more information, see “Item 15. Controls and Procedures.” A “material weakness” is a deficiency, or combination of deficiencies, in internal controls such that there is a reasonable possibility that a material misstatement in financial statements will not be prevented or detected in a timely basis.
We are in the process of implementing measures to address these material weaknesses. We may not be able to remediate these identified material weaknesses. Moreover, we may in the future discover other areas of our internal controls that have material weaknesses or that need improvement, particularly with respect to businesses that we acquire.
Any failure to maintain an effective internal control over financial reporting, or implement required new or improved controls, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our consolidated financial statements, which could result in a decrease in the value of our ADSs.
The market price of our ADSs may fluctuate significantly, and you could lose all or part of your investment
Volatility in the market price of our ADSs may prevent you from being able to sell your ADSs at or above the price you paid for them. The market price and liquidity of the market for our ADSs may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, among others: actual or anticipated changes in our results of operations, quarterly fluctuations, or failure to meet expectations of financial market analysts and investors; investor perceptions of our prospects or our industries; operating performance of companies comparable to us and increased competition in our industries; new laws or regulations or new interpretations of laws and regulations applicable to our business; general economic trends in Peru; catastrophic events, such as earthquakes and other natural disasters; and developments and perceptions of risks in Peru and in other countries.
Substantial sales of ADSs or common shares could cause the price of our ADSs or common shares to decrease
Significant shareholders hold a large number of our common shares. These securities are eligible for sale. The market price of our ADSs could decline significantly if we or our significant shareholders sell securities in our company or the market perceives that we or our significant shareholders intend to do so.
We may raise additional capital in the future through the issuance of equity securities, which may result in dilution of the interests of our shareholders
We may need to raise additional capital and may opt for obtaining such capital through the public or private placement of debt securities or securities convertible into our common shares. In the event of a public or private debt financing, or the financing through the issuance of securities convertible into our common shares, such additional funds may be obtained with the exclusion of the preemptive rights of our shareholders, including the investors in our common shares, which may dilute the percentage interests of investors in our common shares.
No shareholder or group of shareholders holds a majority of our common shares
Our directors and senior management, directly and indirectly, own approximately 31.08% of our common shares as of December 31, 2013, and our Chairmanformer chairman beneficially owns directly and indirectly, 17.81% of our common shares.outstanding share capital. No shareholder or group of shareholders currently owns a majority of our common shares. In addition, there is no shareholders’ agreement among any of our significant shareholders. Accordingly, no shareholder or group of shareholders may on its own determine the outcome of substantially all matters
submitted for a vote to our
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shareholders. In addition, a new investor or group of investors may in the future seek to acquire a significant stake in, or control of, our company, subject to compliance with Peruvian tender offer requirements which require that a tender offer be made to all shareholders upon, among other matters, acquisition of 25%, 50% and 60% of our voting rights. If a new investor or group of investors acquires a significant stake in, or control of, our company, we cannot assure you that such investor or group of investors will not seek to change how our business is managed.
Holders of ADSs may be unable to exercise voting rights with respect to our common shares underlying the ADSs at our shareholders’ meetings
As a holder of ADSs representing common shares being held by the depositary in your name, you may exercise voting rights with respect to the common shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. Holders of our common shares will receive notice of shareholders’ meetings through publication of a notice twenty-five25 days in advance, in accordance with Peruvian law, in the official gazette in Peru, a Peruvian newspaper of general circulation and the website of the Peruvian Securities Commission, and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. ADS holders will not receive notice directly from us. Instead, pursuant to the deposit agreement, we will notify the depositary, who will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which voting instructions may be given. To exercise their voting rights, ADS holders must instruct the depositary how to exercise the voting rights for the common shares which underlie their ADSs. Due to these additional procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of our common shares.
Holders of ADSs also may not receive voting materials in time to instruct the depositary to vote the common shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADS or for the manner of carrying out such instructions, unless such failure can be attributeattributed to gross negligence, bad faith or willful misconduct on the part of the depositary or its agents. Accordingly, holders of ADSs may not be able to exercise voting rights, and they will have little, if any, recourse if the underlying common shares are not voted as requested.
Our shareholders’ ability to receive cash dividends may be limited
Our shareholders’ ability to receive cash dividends may be limited by the ability of the depositary to convert cash dividends paid in nuevos soles into U.S. dollars. Under the terms of our deposit agreement with the depositary for the ADSs, the depositary will convert any cash dividend or other cash distribution we pay on the common shares underlying the ADSs into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If this conversion is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADR holders to whom it is possible to do so. If the exchange rate fluctuates significantly during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the dividend distribution.
Holders of ADSs may be unable to exercise preemptive or accretion rights with respect to the common shares underlying their ADSs
Under Peruvian corporate law, if we issue new common shares as part of a capital increase, unless otherwise agreed to by holders of 40% of our subscribed voting common shares and, provided that such capital increase does not favor, directly or indirectly, certain shareholders to the detriment of others, our shareholders will generally have the right to subscribe to a proportional number of common shares of the class held by them to maintain their existing ownership percentage, which is known as preemptive rights. In addition, shareholders are entitled to the right to subscribe for the unsubscribed common shares at the end of a preemptive rights offering, on a pro rata basis, which is known as accretion rights. You may not be able to exercise the preemptive or accretion rights relating to common shares underlying your ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the common shares relating to these preemptive and accretion rights, and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, you may receive only the net proceeds from the sale of your preemptive and accretion rights by the depositary or, if the preemptive and accretion rights cannot be sold, they will be allowed to lapse. As a result, U.S. holders of our ADSs may suffer dilution of their interest in our company upon future capital increases.
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We are entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement without the prior consent of the ADS holders
We are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement without the prior consent of the ADS holders. Any change related to an increase in deposits or charges for book-entry securities services or any modification that might hinder the rights of the ADS holders will be effective within 30 days after the ADS holders have received notice of such change or modification and such holders will have no right to any compensation whatsoever.
If we are unable to implement and maintain effective internal control over financial reporting in the future, our results of operations and the price of our ADSs could be adversely affected
We are not currently required to comply with Section 404 of the U.S. Sarbanes-Oxley Act of 2012 and, therefore, we have not made a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Section 404 of the U.S. Sarbanes-Oxley Act of 2002 will require us, for our fiscal year ending December 31, 2014 and subsequent years, to document and test the effectiveness of our internal control over financial reporting in accordance with an established internal control framework and to report on our conclusion as to the effectiveness of our internal controls. It will also require an independent registered public accounting firm to test our internal control over financial reporting and to report on and attest to the effectiveness of our internal control over financial reporting. Any delays or difficulty in satisfying our requirements could adversely affect our future results of operations and the price of our ADSs. Moreover, it may cost us more than we expect to comply with these control- and procedure-related requirements. Failure to comply with Section 404 could potentially subject us to sanctions or investigations by the SEC, the New York Stock Exchange or other regulatory authorities.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified opinion regarding the effectiveness of our internal control over financial reporting as of December 31, 2014 and in subsequent years as required by Section 404, investors could lose confidence in the reliability of our consolidated financial statements, which could result in a decrease in the value of our ADSs.
As a result of errors we found in our consolidated statement of cash flow for the year ended December 31, 2012, we identified a material weakness in our internal control over financial reporting and restated our consolidated statement of cash flow. These errors did not have any effect on the net increase (decrease) in cash for the year ended December 31, 2012. Furthermore, all underlying transactions were properly recorded in the 2012 statement of financial position, income statement, statement of comprehensive income and statement of changes in shareholders’ equity, which did not need to be revised or restated. A “material weakness” is a deficiency, or combination of deficiencies, in internal controls such that there is a reasonable possibility that a material misstatement in financial statements will not be prevented or detected in a timely basis. We implemented certain measures to address this material weakness, including: enhancing the IFRS knowledge base of our accounting personnel through additional training; additional training for our accounting personnel specifically in the preparation of cash flow statements and completing the implementation of Hyperion, an automated consolidation system. We may in the future discover other areas of our internal controls that need improvement, particularly with respect to businesses that we acquire.
Peru has different corporate disclosure and accounting standards than those you may be familiar with in the United States
Financial reporting and securities disclosure requirements in Peru differ in certain significant respects from those required in the United States. There are also material differences among IFRS, Peruvian GAAP and U.S. GAAP. Accordingly, the information about us available to you will not be the same as the information available to holders of shares issued by a U.S. company. In addition, the Peruvian Securities Market Law, which governs open or publicly listed companies, such as us, imposes disclosure requirements that are more limited than those in the U.S. in certain important respects. Although Peruvian law imposes restrictions on insider trading and price manipulation, applicable Peruvian laws are different from those in the United States, and the Peruvian securities markets are not as highly regulated and supervised as the U.S. securities markets.
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Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the New York Stock Exchange, which may limit the protections afforded to investors
We are a foreign private issuer within the meaning of the New York Stock Exchange corporate governance standards. Under New York Stock Exchange rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange. We currently follow certain Peruvian practices concerning corporate governance and intend to continue to do so. Accordingly, holders of our ADSs will not have the same protections afforded to shareholders of companies that are subject to all New York Stock Exchange corporate governance requirements.
For example, the New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company.” Under Peruvian corporate governance practices, a Peruvian company is not required to have a majority of independent members on its board of directors. The listing standards for the New York Stock Exchange also require that U.S. listed companies, at the time they cease to be “controlled companies,” have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Peruvian law, a Peruvian company may, but is not required to, form special governance committees, which may be composed partially or entirely ofnon-independent directors. In addition, New York Stock Exchange rules require the independentnon-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian law.
The New York Stock Exchange’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In July 2002, the Peruvian Securities Commission and a committee comprised of regulatory agencies and associations prepared and published a list of suggestednon-mandatory corporate governance guidelines called the “Principles of Good Governance for Peruvian Companies.” Although we have implemented these measures, we are not legally required to comply with the corporate governance guidelines, only disclose whether or not we are in compliance.
Minority shareholders in Peru are not afforded equivalent protections as minority shareholders in other jurisdictions and investors may face difficulties in commencing judicial and arbitration proceedings against our company or the controlling shareholder
Our company is organized and existing under the laws of Peru. Accordingly, investors may face difficulties in serving process on our company, our officers and directors or our significant shareholders in the United States of certain other jurisdictions, and in enforcing decisions granted by courts located in other jurisdictions against our company, our officers and directors or our significant shareholders that are based on securities laws of jurisdictions other than Peru.
In Peru, there are no proceedings to file class action suits or shareholder derivative actions with respect to issues arising between minority shareholders and an issuer, its controlling shareholders or directors and officers. Furthermore, the procedural requirements to file actions by shareholders differ from those of other jurisdictions, such as in the United States. As a result, it may be more difficult for our minority shareholders to enforce their rights against us, our directors, officers or significant shareholders as compared to the shareholders of a U.S. company. The deposit agreement provides that the depositary has no obligation to commence or become involved in any judicial proceedings and any other legal actions relating to the ADSs or the deposit agreement, either on behalf of the ADS holders or on behalf of any other person.
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Judgments of Peruvian courts with respect to our common shares will be payable only in nuevos soles
If proceedings are brought in the courts of Peru seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other than nuevos soles. Under Peruvian exchange control limitations, an obligation in Peru to pay amounts denominated in a currency other than nuevos soles may be satisfied in Peruvian currency only at the exchange rate, as determined by the Peruvian Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not affordnon-Peruvian investors with full compensation for any claim arising out of or related to our obligations under the ADSs.
If securities or industry analysts publish unfavorable research about our business or if they cease to follow our business, the price and trading volume of the ADSs could decline
The trading market for the ADSs will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades the ADSs or publishes unfavorable research about our business, the price of the ADSs would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for the ADSs could decrease, which could cause the price and trading volume of the ADSs to decline.
INFORMATION ON THE COMPANY |
A. History and Development of the Company
Graña y Montero has been operating in Peru since 1933 and it is listed on the Lima Stock Exchange since 1997 and the New York Stock Exchange since 2013. Set forth below are key highlights in our company’s history:
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In 2012 and 2013, Graña y Montero acquired 74.0% and 6.4%, respectively, of Ingeniería y Construcción Vial y Vives S.A. (“Vial y Vives”), an engineering and construction company specializing in the Chilean mining sector. In August 2013, we acquired 86.0% of DSD Construcciones y Montajes S.A. (“DSD Construcciones y Montajes”), a Chilean engineering and construction company specialized in providing services to the energy, oil and gas, cellulose and mining
sectors in Chile and Latin America. In July 2014, our subsidiary Vial y Vives merged with DSD Construcciones y Montajes to form Vial y Vives—DSD S.A. (“Vial y Vives—DSD”), through our subsidiary GyM Chile SpA, we hold an 86.2% interest in Vial y Vives—DSD. As of the date of this annual report, we hold a 94.5% interest in Vial y Vives—DSD. |
Graña y Montero, S.A.A. was incorporated in 1996 and is a publicly-held corporation (sociedad anónima abierta) organized under the laws of Peru. Our principal executive office is located at Avenida Paseo de la República 4667, Lima 34, Peru, and our main telephone number is +511-213-6565.+511-213-6565. Our website address iswww.granaymontero.com.pe. Information contained on, or accessible through, our website is not incorporated in this annual report, and you should not consider any such information part of this annual report.
For information on our organizational structure, see “Item 4.C. Information on the Company—Company – Organizational Structure.”
For information on our capital expenditures and divestitures, see “Item 5.B. Operating and Financial Review and Prospect—Liquidity and Capital Resources—Capital Expenditures.”
Overview
We are the largest engineering and construction company in Peru as measured by revenues during 2012,2016, and one of the largest publicly-traded engineering and construction company in Latin America as measured by market capitalization as of December 31, 2013,2016, with strong complementary businesses in infrastructure, real estate and technical services.
With more than 80 years of operations, we have a long track record of successfully completing the engineering and construction of many of Peru’s landmark private- and public-sector infrastructure projects, such as the Lima International Airport and the Peru LNG gas liquefaction plant, and we believe we have earned a reputation for operational excellence in our markets. We have developed a highly-experienced management team, a talented pool of more than 3,8002,900 engineers and a skilled work force that share our core corporate values of quality, professionalism, reliability and efficiency. As a company listed on the Lima Stock Exchange since 1997 and the New York Stock Exchange since 2013, we also abide by the highest corporate governance standards in Peru.
Beginning in themid-1980s, we leveraged our engineering and construction expertise into complementary lines of business, such as the development, ownership, operation and maintenance of infrastructure assets (including the Lima Metro, Peru’s only urban railway system), real estate development, and the provision of technical services primarily to infrastructure-related assets. We believe our business mix creates significant opportunities across our lines of business, generates more stable revenues and earnings on a consolidated basis, and provides additional financial stability to our company.
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As a result of our performance in Peru, we have been requested by clients to undertake the engineering and construction of large and complex projects outside our home market, such as the Pueblo Viejo gold mine for Barrick Gold in the Dominican Republic. Through the successful execution of those projects, we have developed operational experience in other Latin American countries. We have further expanded our activities in other key markets of the region through the acquisition of businesses with solid positions in those markets. In February 2011, we acquired a controlling interest in Compañía Americana de Multiservicios (CAM), which is headquartered in Chile and provides technical services to power utility companies in Chile, Peru Colombia and Brazil.Colombia. In October 2012, we acquired a controlling interest in Vial y Vives, an engineering and construction company specializing in the Chilean mining sector, thus consolidating our strong positionand in August 2013, we acquired a controlling interest in DSD Construcciones y Montajes, a Chilean engineering and construction company specialized in providing services to the energy, oil and gas, cellulose and mining sectors in Chile and Latin America. In December 2014, we acquired a controlling interest in Morelco, an engineering and construction company specialized in the Latin American mining E&C sector. We expect to continue to selectively undertake projectsColombian oil and pursue acquisitionsgas and strategic alliances in Latin America to further expand our company outside Peru, with a particular focus on Chile and Colombia.other energy sectors.
The tables below show the growth in our backlog, revenues and Adjusted EBITDA from 20102012 to 2013.
2016.
Backlog (in millions of US$ | Revenues (in millions of S/ | EBITDA (in millions of S/ |
During 2013,2016, we generated revenues of S/.5,967.3.6,469.6 million (US$ 2,134.21,925.5 million), Adjusted EBITDA of S/.1,030.6.(64.4) million (US$368.6(19.2) million), and net profit of S/.412.6.(451.6) million (US$147.6(134.4) million) including net profit attributable to controlling interest of S/.320.4.(509.7) million (US$114.6(151.7) million). From 2010 through 2013, our revenues and Adjusted EBITDA grew at a compounded annual growth rate (CAGR) of 33.6% (27.5% excluding acquisitions) and of 21.6% (16.1% excluding acquisitions), respectively.
Our Strengths
We believe our company’s strengths provide us with significant competitive advantages. Our principal strengths include the following:
Leader in fast-growinggrowing markets
We are the largest engineering and construction company in Peru as measured by revenues during 2013,2016, and one of the largest publicly-traded engineering and construction company in Latin America as measured by market capitalization as of December 31, 2013.2016. Peru is undergoing a period of unparalleled development, with over 5.6%4.3% average annual real GDP growth between 2009 and 20132017 and significant private and public investments in the mining, power, oil and gas, transportation, real estate and other infrastructure sectors. We have completed some of the most complex and large-scale infrastructure projects in the country, and we believe we are an integral part of Peru’s ongoing transformation with projects that contribute to the overall economic development of the country. We believe our expertise, reputation, scale and operational capabilities in Peru position us to take advantage of the country’s favorable economic conditions and growth opportunities. We believe we are also a significant infrastructure concessionaire in Peru, the largesta large apartment building developer in Peru, and a leading IT company in Peru.
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We believe we are well-positioned to leverage our platform in the Peruvian market to continue to grow our business in other countries in Latin America, primarily Chile and Colombia. Throughout our history, we have undertaken complex E&C projects in the region and have recently completed acquisitions in Chile.Chile and Colombia. Moreover, we believe we are one of the leading mining E&C companies in Latin America.
Long-standing track record and reputation for operational excellence
During our more than80-year history, we have focused on the successful andon-time execution of complex projects, through our “deliver before deadline” and “lean construction” initiatives. Our extensive experience has allowed us to gain deep market knowledge and expertise, which help us better serve our clients and manage risks in our contractual arrangements. We believe we have a reputation for operational excellence, and were named among the top ten10 most admired companies in Peru through a survey
conducted by PwC in 2012.2012, 2013, 2014, 2015 and 2016. In addition, KPMGMerco ranked us seventh out of 100 companies with the best reputations in Peru in 2012.2012, 2013, 2014, 2015 and 2016. We believe that our track record and the reputation we have earned in our markets for operational excellence are key factors in winning new and repeat business, as well as in partnering with strategic industry players and attracting top talent to our company.
Complementary lines of business which generate more stable cash flows and create additional business opportunities across our segments
We have expanded our company by developing complementary lines of business, many of which have become leaders in their respective markets. These lines of business create significant business opportunities across our segments, enabling us to capture a greater share of infrastructure spending, and also generate cost synergies. One example is Norvial, a toll-road concession operated within our Infrastructure segment. In addition to managing the concession, we used our E&C segment to design and construct the expansion of the highway and, once constructed, we are now using our Technical Services segment to operate and maintain the highway. In addition to increasing our levels of consolidated activity, many of these lines of business enable us to achieve more stable cash flows through medium and long-term client service contracts and concessions, which counter in part the cyclicality of the engineering and construction business.
High growth and profitability with strong financial positionSignificant backlog
Our operations have grown significantly over the last several years, with our consolidated revenues and Adjusted EBITDA growing at CAGR of 33.6% (27.5% excluding acquisitions) and 21.6% (16.1% excluding acquisitions) from 2010 to 2013, respectively. We have achieved this growth with low levels of indebtedness, relying mainly on cash flow from operations to fund our growth. As of December 31, 2013, our net debt to Adjusted EBITDA ratio was (0.2)x, with net debt of S/(163.6) million (US$(58.5) million). In 2013, we achieved an Adjusted EBITDA margin (i.e., Adjusted EBITDA as a percentage of revenues) of 17.3%.
Robust backlog and significant additional potential projects
We have a robust backlog which amounted to US$3,935.03,137.4 million as of December 31, 2013.2016. We believe that our backlog, which as of December 31, 20132016 represented approximately 1.9x1.6x of our related 20132016 revenues, provides visibility as to our potential for growth in the coming years, although backlog may not always be an accurate indicator of future revenues. See “Item 3.D. Key Information—Risk Factors—Risks Related to our Company—Our backlog and our ratio of historical backlog to revenues may not be reliable indicators of future revenues or profit.” Moreover, we believe our backlog is strategically targeted to our key end-markets. Approximately, 85.9% of our backlog as of December 31, 2013 is comprised of contracts with the private sector, strategically targeted to our key end-markets such as mining, infrastructure, power, energy and real estate. In addition toApproximately, 75.8% of our backlog we also have significant potential projects in our pipeline. We have already been awarded concessions foras of December 31, 2016 is comprised of contracts with the Via Expresa Javier Prado project and the Chavimochic Irrigation project, for which we are currently in the contract negotiation stage. We are also in the process of obtaining the necessary licenses to begin construction of our large multi-use real estate development project at Cuartel San Martín.private sector. Furthermore, we continuously evaluate bidding on contracts arising from the significant ongoing private and public investments in Latin America.
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Proven ability to create and grow businesses organically and through acquisitions
We have proven our ability to extend our engineering and construction capabilities into complementary lines of business in a diverse range of industries, some of which began as innovativestart-ups in response to client needs. For example, in 1984, we created a new IT business division, which grew and evolved through the years to become the second largest IT company in Peru. Additionally, we also have successfully acquired and integrated new businesses. In February 2011, we acquired a controlling interest in CAM, our electricity services business headquartered in Santiago, Chile, and have integrated its operations and personnel into our company, while improving its operational performance. In October 2012, we acquired Vial y Vives, an engineering and construction company specializing in the Chilean mining sector which complements our leading E&C practice in the mining sector. More recently, inIn August 2013, we acquired a controlling interest in DSD Construcciones y Montajes, a Chilean engineering and construction company whose main focus is electromechanical works and assemblies in construction projects related to oil refineries, pulp and paper, power plants and mining plants.Weplants. More recently, in December 2014 we acquired a controlling interest in Morelco, an engineering and construction company specialized in the Colombian oil and gas and other energy sectors. We believe that our proven ability to create new businesses, develop businesses organically and acquire and successfully integrate new businesses into our platform is a key competitive advantage as we continue to expand our operations in Latin America.
Highly experienced management, talented engineers and skilled workforce, with shared core corporate values
Our senior management team has an average tenure within our company of approximately 20 years. In March 2014, Euromoney recognized us as the best managed company in Latin America, the first time a Peruvian company has received this recognition. In addition to this award, we also were recognized as the best managed company in Peru, best managed company in the construction and cement sectors in Latin America, and the most transparent accounts in the region. We motivate our management through performance-based compensation, which align their interests with those of our shareholders. In addition, through our efforts to attract, train and retain our workforce, we have built a talented team of employees, including more than 3,8002,900 engineers. We also have access to a network of approximately 62,000156,000 manual laborers throughout Peru that can supplement our workforce when required by our construction pipeline. Thanks to our extensive and talented team, we have the capability and scale to undertake large and complex projects in Peru and elsewhere.
We have been listed on the Lima Stock Exchange since 1997. We abide by the highest corporate governance standards in Peru, and we are one of only 19 companies in Latin America, and one of only three in Peru, that form part of the Company’s Circle, which recognizes companies for their high corporate governance standards and is sponsored by the International Finance Corporation (IFC), the Organization for Economic Co-operation and Development (OECD) and the Global Corporate Governance Forum. In addition, we have developed a strong corporate culture based on principles of high-quality, professionalism, reliability and efficiency. We employ rigoroussafeguard the health and safety standardsof our collaborators and proceduresof all the persons participating in our operations and emphasize environmental sustainabilityservices. To that end, we provide safe work conditions, we manage risks in a timely manner and social responsibility.we promote a culture of prevention, starting from the leadership and commitment of our senior management. In 2013, our engineering and construction subsidiary GyM2016, we had an accident incidence rate of 0.41,0.4, calculated over 89,660,83686,303.933 hours worked. In 2012, GyM had an accident incidence rate of 0.29, calculated over 64,202,006 hours worked. In 2011, GyM had an accident incidence rate of 0.52, calculated over 52,979,699 hours worked, which was significantly lower than that of private construction companies in the United States for the year, which had an average of 3.90, as reported by the Bureau of Labor Statistics of the U.S. Department of Labor.
Our Strategies
In response to the impact of our association with Odebrecht in certain projects in Peru and the termination of the GSP pipeline concession, we are implementing a strategic action plan, as described in “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
Our vision is to be “the most reliable engineering services company in Latin America.” Our key long-term strategies to achieve this vision include the following:
Be the contractor of choice for large-scale and complex projects in Peru and other key Latin American markets
We intend to enhance our position as a contractor of choice for large-scale and complex infrastructure projects in Peru and other key Latin American markets, by (i) utilizing the scale, expertise and market knowledge we have accumulated during our more than80-year operating history to strengthen and expand our E&C segment; (ii) maintaining and
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further developing our long-standing client relationships based on our ongoing pursuit of operational excellence; (iii) continuing to strategically partner with global industry leaders, such as Bechtel and Fluor, with complementary capabilities for specific projects that we undertake; and (iv) leveraging our expertise in the mining sector with a view to becoming the premier mining services provider throughout Latin America.
Further expand our infrastructure-related businesses to increase activity across our business segments and generate more stable cash flows
We plan to continue to expand our infrastructure-related businesses to capitalize on private and public investments in Peru, including in toll roads, airports, ports, railroads, hospitals, water utility companies, and other power and oil and gas infrastructure assets. In addition to providing more recurring and predictable cash flows, our Infrastructure segment generates additional business opportunities for our E&C and Technical Services segments.
Maintain highly capitalized balance sheet
We seek to maintain a prudent and sustainable capital structure and a strong financial position to allow us to capitalize on additional business opportunities as they arise. WeWith the renegotiation and eventual repayment of debt related to GSP, we intend to remainregain our financially disciplined approach by significantly limiting substantially all our debt incurrence to identified projects with repayment sources.
Selectively pursue international opportunities, focusing on Chile and Colombia
We intend to leverage the capabilities and experience we have in Peru, particularly providing engineering and construction services to the mining, oil and gas and infrastructure end-markets, to continue evaluating and selectively pursuing opportunities in other markets. We expect to focus our efforts primarily on Chile and Colombia, which we believe offer attractive opportunities in these end-markets. We are currently in discussions in connection with potential opportunities in line with our strategy, although we cannot assure you that we will be able to take advantage of these opportunities. We intend to evaluate other international opportunities on a case-by-case basis.
Continue fostering our core corporate values throughout the organization
We will continue to instill our core corporate values throughout our organization, while also transmitting these values to surrounding communities. We will continue to attract and develop our human capital through various training, mentorship and reward programs in order to maintain our position as the best company in Peru to learn and work in the engineering and construction field. We also seek to promote social welfare by fostering relationships with the communities that surround our areas of operation. In 2012, the Inter-American Federation of the Construction Industry recognized us for our corporate strategy and promotion of citizenship with the Latin American Social Responsibility award. We strive to promote our corporate values to strengthen our organization and improve our performance as well as to have a positive impact on the markets where we operate.
Engineering and Construction
Our E&C segment has an a more than80-year track record and is the largest player in Peru as measured by revenues during 2013,2016, according to our estimates based on Peru: The Top 10,000 Companies 2013,2016 undertaking a broad range of activities relating to: engineering; civil construction; electromechanic construction; building construction; and contract mining. We provide E&C services for a diverse range ofend-markets, focusing on the mining, power, oil and gas, transportation, real estate and other infrastructure sectors. The following chart sets forth our 20132016 revenues byend-market.
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20132016 E&C Revenues byEnd-Market
We mainly undertake private-sector projects, particularly projects with a high degree of complexity, which enable us to develop innovative and tailor-made solutions to our clients. We provide our clients with an integral service offering by leveraging our various areas of expertise and engaging in virtually all aspects of project execution, thereby capturing a larger share of investment projects.
In 1999, we began adopting the “lean construction” philosophy as a pillar in our design and construction projects. “Lean construction” aims to create value for customers by better understanding and considering clients’ needs to improve project design, functionality and cost optimization. “Lean construction” also provides techniques and tools that significantly reduce construction waste by improving planning reliability, process design, coordination and collaboration.
Although we primarily undertake engineering and construction projects in Peru, our clients often ask us to undertake the engineering and construction of large and complex projects in other countries, such as Mexico, the Dominican Republic, Bolivia, Panama and Chile. As a result, we have developed extensive experience executing projects throughout Latin America. To further capitalize on our capabilities and expertise, we have decided to expand our activities into other key markets, such as Chile and Colombia, which arehave been benefitting from high levels of investment and are aligned with our areas of strategic focus. In 2013,2016, approximately US$162.8254 million (S/.853.4 million) of our E&C revenues were derived from international projects outside of Peru.
The acquisition of Vial y Vives – DSD has solidified our presence in Chile. While we have been undertaking projects in Chile since 1995, such as the construction of the transmission line and crusher of the Caserones mine for SCM Minera Lumina Copiapo, we believe we will benefit from Vial y Vives’the established and long-lasting presence in the country.country of both Vial y Vives and DSD Construcciones y Montajes. Moreover, through the acquisition in December 2014 of Morelco, an engineering and construction company focused on the oil and gas and other energy sectors, we established our presence in the Colombian market.
Given the prevalence of mining operations in our principal markets—Peru and Chile together are estimated to havehas projected investment flows of approximately US$9641 billion between 20132016 and 2021 and Chile as projected investment flows of approximately US$49 billion between 2016 and 2025, according to the Peruvian MinistryLima Chamber of EnergyCommerce and Mines, Cochilco, and APOYO Consultoria—respectively—we have significant expertise with respect to specialized engineering and construction services for the mining sector. As a result, we believe we are one of the leading mining construction companies in Latin America and we leverage this expertise both within our principal markets as well as to selectively undertake complex projects across the region.
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The table below sets forth selected financial information for our E&C business segment.
As of and for the year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$) | |||||||||||||||
Revenues | 2,784.2 | 3,524.6 | 4,075.1 | 1,457.5 | ||||||||||||
Adjusted EBITDA | 315.0 | 387.9 | 546.0 | 195.3 | ||||||||||||
Adjusted EBITDA margin | 11.3 | % | 11.0 | % | 13.4 | % | ||||||||||
Net profit | 166.4 | 188.5 | 256.9 | 91.8 | ||||||||||||
Net profit attributable to controlling interest | 153.1 | 165.1 | 211.9 | 75.8 | ||||||||||||
Backlog (in millions of US$)(1) | 1,839.6 | 2,925.4 | 3,044.0 | |||||||||||||
Backlog/revenues ratio(1) | 1.8x | 2.1x | 2.1x |
As of and for the year ended December 31, | ||||||||||||||||
2014 | 2015 Restated(1) | 2016(2) | 2016(2) | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$)(3) | |||||||||||||||
Revenues | 5,035.7 | 5,829.4 | 4,159.5 | 1,238.0 | ||||||||||||
Net profit | 193.6 | (121.8 | ) | (93.4 | ) | (27.8 | ) | |||||||||
Net profit (loss) attributable to controlling interest | 164.1 | (131.2 | ) | (87.7 | ) | (26.1 | ) |
(in millions of US$)(3) EBITDA EBITDA margin Backlog (in millions of US$)(4) (5) Backlog/revenues ratio(4) (5) As of and for the year ended December 31, 2014 2015 Restated(1) 2016(2) 2016(2) (in millions of S/., except as indicated) 459.5 220.1 106.1 31.6 9.1 % 3.8 % 2.6 % 2.6 % 2,835.3 3,129.4 1,977.9 1,977.9 1.7x 1.8x 1.6x 1.6x
(1) | Includes results from our Morelco acquisition beginning in January 2015. |
(2) | For the effects on our results of operations and backlog for 2016 resulting from the termination of the GSP gas pipeline concession, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.” |
(3) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
(4) | For more information on our backlog, see “—Backlog.” Backlog is calculated as of the last day of the applicable year. Revenues are calculated for such year and converted into U.S. dollars based on the exchange rate published by the SBS on December 31 of the corresponding year. |
(5) | In the third quarter of 2015 we added US$1,067 million in backlog from our participation in the engineering procurement and construction contract for the southern gas pipeline project of GSP. When the GSP gas pipeline concession was terminated on January 24, 2017, our E&C backlog as of December 31, 2016 decreased by US$855 million, representing 30.2% of our E&C backlog. |
Principal Engineering and Construction Activities
The following chart sets forth our 20132016 revenues by E&C activity.
20132016 E&C Revenues by Activities
Engineering Services
Our engineering activities consist of a broad range of services relating to engineering, supervision, geometrics and environmental consultancy, includingpre-investment studies,pre-feasibility studies, process design, project development, supervision of executive designs and construction management, including construction site reviews.
Civil Construction
Our civil construction activities focus on infrastructure projects, including earthworks, the construction of roads, highways, transportation facilities (e.g., mass transit systems such as the Lima Metro), dams, hydroelectric plants, water supply and sewage projects, excavation, structural concrete construction and tunneling. Our civil construction projects are generally large and complex, requiring the use of large construction equipment and sophisticated managerial and engineering techniques.
Electromechanic Construction
Our electromechanic construction activities include the construction and assembly of concentrator plants, pipelines, transmission lines, gas and oil networks, and substations, predominantly for energy projects and industrial plants.
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Building Construction
Through our building construction activities, we respond to the demands of the Peruvian real estate market with a focus on the construction of hotels, affordable housing projects, residential buildings, office buildings, shopping centers, and industrial plants.
Contract Mining
Our contract mining activities consist of mine planning, development, construction works, operation (including earthworks, blasting, loading and hauling ore) and mine closure.
Major Projects
We have played an active role in the development of the infrastructure sector in Peru, as well as other countries in Latin America, including the construction of roads, hotels, hospitals, shopping centers, housing developments, concentrator plants, hydroelectric power plants, thermal power plants and transmission lines as well as water supply and sewage projects, irrigation projects and dam building, among others. Throughout our history, we have participated, on our own or through minority or majority interests in joint operations, in a diverse range of landmark projects, including the following:
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We currently have a diversified portfolio of ongoing projects, on our own or through majority or minority interests in joint operations, in a wide range of sectors in Peru and the other countries where we operate, including the following:
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Clients
We believe that we have developed long-term relationships with many clients as a result of our performance over the years and are focused on the successful andon-time execution of complex projects through our “deliver before deadline” and “lean construction” initiatives. Our extensive experience has earned us a reputation for operational excellence and allowed us to gain deep market knowledge and expertise, which help us better serve our clients. The principal clients of our E&C segment include renowned domestic and multinational mining, power, oil and gas, transportation and infrastructure development companies, such as Xstrata, Hochschild, Buenaventura,Glencore, Sociedad Minera Cerro Verde, Guyana Goldfields, Luz delDel Sur, Kallpa Transelec, Cementos Lima,Generación, Samsung Engineering, Rio Alto, Chinalco Mining, Minera Lumina Copiapo, Hudbay Minerals and Red Eagle Mining Corporation, among others. We have a well-diversified client base, as none of our engineering and construction clients accounted for 13%8% or more of our consolidated revenues in 2013.2016.
Project Selection and Bidding
We win new engineering and construction contracts through public bidding processes or direct negotiation from a variety of sources, including potential client requests, proposals from existing or former clients, opportunities sought by our commercial team and from requests by the Peruvian government. More than 80%Approximately 89% of our 20132016 revenues came from private-sector projects.contracts. The Peruvian government and its agencies typically award construction contracts through a public bidding process conducted in accordance with the Peruvian State Contracting Law (Ley(Ley de Contrataciones del Estado)Estado). In the private sector, in addition to obtaining new projects, another important source of revenue involves increases in the scope of work to be performed in connection with already existing projects. These arrangements are typically negotiated directly with the client, often during the course of the work we are already performing for that client.
We have a designated team that oversees the management of project proposals and a commercial team that reviews and evaluates potential projects in order to estimate costs. In considering whether to bid for a potential project, we principally consider the following factors: competition and the probability of being awarded the project; project size; the client; our experience undertaking similar projects; and the availability of resources, including human resources. As part of the project selection process, our commercial team performs a detailed cost analysis utilizing sophisticated software we developed to assist in determining whether the project is viable and cost-effective. If we choose to pursue a project, a budget leader is assigned to prepare the offer that is eventually presented to our potential client.
Despite the budgeting risks generally associated with engineering and construction contracts, our management believes that our experience generally allows us to estimate our project costs accurately. Our project management teams also periodically review project budgets for inconsistencies between budgeted and actual costs in order to recover for cost variations through contract renegotiation. Budgeting risks are also mitigated through advance payments. Considering that we receive advance payments for most of our E&C contracts, our E&C projects typically do not require significant working capital investment. Our E&C segment secures financing primarily to purchase machinery and equipment for our construction and contract mining services.
We are required, in the majority of our construction contracts, to provide a performance bond to guarantee project performance and completion, which remain in effect for the contract’s duration. We are also required to provide performance bonds to secure any advance payments provided to us by our clients. These bonds are periodically reduced during the project’s execution in accordance with project advancement. After the expiration of the contract term, we are typically required to provide an additional performance bond that remains valid for one year.
Contracts
We principally enter into four types of engineering and construction contracts:
• | Cost-plus fee |
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• | Unit price |
• | Lump-sum |
• | Engineering, procurement and construction (EPC) |
For further information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Results of Operations.”
Raw Materials
The principal inputs we use in our E&C segment are, among others, fuel, cement and steel. These and the other products we require in our E&C segment may be subject to the availability of raw materials, such as oil and iron, and commodity pricing fluctuations, which we monitor on a regular basis. We typically aim to enter into master supply agreements for a period of six months to one year. Although we obtain the majority of our inputs needs in Peru, we believe we have access to numerous global supply sources. The availability of these inputs, however, may vary significantly from year to year due to various factors including client demand, producer capacity, market conditions, transport costs and specific material shortages, and we may incur additional costs in obtaining them.
We purchase and lease the equipment we require for our E&C segment business from several local and international suppliers, currently with no significant concentration with any particular suppliers. While we do not have difficulty obtaining the equipment we need, we may face difficulties finding skilled personnel who are able to operate certain equipment and machinery.
Competition
We generally compete with some of the largest contractors in Peru and the other countries where we operate. Because the E&C sector is highly competitive, the markets served by our business generally require substantial resources and highly-skilled and experienced technical personnel. The principal competitors of our E&C segment include local companies such as Besalco Cosapi S.A., Odebrecht S.A., Andrade Gutierrez S.A., Obrascón Huarte Lain S.A.,San Martin Contratistas Generales, ICCGSA, JJC Contratistas Generales S.A., Cosapi S.A.,and international companies such as Techint SAC,S.A.C., SSK Montajes e Instalaciones S.A.C., Skanska del Perú S.A., Mota-Engil Peru S.A., Grupo San Jose, Salfacorp S.A., Constructores Interamericanos S.A.C. (COINSA), and San Martín Contratistas Generales.OHL, Acciona, Astaldi, Grupo FCC, Ismocol, Termotecnica, Masa, Thiess, Redpath, among others. For certain projects, due to the size of the project, expertise required and other factors, we may choose to partner with our competitors, including the aforementioned companies.
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Competition for our E&C segment is driven by performance, skill and project execution capabilities for completing complex projects in a safe, timely and cost-efficient manner, as well as price.
Infrastructure
We are an important toll road concessionaire in Peru, operating three toll roads. Moreover, we are the concessionaire for the Lima Metro, the largest mass-transit rail system in Peru, and a waste water treatment plant. Additionally, we operate 10 multiple fuel storage facilities, twofour producing oil fields under long-term government contracts and we own a gas processing plant.
The table below sets forth selected financial information for our Infrastructure business segment.
As of and for the year ended December 31, | As of and for the year ended December 31, | |||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2013 | 2014 | 2015 Restated(1) | 2016 | 2016 | |||||||||||||||||||||||||
(in millions of S/., except as indicated) | (in millions of US$) | (in millions of S/., except as indicated) | (in millions of US$)(2) | |||||||||||||||||||||||||||||
Revenues | 404.2 | 524.5 | 681.0 | 243.6 | 884.8 | 1,018.1 | 912.1 | 271.5 | ||||||||||||||||||||||||
Adjusted EBITDA | 176.1 | 207.5 | 244.3 | 87.4 | ||||||||||||||||||||||||||||
Adjusted EBITDA margin | 43.6 | % | 39.6 | % | 35.9 | % | ||||||||||||||||||||||||||
Net profit | 81.8 | 84.0 | 74.5 | 26.6 | 119.1 | 94.0 | 84.2 | 25.1 | ||||||||||||||||||||||||
Net profit attributable to controlling interest | 68.2 | 66.7 | 59.9 | 21.4 | 102.2 | 72.7 | 60.1 | 17.9 | ||||||||||||||||||||||||
EBITDA | 272.5 | 233.0 | 210.8 | 62.7 | ||||||||||||||||||||||||||||
EBITDA margin | 30.8 | % | 22.9 | % | 23.1 | % | 23.1 | % | ||||||||||||||||||||||||
Backlog (in millions of US$) | 195.9 | 413.4 | 320.2 | 311.6 | 256.5 | 300.7 | 300.7 | |||||||||||||||||||||||||
Backlog/revenues ratio | 14.5x | 7.0x | 3.4x | 1.1 | x | 0.9 | x | 1.1 | x | 1.1 | x |
(1) | Two of our four oilfields started operations in April 2015. |
(2) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
(3) | For more information on our backlog, see “—Backlog.” Does not include our Norvial toll road concession, |
Our strategy is to pursue concessions with the potential to generate business opportunities across our organization. Once we obtain a concession, our goal is to be involved virtually in all aspects of project execution through the participation of our different business segments, from the design and construction to the operation and maintenance of the infrastructure asset.
Through our Infrastructure segment we participate in a number of joint operations with the objective of bidding for government concessions or other long-term contracts. When bidding, we occasionally look for partners to reduce our risks and achieve the level of expertise needed to meet the demands of each particular project.
The following table shows selected information about our current concessions and long-term contracts.contracts as of December 31, 2016.
Project | Year Granted | Initiated Operations | Expiration | Characteristics | % Owned by Us | Status | Year Granted | Initiated Operations | Expiration | Characteristics | % Owned by Us | Status | ||||||||||||||||||||||
Toll Roads: | ||||||||||||||||||||||||||||||||||
Norvial | 2003 | 2003 | 2028 | 183 km | 67.0% | Operating | 2003 | 2003 | 2028 | 183 km | 67.0 | % | Operating | |||||||||||||||||||||
Survial | 2007 | 2008 | 2032 | 750 km | 99.9% | Operating | 2007 | 2008 | 2032 | 750 km | 99.9 | % | Operating | |||||||||||||||||||||
Canchaque | 2006 | 2010 | 2025 | 78 km | 99.9% | Operating | 2006 | 2010 | 2025 | 78 km | 99.9 | % | Operating | |||||||||||||||||||||
Mass Transit: | ||||||||||||||||||||||||||||||||||
Lima Metro | 2011 | 2012 | 2041 | 33.6 km(1) | 75.0% | Operating | 2011 | 2012 | 2041 | 33.1 km | 75.0 | % | Operating | |||||||||||||||||||||
Water Treatment: | ||||||||||||||||||||||||||||||||||
La Chira | 2012 | 2015 (expected) | 2037 | Avg. treatment capacity of 6.3 m3/sec (expected) | 50.0% | Under construction | 2010 | | June 2016 |
| 2037 | Avg. treatment capacity of 6.3 m3/sec (expected) | 50.0 | % | Operating | |||||||||||||||||||
Energy(2): | ||||||||||||||||||||||||||||||||||
Oil Production Block I | 1995 | 1995 | 2021 | Avg. daily production of 1,460 bbl (2013) | 100% | Operating | ||||||||||||||||||||||||||||
Energy: | ||||||||||||||||||||||||||||||||||
Oil Production(1) Block I | 1995 | 1995 | 2021 | Avg. daily production of 1,307 bbl (2016) | 100.0 | % | Operating | |||||||||||||||||||||||||||
Block V | 1993 | 1993 | 2023 | Avg. daily production of 132 bbl (2013) | 100% | Operating | 1993 | 1993 | 2023 | Avg. daily production of 728 bbl (2016) | 100.0 | % | Operating | |||||||||||||||||||||
Gas Processing(3) | 2006 | 2006 | N/A | Avg. daily processing capacity of 84 MMcf | 100% | Operating | ||||||||||||||||||||||||||||
Fuel Terminals | 1998 | 1998 | 2014 | Aggregate storage capacity of 2.6 MMbbl | 50.0% | Operating |
Project Characteristics Block III Block IV Gas Processing(2) North and Central Fuel Terminals South Fuel Terminals 2018 Year
Granted Initiated
Operations Expiration % Owned
by Us Status 2015 2015 2045 Avg. daily production of 950 bbl (2016) 100.0 % Operating 2015 2015 2045 Avg. daily production of 638 bbl (2016) 100.0 % Operating 2006 2006 N/A Avg. daily processing capacity of 44 MMcf (2016) 100.0 % Operating 2014 2014 2034 Aggregate storage capacity of 2.2 MMbbl 50.0 % Operating 1997 1998 August Aggregate storage capacity of 1.4 MMbbl 50.0 % Operating
(1) |
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Percentages owned in Energy reflect GMP’s ownership. We own 95% of GMP. |
We own a gas processing plant and have a long-term delivery and gas processing contract with |
Additionally, in 2012 we werethe Chavimochic concession was awarded and in 2013 we signedfor the contract,design, construction, operation and maintenance of major hydraulic works in northern Peru. Affiliates of Odebrecht own 73.5% of the Chavimochic consortium, with the remaining 26.5% stake held by us. The second phase of the hydraulic works project has not begun as a result of the government’s failure to deliver the required lands for the project. Chavimochic has requested the termination of the concession in light of the government’s breach, and the parties are currently in discussions, including for a 40 year concession for Vía Expresa Sur. See “—Principal Infrastructure Linespotential sale of Business—Toll Roads—Additional Toll Road Projects.”the project to the government.
On November 11, 2013, we entered into a memorandum of understanding with Canada Pension Plan Investment Board (“CPPIB”), to create an alliance regarding a partnership to invest in infrastructure projects in Latin America, mainly Peru, Chile and Colombia. This alliance isnon-exclusive and investments will be determined on acase-by-case basis. As part of this alliance,In December 2014, we undertook our first large investment with CPPIB, by formalizing an agreement with Enagás (as defined below) and CPPIB whereby we acquired 51% of Tecgas and owner of 100% of the purchaseshares of COGA, the current operator of TGP while Enagás acquired 30% and saleCPPIB maintained 19% of the participation. COGA is dedicated to the management, operation, maintenance, and integrity management of transport and distribution hydrocarbon pipelines and installations as well as industrial plants and ancillary installations. COGA operates and maintains more than 1,430km of pipelines, one compression plant with 72,000 horse power and four pump stations with 19,200 horse power each. COGA operates two pipelines: one which is 730 km and transports natural gas (GN) with a 1,275 MM cubic feet per day capacity; and the other one which is 530 km and transports natural gas liquids (NGL) with a 130,000 barrels per day capacity. Both pipelines run from Cusco to Ayacucho and Huancavelica, with the GN pipeline extending to Lurin and the NGL pipeline continuing to the Pisco fractionation plant. As this is a joint operation, we do not include the results of our COGA venture in our consolidated results under our Infrastructure segment. On April 24, 2017, we sold our interest in COGA.
On September 29, 2015, we entered into a memorandum of understanding with Odebrecht Latinvest to participate with a 20% stake in the shareholder equity interests in Transportadora de Gas del Perúof Concesionaria Gasoducto Sur Peruano S.A. (“TGP”), for an amount of US$215 million (S/.722.4 million). The other shareholders are Odebrecht Latinvest with a 55% stake and Enagás with a 25% stake. Concesionaria Gasoducto Sur Peruano S.A. was responsible for the design, financing, construction and operation of the southern gas pipeline, a project which would bring natural gas to the southern region of Peru, particularly to the provinces of Cuzco, Arequipa, Puno and Moquegua. The GSP gas pipeline concession was terminated by the Peruvian Ministry of Energy and Mines on January 24, 2017.
For more information, see “Item 5.A5.A. Operating and Financial Review and Prospects—Operating Results—Factors Affecting Our Results of Operations—Acquisitions.Recent Developments.” In addition, we reached an agreement with CPPIB for the purchase of a 51% equity interest in Compañía Operadora de Gas del Amazonas (“COGA”), the operator of TGP, for a total amount of US$25.5 million. CPPIB will also sell 30% of COGA to Enagás, and will retain the remaining 19%. This purchase is subject to certain conditions and we cannot assure you that we will be able to consummate the transaction.
Principal Infrastructure Lines of Business
Toll Roads
Peru’s economic development is underpinned by a strong government commitment to infrastructure investment, with a particular focus on improving the country’s road system through the award of new concessions to the private sector. As of January 2013, the total transportation project pipeline in Peru was US$22 billion, according to APOYO Consultoría. We believe this investmentcommitment offers significant opportunities to our Infrastructure segment.
Our Infrastructure segment currently has three toll road concessions through our subsidiaries Norvial, Survial and Canchaque. All three toll roads are currently in operation and we have the authorizations, permits and licenses necessary to fulfill our obligations under each concession, including releases of rights of way. All of our toll road concessions have utilized the construction services of our E&C segment and the roads are currently operated and maintained by our Technical Services segment. The table below sets forth selected financial information relating to our toll roads.
Year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$) | |||||||||||||||
Revenues | 115.2 | 123.3 | 193.4 | 69.2 | ||||||||||||
Adjusted EBITDA | 54.5 | 71.5 | 69.9 | 25.0 | ||||||||||||
Adjusted EBITDA margin | 47.3 | % | 58.0 | % | 36.1 | % | 36.1 | % |
Year ended December 31, | ||||||||||||||||
2014 | 2015 Restated | 2016 | 2016 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Revenues | 338.2 | 394.5 | 264.4 | 78.7 | ||||||||||||
EBITDA | 80.1 | 79.2 | 76.8 | 22.9 | ||||||||||||
EBITDA margin | 24.5 | % | 20.1 | % | 29.0 | % | 29.0 | % |
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(1) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
The pie charts below set forth the breakdown of our revenues and Adjusted EBITDA from our toll road concessions for 2013.2016.
Norvial
Under our Norvial concession, we operate and maintain part of the only major highway that connects Lima to the northwest of Peru. This183-km road, known as Red Vial 5, runs from the cities of Ancón to Pativilca and has three toll stations. The concession was awarded to Norvial in 2003 for a25-year term. We own 67% of Norvial; and our partner in this concession is JJC Contratistas Generales. The following map shows the location of the Red Vial 5 road in Peru.
Norvial’s revenue derives from the collection of tolls. For the Norvial toll road, the toll rate is set out in the Norvial concession agreement and adjusted in accordance with a contractual formula that takes into account the nuevo sol/U.S. dollar exchange rate and Peruvian and U.S. inflation. We are required to transfer 5.5% of our monthly toll revenue to the Peruvian Ministry of Transport and Communications and pay a 1% regulatory fee to the Peruvian Supervisory Agency for Investment in Public Transportation Infrastructure.
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Our obligations under the concession include expanding the already existing road by, among other things, adding two additional lanes. The first stage of construction was completed in 2008, and the second stage is expected to begincommenced in the second quarter of 2014.2014 and is expected to be completed by March 2019. We estimate that our capital investment for the second stage will be approximately US$105 million. When the construction of the second stage begins, we will also be required to pay a one-time estimated fee of approximately US$1.895 million to the Peruvian Supervisory Agency for Investment in Public Transportation Infrastructure.(S/.319.2 million).
Unlike other toll roads in Peru, Norvial charges toll fees in both directions. Our road is highly transited both by heavy vehicles, primarily for the purpose of transporting goods, and also by passenger vehicles, which typically use the road to access tourist destinations. The following table sets forth average daily traffic volume and average toll fees charged for vehicle equivalents in respect to the Norvial toll road concession for 2011, 20122014, 2015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Average daily traffic by vehicle equivalents(1) | 16,290 | 17,847 | 19,002 | |||||||||||||||||||||
Average daily traffic by vehicle equivalents(1) | 19,750 | 21,965 | 24,140 | |||||||||||||||||||||
Average toll fee charged for vehicle equivalents (in S/.) | 13.23 | 13.15 | 13.30 | 13.81 | 13.83 | 14.30 |
(1) | Each automobile is counted as one equivalent vehicle and commercial vehicles (such as trucks or buses) represent the number of equivalent vehicles equal to the ratio between the toll rate applicable to commercial vehicles and that which is applicable to one automobile. |
The table below sets forth selected financial information relating to Norvial.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$) | (in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||||||||
Revenues | 78.7 | 85.7 | 92.3 | 33.0 | 178.2 | 246.2 | 216.3 | 64.4 | ||||||||||||||||||||||||
Adjusted EBITDA | 60.1 | 66.7 | 59.6 | 21.3 | ||||||||||||||||||||||||||||
Adjusted EBITDA margin | 76.4 | % | 77.9 | % | 65 | % | ||||||||||||||||||||||||||
Net profit | 26.4 | 27.2 | 30.2 | 10.8 | 31.1 | 40.9 | 47.3 | 14.1 | ||||||||||||||||||||||||
EBITDA | 62.3 | 68.9 | 77.7 | 23.1 | ||||||||||||||||||||||||||||
EBITDA margin | 35.0 | % | 28.0 | % | 35.9 | % | 35.9 | % |
(1) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
Survial
Under our Survial concession, we operate and maintain a 750 km road from the San Juan de Marcona port to Urcos, Peru, which is connected to an interoceanic road that runs up to thePeruvian-Brazilian border. The road has five toll stations and three weigh stations. The concession was awarded to Survial in 2007 for a25-year term. We own 99.9% of Survial. The following map shows the location of the road in Peru.
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Our obligations under the concession include the construction of the road, which was completed in 2010.
Our revenue from this concession consists of an annual fee paid to Survial by the Peruvian Ministry of Transport and Communications in consideration for the operation and maintenance of the road, which fee can vary depending on the amount of maintenance required due to road damages. In 2011, 20122014, 2015 and 2013,2016 the fee amounted to US$9.18.9 million (S/.26.6 million), US$37.533.9 million (S/.115.7 million) and US$20.78.1 million (S/.27.2 million), respectively. Our revenue in this concession does not depend on traffic volume. Additionally, we had a one-time income in 2013 for catastrophic events relating to heavy rains that impacted the highway in prior years, which amounted to US$15.8 million.
Canchaque
Under our Canchaque concession, we operate and maintain a 78 km road from the towns of Buenos Aires to Canchaque, in Peru. The road has one toll station. The concession was awarded to Canchaque in 2006 for a 15- year15-year term. We own 99.9% of Canchaque. Our obligations under the concession include the construction of the road, which was completed in 2009. Our revenue from this concession consists of an annual fee paid by the Peruvian Ministry of Transport and Communications in consideration for the operation and maintenance of the road, which fee can vary depending on the amount of road maintenance required due to road wear and tear. In 2011, 20122014, 2015 and 2013,2016, the fee amounted to US$1.51.4 million (S/.4.2 million), US$1.71.3 million (S/.4.4 million) and US$1.81.2 million (S/.4.0 million), respectively. Our revenue in this concession does not depend on traffic volume.
Additional Toll Road Projects
We continuously evaluate infrastructure projects and strategically present public-private partnership proposals and participate in bidding processes for road concessions. In 2012 we were awarded, and in 2013 we signed the contract for, a40-year concession for a 4.6 km extension of ViaVía Expresa Sur, one of the main roads in Lima, which crosses the city from north to south. The road will connect downtown Lima to Panamericana Sur, a highway that runs from Ecuador to Chile. Our estimate of the total investment under the concession, as submitted in our bid, is of approximately US$200 million.million (S/.672 million). Such investment will be made during the construction phase, which is expectedwas originally to take up to five years.be completed in 2018. Our revenue will derive from the collection of a toll fee upon completion of the
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construction. The concession is expected to guaranteegenerate a minimum annual revenue of US$18 million (S/.60.5 million) during the first two years of the concession term, and US$19.6 million (S/.65.9 million) for the third year and for an additional period, the term of which is being negotiated.year. If in a particular year, our annual revenue is lower than the minimum guaranteed, we expect the government to compensate us for the difference, up to an
amount not to exceed US$10 million. Completionmillion (S/.33.6 million). The beginning of the projectconstruction phase is subject to expropriation by the government of the land necessary for the construction of the road. ReleasesMoreover, in June of right2017, we signed Initial and Additional Acts of way are still pending.Suspension of the Concession with the municipality of Lima to freeze the reponsibilities of the government, on the one hand, and the concessionaire, on the other hand, with respect to the concession for a period of 12 months. The concessionaire continues to act as custodian of certain assets of which it had taken possession and continues to maintain certain performance guaranties in connection with the concession. Also, the government and the concessionaire continue to meet and coodinate aspects of the project, with the goal of resuming operations. We cannot assure you that this concession contract will be resumed.
A joint operation in which we have a 50% interest has been awarded, and is in the process of negotiating the terms for, a37-year concession for Via Expresa Javier Prado, a 20 km toll road that crosses Lima from east to west, traversing through eight districts. A project contract was approved by the City of Lima´s Council in November 2013, and we expect the contract to be signed by both the Minister of Economy and the Government´s General Comptroller during the first half of 2014, although we cannot assure you that they will approve the contract under the current terms or at all.
According to estimates from the Municipality of Lima, the total investment in the concession is expected to amount to approximately US$790 million.700 million (S/.2,352 million). Such investment will be made during the construction phase which is expected to take between five to seven years. Our revenue will derive from the collection of a toll fee upon completion of the construction. This concession was awarded to the joint operation at the end of the 1990s and negotiations were discontinued but were resumed in 2012
2012. A project contract was approved by the City of Lima’s Council in November 2013 and was submitted to the Peruvian Ministry of Economy and Finance, which requested additional studies prior to approving the project. Subsequently, the municipality of Lima signed an agreement that annulled the granting of the private initiative. The company has initiated legal action in Peru against such decision. A preliminary injunction is pending that would prevent the municipality of Lima from granting the private initiative to another party. We cannot assure you that our position in these proceedings will prevail, nor can we assure you if or when the concession contractcontracts will be agreed or whether the contractual terms will be favorable to us. See “Item 3.D. Key Information—Risk Factors—Risks Related to our Infrastructure Business.”
Mass Transit
Lima Metro
In 2011, we were awarded a30-year concession for the operation of Line One of the Lima Metro, Peru’s only urban railway system. The concession was awarded to our subsidiary GyM Ferrovías, in which we hold a 75% ownership interest, with the other 25% being held by Ferrovías S.A.C. Our obligations under the contract include: (i) the operation and maintenance of the five existing trains provided by the government; (ii) the acquisition of 19 new trains on behalf of the Peruvian government, which will be the legal owner of such trains; (iii) the operation and maintenance of the 19 new trains (24 trains in the aggregate); and (iv) the design and construction of the railway maintenance and repair yard, which was built by our E&C segment. We currently have 14all 24 trains (including two backup trains) authorized to operate. We have ordered and received ten additional trains and we expect to operate these additional trains once thein operation. The construction of the second stretch of Line One has beenwas completed in July 2014, and started operations on July 25, 2014.
We entered into the fourth addendum to the Lima Metro concession contract on July 11, 2016, in order to expand the transportation capacity of Line One. In accordance with the fourth addendum, the expansion project involves: (i) the purchase of 20 new trains withfive-car from Alstom; (ii) the purchase of 39 new cars from Alstom, to be coupled with the 19 existing Alstom trains and the 20 new Alstom trains, resulting in a consolidated fleet of 39 Alstom trains with asix-car configuration; and (iii) the expansion and improvement of the existing infrastructure, including revamping and improvement of five stations, improvements in the electrical systems, a new access route to the maintenance workshop and new switches on the main track. The construction of the expansion of the infrastructure will be carried out by our E&C segment and it is scheduled to be completed by the end of 2018 with the additional trains and rail cars to be delivered by the end of 2019.
As compensation for the investments of the expansion project, we are entitled to receive from the Ministry of Transportation and Communication, an advance payment of 30% of each investment component as well as the balance of 70% of each investment component compensated through an annual payment for complementary investments (pago annual por inversiones complementarias), which is currently planned forrepresents the unconditional and irrevocable right to receive a series of 56 quarterly payments from the Ministry of Transportation and Communication. In 2016 we already received the advance payment of the trains and cars, and in the third quarter of 2014.2017 we expect to receive the advance payment corresponding to the infrastructure expansion.
The construction of the first and second stretches of Line One was carried out by our E&C segment. The operation and maintenance of the trains is carried out by our Technical Services segment, which is currently operating the first stretch of Line One and will start operating the full Line One once the construction of the second stretch is completed. A joint operation in which our E&C segment participates was awarded the construction of the second stretch of Line One.segment. The map below shows the route of Line One.
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As of December 31, 2013,2016, GyM Ferrovías had spent a total of S/.549.8.660 million (US$196.6196 million) in capital expenditures in connection with the Lima Metro.
Our revenue from this concession consists of a quarterly fee that we receive from the Ministry of Transport and Communications based on the kilometers travelled per train and adjusted for inflation, with the fee per kilometer, the number of trains required to be in operation and the number of kilometers that we are required to travel established by the terms of the concession. Our revenues do not depend on passenger traffic volume. According to the government, completion of the second stretch should take place by July 2014. This, together with the operation of the new trains, will increase our revenue since we will operate more trains which will travel more kilometers, as established in the concession contract.
We currently operate 1424 trains (including two backup trains) on the first stretchand second stretches which enable us to travel 1,626,905 km2,603,453 kilometers per year based on required schedule and frequency. We expect to be in full operation by the third quarter of 2014 with 24 trains, that are expected to travel 2,603,453 km per year in theThe full Line One based on required schedule and frequency.consists of 33.1 kilometers. The following tables show (i) the length of Line One, the average frequency of the trains is 6 to 10 minutes and the fee per kilometer travelled; and (ii) the increase in scheduledtravelled is S/.80.37.
Additionally, as of April 30, 2018, we operate eight new trains from a complementary investment, which we expect to enable us to travel 581,106 kilometers in relation to the number of trains in operation.per year. The fee per kilometer travelled is S/.53.50.
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Lima Metro-Line One | Operating Trains | Contracted Km per Year(1) | ||||||||
Stretch One | Full Line One (expected) | 5 | 812,539 | |||||||
|
| |||||||||
6 | 1,000,879 | |||||||||
Kilometers | 21.5 | 33.6 | 7 | 1,275,326 | ||||||
Required average frequency | 15 minutes | 7 minutes | 8 | 1,386,691 | ||||||
Fee per kilometer travelled (S./) | 73.97 | 71.97 | 9 | 1,508,494 | ||||||
10 | 1,567,673 | |||||||||
11 | 1,598,633 | |||||||||
12 | 1,626,905 | |||||||||
13 | 1,655,178 | |||||||||
14 | 1,670,873 | |||||||||
24(2) | 2,603,453 |
Pursuant to the concession, we must comply with certain requirements in the operation of the trains. According to the concession, at least 95% of our trains must be running and available for use and not less than 85% of our trains that are available for use must arrive to destination on scheduled time. The table below shows our monthly average results during 2013.2016.
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Trujillo Urban Transportation
In October 2014, our subsidiary GMD was awarded a concession for the electronic collection of public transportation fares in the city of Trujillo in northern Peru for a period of 20 years. The concession includes equipping buses with communication systems, GPS, video and fare collection systems; managing a bus fleet control center (for speed, punctuality, and observance of the routes); installing card sale and charge points; and conducting inspections onboard buses. The estimated initial investment for the first three years is US$22 million (S/.73.9 million). We have committed to renew the equipment upon its wear down due to common use. Such technological renovation is estimated at US$18 million (S/.60.5 million), which will be paid over the following eight years. The contract was signed in April 2016. On June 6, 2017, we sold our interest in GMD.
Water Treatment
In 2012,2010, we were awarded a25-year concession for the construction, operation and maintenance of La Chira waste water treatment plant in the south of Lima. The project is aimed at addressing Lima’s environmental problems caused by sewage discharged directly into the sea. We hold a 50% share in this projectconcession and our partner Acciona Agua holds the remaining 50%. The plant began operations in June 2016.
We estimate that La Chira’s total investment in the concession will amount to approximately US$83.1 million.was S/.250 million (US$74.4 million). Once the project is completed, La Chira will be entitled to collect (i) an annual payment for the investment made in the construction of the project for an amount of S/.24.2 million (approximately US$9.37.1 million), and (ii) and annual payment for the operation and maintenance of the project for an amount
of S/.6.8 million. These fees will be paid by Sedapal S.A., the public utility company responsible for the supervision of the water service in Lima, for a period of 25 years. We funded our construction costs related to La Chira through the sale of government certificates to financial institutions, and, as a result, will not receive future cash flows from item (i). See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Factors Affecting Our Results of Operations—Infrastructure.” A joint operation in which our E&C segment participates is undertaking the construction of the waste water treatment plant.
Energy
We currently operate three energy businesses within our Infrastructure segment.segment: Exploration and Production; Natural Gas; and Transport and Distribution. We operate and extract oil from four onshore fields (Block I, Block III, Block IV and Block V) located in the provinces of Talara and Paita in northern Peru. We have two long-term hydrocarbon extraction service contracts with Perupetro, the Peruvian entity responsible for the administration and supervision of all exploration and production contracts in Peru, under which we operate two onshore oil producing fields, Blocks I and V. In addition, we have two long-term license contracts with Perupetro for two other blocks, Block III and IV, which started operations in northern Peru. Aggregate averageApril 2015. During 2016, the oil production of these fields in 2013our four blocks was of approximately 1,5922,756 bbl per day. We also own and operate a natural gas processing plant located in northern Peru, which processes and fractions natural gas from its liquids in northern Peru and delivers dry gas to agas-fired power generation company under a long-term processing and fractionation agreement. In addition, we are a 50% partner in two consortiums named Consorcio Terminales (CT) and Terminales del Peru (IP) both of which has ahave contract with Petroperú, the othera state owned oil and gas company, to operate nineand maintain ten fuel storage terminals.
In addition, we are a 50% partner in Oil Tanking Andina Services S.A.C. (“OTAS”). This subsidiary operates a fuel terminal named Terminal Marino Pisco Camisea under a contract subscribed with Pluspetrol to operate an export terminal for gasoline, diesel, propane and butane.
The table below sets forth selected financial information relating to our Energy line of business.
Year ended December 31, | ||||||||||||||||
2014 | 2015 Restated(1) | 2016 | 2016 | |||||||||||||
(in millions of S/.) | (in millions of US$)(2) | |||||||||||||||
Revenues | 350.3 | 389.4 | 382.2 | 113.8 | ||||||||||||
Net profit | 62.7 | 20.2 | 12.0 | 3.6 | ||||||||||||
EBITDA | 162.0 | 121.8 | 99.5 | 29.6 | ||||||||||||
EBITDA margin | 46.2 | % | 31.3 | % | 26.0 | % | 26.0 | % |
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(1) | Includes production from the start of operations of Blocks III and IV in April 2015. |
(2) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
Year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$) | |||||||||||||||
Revenues | 289.0 | 287.0 | 321.1 | 114.8 | ||||||||||||
Adjusted EBITDA | 136.8 | 136.4 | 132.8 | 47.5 | ||||||||||||
Adjusted EBITDA margin | 47.3 | % | 47.5 | % | 41.4 | % | ||||||||||
Net profit | 69.1 | 63.4 | 45.0 | 16.1 |
The pie charts below set forth the breakdown of our revenues and Adjusted EBITDA from our Energy line of business for 2013.2016.
Revenues EBITDA
|
|
Oil and Gas Production
We operate and extract oil from twofour mature fields (Block I, Block III, Block IV and Block V) located in the provinceprovinces of Talara and Paita in northern Peru. BothTwo of these fields, Blocks I and V, are operated under long-term service contracts inunder which we provide hydrocarbon extraction services to Perupetro. Hydrocarbons extracted from each fieldthese two blocks belong to Perupetro, which in turn pays us, twice a month, a variable fee per barrel of lifted hydrocarbons, whichhydrocarbons. This extraction fee is based on a basket of international crude prices and the level of production. The fee is paidother two fields, Blocks III and IV, are operated under long-term license contracts with Perupetro. The hydrocarbons extracted are owned by our subsidiary GMP, which in turn pays royalties, on a monthly basis.fortnightly basis, to Perupetro, based on a basket of international crude prices and the level of production. Our activities are focused on proved reserves development and production and are conducted in mature oil fields, which have been producing oil for over 100 years in the case of Block I, approximately 96 years in the case of Block III, approximately 95 years in the case of Block IV, and over 50 years in the case of Block V. We believe our activities in these fields bear limited exploration risk.
The following table shows selected information about our fields.
Property | Basin | GMP’s Ownership | Expiration | Developed Acres | Undeveloped Acres | Basin | GMP’s Ownership | Expiration | Developed Acres | Undeveloped Acres | ||||||||||||||||||||
Block I | Talara | 100% | 2021 | 25,154 | 4,808 | Talara | 100 | % | 2021 | 25,154 | 4,110 | |||||||||||||||||||
Block III | Talara | 100 | % | 2045 | 7,475 | 80,986 | ||||||||||||||||||||||||
Block IV | Talara | 100 | % | 2045 | 8,400 | 64,550 | ||||||||||||||||||||||||
Block V | Talara | 100% | 2023 | 6,320 | 2,496 | Talara | 100 | % | 2023 | 6,320 | 2,220 |
Block I:
We operate and extract oil and natural gas from Block I under a20-year hydrocarbon extraction service contract with Perupetro, which was extended for an additional10-year term and expires in December 2021. Average daily production during 20132016 was 1,4601,040 barrels of crude oil. We operate 195241 wells using various oil extraction systems and operate a network of production batteries and pipelines to collect, measure and deliver oil in fiscalization point close to the Talara refinery. The field is located in the province of Talara, department of Piura, in northern Peru, approximately five miles from the Talara refinery, the second largest refinery in the country. Block I is the oldest oil producing field in Peru and has been producing oil since around 1890.
Block III:
We operate and extract oil and natural gas from Block III under a30-year license agreement with Perupetro, which expires in April 2045. Average daily production during 2016 was 953 barrels of crude oil. We operate 207 wells using various oil extraction systems and operate a network of production batteries and pipelines to collect, measure and deliver oil in a fiscalization point close to the Talara refinery. The field is located between the provinces of Talara and Paita, department of Piura, in northern Peru, approximately 21 miles from the Talara refinery.
Block IV:
58We operate and extract oil and natural gas from Block IV under a30-year license agreement with Perupetro, which expires in April 2045. Average daily production during 2016 was 640 barrels of crude oil. We operate 250 wells using various oil extraction systems and operate a network of production batteries and pipelines to collect, measure and deliver oil in a fiscalization point close to the Talara refinery. The field is located in the province of Talara, department of Piura, in northern Peru, approximately 21 miles from the Talara refinery.
Block V:
We operate and extract oil and natural gas from Block V under a20-year hydrocarbon extraction service contract with Perupetro, which was extended for an additional10-year term and expires in October 2023. Average daily production during 20132016 in this field was 132128 barrels of crude oil. We operate 4859 wells in this field using various oil extraction systems. The Block V field is located in the province of Los Organos, department of Piura, Peru, close to the border with Ecuador. Block V has been producing oil since the 1950s.
The map below shows the geographic location of our oil producing blocks in northern Peru.
Under our hydrocarbon extraction service contracts,For Block I and Block V, we are entitled to a variable fee, which is based on the level of production of each field and a basketprice formula that is based on an average price of three international crude prices, which include Fortis Blend, Suez Blendoil prices: fortis blend, suez blend and Omanoman crudes, and a discount over this price of approximately of 17% per barrel.
For Block III and Block IV, the formula price is also based on an average price of three international crude oil prices: fortis blend, suez blend and oman crudes. The royalties paid to Perupetro were US$16.58 per barrel during 2015 and US$12.76 per barrel during 2016.
During 2011, 20122014, 2015 and 2013,2016, we received an average feerevenue (for all blocks) of US$84.00,77.33, US$86.1345.59 and US$84.9938.55 per barrel of extracted oil, which was equivalent to approximately 75.5%78.1%, 77.1%84.26 % and 78.2%88.52%, respectively, of average Brent crude oil prices in the same years. According to our hydrocarbons development contracts, we are required to deliver all the oil and gas we produce, regardless of its quantity, to Perupetro. Therefore, weWe are not committed to provide a fixed and determinable quantityvolume of oil or natural gas in the near future under existingour four contracts.
We produce natural gas as a byproduct of the production of crude oil.oil (an average of 9.4 MMcf per day during 2016). In Block I, we provide natural gas to Perupetro, which in turn sells itEEPSA under a “take or pay” contract (an average of 3 MMcf per day), and we pay to EEPSA, and pays usPerupetro a fee which varies depending on market conditions. The additional volume of natural gas extracted is sent to our Pariñas plant to be processed and commercialized as liquid natural gas. In Block V, we reinject thatthe natural gas produced back into the wells. In Block III, we use part of the produced gas as fuel to operate wells equipment (pumping units) and we are looking for a market to sell the excess. In Block IV, we also use a volume of gas as fuel and the residual volume is burnt. Our revenues for the sale of natural gas are not material relative to our oil production revenues.
Estimated Proved Reserves:
The following table sets forth estimated proved crude oil and natural gas reserves in Blocks I, III, IV and V as of December 31, 2013.2016. We have only included estimates of proved and have not included any estimates of probable and possible reserves.
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Crude Oil (Mbbl) | Natural Gas (MMcf) | Crude Oil Equivalents (MBoe) | ||||||||||||||||||||||
Block I: | Crude Oil (Mbbl) | Natural Gas (MMcf) | Crude Oil Equivalents (MBoe) | |||||||||||||||||||||
Proved developed producing | 2,120.0 | 8,072.0 | 3,554.8 | 1,363 | 10,186 | 3,174 | ||||||||||||||||||
Proved developed non-producing | 293.0 | 1,115.0 | 491.2 | 68 | 334 | 127 | ||||||||||||||||||
Proved undeveloped | 1,142.0 | 5,018.0 | 2,033.9 | 0 | 0 | 0 | ||||||||||||||||||
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| ||||||||||||||||||||||
Total proved reserves | 1,431 | 10,521 | 3,301 | |||||||||||||||||||||
Block III: | ||||||||||||||||||||||||
Proved developed producing | 2,974 | 0 | 2,974 | |||||||||||||||||||||
Proved developednon-producing | 17 | 0 | 17 | |||||||||||||||||||||
Proved undeveloped | 10,603 | 0 | 10,603 | |||||||||||||||||||||
Total proved reserves | 13,594 | 0 | 13,594 | |||||||||||||||||||||
Block IV: | ||||||||||||||||||||||||
Proved developed producing | 3,749 | 0 | 3,749 | |||||||||||||||||||||
Proved developednon-producing | 17 | 0 | 17 | |||||||||||||||||||||
Proved undeveloped | 6,068 | 0 | 6,068 | |||||||||||||||||||||
Total proved reserves | 3,555.0 | 14,205.0 | 6,079.9 | 9,834 | 0 | 9,834 | ||||||||||||||||||
Block V: | ||||||||||||||||||||||||
Proved developed producing | 394.0 | — | 394.0 | 285 | 0 | 285 | ||||||||||||||||||
Proved developed non-producing | 73.0 | — | 73.0 | 48 | 0 | 48 | ||||||||||||||||||
Proved undeveloped | 244.0 | — | 244.0 | 0 | 0 | 0 | ||||||||||||||||||
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|
| ||||||||||||||||||||||
Total proved reserves | 711.0 | — | 711.0 | 333 | 0 | 333 | ||||||||||||||||||
Total: | ||||||||||||||||||||||||
Proved developed producing | 2,514.0 | 8,072.0 | 3948.8 | 8,370 | 10,186 | 10,181 | ||||||||||||||||||
Proved developed non-producing | 366.0 | 1,115.0 | 564.2 | 151 | 334 | 210 | ||||||||||||||||||
Proved undeveloped | 1,386.0 | 5,018.0 | 2,277.9 | 16,670 | 0 | 16,670 | ||||||||||||||||||
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|
| ||||||||||||||||||||||
Total proved reserves | 4,266.0 | 14,205.0 | 6,790.9 | 25,191 | 10,521 | 27,061 |
Proved reserves are those quantities of oil and natural gas which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil and/or natural gas actually recovered will equal or exceed the estimate. To achieve reasonable certainty, we employed methodologies that have been demonstrated to yield results with consistency and repeatability. The methodologies and economic data used in the estimation of the proved reserves in the fields include, but are not limited to, well logs, geologic maps and available down hole and production data, seismic data, and well test data.
Reserve amounts were determined based on the12-month unweighted arithmetic average of thefirst-day-of-the-month Brent crude price for each month in the period January through December 2013,2016, which, pursuant to our contractual agreements, resulted in average oil and gas prices of US$84.9942.9 per barrel and US$2.121.324 per Mcf,Mmbtu, respectively, that for the purpose of reserve amount estimation were assumed to remain constant throughout the remaining terms of our service contracts.constant.
Proved undeveloped reserves in the fields as of December 31, 20132016 were 2,277.9 Mboe,16,670 MBbbl consisting of 1,386.016,670 Mbbl of crude oil and 5,018.0(0 MMcf of proved undeveloped reserves of natural gas.gas). We estimate that during 2013 approximately 717.82016, proved undeveloped reserves increased by 2,729 Mboe (429.1Mbbl of crude oil and 1,624.4 MMcf, or 288.7approximately 621 Mboe of natural gas)crude oil of proved undeveloped reserves were converted into proved developed reserves. We estimate that during 2013, proved undeveloped reserves declined by 23.71%, or 707.8 Mboe, consisting of a decline of 844.5 Mboe (4,807.2 MMcf) of natural gas and an increase of 136.7 Mbbl of crude oil. Capital expenditures, for both drilling activities and workovers, made during 20132016 to convert undeveloped reserves to prove developed reserves amounted to approximately US$18.2 million.5.9 million (S/.19.8 million).
The principal changes in proved undeveloped reserves during 20132016 were:
For changes in proved developed and undeveloped reserves from December 31, 20102013 to December 31, 2013,2016, see supplementary data (unaudited) annexed to our audited annual consolidated financial statements included in this annual report.
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Qualifications of Technical Persons and Internal Controls Over Reserves Estimation Process:
The reserves estimates shown in this annual report have been prepared internally by our engineers in accordance with the definitions and guidelines of the SEC. Our reserves are estimated at the property level and compiled by our engineering staff. Our engineering staff interacts with our internal staff of operations engineers and geoscience professionals and with accounting employees to obtain the necessary data for the reserves estimation process. Our reservoir engineers and geoscience professionals have worked to ensure the integrity, accuracy and timeliness of the data, methods and assumptions used in the preparation of the reserves estimates. Mr. Victor Salirrosas isLuis Huaranga and Javier Portuguez are our Reservoir Engineer and head of our staff of reservoir engineers and geoscience professionals.Engineers. The reserves estimate report was submitted to our Committee of Reserves, Development, which is formed by Mr. Anthony Alfaro (Exploration and Production Manager), Mr. Iván Miranda Zuzunaga (Exploration and Production Technical Manager), Mr. Jose Pisconte Lomas (Chief of Geology), and independent consultants (including Mr. Humberto Barbis Valderrama, GMP’s former Exploration and Production Manager until December 2013)Manuel Gomez (Chief of Reservoir Engineering). The Committee of Reserves Development reviews the report and relays it for approval to the board of directors of GMP together with its recommendations with respect to the estimation and categorization of reserves. Mr. SalirrosasHuaranga holds a Petroleum Engineering degree from Universidad Nacional de Ingeniería in Lima, Peru and has 3920 years of experience, developed as a reservoir engineer at Pluspetrol, Petrobras, and Repsol. From September -2016 he is working for GMP. Mr. Portuguez holds a Petroleum Engineering degree from Universidad Nacional de Ingeniería in Lima, Peru and has 23 years of experience, developed as a production and reservoir engineer at Mercantile and Interoil Peru. Mr. Gomez holds a Petroleum Engineering degree from Universidad Nacional de Ingeniería in Lima, Peru and has 10 years of experience, most of it as drilling, completion, stimulation, and reservoir engineer. Mr. Pisconte Lomas, holds a reservoir engineer at PerupetroGeologist Engineering degree and GMP. Mr. Salirrosas is also a professorRegional Geology Master’s degree from Universidad Nacional Mayor de San Marcos and has 25 years of reservoir engineering and enhanced oil recoveryexperience in the Petroleum Engineering School of Universidad Nacional de Ingeniería in Lima, Peru. In addition,oil industry. Mr. Miranda, Zuzunaga, our Exploration and Production Manager, holds a degree in Petroleum Engineering from Universidad Nacional de Ingeniería in Lima and a Petroleum Engineering Master’s degree from Texas A&M University of Texas,Texas—USA, and has 3033 years of experience in the oil industry.industry developed at Petroperu, Unipetro ABC, and GMP. Mr. Pisconte Lomas, Chief of Geology,Alfaro holds a GeologistPetroleum Engineering degree and a Regional Geology master’s degree from Universidad Nacional Mayor de San MarcosIngeniería in Lima, Peru, Master´s degree in Business Administration from Universidad Rafael Belloso Chacin in Maracaibo, Venezuela, Master´s degree in Projects Management an Administration from Universidad de Ciencias Aplicadas in Lima, Peru and has 2328 years of experience in the oil industry. Furthermore, the board of directors of GMP has in the past contracted two independent extraction consultants who are highly experienced in the oildeveloped at Petroperu, Perez Companc Peru and gas industryArgentina, Petrobras Venezuela and who review the methodology used for the estimation of reserves.Peru, Grupo Synergy E&P Ecuador, and GMP.
Production, Revenues, Prices and Costs:
The following table sets forth information regarding our production, revenues, prices and production costs for 2011, 20122014, 2015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015(1) | 2016 | |||||||||||||||||||
Production volumes(1): | ||||||||||||||||||||||||
Production volumes(2): | ||||||||||||||||||||||||
Crude oil (Mbbl) | ||||||||||||||||||||||||
BlockI | 381.9 | 458.2 | 532.9 | |||||||||||||||||||||
Block I | 592.5 | 507.9 | 381.3 | |||||||||||||||||||||
Block III | 319.7 | 347.7 | ||||||||||||||||||||||
Block IV | 174.7 | 232.7 | ||||||||||||||||||||||
Block V | 56.2 | 54.8 | 48.2 | 48.4 | 59.0 | 46.9 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total (crude oil Mbbl) | 438.0 | 513.0 | 581.1 | 640.9 | 1,061.40 | 1,008.60 | ||||||||||||||||||
Natural gas (MMcf) | ||||||||||||||||||||||||
BlockI | 1,843.8 | 2,012.6 | 2,446.5 | |||||||||||||||||||||
Block I | 3,238.30 | 3,729.90 | 2,025.77 | |||||||||||||||||||||
Block III | 1,075.70 | |||||||||||||||||||||||
Block IV | 156.7 | |||||||||||||||||||||||
Block V | 146.0 | 151.8 | 132.0 | 157.5 | 175.7 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total (natural gas MMcf) | 1,989.8 | 2,164.4 | 2,578.5 | 3,395.80 | 5,138.00 | 2,025.77 | ||||||||||||||||||
Crude oil equivalents (Mboe) | 353.7 | 384.7 | 458.3 | 603.6 | 913.4 | 360.14 | ||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||
Total Company | 791.7 | 897.7 | 1,039.4 | 1,244.50 | 1,974.80 | 1,368.75 | ||||||||||||||||||
Average sales prices(2): | ||||||||||||||||||||||||
Average sales prices(3): | ||||||||||||||||||||||||
Crude oil (US$/bbl) | 83.9 | 86.1 | 85.0 | 77.33 | 45.59 | 38.48 | ||||||||||||||||||
Natural Gas (US$/Mcf) | 1.4 | 1.4 | 2.12 | 3.08 | 2.15 | 1.53 | ||||||||||||||||||
Crude oil equivalents (US$/boe) | 55.5 | 59.4 | 57.0 | 50.17 | 37.56 | 30.62 | ||||||||||||||||||
Costs and expenses(2): | ||||||||||||||||||||||||
Costs and expenses(3): | ||||||||||||||||||||||||
Production expenses (US$/boe) | 7.9 | 7.8 | 6.7 | 6.16 | 10.07 | 10.08 | ||||||||||||||||||
Royalties (US$/boe) | — | 4.0 | 5.4 | |||||||||||||||||||||
General and administrative expenses (US$/boe) | 4.7 | 5.2 | 3.4 | 4.95 | 2.42 | 2.09 | ||||||||||||||||||
Depreciation, depletion, amortization and accretion expenses (US$/boe) | 8.4 | 13.9 | 13.3 | 11.78 | 8.57 | 12.58 |
(1) | Includes operations of Blocks III and IV starting in April 2015. |
(2) | Hydrocarbons extracted from |
Crude oil sales volume differs from total production volume due to operational circumstances such as the inventory of product stored in our field batteries at the end of each monthly measurement. “Average sales prices” refers to the fees received in consideration for our extraction services, which do not equal the sales prices of crude oil. Average sales prices have been calculated using a basket price formula according to the service and license contracts of each block. Such formulation is at a discount to global oil prices for Blocks I and V, and for Blocks III and IV we |
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Acreage, Productive and Development Wells, Drilling:
The following table sets forth certain information regarding the total developed and undeveloped acreage as of December 31, 2013.2016.
Formation | Developed Acreage | Undeveloped Acreage | Developed Acreage | Undeveloped Acreage | ||||||||||||
Block I | ||||||||||||||||
Pariñas | 2,271 | 70 | 2,271 | 70 | ||||||||||||
Mogollón | 2,580 | 350 | 2,583 | 320 | ||||||||||||
Basal Salina | 1,850 | 105 | 1,850 | 100 | ||||||||||||
Mesa | 1,472 | 1,700 | 1,485 | 1,650 | ||||||||||||
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| |||||||||||||
Total Block I | 8,173 | 2,225 | 8,189 | 2,140 | ||||||||||||
Block III | ||||||||||||||||
Salina Mogollón | 7,475 | 3,983 | ||||||||||||||
Amotape | 1,750 | 2,370 | ||||||||||||||
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| |||||||||||||||
Total Block III | 9,225 | 6,353 | ||||||||||||||
Block IV | ||||||||||||||||
Pariñas | 4,155 | 3,402 | ||||||||||||||
Palegreda | 5,170 | 3,741 | ||||||||||||||
Mogollón | 1,240 | 2,460 | ||||||||||||||
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| |||||||||||||||
Total Block IV | 10,565 | 9,603 | ||||||||||||||
Block V | ||||||||||||||||
Verdún | 530 | 650 | 530 | 650 | ||||||||||||
Ostrea | 165 | 120 | 175 | 115 | ||||||||||||
Mogollón | 1,350 | 120 | 1,350 | 120 | ||||||||||||
|
|
|
| |||||||||||||
Total Block V | 2,045 | 890 | 2,055 | 885 | ||||||||||||
|
|
|
| |||||||||||||
Total | 10,218 | 3,115 | 30,034 | 18,981 |
As of December 31, 2013,2016, we had a total of 242757 producing wells. Our wells are oil wells, many of which also produce natural gas. We do not have interests in wells that only produce natural gas.
The following table shows the number of development and exploratory wells drilled during 2011, 20122014, 2015 and 20132016 in both BlockBlocks I, III, IV and Block V.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015(1) | 2016 | |||||||||||||||||||
Development Wells | ||||||||||||||||||||||||
Productive | 12 | 12 | 16 | 26 | 4 | 11 | ||||||||||||||||||
Dry | — | — | — | — | — | — | ||||||||||||||||||
|
|
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|
|
| |||||||||||||||||||
Total | 12 | 12 | 16 | 26 | 4 | 11 | ||||||||||||||||||
Exploratory Wells | ||||||||||||||||||||||||
Productive | 1 | — | 16 | — | — | — | ||||||||||||||||||
Dry | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | 1 | — | — | — | — | — |
(1) | Includes operations of Blocks III and IV, starting in April 2015. |
During 2011, 20122014, 2015 and 20132016 we invested US$14.225.6 million (S/.76.5 million), US$18.73.8 million (S/.13.0 million) and US$17.85.4 million (S/.18.1 million), respectively, in drilling activities. FifteenWe drilled a total of the sixteen developmenteleven wells drilled during 2013 were located2016 in Block I with a depth average of approximately 6,756 feet.IV. All of them are productive wells and they partially explain our production volume increase registered during 2013 compared to 2012.
The company is drilling an average of 1.33 wells per month in its quest to accelerate the recovery of proved reserves. Most of the drilling is done in Block I where environmental permits allow us to drill up to 121 new wells. From time to time, based on geological analysis, we try to obtain more oil by increasing the depth of our productive formations. In this way, we minimize exploratory risks.
Under the terms of our service contracts,agreements with Perupetro, at the time the contract terminates, we are required to closenon-producing wells that we have drilled. As of December 31, 2013,2016, we estimated that we will be required to close 6948 wells in Block I in December 2021 and 146 wells in Block V in October 2023, out of approximately 31440 wells currently not in production.Block III and 50 wells in Block IV in December 2045. We have created a provision in our financial statements for the costs relating to those well closings. See note 25notes 4.1(d) and 17(d) to our audited annual consolidated financial statements included in this annual report.
Gas Processing Plant
We own a gas processing plant located 7 km north of the city of Talara in Piura, Peru. We currently have under a long-term delivery and gas processing and fractioning contract with EEPSA, according to which EEPSA delivers wet natural gas that it purchases from onshore and offshore gas operators in the area. We then process and fraction the gas into two products: (i) dry natural gas, which can be used as fuel in EEPSA’sgas-fired turbine; and
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(ii) natural gas liquids, which are sold in the Peruvian market. Under the terms of the agreement, we are responsible for all operating costs of the gas processing plant but are also entitled to keep revenues from the sale of the natural gas liquids to third parties after payment of a variable royalty, based on the volume of gas processed, to EEPSA. Our current gas processing and fractionation contract with EEPSA expires in 2023.
Our gas processing plant has the capacity to process up to 44 MMcf per day. We processed 31.427.3 MMcf per day during 2011, 26.32014, 31.7 MMcf per day during 20122015 and 18.133.2 MMcf per day during 2013. Volumes2016. Approximately 70% of the volume processed by our gas processing plant ultimately depend upondepends on the gas volumes demandedprovided by EEPSA for processing and use on itsgas-fired turbines. These volumes vary per month and depend upon the power dispatch curve of EEPSA among Peruvian power generation plants. In rainy months (December to April) where hydroelectric power generation in Peru is typically higher, gas volumes demanded by EEPSA are lower than in dryer months (May to November) in which activity of thermal generators tends to be higher. DuringThe remaining approximately 30% of the first quarter of 2013, a technical team (comprised of GMP’s maintenance engineers as well as hired contractors) carried out a programmed major maintenance worksvolume processed by our gas processing plant depends on the plant,volumes of gas extracted by GMP in Block I, which lasted about 25 days, during which the plant was not in operation.we process and commercialize as liquid natural gas.
Fuel Storage Terminals
We are a 50% partner in Consorcio Terminales and have a contract with Petroperú to operate the largest fuel storage terminal business in Peru. Our 50% partner is a Peruvian affiliate of Oiltanking GmbH, one of the world’s largest operators of independent terminals for bulk liquid storage. Consorcio Terminales had a contract with Petroperú to operate the North and South Fuel Terminals in Peru, which expired in August 2014. In May 2014, there was a public bidding for the operation of the North, Center and South Terminals. In June 2014, Terminales del Perú, a new consortium also integrated by our subsidiary GMP S.A. and Oiltanking Peru was awarded a concession for the operation of the North and Central Fuel Terminals for Petroperú. The contracts have a20-year term and consist of the operation of four terminals in the north and one terminal in the center of the country, providing storage and dispatching bulk liquid fuel. The total amount of the committed investment for both projects is approximately US$37.2 million (S/.125 million), while the total amount of the additional investment, which will be reimbursed, is approximately US$186 million (S/.625 million). There was no winner in the public bidding for the operation of the South Fuel Terminals, and the contract of Consorcio Terminales was extended through contract amendments: first, for an additional year until August 2015; subsequently, for two more years until August 2017; and most recently, in July 2017 for an additional year until August 2018. The total amount of the additional investment required during this two year period, which will be reimbursed, is approximately US$10 million (S/.84 million).
Our open-access terminals are equipped with modern technologies and offer our customers dependable and critical handling and storage services for refined petroleum liquid products, maintaining high quality, safety and environmental standards. We have seven terminals strategically located along Peru’s Pacific coast. We also have two inland facilities. We provide storage, handling and loading and uploading services for a broad range of refined petroleum liquid products, including gasoline, aircraft fuel, diesel and heavy fuel oil. We deliver the liquids into two types of transportation systems, railroad cars and cistern trucks. Because of the strategic location of our assets, our deep-water access, inland terminals and our aggregate storage capacity of 2.62.2 MMbbl in the North and Central Terminals and of 1.4 MMbbl in the South Terminals, we believe that we are well-positioned to cover the needs of our clients, the two principal refineries in Peru. The map below shows the location of each of our fuel storage terminals in Peru.
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Our activities under Consorcio Terminales are carried out under a 15-year contract, which we entered into in January 1998 and which has been extended until August 2014. We cannot assure you that the current contract will be renewed or that the terms of such potential renewal will not differ materially from those of our current contract.
Under the current contract,contracts, Consorcio Terminales receivesand Terminales del Perú receive revenues paid in connection with monthly reserved volume in tanks for refined crude products (storage fee) and for volumes loaded and delivered into railroad cars or cistern trucks to each terminal (throughput fee). The storage fee per barrel, is based upon reserved volumes whether they are received or not. The throughput fee is paid based on effective barrels delivered per month. During 2011, 20122014, 2015 and 2013,2016 Consorcio Terminales and Terminales del Perú generated revenues of US$44.244.5 million (S/.133.0 million), US$49.166.8 million (S/.228.0 million) and US$48.774.1 million (S/.249.0 million) (we are entitled to 50% of the joint operation revenues), respectively. Under the contract,contracts, Consorcio Terminales isand Terminales del Perú are responsible for paying the fuel terminals operating and maintenance costs and also paying a royalty fee to Petroperú based on effective barrels delivered each month.
At the current stage of the contract,contracts, any capital expenditure we invest in the fuel storage terminals can be recouped from any present and future royalties we owe to Petroperú.
Other Terminal Operations
We are a 50% partner in Oiltanking Andina Services S.A.C. (“OTAS”). This subsidiary operates a fuel terminal named “Terminal Marino Pisco Camisea” under a contract subscribed with Pluspetrol to operate an export terminal for gasoline, diesel, propane and butane. In 2013,2016, this terminal dispatched 44.5530.0 million barrels of natural gas liquids. Additionally, through OTAS, we are also a 25% partner in Logística Químicos del Sur S.A. (“LQS”), that operates the “Terminal de Químicos de Matarani,” which in 20132016 dispatched 32,43556,713 tonnes of sodium hydrosulfide for international mining companies. During 2011, 20122014, 2015 and 2013,2016 these activities generated revenues in the aggregate of approximately US$4.1 million (S/.12.3 million), US$4.34.6 million (S/.15.7 million) and US$ 4.26.3 million (S/.21.2 million), respectively.
Competition
Our ability to grow through successful bids for new infrastructure concessions or other long-term contracts could be affected as a result of competition. We view our competition as including both Peruvian and international infrastructure concession operators including joint operations with partners with specialized expertise in the relevant sector. Competition varies on acase-by-case basis, depending on the main purpose of the concession.
Real Estate
Our Real Estate segment is one of the largest apartment building developerdevelopers in Peru, in terms of number of units sold and value of sales in 2013,2016, and is focused on the development and sale of affordable housing and housing as well as other real estate projects. Since commencing our operations in 1987, we have developed approximately 568,000705,253 m2 of affordable housing (approximately 8,46210,833 units); approximately 310,000329,876 m2 of housing (approximately 1,5221,635 units); approximately 115,000170,075 m2 of office space (approximately 780902 offices); and approximately 43,000 m2 of shopping centers (three shopping centers). Moreover, we are currently building approximately 71,000121,196 m2 of affordable housing (approximately 1,1802,028 units); approximately 3,90049,743 m2 of housing (approximately 40148 units); and approximately 24,0003,631 m2 of office space (approximately 4017 offices, with an average size of 600214 m2 each). Our Real Estate segment also owns significant land parcels in Lima, comprising of approximately 812930 hectares as of December 31, 2013,2016, and we have sold undeveloped land in the past and intend to continue such sales in the future.
The table below sets forth selected financial information for our Real Estate business segment.
Year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$) | |||||||||||||||
Revenues | 152.3 | 240.1 | 313.7 | 112.2 | ||||||||||||
Adjusted EBITDA | 37.5 | 70.5 | 135.2 | 48.3 | ||||||||||||
Adjusted EBITDA margin | 24.6 | % | 29.4 | % | 43.1 | % | ||||||||||
Net profit | 24.1 | 45.3 | 59.0 | 21.1 |
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Year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$) | |||||||||||||||
Net profit attributable to controlling interest | 6.1 | 12.4 | 19.2 | 6.9 | ||||||||||||
Backlog (in millions of US$)(1) | 58.2 | 108.4 | 85.0 | |||||||||||||
Backlog/revenues ratio(1) | 1.0x | 1.2x | 0.8x |
Year ended December 31, | ||||||||||||||||
2014 | 2015 Restated | 2016(1) | 2016(1) | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$)(2) | |||||||||||||||
Revenues | 224.6 | 215.8 | 411.5 | 122.5 | ||||||||||||
Net profit | 26.5 | 29.3 | 77.2 | 23.0 | ||||||||||||
Net profit attributable to controlling interest | 9.5 | 12.4 | 22.1 | 6.6 | ||||||||||||
EBITDA | 56.5 | 52.8 | 121.4 | 36.1 | ||||||||||||
EBITDA margin | 25.2 | % | 24.5 | % | 29.5 | % | 29.5 | % | ||||||||
Backlog (in millions of US$)(3) | 70.0 | 111.0 | 95.9 | 95.9 | ||||||||||||
Backlog/revenues ratio(3) | 0.9 | x | 1.8 | x | 0.8 | x | 0.8 | x |
(1) | In 2016 S/.97.0 million (US$28.9 million) in revenues from land sales. |
(2) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
(3) | For more information on our backlog, see “—Backlog.” Backlog is calculated as of the last day of the applicable period. Revenues are calculated for such period and converted into U.S. dollars based on the exchange rate published by the SBS at such period. |
We undertake a significant amount of the activities in our Real Estate segment with partners through financing and commercial arrangements we use to purchase land and to develop real estate projects. See “—Financing.” As a result, a significant amount of our net profit in the Real Estate segment is attributable to thenon-controlling interest of our partners. See also “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Results of Operations—General—Real Estate.”
Principal Real Estate Activities
Our real estate developments include the following products:
We began developing affordable housing projects in 2001, following the Peruvian government’s efforts to address the country’s housing deficit, particularly forlow-income families. We launched the first major affordable housing project in Peru in 2007, Parque Agustino in Lima’s El Agustino neighborhood. Since 2001, we have completed 1316 affordable housing projects. As of December 31, 2013,2016, we are developing nineeight affordable housing projects, which are in various stages of development, including threesix for which arethe construction phase has been completed, one which is in the construction phase, and sixone for which we have purchased land, but areis still in the process of obtaining the required approvals and permits. Three of our ongoing affordable housing projects consist of expansions of projects previously completed by us.
Affordable housing consists of apartments, usually ranging between 5550 and 11072 m2, that are purchased through government subsidies. The Peruvian government has adopted the Nuevo Crédito Mi Vivienda and Techo Propio programs, among others, which promote access to affordable housing in Peru by providing government subsidies to individuals for the purchase of homes. In order for a unit to qualify for the Nuevo Crédito MiVivienda program, its selling price must range between 14 UIT and 7050 UIT (approximately between S/.53,200.55,300 and S/.266,000).197,500). In order for a unit to qualify for the Techo Propio program, its selling price must range between 5.5 UIT and 1420 UIT (approximately between S/.20,900.21,725 and S/.53,200).79,000).
In order to be eligible for an affordable housing subsidy under the Nuevo Crédito MiVivienda program, a purchaser must not own any other home or have benefitted from a housing subsidy program in the past, among other requirements. A purchaser must also provide a down payment between 10% and 30% of the total purchase amount. Housing subsidies under this program fluctuate between S/.5,000.12,500 and S/.12,500,.17,000, which incentivize purchasers with reduced monthly rates so long as they pay their mortgage loan payments on a timely basis. In order to be eligible for an affordable housing subsidy under the Techo Propio program, a purchaser must have a monthly income that does not exceed 0.450.48 UIT (approximately S/.1,710).1,896) and must not have received any other government-sponsored housing benefit in the past, among other requirements. A Techo Propio purchaser must also show proven savings equal to at least 10% of the total purchase amount. Housing subsidies under this program fluctuate between threefour UIT and five UIT (approximately between S/.11,400.15,800 and S/.19,000).19,750). Purchasers of subsidized housing under both programs are also not required to pay a value-added tax normally applicable to residential purchases.
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We develop substantially all of our affordable housing projects on land purchased from the private sector. To the extent these projects meet the requirements of a particular government subsidy program, purchasers can purchase units with government subsidies. Some of our affordable housing projects, however, such as Parque Agustino, are developed through government bidding processes. Government subsidy programs like Nuevo Crédito MiVivienda and Techo Propio have driven the demand for affordable housing in Peru, which has in turn increased our sales of affordable housing units.
Our housing developments consist of residential buildings comprised of apartments with amid- to high-price range that do not qualify for government subsidies. Since 1987, we have developed 38 housing developments. As of December 31, 2013,2016, we are developing three housing projects, including one which are in the construction stage and two for which we have purchased land, but are still in the process of obtaining the required approvals and permits.stage. Our housing units typically range between 130 and 400 m2 in size.
Substantially all of our affordable housing and housing development projects are located in Lima. We have also purchased land to develop twofour affordable housing projects in Piura, Chimbote and Chimbote,Huancayo, two cities north of Lima.Lima and one in the center of the country. We intend to develop affordable housing projects in other cities outside of Lima.
The table below sets forth number of units sold and not yet delivered and number of units delivered, as well as the value of units sold and our sales revenue for the periods indicated.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Number of Units Delivered(1): | ||||||||||||||||||||||||
Number of Units Delivered(1): | ||||||||||||||||||||||||
Affordable Housing | 1,243 | 1,255 | 1,619 | 772 | 792 | 855 | ||||||||||||||||||
Housing | 1 | 113 | 138 | 59 | 41 | 79 | ||||||||||||||||||
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| |||||||||||||||||||
Total | 1,244 | 1,368 | 1,757 | 831 | 833 | 934 | ||||||||||||||||||
Number of Units Sold and Not Yet Delivered(1): | ||||||||||||||||||||||||
Number of Units Sold and Not Yet Delivered(1): | ||||||||||||||||||||||||
Affordable Housing | 1,252 | 1,940 | 1,082 | 579 | 1316 | 1,620 | ||||||||||||||||||
Housing | 116 | 77 | 52 | 47 | 96 | 97 | ||||||||||||||||||
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| |||||||||||||||||||
Total | 1,368 | 2,017 | 1,134 | 653 | 1,412 | 1,717 | ||||||||||||||||||
Total m2 Delivered: | ||||||||||||||||||||||||
Affordable Housing | 89,529 | 127,907 | 102,538 | 49,150 | 46,894 | 48,460 | ||||||||||||||||||
Housing | 203 | 13,730 | 18,000 | 14,539 | 12,962 | 19,398 | ||||||||||||||||||
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|
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| |||||||||||||||||||
Total | 89,732 | 141,637 | 120,538 | 63,689 | 59,885 | 67,858 | ||||||||||||||||||
Total m2 Sold and Not Yet Delivered: | ||||||||||||||||||||||||
Affordable Housing | 65,764 | 123,958 | 87,948 | 36,257 | 74,911 | 55,404 | ||||||||||||||||||
Housing | 16,440 | 10,109 | 6,660 | 15,619 | 29,939 | 21,825 | ||||||||||||||||||
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|
|
| |||||||||||||||||||
Total | 82,204 | 134,067 | 94,608 | 51,875 | 104,849 | 77,229 | ||||||||||||||||||
Value of Units Delivered (in millions of S/.): | ||||||||||||||||||||||||
Affordable Housing | 135.2 | 153.5 | 215.9 | 101.1 | 99.0 | 138.0 | ||||||||||||||||||
Housing | — | 35.0 | 71.3 | 72.2 | 92.0 | 163.0 | ||||||||||||||||||
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Total | 135.2 | 188.5 | 287.2 | 191.4 | 191.0 | 301.0 |
(1) | We typicallypre-sell our affordable housing and housing units before construction begins and continue to sell during construction, although we recognize revenues at the time of delivery of units. |
We develop and sell office and commercial buildings, such as shopping centers. On certain occasions, we have operated our commercial real estate and later sold it, such as Larcomar, a landmark shopping center which we built in 1998 and sold in 2010. We have also developed commercial real estate buildings in connection with our affordable housing and housing projects, such as the Parque Agustino shopping center. Since 1987, we have developed 1214 office buildings, three shopping centers and one medical center. We are currently in the process of developing fourone office buildingsbuilding in Lima, two ofLima: Real II project, which areis in the construction phase including the Real Ocho project,and is expected to be a 16-floor14-floor office building (30% of which is owned by us and 70% of which is owned by Inversiones Centenario S.A.A.); and two for which we have purchased land, but are still in the process of obtaining the requires approvals and permits.
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Land Bank
We typically purchase land to develop real estate projects with the intention to begin construction within a12- to18-month period after the purchase of the land. We may also, from time to time, purchase land for subsequent resale. As of December 31, 2013,2016, we owned approximately 812930 hectares, of which 86%87% is located in Lima and 14%13% outside of Lima. We continually evaluate opportunities to purchase new land for our real estate development projects.
We have a 50.0% interest in Cuartel San Martín with Urbi Propiedades S.A. of Intergroup Financial Services Corp. owning the remaining 50.0%. Cuartel San Martín is a 68,000 m2 former military base located in Lima’s upscale Miraflores district, where we plan to invest approximately US$680 million to develop a premiere mixed-use development consisting of approximately 98,000 m2 of housing, 68,000 m2 of office towers, a 61,000 m2 shopping mall, and a 48,000 m2 luxury hotel and conference center. Although we are still in the pre-construction approval phase and have not yet obtained all required building permits, we plan to begin construction of this project in the first half of 2015 and expect to complete the project through multiple stages within four years.
We have a 50.4% interest in Almonte, which owns approximately 812 hectares of undeveloped land in Lurin, located 30 km south of Lima. We previously sold 24 hectares of the land for industrial use, and we expect to sell 71 hectares of the remaining land for industrial use in the next five years. We also expect to develop affordable housing projects on the land once water and sewage services become available.
WeOn February 24, 2017, we sold our interest in Project Espacio (formerly known as Cuartel San Martín) to Urbi Propiedades S.A., our partner in the project, for US$50 million (S/.168 million). On April 28, 2017, we also own a minoritysold our interest (approximately 20.8%) in Promoción Inmobiliaria del Sur S.A. (PRINSUR) of Inversiones Centenario, which owns approximately 983.83937.66 hectares of undeveloped land also located in Lurin. We expectLurin, to develop affordable housing projects on the land once waterits partner Inversiones Centenario S.A.A. for US$25 million (S/.84 million). For more information, see “Item 5.A. Operating and sewage services become available. Our proportional interest in this land is not included in our land bank.Financial Review and Prospect— Operating Results—Recent Developments.”
Financing
We generally fund land purchases for our housing and commercial real estate projects through cash from our operations. For our affordable housing projects, we generally partner with real estate investment funds and insurance companies that provide between 60% and 70% of the total capital required to purchase the land and cover certainpre-construction costs in exchange for equity in the project. Once we acquire land for a particular real estate development project, we obtain working capital through a credit line from a financial institution, which we utilize to finance additional project needs as they arise. We also obtain financing throughpre-construction sales for our affordable housing and housing projects and, to a lesser extent, our commercial real estate projects. Our affordable housing and housing projects generally require less outside financing because they are generally financed withpre-construction sales.
Sales and Marketing
We typicallypre-sell our affordable housing and housing units prior to and during construction, and use the related proceeds we receive to finance the construction of the units. Our commercial and sales processes differ depending on the type of development and market segment of the development. We primarily sell our real estate development projects through an internal sales force that is assigned to particular projects and, to a lesser extent, external brokers on anon-exclusive,commission-fee basis. Our marketing efforts primarily consist of newspaper advertisements, radio and television commercials, billboards and promotional offers for referrals. We also advertise our real estate projects on our website.
We believe our brand is associated with product quality, professional operations and reliable post-sale customer service. We provide customer service call centers through which residents can report complaints or defects. Engineers respond with site visits, and repairs are made as long as the property continues to be covered by the applicable warranty or guarantee.
For our affordable housing projects, we provide post-sale customer service through our Ayni program, which aims to preserve the long-term value of our affordable housing developments by promoting a cooperative
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community life. Through this program, we distribute manuals that teach best practices for living in communities, offer leadership workshops, budget workshops, promote small business development, facilitate conflict resolution and provide other services. These services are provided for asix- to eight-month period following project delivery. In 2012, we initiated the Ayni contest for residents of our affordable housing projects with the aim of stimulating the sustainability of their community. Participants present an enhancement project for their community, such as a recreation center, and a jury selects the best project, which we fund and construct.
Competition
The Peruvian real estate development industry is highly competitive. The market is fragmented and no single company has a significant share of the national market. The principal competitors for our Real Estate segment are Paz Centenario Global S.A., Paz Centenario Inmobiliaria, Corporación Líder Perú S.A., Urbana Perú, Los Portales, Inmobiliari S.A., Imagina Grupo Inmobiliario, ENACORP, Besco S.A. and Gerpal. In the coming years, we expect more competition from domestic and foreign real estate development companies who recognize the growth potential in the Peruvian residential market. The main factors that drive competition are product design and amenities, price, location and post-sale service offerings.
Technical Services
Our Technical Services segment undertakes a broad range of activities, including (i) the operation and maintenance of infrastructure assets; (ii) information technology (IT) services for private clients and the government; and (iii) electricity networks services. Characterized bymid-to long-term contracts, our Technical Services segment further adds a more stable cash flow stream to our consolidated activities.
On June 6, 2017, we sold our 89.19% interest in our subsidiary GMD to Advent International for US$84.7 million (S/.276.9 million). Beginning on April 1, 2017, we have transferred Concar from our Technical Services segment to our Infrastructure segment. We believe that this strategic decision will strengthen and boost the operating capacity of our Infrastructure segment by incorporating the experience and knowledge of our Concar team members for concession management.
The table below sets forth selected financial information for our Technical Services business segment.
As of and for the year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$) | |||||||||||||||
Revenues | 977.0 | 1,083.3 | 1,169.1 | 418.1 | ||||||||||||
Adjusted EBITDA | 121.6 | 111.6 | 109.6 | 39.2 | ||||||||||||
Adjusted EBITDA margin | 12.4 | % | 10.3 | % | 9.4 | % | ||||||||||
Net profit | 61.1 | 61.5 | 39.9 | 14.3 | ||||||||||||
Net profit attributable to controlling interest | 53.9 | 50.6 | 34.3 | 12.3 | ||||||||||||
Backlog (in millions of US$)(1) | 516.1 | 873.7 | 619.0 | |||||||||||||
Backlog/revenues ratio(1) | 1.4x | 2.1x | 1.5x |
As and for the year ended December 31, | ||||||||||||||||
2014 | 2015 Restated | 2016 | 2016 | |||||||||||||
(in millions of S/., except as indicated) | (in millions of US$)(1) | |||||||||||||||
Revenues | 1,208.2 | 1,152.5 | 1,401.8 | 417.2 | ||||||||||||
Net profit (loss) | (5.1 | ) | 46.9 | 14.8 | 4.4 | |||||||||||
Net profit (loss) attributable to controlling interest | (5.3 | ) | 40.3 | 15.9 | 4.7 | |||||||||||
EBITDA | 63.5 | 113.3 | 117.5 | 35.0 | ||||||||||||
EBITDA margin | 5.3 | % | 9.8 | % | 8.4 | % | 8.4 | % | ||||||||
Backlog (in millions of US$)(2) | 646.3 | 613.0 | 857.8 | 857.8 | ||||||||||||
Backlog/revenues ratio(2) | 1.6 | x | 1.8 | x | 2.1 | x | 2.1 | x |
(1) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
(2) | For more information on our backlog, see “—Backlog.” Backlog is calculated as of the last day of the applicable year. Revenues are calculated for such year and converted into U.S. dollars based on the exchange rate published by the SBS on December 31 of the corresponding year. |
The pie charts below set forth the breakdown of our revenues and Adjusted EBITDA from our Technical Services for 2013.
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Revenues | EBITDA | |
Operation and Maintenance of Infrastructure Assets
We began providing our operation and maintenance of infrastructure assets services in 1994 when we were awarded the concession for the Arequipa Matarani highway in southern Peru. With this experience, in 2003, we began providing operation and maintenance services to Norvial. In 2007, the Peruvian government initiated Proyecto Peru, a program aimed at maintaining roads not under concession to ensure their longevity. Proyecto Peru allowed us to develop new business opportunities providing maintenance services to more than 4,000 km of public roads in Peru. We believe the experience we have gained operating highway and transportation concessions positioned the company to capitalize on the Peruvian government’s initiatives to increase infrastructure development.
Our revenue in the operation and maintenance of infrastructure assets is generated either from fees we charge to Norvial, Survial, Canchaque and the Lima Metro to operate and maintain our concessions or from government payments through maintenance service contracts we have been awarded. As depicted in the chart below, we operate and maintain more than 5,0003,684 km of Peruvian roads and highways, including our own highway concessions, in addition to the Lima Metro.
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Operation and Maintenance of Infrastructure Assets
Total 3,684 KM
Total:5,063 km
The table below sets forth selected financial information for our operation and maintenance of infrastructure assets activities.
Year ended December 31, | ||||||||||||||||
2011 | 2012 | 2013 | 2013 | |||||||||||||
(in millions of S/.) | (in millions of US$) | |||||||||||||||
Revenues | 232.9 | 242.8 | 428.9 | 153.4 | ||||||||||||
Adjusted EBITDA | 53.6 | 23.2 | 18.0 | 6.4 | ||||||||||||
Adjusted EBITDA margin | 23.0 | % | 9.6 | % | 4.2 | % | ||||||||||
Net profit | 34.9 | 12.6 | 7.9 | 2.8 |
Year ended December 31, | ||||||||||||||||
2014 | 2015 Restated | 2016 | 2016 | |||||||||||||
(in millions of S/.) | (in millions of US$)(1) | |||||||||||||||
Revenues | 364.4 | 334.8 | 262.7 | 78.2 | ||||||||||||
Net profit (loss) | (26.5 | ) | 18.5 | 14.0 | 4.2 | |||||||||||
EBITDA | (15.3 | ) | 39.3 | 27.0 | 8.0 | |||||||||||
EBITDA margin | (4.2 | %) | 11.7 | % | 10.3 | % | 10.3 | % |
(1) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
The below map illustrates the roads in Peru for which we currently provide operation and maintenance services.
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We provide the following road operation and maintenance services:
• | Routine |
• | Periodic Maintenance.These services entail activities that are performed periodically, intended to prevent the occurrence or exacerbation of defects, conserve the structural integrity of roads and correct major defects. |
• | Emergency maintenance.This maintenance work is performed whenever the need arises, such as when natural disasters damage road surfaces. |
We also administer toll stations and weighing stations; offer road patrolling services; operate assistance call centers; and provide emergency medical services.
The operation and maintenance services we provide to the Lima Metro aim to preserve the mass transit system through ongoing maintenance, including cleaning of the trains and stations and providing train operators, among other services.
With respect to operation and maintenance contracts with the Peruvian government, we obtain new contracts through public bidding. With respect to contracts with our Infrastructure segment, we participate in direct negotiation. Contract length typically ranges from three to five years.
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IT Services
We began our IT services business in 1984 providing computer equipment to companies and evolved into a technology solutions provider in 2000. In the early 1980s, Sonda, one of the main IT services providers in Latin America, was looking for a partner to represent Digital Equipment Corp. (currently, Hewlett-Packard)Hewlett Packard Enterprise) for the sale of hardware in Peru. Sonda’s need coincided with our diversification strategy and, therefore, we decided to jointly constitute GMD. In 1994, we bought out Sonda. Nowadays ourOur main focus iswas the provision of business process and IT outsourcing services, and providing the necessary corresponding equipment, to well-known large companies and public institutions in Peru. On June 6, 2017, we sold our interest in GMD.
The infrastructure through which we operate our business includes the largest software factory in the country, two world class data centers, one of which is Tier III certified and two call centers with a total of 141 workstations and three data centers.high availability for help desk services. In addition, we have successfully entered into strategic partnerships with key international IT vendors such as Cisco Systems, Microsoft, Hewlett-Packard, Oracle, SAP, IBM, Citrix, VMware, CA Technologies and Louis Berger Group.
On January 4, 2016, we completed the acquisition of a 52% stake in Adexus. Adexus is a leading Chilean company in the development and implementation of solutions for information technology, with the ability to integrate technological systems of high added value and over 25 years of experience in the market. It has a significant regional presence distributed between Chile, Peru and Ecuador. The remainder of Adexus is owned by Sistemas y Redes Ltda. with a 47.5% stake and Asesorías e Inversiones Busso with the remaining 0.5%.
The table below sets forth selected financial information relating to our IT services.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$) | (in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||||||||
Revenues | 185.9 | 208.0 | 226.4 | 81.0 | 247.9 | 253.9 | 411.1 | 122.4 | ||||||||||||||||||||||||
Adjusted EBITDA | 31.6 | 34.5 | 34.8 | 12.4 | ||||||||||||||||||||||||||||
Adjusted EBITDA margin | 17.0 | % | 16.6 | % | 15.4 | % | ||||||||||||||||||||||||||
Net profit | 9.1 | 11.3 | 8.5 | 3.1 | 6.0 | 5.2 | 3.8 | 1.1 | ||||||||||||||||||||||||
EBITDA | 34.4 | 38.9 | 58.6 | 17.4 | ||||||||||||||||||||||||||||
EBITDA margin | 13.9 | % | 15.3 | % | 14.3 | % | 14.3 | % |
(1) | Calculated based on an exchange rate of S/.3.36 to US$1.00 as of December 31, 2016. |
Services
We provide the following services to our clients:
Business Processes Outsourcing: consists of the outsourcing of specific business processes including billing payments and collection;delivery, facilities monitoring, digital management; customer care services such as management of complaints; organization and control of voting processes; inventory, shipping and custody of documents; among
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The pie chart below shows our revenues by service for 2013.2016.
Revenues by Service
Clients
We provide services to our clients pursuant to service level agreements which enable us to customize each contract to the needs of the particular client. We set specific parameters and standards which can include maximum times for response and levels of equipment performance, among others. The average term of our contracts is three to five years and we have achieved a significant level of contract renovation.
We have built a strong client base in Peru, including local affiliates of global companies, spanning a broad range of industries, including key clients from the energy, government, banking, insurance, pension funds, industrial, commercial, education and mining sectors. Our principal clients are affiliates of Barrick Gold Corporation, Repsol, BBVA Banco Continental, Honda, Telefónica, the Peruvian National Office of Electoral Processes (Oficina Nacional de Procesos Electorales), the Peruvian National Pension System (Sistema Nacional de Pensiones), the water authority of Lima (SEDAPAL), BBVA Continental, the Peruvian SUNAT, AFP Integra- Sura Group, Backus, BELCORPNational Superintendence of Tax Administration, Saint Ignatius of Loyola University, Bolsa de Valores de Lima S.A. and UNIQUE.Honda del Perú S.A.
Competition
The IT services industry is highly competitive. The market includes both international companies and local or regional companies. Our main competitors, which are sometimes also our partners, include companies such as IBM, Telefónica, Indra, Tata Consultancy Services Sonda, Indra,and Cosapi Data, among others.
Electricity Networks Services
We offer field and specialized services consisting of installation and routine operation and maintenance of electricity infrastructure, primarily for power utility companies in Chile and, to a lesser extent, Colombia, Brazil and Peru. Field services includeday-to-day services and troubleshooting required to maintain the electric grid. Specialized services require more sophisticated and more tailored technology and expertise. With over 20 years operating experience developing, installing, operating and maintaining metering systems, we have also developed a broad range of specialized solutions to reduce electricity theft, one of the main concerns for power utility companies in Latin America.
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The table below sets forth selected financial information for our Electricity Networks Services.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||
2011(1) | 2012 | 2013 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$) | (in millions of S/.) | (in millions of US$)(1) | |||||||||||||||||||||||||||||
Revenues | 558.2 | 632.5 | 513.8 | 183.8 | 595.9 | 563.9 | S/. 727.9 | S/. 216.6 | ||||||||||||||||||||||||
Adjusted EBITDA | 36.4 | 53.9 | 56.9 | 20.4 | ||||||||||||||||||||||||||||
Adjusted EBITDA margin | 6.5 | % | 8.5 | % | 11.1 | % | ||||||||||||||||||||||||||
Net profit | 17.1 | 37.5 | 23.5 | 8.4 | 15.5 | 23.3 | S/. (3.0 | ) | S/. (0.9 | ) | ||||||||||||||||||||||
EBITDA | 44.4 | 35.1 | S/. 31.9 | S/. 9.5 | ||||||||||||||||||||||||||||
EBITDA margin | 7.5 | % | 6.2 | % | 4.4 | % | 4.4 | % |
(1) |
The field services we provide include, among others, installing and maintaining medium- and high-voltage electricity networks and public lighting networks; connecting new residential, commercial and industrial customers to the electrical grid; disconnecting and reconnecting the power supply of our clients’ customers; meter reading; verification of electricity theft; and the installation of meters and anti-theftantitheft solutions. We also provide services that include changing and repairing damaged electrical equipment and maintaining, transferring and expanding the electrical grid. We have developed a sophisticated management system to monitor the efficiency of the field services we provide and increase the daily productivity of our field crews.
We also provide specialized services, which involve more technical expertise and specialized equipment, including the monitoring of electrical consumption for approximately 420,000 industrial, commercial and residential customers. We have developed specialized metering systems and anti-theft solutions for the Latin American markets. We believe we are one of two companies with a relevant market penetration of these antitheft solutions for power utility companies in our markets. We also operate laboratories that offer an array of services in response to local regulation requirements, such as meter certification, equipment testing and theft reports.
In Brazil and Chile, we also operate the warehouse facilities of local power utility companies, which store and distribute the necessary equipment for operations, such as cables, insulators and meters. In addition, in Chile, we lease residential electricity meters to a power utility company, for which we also provide maintenance services. We have formed strategic alliances with equipment manufacturers in order to develop and commercialize specialized metering systems and anti-theft solutions.
The chart below sets forth the percentage of our 20132016 revenues in each of the countries where we operate.
Revenue by Country
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Contracts and Clients
We typically provide our services pursuant to long-term contracts ranging between three and five years. Most of our contracts are awarded through anon-public bidding process, although some contracts are negotiated directly with the client.
Our principal clients are power utility companies and, to a lesser extent, industrial clients, predominantly in the private sector. In Peru, we also provide services to the telecommunications industry. Our principal clients are the distribution companies of
Enel, which acquired Enersis. Over the years, we have worked with the principal power utility companies in the region, including Chilectra, Saesa, Chilquinta, AES,E-CL, Endesa Chile, Ampla, Coelce, Cemig, Coelba, Elektro, Light, Codensa, Emgesa, EEC, Enertolima, Emcalo, Edelnor, Electrocentro, Enosa, and the telecommunication companies VTR, Entel, Claro and Telefonica.
Competition
The market for electricity networks services is highly fragmented and no single company has a significant share of the national market in the countries where we operate. We primarily compete with small, local privately-held service companies. We expect competition to increase in the coming years as electricity consumption grows in response to the economic growth, and relatively low per capita consumption, in the countries where we operate. The main factors that drive competition are safety; product and service quality; reliability; price; and ability to respond to increased industry regulations.
Backlog
We define our backlog as the U.S. dollar equivalent value of revenue we expect to realize in the future as a result of performing work under multi-period contracts that we have entered into. Backlog is not a measure defined by IFRS, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog. For contracts denominated in nuevos soles or other local currencies, amounts have been converted into U.S. dollars based on the exchange rate published by the SBS on December 31 of the corresponding year.
We do not include backlog in this annual report in our Infrastructure segment for: (i) our Norvial toll road concession because its revenues from the concession are derived from toll fees charged to vehicles using the highway, and, as a result, such revenues are dependent on vehicular traffic levels; and (ii) our Energy line of business because: (a) its revenues from hydrocarbon extraction services are dependent on the amounts of oil and gas we produce and market prices, which fluctuate significantly; (b) our revenues from our gas processing plant are dependent on the amount of gas we process and market prices for natural gas liquids, which fluctuate significantly; and (c) our revenues from our fuel storage terminal operation partially depend on the volume of fuel dispatched, such revenues aredispatched; and (iii) our COGA venture, which is not material to our consolidated results of operations and the concession for such servicesbecause it is scheduled to terminate in August 2014.jointly controlled (which we sold on April 24, 2017).
When we present backlog on a segment basis, we do not include eliminations that are included in our consolidated backlog. For a description of how we calculate our backlog, see our segment backlog presented below.
Our consolidated backlog as of December 31, 20132016 was US$3,9353,137.4 million. We expect to recognizerecognized as revenues 49%44% of our backlog by December 31, 2014,2017, and we expect to recognize as revenues 28% of oursuch backlog by December 31, 20152018 and 22%27% of oursuch backlog thereafter. The following table sets forth the growth of our consolidated backlog from December 31, 20092012 to December 31, 2013.
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Backlog Growth (in US$ million)
Our backlog may not grow at recent historic ratesdeclined in 2016 and may decline.decline further in the future. We cannot assure you that we will be able to continue obtaining sufficient contracts in the future in number and magnitude to continue to grow our backlog. Additionally, the amount of new contracts signed can fluctuate significantly from period to period due to factors that are beyond our control.
The table below sets forth our ending backlog for 2014, 2015 and 2016 accounting for opening backlog for each year, annual contract bookings and adjustments, cancellations during the year and annual revenues recognized.
2014 | 2015 | 2016 | ||||||||||
(in millions of US$) | ||||||||||||
Opening backlog (end of prior year) | 3,935.0 | 3,815.3 | 4,037.8 | |||||||||
Contract bookings and adjustments during the year | 2,046.4 | 2,381.2 | 1,759.8 | |||||||||
Cancellations during the year | — | — | (855.0 | )(1) | ||||||||
Revenues recognized during the year | (2,215.9 | ) | (2,158.7 | ) | (1,805.3 | ) | ||||||
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Ending backlog (end of current year) | 3,765.4 | 4,037.8 | 3,137.4 |
(1) | In the third quarter of 2015, we acquired a 29% participation in the construction consortium of the GSP gas pipeline project, and, as a result, we incorporated US$1.0 billion in backlog. Due to the termination of the GSP gas pipeline concession on January 24, 2017, we have removed US$855 million from the backlog, representing 21.4% of our total backlog. |
The chart below sets forth our consolidated backlog breakdown byend-market, geography and client sector as of December 31, 2013.
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Backlog byEnd-Market | Backlog by Geography | |||
Backlog by Client Type
The chart below shows new facts on our backlog of our participation in the GSP pipeline concession and the subsequent termination of the concession.
E & C Backlog
To include an engineering and construction contract in our backlog, we assume that each party will satisfy all of its respective obligations under the contract. We also make assumptions, in agreement with the client, regarding the total expected contract price in the case of unit price and cost-plus fee contracts and the amount of the contract that will be completed in each year. We adjust our backlog periodically to account for developments related to each project. For projects related to joint operations or equity investments, we only include our percentage ownership of the joint operation’s or equity investment’s backlog. Our E&C segment backlog does not include intersegment eliminations.
Our E&C backlog as of December 31, 20132016 was US$3,0441,977.9 million. We expect to recognizerecognized as revenues 51%43% of our backlog by December 31, 2014, 28%2017, and we expect to recognize as revenues 30% of our backlog by 2015December 31, 2018 and 21%27% of our backlog thereafter. The following table sets forth the growth of our E&C backlog from December 31, 20092012 to December 31, 2013.2016.
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E&C Backlog Growth (in US$ million)
The number and amounts of new contracts signed can fluctuate significantly from period to period. For example, two large mining services contracts were signed in the fourth quarter of 2012 for an aggregate amount of backlog of US$1.1 billion. During that same quarter we also recorded US$259 million in backlog from our Vial y Vives acquisition. These contracts and acquisition accounted for a significant portion of the extraordinary growth in our E&C backlog between December 31, 2011 and December 31, 2012 and explain in part the more gradual growth between December 31, 2012 and December 31, 2013. In the third quarter of 2015, we acquired a 29% participation in the construction consortium of the GSP gas pipeline project, and, as a result, we incorporated US$1.0 billion in backlog. Due to the termination of the GSP gas pipeline concession on January 24, 2017, we have removed US$855 million from the backlog, representing 30.2% of our E&C backlog. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
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The following pie charts set forth our E&C backlog breakdown byend-market, geography, client sector and contract type as of December 31, 2013.2016.
Backlog byEnd-Market | Backlog by Geography | |
Backlog by Client Type | Backlog by Client Type | |
The table below sets forth our ending E&C backlog for 2011, 20122014, 2015 and 2013,2016 accounting for opening backlog for each year, annual contract bookings and adjustments, cancellations during the year and annual revenues recognized.
2011 | 2012 | 2013 | ||||||||||
(in millions of US$) | ||||||||||||
Opening backlog (end of prior period) | 1,064.1 | 1,839.6 | 2,925.4 | |||||||||
Contract bookings and adjustments during the year | 1,807.8 | 2,447.1 | 1,576.0 | |||||||||
Revenues recognized during the period | (1,032.3 | ) | (1,361.4 | ) | (1,457.5 | ) | ||||||
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Ending backlog (end of current period) | 1,839.6 | 2,925.4 | 3,044.0 |
The table below sets forth our backlog at the reported years end and the ratio of such backlog to revenues earned in the subsequent two years.
(in millions of US$) | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
E&C backlog | Total | |||||||||||||||||||||||||||||||||||
As of December 31, 2008 | US$530 | US$380 | US$128 | US$21 | ||||||||||||||||||||||||||||||||
As of December 31, 2009 | US$905 | US$506 | US$242 | US$156 | ||||||||||||||||||||||||||||||||
As of December 31, 2010 | US$1,064 | US$707 | US$236 | US$121 | ||||||||||||||||||||||||||||||||
As of December 31, 2011 | US$1,840 | US$824 | US$580 | US$435 | ||||||||||||||||||||||||||||||||
As of December 31, 2012 | US$2,925 | US$1,232 | US$921 | US$773 | ||||||||||||||||||||||||||||||||
As of December 31, 2013 | US$3,044 | US$1,550 | US$849 | US$645 | ||||||||||||||||||||||||||||||||
E&C revenues | US$605 | US$1,032 | US$1,361 | US$1,457 | ||||||||||||||||||||||||||||||||
E&C revenues / backlog ratio | ||||||||||||||||||||||||||||||||||||
Based on backlog |
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Based on backlog |
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Based on backlog |
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Based on backlog |
| 1.65x | 2.51x | |||||||||||||||||||||||||||||||||
Based on backlog |
| 1.18x | 1.85 | |||||||||||||||||||||||||||||||||
Based on backlog |
| 1.10 |
2014 | 2015 | 2016 | ||||||||||
(in millions of US$) | ||||||||||||
Opening backlog (end of prior year) | 3,044.0 | 2,885.1 | 3,129.4 | |||||||||
Contract bookings and adjustments during the year | 1,476.1 | 1,954.6 | 926.2 | |||||||||
Cancellations during the year | — | — | (855.0 | ) | ||||||||
Revenues recognized during the year | (1,684.7 | ) | (1,710.3 | ) | (1,222.8 | ) | ||||||
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Ending backlog (end of current year) | 2,835.3 | 3,129.4 | 1,977.9 |
(1) |
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The first section from the table above shows what the estimated backlog for the E&C segment had been as of each year-end period, between 2008 and 2013, as well as the portion of each year-end backlog that was estimated at the time to be executed in each of the next two years and thereafter. For example, E&C backlog as of December 31, 2008 was US$530 million, of which US$380 million was estimated at the time to be executed in 2009 (“T+1”), US$128 million in 2010 (“T+2”) and US$21 million in 2011 and thereafter.
The second section of the table shows actual E&C revenues for each of the years in the 2010-2013 period presented in accordance with IFRS.
The third section of the table shows E&C revenues to backlog ratios, calculated as the actual E&C revenues that were obtained in a year divided by what the estimated E&C backlog realization for that same year had been one year before and two years before. For example, the ‘T+1’ revenues to backlog ratio for 2009 was 1.20x (calculated as 2010 revenues of US$605 million divided by US$506 million, which was the portion of the backlog as of December 31, 2009 that was estimated at the time to be executed in 2010). This means that in 2010 we were able to generate actual E&C revenues of 1.20x times what the estimated E&C backlog for 2010 had been as of the previous year-end period.
Based on 2007 backlog of US$419 million, of which US$275 million was expected to be realized in 2008 and US$144 million in 2009, the ratios of E&C revenues (under Peruvian GAAP) to backlog for 2008 (T+1) and for 2009 (T+2) were 1.68x and 3.58x, respectively. Similarly, based on 2008 backlog of US$530 million, of which US$380 million was expected to be realized in 2009, the ratio of E&C revenues (under Peruvian GAAP) to backlog for 2009 (T+1) was 1.36x.
Our revenues in each of the reported years exceeded T+1 estimated backlog realization for the year because revenues were earned from, in addition to contracted amounts reflected in such backlog, new contracts signed during the year and change orders on backlog contracts. These positive effects were offset in part by delays in project execution and project cancellations. Our T+1 ratios have varied significantly from year to year because of the unpredictability and wide dispersion in size of new projects, change orders, delays and cancellations, and the variation in T+2 ratios is even greater because the effect of these factors increases with the passage of time. Our historical T+1 and T+2 ratios may not be indicative of future backlog realization ratios because the effect of these factors is unpredictable and we may not be able to generate revenues at multiples above our contracted backlog due to the factors explained above and because we may not be able to increase the scale of our operations to realize such incremental revenues. In particular, you should not assume that the ratio of our future E&C segment revenues for 2014 and 2015 to backlog as of December 31, 2013 that is currently expected to be realized in each of those years will be comparable to our historic ratios shown above. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Company—Our backlog and our ratio of historical backlog to revenues may not be reliable indicators of future revenues or profit.”
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Infrastructure Backlog
In reflecting an Infrastructure contract in our backlog, we assume that each party will satisfy all of its respective obligations under the contract. For our Infrastructure backlog, we only include contracted revenues expected to be paid during the next three years following the backlog calculation date. Infrastructure backlog in this annual report does not include our Norvial toll road concession or our Energy line of business. Our Infrastructure segment backlog does not include intersegment eliminations. We calculate our Infrastructure backlog as follows:
Our Infrastructure backlog as of December 31, 20132016 was US$320.2300.7 million. We expect to recognizerecognized as revenues 37%32% of our backlog by December 31, 2014,2017, and we expect to recognize as revenues 31% of our backlog by December 31, 20152018 and 32%37% of our backlog in 2016.thereafter. The following chart sets forth the growth of our Infrastructure backlog from December 31, 20102012 to December 31, 2013.2016.
Infrastructure Backlog Growth (in US$ million)
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The following pie charts setchart sets forth our Infrastructure backlog breakdown by line of business as of December 31, 2013.2016.
Backlog by Line of Business
The table below sets forth our ending Infrastructure backlog for 2011, 20122014, 2015 and 2013,2016, accounting for opening backlog for each year, annual contract bookings, cancellations during the year and adjustments and annual revenues recognized (excluding Norvial and our Energy line of business).recognized.
2011 | 2012 | 2013 | ||||||||||
(in millions of US$) | ||||||||||||
Opening backlog (end of prior period) | 47.2 | 195.9 | 413.4 | |||||||||
Contract bookings and adjustments during the year | 162.2 | 276.2 | 1.6 | |||||||||
Revenues recognized during the period | (13.5 | ) | (58.6 | ) | (94.9 | ) | ||||||
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Ending backlog (end of current period) | 195.9 | 413.4 | 320.2 |
2014 | 2015 | 2016 | ||||||||||
(in millions of US$) | ||||||||||||
Opening backlog (end of prior year) | 320.2 | 311.6 | 256.5 | |||||||||
Contract bookings and adjustments during the year | 107.1 | 54.8 | 134.7 | |||||||||
Cancellations during the year | — | — | — | |||||||||
Revenues recognized during the year | (115.6 | ) | (109.9 | ) | (90.5 | ) | ||||||
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Ending backlog (end of current year) Real Estate Backlog | 311.6 | 256.5 | 300.7 |
Real Estate Backlog
Our Real Estate segment backlog reflects sales contracts with buyers for units that have not yet been delivered and will be recognized as revenues once they are delivered.
Our Real Estate segment backlog as of December 31, 20132016 was US$85.095.9 million. We expect to recognizerecognized as revenues 77%92% of our backlog by December 31, 2014, 19%2017, and we expect to recognize as revenues 7% of our backlog in 2015by December 31, 2018 and 4%1% of our backlog thereafter.
The following pie chart sets forth our Real Estate backlog breakdown by type of real estate activities as of December 31, 2013.2016.
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The table below sets forth our ending Real Estate backlog for 2011, 20122014, 2015 and 2013,2016, accounting for opening backlog for each year, annual contract bookings and adjustments, cancellations during the year and annual revenues recognized.
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
(in millions of US$) | (in millions of US$) | |||||||||||||||||||||||
Opening backlog (end of prior period) | 1.8 | 58.2 | 108.4 | |||||||||||||||||||||
Opening backlog (end of prior year) | 85.0 | 81.3 | 111.0 | |||||||||||||||||||||
Contract bookings and adjustments during the year | 112.8 | 143.0 | 88.8 | 71.5 | 92.9 | 107.3 | ||||||||||||||||||
Revenues recognized during the year | (56.5 | ) | (92.7 | ) | (112.2 | ) | (75.1 | ) | (63.2 | ) | (122.5 | ) | ||||||||||||
Cancellations during the year | — | — | — | |||||||||||||||||||||
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Ending backlog (end of current period) | 58.2 | 108.4 | 85.0 | |||||||||||||||||||||
Ending backlog (end of current year) | 81.4 | 111.0 | 95.9 | |||||||||||||||||||||
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Technical Services Backlog
In reflecting a Technical Services contract in our backlog, we assume that each party will satisfy all of its respective obligations under the contract and that work under the contract will be completed on a straight-line basis. Our Technical Services segment backlog does not include intersegment eliminations. The following information on our backlog for technical services does include our backlog from GMD, which we sold on June 6, 2017. GMD’s backlog as of December 31, 2016 was US$125.7 million.
Our Technical Services backlog as of December 31, 20132016 was US$619.0857.8 million. We expect to recognizerecognized as revenues 45%44% of our backlog by December 31, 2014, 29%2017, and we expect to recognize as revenues 28% of our backlog in 2015by December 31, 2018 and 26%28% of our backlog thereafter. The following chart sets forth the growth of our Technical Services backlog from December 31, 20092012 to December 31, 2013.2016.
Technical Services Backlog Growth (in US$ million)
* | Includes CAM, which we acquired on February 24, 2011. |
The table below sets forth our ending Technical Services backlog for 2011, 20122014, 2015 and 2013,2016, accounting for opening backlog for each year, annual contract bookings and adjustments, cancellations during the year and annual revenues recognized.
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
(in millions of US$) | (in millions of US$) | |||||||||||||||||||||||
Opening backlog (end of prior period) | 267.1 | 516.1 | 873.7 | |||||||||||||||||||||
Opening backlog (end of prior year) | 619.0 | 646.3 | 613.0 | |||||||||||||||||||||
Contract bookings and adjustments during the year | 611.2 | 776.1 | 163.4 | 431.5 | 304.2 | 666.3 | ||||||||||||||||||
Cancellations during the year | — | — | — | |||||||||||||||||||||
Revenues recognized during the year | (362.2 | ) | (418.4 | ) | (418.1 | ) | (404.2 | ) | (337.4 | ) | (421.6 | ) | ||||||||||||
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Ending backlog (end of current period) | 516.1 | 873.7 | 619.0 | |||||||||||||||||||||
Ending backlog (end of current year) | 646.3 | 613.0 | 857.8 |
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The following pie charts set forth our Technical Services backlog breakdown by geography,end-market and client sector as of December 31, 2013.2016.
Warranties
For certain of our contracts, we are required to provide performance bonds to ensure compliance with contractual obligations such as construction works, operation and maintenance of infrastructure assets, among others. The amount of the performance bond varies on acase-by-case basis, depending on the value of the project. Performance bonds are usually renewed annually until the contractual obligation which they intend to guarantee is fully satisfied.
As part of our real estate sales contracts, we provide asix-months warranty for latent defects, which covers hidden flaws not discoverable through inspection. The warranty extends to a five-year term if the defects are caused by: (i) the use of materials below the requisite quality standards; (ii) poor execution; or (iii) faulty land. We also provide a five-year warranty for structural defects, and assume the terms and conditions of our finishes suppliers’ warranties.
We provide warranties in connection with our IT services. All government contracts include a latent defects clause, in accordance with Article 51 of the Procurement Act which establishes a minimum warranty of one year, although, for some contracts, we provide warranties for two or three years. For contracts involving the sale of equipment or licensing, we provide the manufacturer’s warranty and, if a claim arises, we transfer the claim to the manufacturer unless we provided an extended warranty. For software development contracts, we provide a one to three years good performance warranty.
We have had no material disbursement or expenditure related to our warranties in the recent past.
Quality Assurance
The quality ofIn 2017, our services is backed byoperations were certified according to the following certifications:international standards:
ISO 9001 | ISO 14001 | OHSAS 18001 | ISO 27001 | ISO 20000 | Other standards | |||||||||||||||||||||
Engineering and Construction | GMI | x | x | x | ||||||||||||||||||||||
GyM | x | x | x | |||||||||||||||||||||||
MORELCO | x | x | x | x | ||||||||||||||||||||||
Vial y Vives - DSD | x | x | x | |||||||||||||||||||||||
Infrastructure | GMP | x | x | x | ||||||||||||||||||||||
CONCAR | x | x | x | |||||||||||||||||||||||
GyM Ferrovias | x | |||||||||||||||||||||||||
Technical Services | CAM Chile | x | x | x | x | |||||||||||||||||||||
CAM Colombia | x | x | x | x | ||||||||||||||||||||||
CAM Perú | x | x | x | x | ||||||||||||||||||||||
ADEXUS | x | x | x | x | x | x |
Engineering and Construction:
Infrastructure:
Technical Services:
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Corporate Social Responsibility
We aimare committed to attractthe sustainable development of our operations. We seek to create long-term value and developconduct business in a manner that is not only economically viable, but also beneficial to greater society and environmentally responsible.
Our Sustainability Policy was approved by our human capital through various training, mentorshipboard of directors on January 28, 2016, and rewardsits guidelines allow us to focus on seven managerial priorities linked to our stakeholders: ethical conduct, development of people, operational excellence, health and safety, the environment, communication and dialogue and sharing wellbeing.
The focuses of our social investment projects include education and capacity building to foster job creation and the promotion of responsible citizen behavior, particularly among our users, suppliers and neighboring communities.
The following are key programs in orderwe perform for the benefit of society:
In 2017, volunteers participated in the engineering fieldProject to Expand the National Institute of Neoplastic Illnesses (INEN), in Peru. We also seek to promote social good by continuing to foster relationships with the communities that surround the areas of operation of each of our business segments. As part of our citizenship building efforts, among other things, we provide: necessary toolswhich engineers led playshops for improving the employability and economic livelihood of citizens; create basic infrastructure to promote the use of public spaces as cultural spaces and training grounds for citizens; and create spaces that not only provide benefits, but also encourage citizens to actively participatechildren in their maintenance.
Our social responsibility efforts have been recently recognized by the award of prizes such as:
Our model of sustainable development is based upon building relationships of trust. In our projects we consider the needs of local communities with respect to generating employment; the expectations of our customers regarding the particular goals of the project; the demand of the state for a trained service provider; and investors who wish to entrust their capital to a company that follows best practices in corporate governance and social responsibility. The following is description of our main corporate social responsibility projects:hospital.
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• |
Regulatory Matters
Set forth below is a description of the regulatory framework applicable to our company. We believe we are in compliance, in all material respects, with applicable laws and regulations in all of our business segments.
Engineering and Construction
Regulatory Framework Applicable to Contracts with the Public Sector
As of the date of this annual report, Peru’s State Contracting Law, approved by Legislative DecreeLaw No. 1017 (Ley30225 (Ley de Contrataciones del Estado)Estado) and its regulationregulations, approved by Supreme Decree No. 184-2008-EF, govern350-2015-EF, which entered into force on January 9, 2016, governs services and construction agreements entered into with public entities. Article 108 of the Supreme Decree No. 184-2008-EF350-2015-EF establishes that, at the beginning of the contracting process, the contracting public entity must prepare a technical file describing the characteristics of the services it intends to purchase and the selection process for its counterparts, among other specifications such as a feasibility statement in accordance with the Peruvian Public Investment National System.specifications.
The selection processes are established in Articles 32, 15, 16, 17 and 18 of Peru’s State Contracting LawSupreme Decree No.350-2015-EF as follows:
• | public biddings (licitación pública), applicable to goods and works; |
• | public tenders (concurso público), applicable to services, including consulting services; |
• | simplified award (adjudicación simplificada), applicable to (i) goods, if the value is greater than S/.31,600 and less than S/.400,000; (ii) services, if the value is greater than S/.31,600 and less than S/.400,000; and (iii) works, if the value is greater than S/.31,600 and less than S/.180,000; |
• | electronic reverse auction (subasta electronica inversa), applicable to goods and services with a value greater than S/.31,600; |
• | selection of individual consultants (selección de consultores individuales), applicable for the hiring of qualified consultants who do not need teams of personnel or additional professional support; |
• | price comparison (comparación de precios), applicable to goods and services that are easy to obtain in the market and that are not manufactured, produced, supplied or provided under a particular description or set of instructions given by the contracting entity; and |
• | direct contracting (contratación directa), applicable to goods and services, in situations of emergency arising from catastrophic events, involvement of national security, shortages, among other similar reasons. |
With the exception set forth in Article 2249 of the Supreme Decree No. 184-2008-EF,350-2015-EF, the selection processes include the following phases:
Article 946 of Peru’s State Contracting Law establishes that participants of any of the foregoing selection processes must be registered in the Peruvian National Registry of Suppliers (Registro(Registro Nacional de Proveedores)Proveedores) and must not be disqualified from contracting with the state. Article 252234 of the Supreme Decree No. 184-2008- EF350-2015-EF establishes that this registration is renewable as long as a request is submitted to the Peruvian National Registry of Suppliers 60 days prior to expiration of the registry.
Bidders may participate in the selection process as part of a joint operation, in which case all members of the joint operation must be registered in the Peruvian National Registry of Suppliers and will be jointly liable for all consequences arising from the joint operation’s participation in the selection process and the execution of the agreement.
GyM and GMI are registered in the Peruvian National Registry of Suppliers as a construction and a consulting company, respectively.
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Article 4014 of the Supreme Decree No. 184-2008-EF350-2015-EF establishes the types of contracts that may be entered into by public entities:
• | lump-sum (sistema a suma alzada), applicable when the amounts, magnitudes and quality are determined in the terms and conditions of the selection process. The bidder submits its proposal indicating a fixed amount and a term for the completion of the agreement; |
• | unit price, rates or percentages (sistema de precio unitario, tarifas o porcentajes), applicable when the nature of the service to be provided does not allow accurate determination of the required quantities; |
• | lump-sum and unit price, rates or percentages mix (esquema mixto de suma alzada y precios unitarios), applicable when accurate determination of the quantities required for some of the components cannot be made; and |
• | fixed amount plus success fee (honorario fijo y comisión de éxito), applicable in contracts for rendering services. The fixed amount and success fee may be estimated on the basis of percentages. |
Article 4115 of the Supreme Decree No. 184-2008-EF350-2015-EF establishes that, in the case of goods and works, the terms and conditions of the selection process must indicate the execution type of the agreement as follows:
• | “turn-key” (llave en mano), when completion is subject to the construction, equipment and operations, and, if applicable, the submission of the technical file in connection with the bidding process; and |
• | bid contest (concurso oferta), when completion is subject to the submission of the technical file, the completion of the work or land, as applicable. This completion type is only applicable tolump-sum contracts and public bidding selection process. |
Peru’s State Contracting Supervising Agency (Organismo(Organismo Supervisor de las Contrataciones del Estado, or “OSCE”), a public-sector entity within the Peruvian Ministry of Economy and Finance, supervises and oversees the selection processes carried out by public entities; manages the Peruvian National Registry of Suppliers; imposes penalties to suppliers that violate the provisions set forth in Peru’s State Contracting Law, its regulation and other related provisions; and informs the government’s General Controller (ContraloríComptroller (Contraloría General de la República)blica) regarding violations to the regulationregulations when damages are caused against the state. As of the date of this annual report we do not believe that Peru’s State Contracting Law and Supreme Decree No.350-2015-EF will have a material impact on our business.
Regulatory Framework Applicable to Contracts with the Private Sector
Parties to a private-sector agreement may freely determine the contract type and its contents as long as it complies with certain legal requirements, including the provisions set forth in Article 1353 of the Peruvian Civil Code.Code (which states that all contracts, including innominate contracts, must comply with the rules of Section VIII of the Peruvian Civil Code, absent a statute specific to said contract type that collides with said rules). GyM GMI and Stracon GyMGMI participate in private-sector contracts for engineering and constructions.
Construction Activities in Peru
Legal Framework
Peru’s Law for the Promotion of Private Investment in Construction, approved by Legislative Decree No. 727 declared(Ley de Promoción de la Inversión Privada en Construcción), states that construction activities in Peru are in the public interest and of preferentiala national interest.priority. According to Section F of the Fourth review of the United Nations International Statistical Industrial Classification (ISIC), construction activities typically consist of the construction of dwellings, buildings and stores; and the construction of large scale infrastructure projects such as highways, bridges, tunnels, railways, irrigation systems, sewage systems, industrial facilities, pipelines and electric lines, among others. GyM has developed numerous projects in the construction sector. Currently, the company focuses on buildings (ISIC Division 41), civil works (ISIC Division 42) and specialized activities (ISIC Division 43).
Construction entities must comply with the National Building Regulation, (Reglamento Nacional de Edificaciones approved by Supreme Decree No. 011-2006- VIVIENDA)011-2006-VIVIENDA (Reglamento Nacional de Edificaciones), which establishes that urban allotments and buildings must be developed in compliance with the rules governing safety, functionality, accessibility, habitability and environmental impact. According to Article 25 of the National Building Regulation, construction companies, such as GyM and GMI, are responsible for (i) executing works in accordance with project specifications
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and applicable regulation;regulations; (ii) possessing thesufficient organization and infrastructure thatto guarantee the feasibility of the project; (iii) appointing the party responsible for the construction to assume its technical representation; (iv) providing the resources and materials to complete the project pursuant to the terms of the agreement and required standards and within the approved budget; (v) executing subcontracts within contractual limitations; and (vi) delivering to the client documented information regarding the executed works.
Notwithstanding any legal actions that the construction company may take against suppliers, manufacturers or subcontractors, the construction company may be responsible for all the constructionworks, including the workthose executed by subcontractors, and for the use of defective materials or supplies.
Penalties for violating the National Building Regulation are determined by the municipal government in the jurisdiction where the project is developed, and set forth in its corresponding regulations. In addition, they may also pursue criminal actions or civil claims if applicable.
Safety Regulation in Construction Projects
The Law on Safety and Health at Work (Law No. 29783) is intended to promote workplace accident prevention and applies to all business sectors. The principal safety rules applicable to construction projects include the following:
The Peruvian Ministry of Labor and Employment Promotion, the National Superintendence of Labor Inspection (the “SUNAFIL”) and the Peruvian Ministry of Health are the competent organisms in the safety and health fields, respectively.
Safety Regulations Applicable to Subsectors
In addition to the Law on Safety and Health at Work applicable to all our business sectors, our Engineering and Construction segment must also comply with the regulations set forth below.
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Power and Utilities
GyM and CAM Peru must comply with the rulesRules of Safety and Health at Work with Electricity, approved by Ministerial Resolution No.111-2013-MEM-DM, for its activities relating to the construction of hydroelectric plants, transmission lines and substations. OSINERGMIN is the authority responsible for supervising and enforcing compliance of the foregoing rules. The most relevant of the safety rules with which GyM and CAM Peru must comply include: (i) providing employees with necessary information regarding safety measures related to the tasks they perform; (ii) providing employees with adequate safety equipment; and (iii) evaluating and remedying potential sources of danger.
Mining
GyM and Stracon GyM must comply with the Mining Occupational Health and Safety Regulation, approved by Supreme Decree No. 055-2010-EM024-2016-EM, and other related regulations for their mining-related construction activities including the construction of mineral processing plants and other mining-related buildings, among others. In developing mining projects, our subsidiaries’ personnel must follow the safety programs and be familiar with internal rules from their mining sector client. The Peruvian Ministry of Labor and Employment PromotionSUNAFIL and OSINERGMIN are the authorities responsible for supervising and enforcing compliance of the foregoing rules. The most relevant of the safety rules with which GyM and Stracon GyM must comply include: (i) creating an internal safety and health regulation policy and selecting a manager responsible for its implementation; (ii) monitoring and recording workplace accidents and occupational diseases; (iii) providing information to employees regarding the safety risks related to their work; (iv) providing employees necessary first aid and medical attention in the event of a workplace accident; (v) providing employees the necessary tools, equipment or materials to perform their activities safely; and (vi) evaluating risks in order to establish accident prevention and mitigation plans.
Oil and Gas
GyMGMP must comply with the Hydrocarbons Safety Regulations, as approved by Supreme Decree No.043-2007-EM, for its activities relating to which are enforced by the construction of gas processing plants. The Peruvian Ministry of Labor and Employment Promotion is the authority responsible for supervising and enforcing compliance of the foregoing rules. See “—Infrastructure— Peruvian Hydrocarbon Regulation—Environmental Regulation” for more information on environmental regulation applicable to the oil and gas sector.OSINERGMIN, while performing any hydrocarbon activities. The most relevant of the safety rules with which GyMGMP must comply include: (i) assuring that senior project managers are responsible for the safety and health of workers; (ii) assigning specialized personnel responsible for safety and health matters; and (iii) monitoring and recording workplace accidents on a monthly basis.
Industrial Construction
GyM must comply with the Industrial Safety Regulation, approved by Supreme Decree No.42-F (Reglamento (Reglamento de Seguridad Industrial)Industrial), for its activities relating to the construction of industrial plants. The most relevant of the safety rules with which GyM must comply include: (i) overseeing that worksites are constructed, equipped and managed to provide security and protection to employees; (ii) instructing employees about risks to which they are exposed related to their work and adopting necessary measures to avoid accidents and damage to employee health; and (iii) overseeing inspections to verify the proper installation of safety equipment.
Registries and Permits
According to Supreme Decree No.008-2013-TR, civil contractors must be registered in the National Civil Construction Works Registry, and comply with the rules of Ministerial Resolution No.195-2007-TR which establishessets out the requirements for registration, including registering through the corresponding local agency and filing an affidavit indicating compliance with the registration requirements before the effective date of registration. GyM and Stracon GyM areis currently registered in the National Civil Construction Contractors and Subcontractor Registry.
According to Supreme Decree No.005-2008-EM mining contractors must register with the National Mining Contractors and Specialized Companies Registry. GyM and Stracon GyM areis currently registered. Proper registration requires the filing of a request with the Regional Agency of Energy and Mines with jurisdiction in the area where the mining activities will take place. In addition, within five days upon commencement of construction, GyM and Stracon GyM must provide in writing theirits employees with the following information: (i) the company’s legal name; (ii) the scope of the contract; (iii) the place of execution; (iv) the applicable health and safety regulations; (v) the Safe Work Written Procedures (PETS); and, (vi) risk insurance policies.
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Labor Law Requirements in Civil Construction
Labor law requirements in civil construction consist of the specific legal framework for civil construction workers and the general legal framework applicable to the administrative personnel in the civil construction sector set forth in the Single Revised Text of the Labor Productivity and Competitiveness Law, approved by D.SSupreme Decree No.003-97-TR.
Seasonality of services is one of the main features in the specific legal framework due to the temporary nature of construction contracts. Consequently, certain general rules such as the trial period are not applicable to construction workers.
The principal terms and conditions relating to collective bargaining from our civil construction workers have been agreed upon and recorded in the 2012-20132015-2016 agreement, dated August 16, 2012,6, 2015, and entered into between the Peruvian Chamber of Construction and the Federation of Civil Construction Workers (Federació(Federación de Trabajadores en Construcción Civil)Civil). The 2012-20132015-2016 agreement included the following benefits: (i) remunerationpay increase; (ii) bonuses for employees working 28 consecutive days or more in projects with difficult access; and premiums rewarding high specialization degrees; (iii) bonuses for workers that work at elevations above 3,000 meters or below zero-level elevation (belowpaid leave in case of death of a second basement or five meters underrelative of the zero-level elevation).employee.
The Supreme Decree No.009-97-SA, Law No. 26790 and Supreme Decree No.003-98-SA require construction companies to have complementary high risk insurance for workers that perform high risk tasks. As of the date of this annual report, GyM and Stracon GyM havehas this insurance coverage.
The insurance coverage provides medical care for injured workers to allow them to achieve full recovery. Moreover, it provides pensions to workers or their beneficiaries in case the worker becomes handicapped or dies as a result of a work accident or occupational disease.
Environmental Regulations
Section 24 of the General Environmental Law, approved by Law No. 28611 (the “General Environmental Law”), provides that all human activity likely to cause significant environmental impact is subject of regulation by the National System of Environmental Impact Assessment. The Peruvian Ministry of the Environment, through the Environmental Supervising and Enforcement Agency (Organismo(Organismo de Evaluación y Supervisión Ambiental,or “OEFA”) supervises compliance with the compliancelaw and enforces environmental rules related to mining, oil and gas and electricity.
In addition to being responsible for the impact that theirits activities, by action or omission, may causehave on the environment, GyM and Stracon GyM areis also subject to an environmental impact assessment and must obtain an environmental certification necessary to obtain project permits or licenses. These companiesGyM must also adopt measures for the management of hazardous materials intrinsic to theirits activities to mitigate the negative environmental impact theirits activities may have.
Civil Construction
The Supreme Decree No.015-2012-VIVIENDA (modified by the Supreme Decree No.004-2015-VIVIENDA) regulates the environmental aspects of projects related to housing, urbanism, construction and sanitation activities in urban or rural areas. The National Directorate of Housing, Urbanism, Construction and Sanitation supervises the compliance and enforces the applicable rules. Projects are categorized according to their environmental impact during and after their execution and different rules are established for each category including compliance with the following environmental studies prior to initiatingstarting construction works: (i) projects expected to cause minor environmental impacts require an environmental impact statement; (ii) projects expected to cause moderate environmental impacts require ana semi-detailed environmental impact assessment; and (iii) projects expected to cause a major environmental impact require a detailed environmental impact assessment.
Other Subsectors
Depending on the subsector in which they operate,it operates, GyM and Stracon GyM areis required to follow specific environmental provisions issued by the competent authorities.
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Tax Legal Regime Applicable to Construction
Section 63 of the Peruvian Income Tax Law, approved by Supreme Decree No.179-2004-EF, establishes that construction companies engaged in construction contracts for a period longer than one fiscal year can choose to be taxed under any of the following systems:
In both situations, a special accounting registry must be kept for each project, which is meant to keep a record of the costs, expenses and income of each project in an account separate from the general analytical accounts (cuentas(cuentas analíticas de gestión)n).
Until December 31, 2012, construction companies could defer revenues related to each individual project until the total completion of the project, provided the project was completed in three years or less. In such cases, the income was to be recognized in the fiscal year in which the project concluded or was delivered. In case the project was scheduled to conclude in a period exceeding three years, the results would be determined in the third year in accordance with the progress of the works over the three-year period. Beginning in the fourth year, results were determined following the foregoing methods.
Starting on January 1, 2013, in accordance with Legislative Decree No. 1112, which amended the Peruvian Income Tax Law, construction companies that adopted the deferral method are authorized to continue with the use of such method only with respect to income arising from the execution of work contracts initiated prior to January 1, 2013, until itstheir completion, and for execution of work contracts initiated on or after January 1, 2013 the deferral method is no longer accepted.
The Peruvian Income Tax Law also provides that the difference that may result from a comparison between the real gross income and the income assessed pursuant to any of the methods described above shall be allocated to the fiscal year in which the work concluded. Additionally, the company must apply the same system to all its construction contracts and must receive prior authorization from tax authorities to change the applied system.
Prevention of Money Laundering and Financing of Terrorism
Regulations for money laundering and terrorism financing prevention, (SBSapproved by SBS ResolutionNo. 486-2008)486-2008, require construction and real estate companies to implement a money laundering and terrorism financing prevention system, including the appointment of a compliance officer, setting up a registry of operations and notifying the Financial Intelligence Unit of the SBS, the entity responsible for of supervising and enforcing compliance, of any suspicious activity.
Infrastructure
Private Investment in Public Infrastructure and Public Services through Public Private Partnership Contracts
In Peru, promotionAs a result of private investmententering into “Programa País” in public infrastructureDecember 2014 with the Organization for EconomicCo-operation and servicesDevelopment (OECD), the Peruvian state is undertaken by Proinversiónimplementing a new regulatory framework (Legislative Decree No. 1224 and commonly awarded through multi-party concession agreements among the concessionaire, Proinversión and the respective public entity. Private investment in public infrastructure is regulated by the Single Revised Textits regulations, approved by Supreme Decree No. 059-96-PCM (Texto Único Ordenado or “TUO”)410-2015-EF) establishing the procedures and its additional regulation approved by Supreme Decree No. 108-2006-EF.
In accordance withways of promoting private investment for the TUO and its regulation, concessionaires are entitled to receive from the state: (i) in the case of self-financing projects, fees and tolls charged to end-users; (ii) in the case of co-financed projects, subsidies and payments from the public entity awarding the concession; and (iii) any other financing structure agreed upon by the parties.
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The regulation of private-public partnerships allows public entities to participate, together with private investors, in the development or operation of public infrastructure, public services, any ancillary services, applied research projects and/or technological innovation, through Public-Private Partnerships (PPP) and services. Projects with State Assets.
The regulationmain aspects of private-public partnerships establishes that projects classified as self-financing and those classified as co-financed must comply with the requirements and procedures set forth innew legal framework are the Public Investment National System Law (Ley del Sistema Nacional de Inversión Pública) and in the Indebtedness National System law (Ley del Sistema Nacional de Endeudamiento) as amended.following:
1. | The Ministry of Economy and Finance (Ministerio de Economía y Finanzas) is the governing authority of the National System for the Promotion of Private Investment (SNPIP), composed by ministries and public agencies of the national government, The Agency for the Promotion of Private Investment—ProInversión, and regional and local governments. |
2. | Private investment projects will comprise the following stages: (i) planning and programming, (ii) formulation, (iii) structuring, (iv) transaction, and (v) contract execution. Great emphasis is given to the Evaluation Report (Informe de Evaluación), a document determining the economic, financial and legal viability of a potential Public Private Partnership applying, where appropriate, the national public investment system. Investors are entitled to receive from the Peruvian state: (a) in the case of self-financed projects, taxes and tolls to be collected from final consumers; (b) in the case ofco-financed projects, subsidies and payments from the public entity awarding the project; and (c) any other financing structure agreed between the parties. |
3. | The management of Public Private Partnership contracts by the three levels of government (central, regional and local) is regulated. |
4. | For projects in regulated sectors, the monitoring of Public Private Partnership contracts is subject to the provisions of the Law No. 27332, Framework Law on Regulators. According to this law, OSIPTEL, OSITRAN, SUNASS and OSINERGMIN should primarily safeguard the compliance of service levels agreed in Public Private Partnership contracts. For this purpose, Public Private Partnership contracts must establish the necessary arrangements to ensure timely and efficient supervision during the contract execution stage. To this end, public entities are required to ensure timely participation of regulatory agencies in the arbitration, when decisions and matters related to the competence of those bodies are discussed. |
5. | Favorable opinions for the Public Private Partnership contracts from the General Comptroller of Peru are required. The General Comptroller will issue a report on any aspects that may jeopardize the financial capacity of the Peruvian state, according to Law No. 27785, Organic Law of the National Control System and the General Comptroller of Peru. |
6. | Investors interested in participating as bidders in private investment processes must review the list of impediments and prohibitions established in the State Contracting Law. Whether an investor is barred from participating shall be determined through administrative channels, and such impediment will apply to any expected strategic partners as well. Such partners usually accredit their technical capacity during the promotion process. Furthermore, it is stated that, in case the contract does not set a strategic partner, the impediment would apply to those who have exercised direct control over the investor, as indicated in the regulations approved by the Superintendence of the Stock Market. If barred, the ban shall stand for two years; except for the impediments established in the State Contracting Law, which will be valid for the terms indicated in such law. |
7. | The development of projects related to assets owned by the Peruvian state (Legislative Decree No. 674, Law Promoting Private Investment in State Enterprises) can be carried out by private sector initiatives, without committing any public resources or transferring any risks to public entities, unless expressly required by law. |
Each of our subsidiaries Norvial, Survial, Canchaque and GyM Ferrovías has entered into a concession agreement with ProinversióProInversión and the Peruvian Ministry of TransportTransportation and Communications. La Chira has entered into concession agreements with ProinversióProInversión and Sedapal S.A. The abovementioned agreements were entered into in accordance with the provisions set forth in force at the TUO and its regulation, and with the regulationtime of private-public partnerships when applicable.their execution.
Infrastructure Construction and Safety
Infrastructure concessionaires must assure that the construction companies they hire to construct infrastructure projects comply with the foregoing rules relating to construction projects. In addition, companies engaged in road construction must comply with the guidelines issued by the Road and Railways General Directorate of the Peruvian Ministry of TransportTransportation and Communications and with the National Road Infrastructure Management Regulation regarding road construction, maintenance and safety. These regulations establish procedures for authorizing road construction and approving work contracts, among others.
Environmental Regulations
Peruvian environmental laws and regulations have become increasingly stringent over the last decade. All industries and projects are subject to Peruvian laws and regulations concerning water, air and noise pollution, and the discharge of hazardous substances. The principalmain legislation governing environmental matters is the General Environmental Law; the Law of the National System of the Environmental Impact Evaluation, approved by General Law No. 27,44627446 (the “SEIA”); the regulations of the SEIA Law, approved by Supreme Decree No. 019- 2009-MINAM;019-2009-MINAM; and several environmental regulations that have been issued under the General Environmental Law, SEIA and other laws by the government with the collaboration of the Peruvian Ministry of the Environment.
Since the enactment of the General Environmental Law in October 15, 2005, several technical environmental regulations have been issued and this environmental regulatory framework is generally revised and updated regularly. Some regulations apply generally to Peruvian industries and some technical regulations are issued for specific industries.
The main environmental rules applicable to infrastructure projects include those described above in “—Engineering and Construction—Environmental Regulation.”
Peruvian Hydrocarbon Regulation
Our hydrocarbon operations are subject to governmental regulations as described below.
Exploration and Production
GMP is engaged in two major activities relating to the exploration and production of oil and gas: exploration and production of oil fields; and providing services to the oil industry.
Exploration and Production of Oil Fields
Peru’s hydrocarbon legislation regarding oil and gas exploration and production activities includes, among others, the Hydrocarbon Organic Law and the regulations governing the qualification of petroleum companies; the exploration and production of hydrocarbons; the transportation of hydrocarbons; hydrocarbons pipelines and safety requirements in such activities.
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The foregoing regulations define the roles of Peruvian government agencies which regulate the oil and gas industry; providesprovide the framework for the promotion and development of hydrocarbon activities based on the principles of private-sector competition and access to all economic activities; and setsset the safety and security standards as well as the legal proceedings for carrying out operations.
The Peruvian Constitution establishes that the government is the sole proprietor of underground hydrocarbons within its national territory. However, the Peruvian government has granted Perupetro, a state-owned company authorized to negotiate and enter into agreements for the exploration and/or production of hydrocarbons, the ownership right over the hydrocarbons extracted which allows Perupetro to enter into such agreements. Furthermore, the Peruvian Ministry of Energy and Mines, the Environmental Evaluation and Supervision Agency (“OEFA”) and OSINERGMIN constitute public entities that play an active role in oil and gas regulation.
The Peruvian Ministry of Energy and Mines is responsible for devising energy and mining policies; supervising activities in the energy and mining sectors; and promoting investments in those sectors. Within the Peruvian Ministry of Energy and Mines, the General Directorate of Hydrocarbons (DGH)(“DGH”) is responsible for regulating the development of oil and gas fields and the General Directorate of Energy-Related Environmental Affairs (DGAAE)(“DGAAE”) is responsible for reviewing and approving regulations related to environmental risks associated with hydrocarbon exploration and production activities.
OEFA is a public entity ascribed to the Peruvian Ministry of the Environment and is responsible for evaluating and ensuring compliance with applicable environmental rules covering hydrocarbon activities, as well as for initiating sanctioning proceedings.proceedings when a breach of an environmental regulation occurs. OSINERGMIN is a public entity ascribed to the Presidency of the Council of Ministers’ (Presidencia del Consejo de Ministros) office and is responsible for ensuring compliance with safety and security standards in the hydrocarbon industry, as well as for sanctioning proceedings. GMP is subject to the supervision, authority and regulations enacted by the foregoing agencies.
Regarding hydrocarbon exploration and production activities, companies are required to enter into either a licensing or a services agreement with Perupetro; other contractual arrangements are permitted with prior approval from the Peruvian Ministry of Energy and Mines. The foregoing agreements are governed by private law and must be approved by the Peruvian Ministry of Energy and Mines and the Peruvian Ministry of Economy and Finance. In licensing agreements, licensees obtain authorizations to explore and produce hydrocarbons in a determined area, are granted ownership over the extracted hydrocarbons and are subject to the payment of royalties. Licensees may trade the hydrocarbons with no limitations on sales prices, except in the event of a national emergency.
Services agreements grant contractors the right to perform hydrocarbon exploration and production activities in a determined area and receive compensation according to the production of hydrocarbons. The contractor is technically and financially responsible for the operations, but Perupetro maintains the ownership over the hydrocarbons extracted. These are the type of contracts GMP is party to services agreements with respect to BlockBlocks I and Block V.V, and to licensing agreements with respect to Blocks III and IV. Each block has an independent contract with Perupetro.
Services and licensing agreements are intended for the development, production and eventually transportation of hydrocarbons, as well as for certain storage activities. Services agreementand licensing agreements commonly include a minimum performance schedule guaranteed by performance bonds and require corporate guarantees to be issued to secure the contractor’s compliance to the provisions established by the parties.
Additionally, a company must be qualified by Perupetro prior to entering into hydrocarbon exploration and production agreements. In order to qualify, a company must meet the standards under the Regulations on the Qualification of Petroleum Companies, requiring companies to demonstrate that they have the technical, legal and financial capacity to comply with all the obligations they will assume under the agreement with Perupetro. Such capacities are measured according to the characteristics of the area to be explored or produced, the expected investment required for the project, and the strict fulfillment of the rules regarding prior consultation (if applicable), citizen participation and environmental issues related to the operation’s performance. Upon a positive evaluation, the company is issued a qualification certificate from Perupetro that allows it to initiate the negotiations of the agreement; notwithstanding the company remains responsible for obtaining all other licenses, permits and approvals required by applicable regulation.
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Under the current regulation, 30 years is the maximum term of services and licensing agreements for the production of crude oil. On the other hand, natural gas and condensates-related services agreementor licensing agreements have a maximum term of 40 years. Graña y Montero acts as GMP’s guarantor in both ourall of the Block I, Block III, Block V and Block V production services agreements.VI contracts.
GMP must comply with Supreme Decree No.043-2007-EM for its activities relating to exploration and production of hydrocarbons.hydrocarbons in all phases. The Peruvian Ministry of Labor and Employment PromotionOSINERGMIN is the authority responsible for the supervision and enforcement of the foregoing rules. See “—Infrastructure—Peruvian Hydrocarbon Regulation—Environmental Regulation” for more information on environmental regulation applicable to the oil and gas sector.
Services to the Petroleum Industry
Peruvian regulation provides that all companies that enter into a service agreement with any company that holds a licensing or services agreement must be registered as a subcontractor in the Hydrocarbons Public Registry in case they render any of the following services: (i) geological studies, geophysical studies, petroleum engineering related to drilling operations, production and well services; or (ii) construction of oil pipelines, gas pipelines, refineries and their maintenance, and specialized transportation by land, air, sea or river. In order to register a company as a subcontractor in the Hydrocarbons Public Registry, prior authorization from the General Directorate of Hydrocarbons (DGH)(“DGH”) of the Peruvian Ministry of Energy and Mines is required.
On June 1, 2004, GMP was included as a subcontractor for the petroleum industry in the Hydrocarbons Registry of Lima’s Public Registry of Legal Entities; such registry remains in force as of the date of this annual report.
Environmental Regulations
The Peruvian Ministry of Energy and Mines is responsible for enacting environmental regulation for the oil and gas sector. The Oil and Gas Environmental Protection Regulation, approved by Supreme Decree
No. 015-2006-EM,039-2014-EM, sets out the legal framework and specific rules applicable to the exploration, production, refinement, processing, transportation, commercialization, storage and distribution of hydrocarbons, with the aim of preventing, controlling and remedying the negative environmental impacts arising from the foregoing activities.
The Peruvian Ministry of the Environment establishes general rules applicable to different activities in several sectors, in contrast to the specific rules enacted by the Peruvian Ministry of Energy and Mines regarding the oil and gas sector. Environmental laws and regulations are enforced by the National Environmental Enforcement Agency, OEFA (Organismo(Organismo de Evaluación y Fiscalización Ambiental)Ambiental) which was created in 2008. Sanctions range from warnings and fines to suspensions of activities and mitigation of environmental damages, among others. In this regard, a breach of the obligations contemplated in the Environmental Impact Assessments in the hydrocarbons sector may originate fines up to 30,000 Tax Units (approximately US$42 million or S/.141 million)according to the applicable law.
The main environmental rules applicable to GMP’s hydrocarbon projects include:
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Operation of Terminals
In accordance with the Glossary, Acronyms and Abbreviations for the Hydrocarbons Subsector approved by Supreme DecreeNo. 032-2002-EM, a terminal is a facility that includes storage tanks, submarine lines or docks for receiving or dispatching liquid hydrocarbons and facilities related to activities of storage and reception and/or dispatch of liquid hydrocarbon from/to vessels.
Consorcio Terminales is aand Terminales del Perú are two joint operation amongoperations conducted by GMP and Oiltanking Peru S.A.C. which currently operates nineten of Petroperú’s terminals in Peru: (i) the South Terminals of Pisco, Mollendo, Ilo, Juliaca and Cuzco; and (ii) the North Terminals of Eten, Salaverry, Chimbote and Supe.Supe; including Callao, respectively. Consorcio Terminales and Terminales del Perú provides hydrocarbons handling and storage services in Peru for gasoline, aviation fuel and diesel, among others.
The operation of both the South and North Terminals was granted through the “South Terminal Operation Agreement” and the “North Terminal Operation Agreement” (the “Operation Agreements”) dated February 2, 1998, by and among Petroperú and Consorcio Terminales. The Operation Agreements resulted from two tenders in accordance with Legislative Decree No. 674, and mandate that Consorcio Terminales, as operator of the terminals, be responsible for the storage, handling, additivation and dispatch of hydrocarbons in such facilities.
The initial term of the Operation Agreements was fifteen15 years; however the parties agreed to extend the duration of the agreement to an additional eighteen18 months ending in August 2014. The purpose of this extension was to undertake the additional investments that were necessary to satisfy the national demand increase and to perform operative and safety-related improvements to the facilities. In July of 2014, the Operation Agreements were extended for an additional four years ending in July of 2018. We expect to extend such agreements, at least for a few months.
In executing its operations, Consorcio Terminales is committed to develop and follow a work program which must include an investment schedule. The work program performed included the installation of fire protection systems and loading systems, among others and was secured by a performance bond.
GMP’s activities as a part of Consorcio Terminales fall under the scope of the Hydrocarbons Storage Safety Regulation, (Supremeapproved by Supreme Decree No. 052-93-EM).052-93-EM. Consorcio Terminales is registered in the Hydrocarbon Registry of OSINERGMIN and is authorized to perform transportation activities such as loading and unloading hydrocarbons from vessels on the terminals. This regulation establishes the conditions under which GMP can operate and maintain storage facilities for hydrocarbons. For instance, the regulation specifies the technical requirements for storage systems, which vary depending upon the kinds of hydrocarbons stored. Moreover, pursuant to this regulation, GMP must establish procedures to minimize potential risks that these facilities present for employees, third parties and properties.
Gas Processing Plants
In accordance with the Glossary, Acronyms and Abbreviations for the Hydrocarbons Subsector, approved by Supreme DecreeNo. 032-2002-EM, a processing plant is a facility where the natural characteristics of hydrocarbons are changed to break them into the different compounds that comprise them, as well as the subsequent transformations to convert the hydrocarbons into fuel of specific qualities and suitable for transportation. This includes the facilities where the impurities, hydrogen sulfide, carbon dioxide, water and hazardous components are removed from natural gas.
Our processing and fractionation activities fall under the scope of regulations governing hydrocarbons refinement and processing including regulations on the design, construction, operation and maintenance of refineries and hydrocarbons processing plants, the oil refining process, the manufacture of natural asphalts, oil and lubricants, basic petrochemical activities and the processing of natural gas and condensates. In order to comply with these regulations, GMP must take cautionary measures in order to protect the safety of its employees and its facilities, protect the environment, preserve energy resources and ensure the quality of the products or services it delivers. For
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instance, GMP’s plant operations must be authorized by the General Direction of Hydrocarbons and comply with fire safety regulations. In the event of an accident, GMP must notify the Peruvian Ministry of Energy and Mines, the Peruvian Ministry of Labor and the Peruvian Social Security Administration.
Terms of our Concessions
Our concessions are subject to certain terms and conditions established in each concession agreement. During the term of the concessions, we are responsible for the construction and maintenance of the infrastructure necessary to their operation. The concession agreements establish minimum capital stock requirements for our concessionaire subsidiaries as follows: US$15 million (S/.50 million), US$8 million (S/.27 million), US$0.8 million (S/.2.7 million), S/.46 million and S/.100 million for Norvial, Survial, Canchaque, La Chira and the Lima Metro, respectively.
The concession agreements establish grounds for termination including mutual agreement of the parties thereto, force majeure and breach of certain contractual obligations. Additionally, in the case of La Chira and the Lima Metro, the agreement can be terminated unilaterally by the grantor, with the payment of compensation. On the expiration date, all of the assets that are essential for the operation of the concession are considered the state’s property and no compensation is paid to the concessionaire.
In the event that changes in legislation or regulations that are exclusively related to the financial conditions of the earnings and/or costs associated with the investment, operation or conservation of the infrastructure, affect the economic terms of the contract by 10% or more, the concession agreements set forth economic terms adjustment mechanisms aimed at restoring the economic and financial equilibrium. See “—Infrastructure—Principal Infrastructure Lines of Business.”
Real Estate
Since 1987, we have been operating in the Peruvian real estate sector. In 2008, we incorporated Viva GyM to concentrate the group’s activities in this sector including promoting and managing real estate projects including affordable housing and housing and commercial real estate projects.
Zoning Regulations
Article 79 of the Municipalities Organic Law (Law No. 27972) establishes that municipal governments are the exclusive authority responsible for approving urban and rural development plans, as well as the zoning of the urban areas under their jurisdiction. Peruvian regulation establishesstates that urban zoning refers to the division of a municipal jurisdiction in zones for specific usages,usage, such as residential, commercial, industrial ormixed-use.
The main zoning rules applicable to our real estate projects include the following:
property.
Environmental Regulations
The Environmental Protection Regulation for real estate, urbanism, construction and regularization related projects, (Supremeapproved by Supreme Decree No. 015-2012-VIVIENDA)015-2012-VIVIENDA, sets out to prevent, mitigate, control and remedy negative environmental impacts that may arise from real estate developments. Prior to initiating construction works, companies are required to obtain an environmental authorization from the Housing, Urbanism, Regularization or Construction National Directorate of the Peruvian Ministry of Housing, Construction and Sanitation and to comply with the provisions set forth in the corresponding environmental impact assessment.
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The main environmental rules applicable to our real estate projects include the following:
Licenses
Article 10 of the Regulation of Urban Habilitation and Buildings Law, approved by Law No. 29090, establishes the license requirements for urban habilitation and construction, depending on land size, the dimensions of the work to be undertaken and the financial target.
Upon completion of the real estate development and construction stages, as the case may be, the following requirements must be met:
• | for urban development, the reception of the works (recepción de la obra) must be requested to the corresponding municipal government in compliance with Article 19 of the Habilitation and Construction Law; and |
• | for construction, the conformity of the works (conformidad de obra) must be requested to the corresponding municipal government in compliance with Article 28 of the Habilitation and Construction Law, accompanying the request with the construction plans and the construction statement (a description of the technical conditions and characteristics of the work performed). |
Exclusive and Common Property Real Estate Units Regimes
The Regularization Buildings Factory Declaration Proceeding and Real Estate Units Regimen of Exclusive and Common Property Law, (Lawapproved by Law No. 27157)27157, establishes the legal regime applicable to real estate comprised of assets with exclusive and common property, including, among others, (i) apartment buildings; (ii) condominiums; (iii) units underco-ownership; and (iv) commercial spaces, such as galleries and malls. The foregoing construction projects must include internalby-laws prepared or approved by the sponsor or builder, or by the owners with the vote of the majority of participating owners, the content of which is regulated in Article 42 of the Regularization Buildings Factory Declaration Proceeding and Real Estate Units Regimen of Exclusive and Common Property Law. Articles 40 and 41 of the foregoing law itemize the assets and services that qualify as common.
Owners of the real estate units have the opportunity to choose between the exclusive and common property regime, and the independent andco-ownership regime. The internalby-laws, the owner’s assembly minutes, all construction plans, architectural division plans, perimetric boundaries and the construction statement must be registered in the Real Estate Registry of the corresponding jurisdiction. Upon completion of the proper registries, units are registered independently from one another.
Fondo Mivivienda
The acquisition of affordable housing units developed by Viva GyM is often financed by Fondo Mivivienda S.A., a publicly owned financial institution established in 1998 by Law No. 26912, with the purpose of (i) promoting and financing the acquisition, bettering and construction of houses, especially those of social interest; (ii) carrying out activities related to the fostering of capital flows to the housing financing market; (iii) participating in the primary and secondary markets of mortgage credits; and (iv) contributing to the development of the capital markets.
Prevention of Money Laundering and Financing of Terrorism
SBS ResolutionNo. 486-2008, as amended from time to time, requires construction and real estate companies to implement a money laundering and terrorism financing prevention system, including appointing a compliance officer, setting a registry of operations and notifying the Financial Intelligence Unit of the SBS, the entity responsible for supervising and enforcing compliance to the resolution referred to herein, of any suspicious activity.
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Technical Services
Public- and Private-Sector Contracts
Concar provides services in compliance with Peru’s State Contracting Law and its regulation, approved by Supreme Decree No. 184-2008-EF,350-2015-EF, as amended, when dealing with public counterparties; and with the regulation set forth in the Civil Code when dealing with private counterparties. Such regulations establish the different types of selection processes which companies may undergo when contracting with the state, as well as the rules and conditions applicable to such processes. They also establish general rules applicable to contractual relationships among private parties. See “—Engineering and Construction” for more information on the applicable legal frameworks. Concar is registered with the Peruvian National Registry of Suppliers, required to act as supplier for public entities.
Intellectual Property
Certain operations of GMI and GMD are protected by Peruvian Copyright Law, approved by Legislative Decree No. 822, specifically the engineering drawings and software registered in the INDECOPI Copyright Registry. However, the company’s business and profitability are not dependent on patents or licenses; industrial, commercial or financial contracts; or new manufacturing processes.
Dimension Testing Services
CAM Peru S.R.L. provides the dimension testing service of electrical meters, for which it must be a registered testing entity as provided by Technical and Commercial Regulations Commission Resolution No.0065-1999/INDECOPI-CRT. As of the date of this annual report, Cam Peru S.R.L, is registered as an accredited dimension testing of electrical meters services provider. The pertaining registration can be renewed for consecutive periods, provided that a request is filled 60 days prior to expiration. If Cam Peru S.R.L. does not comply with the rules approved by the INDECOPI, said governmental authority may impose a suspension or revoke the registry.
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The following organizational chart sets forth our principal operating subsidiaries within our four business segments.
The following charts set forth the principal activities of each of our four business segments:
The following is a brief description of our principal operating subsidiaries:
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D. Property, Plant and Equipment
Approximately 89%79.0% of our assets isare located in Peru, with the balance located primarily in Chile.Chile and Colombia. At December 31, 2013,2016, the book value of all our land (excluding real estate inventories) and buildings, machinery and equipment was US$340.7 million.335.7 million (S/.1,128.1 million). We currently lease certain machinery and equipment from vendors. The term of our leasing contracts ranges from two to five years, depending on the nature of the equipment. Leased machinery and equipment are capitalized for accounting purposes. Our principal executive offices, which we lease, are located at Av. Paseo de la República 4667, Surquillo, Lima 34, Peru. We are constructing additional office space for our corporate use, which we expect to complete in the second quarter of 2014.Peru and Av. Petit Thouars 4957, Miraflores, Lima 18, Perú.
Insurance and Contingency Planning
We have insurance coverage for fire; strike, riot, malicious damage, vandalism and terrorism; loses or damages to construction machinery and equipment; destruction or disappearance of property; civil liability, including physical harm to third parties; professional liability; transportation; vehicle theft, collision, rollover, fire and accidents; and directors and officersofficers’ liability. Additionally, we carry different policies for specific risks related to our business segments. Our management considers this coverage to be sufficient to cover probable losses and damages, taking into consideration the nature of our activities, the risks involved in our transactions and the advice of our insurance brokers.
We also have contingency plans in place in order to protect our company and the interests of our clients. In the event of an emergency, we have procedures in place designed to minimize any resulting interruption in service to our most critical business processes.
Moreover, in the event of an emergency, we have systems and procedures in place that minimize the impact of unplanned downtime to our IT services’ clients. Our data centers have redundant facility systems and infrastructure to provide continued operation on each of them, complying with international standards such as ISO/IEC 27001 and ISO 9001.
ITEM 4A. |
Not applicable.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
The following discussion should be read in conjunction with our consolidated financial statements included in this annual report. Our consolidated financial statements included in this annual report, which have been prepared in accordance with IFRS issued by the IASB. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth under “Part I. Introduction—Forward-Looking Statements” and “Item 3.D. Key Information—Risk Factors.”
Overview
We are the largest engineering and construction company in Peru as measured by revenues during 2013,2016, and one of the largest publicly traded engineering and construction company in Latin America as measured by market capitalization as of December 31, 2013,2016, with strong complementary businesses in infrastructure, real estate and technical services. With more than 80 years of operations, we have a long track record of successfully completing the engineering and construction of many of the country’s landmark private and public sector infrastructure projects. Beginning in themid-1980s, we decided to leverage our engineering and construction expertise into complementary lines of business. We have also undertaken the engineering and construction of large and complex projects outside our home market throughout our history. More recently, we decided to expand our activities into other key markets of the Latin American region through the acquisition of businesses with solid positions in those markets.
Recent Developments
Overview
We have participated in six consortia with affiliates of Odebrecht related to the construction and operation of infrastructure projects in Peru during the period from 2005 to 2017. On December 21, 2016, Odebrecht entered into a plea agreement with U.S., Brazilian and other authorities in which they admitted to making illegal bribery payments in connection with projects in various countries, including Peru. These projects include certain consortia in which we participated. As a result of the plea agreement, Peruvian authorities have initiated congressional inquiries and criminal investigations, including against our company and certain of our former directors and executive officers.
Additionally, on January 24, 2017, the Peruvian government terminated the gas pipeline concession held by GSP, consortium in which we participated with Odebrecht affiliates, due to failure of GSP to obtain the required project financing by the stipulated deadline. The termination of the GSP gas pipeline concession, despite the government payment contemplated under the concession contract, has had a material impact on our consolidated financial results and backlog.
In response to these events, we have instituted a multi-step strategic action plan that we are currently in the process of implementing. This strategic action plan includes: (i) monitoring the process for government payment resulting from the termination of the GSP gas pipeline concession; (ii) renegotiations with creditors of certain debts that became due upon termination of the GSP gas pipeline concession contract; (iii) board approval of the sale of certainnon-strategic assets to repay debt related to GSP; (iv) an internal investigation relating to our participation in consortia with Odebrecht; (v) an assessment to strengthen our anti-corruption compliance program; and (vi) changes to our board of directors and senior management.
See “Item 3.D. Key Information—Risk Factors —Risks Related to Recent Developments.”
Our Association with Odebrecht
We have participated in six construction and operation of infrastructure projects in Peru with affiliates of Odebrecht during the period from 2005 to 2017 (known as: IIRSA South Tranche II; IIRSA South Tranche III; IIRSA North; Electric Train Platform; Gasoducto Sur Peruano; and Chavimochic). Our stakes in these projects ranged from 17% to 33%. During 2016 we only participated
in two of these projects (Gasoducto Sur Peruano and Chavimochic), neither of which are currently ongoing. During the period from January 1, 2005 to December 31, 2016 83% of the projects carried out by our company, in terms of consolidated revenues, involved the private sector, while projects with Odebrecht accounted for less than 5% of our consolidated revenues during this period. In its plea agreement, Odebrecht admitted to paying bribes in connection with the IRSA South Tranche II, the IRSA South Tranche III and the Electric Train Platform.
The Chavimochic concession, awarded in 2013 for the design, construction, operation and maintenance of major hydraulic works in northern Peru, is the only project in which we are currently associated with Odebrecht. Affiliates of Odebrecht own 73.5% of the Chavimochic-related concessionaire company and construction consortium, and we hold the remaining 26.5% stake. As a result of the government’s failure to deliver land required for the project, the project’s first phase, hydraulic works, cannot be concluded, and the project’s second phase cannot begin. Since February 2017, the Chavimochic consortium has requested the termination of the concession in light of the government’s breach, and the parties are currently in discussions, including for a potential sale of the project. As of December 31, 2017, our investment in this project amounted to US$8.6 million (S/.29 million) and our portion of the performance guarantee amounted to US$9.5 million (S/.31.9 million).
Termination of the Gasoducto Sur Peruano Concession
In September 2015, we entered into a memorandum of understanding to invest US$215 million (S/.722 million) for a 20% stake in GSP, a company that had previously been awarded the concession for the design, construction and operation of the southern gas pipeline, a project to deliver natural gas to the southern region of Peru, particularly to the provinces of Cuzco, Arequipa, Puno and Moquegua. With our 20% investment commitment, an affiliate of Odebrecht owned a 55% interest and an affiliate of Enagás International, S.L. (“Enagas”) owned a 25% interest in GSP. As of the date of this annual report, we have made total investments in the project in an amount of US$243 million (S/.811 million).
On January 24, 2017, the Peruvian government terminated the concession due to GSP’s failure to obtain the required project financing by the stipulated deadline. As a result, we recognized impairment with respect to our investment in GSP and our participation in the related construction consortium (Consorcio Constructor Ductos del Sur).
In accordance with the concession contract, the Peruvian government is required to carry out an auction process to sell GSP’s assets and obtain a new concessionaire within one year of the contract termination, with the funds raised in the sale to be used to pay the existing concessionaire for its investment in the project. The amount of the termination payment is required to be no more than 100% and no less than 72.25% of the net carrying amount (valor contable neto), as defined in the concession contract. Consequently, the auction process should initiate with a base price equivalent to 100% of the net carrying amount. If the auction is unsuccessful in the first round, the government is required to undertake a second round, with a base price equal to 85% of the net carrying amount; and, if the second round is unsuccessful, the government is required to undertake a third round, with a base price equal to 72.25% of the net carrying amount. If a successful bidder is not obtained within one year of the termination of the contract, the termination payment to the existing concessionaire would be 72.25% of the net carrying amount.
The Peruvian Ministry of Energy and Mines announced on April 18, 2017 that the auction process for the new concessionaire of the project assets will be carried out during the first quarter of 2018, notwithstanding the requirements under the concession contract. On April 28, 2017, a third party was appointed, through an adjudication process, as temporary custodian and administrator of the gas pipeline assets until the new bidder is awarded the concession. Although the concession contract provides that payment must be made within one year of termination, the Peruvian Ministry of Energy and Mines has not made payment or, to our knowledge, initiated the auction or payment process. Because this payment had not been made, GSP’s right to compensation pursuant to the concession contract should be 100% of the net carrying amount.
In 2016, in connection with efforts to restructure or sell Odebrecht’s participation in GSP, due to the corruption scandal surrounding Odebrecht, Odebrecht contractually agreed to subordinate its claims under the concession to the other project partners, Enagás and ourselves. As a result, we and Enagas may be entitled to repayment of our percentage payment under the concession contract prior to Odebrecht. However, on January 3, 2018, Odebrecht commenced arbitration proceedings against us, our subsidiary GyM and Enagás, seeking to invalidate the contractual subordination and certain voting and other arrangements.
As of the date of this annual report, we have made investments in the GSP project of US$243 million (S/.811 million), which we financed in part with borrowings. We have also assumed our proportional obligation to repay the project’s bridge loan in an amount of US$129 million (S/.433 million) and the project’s performance guarantee in amount of US$52.5 million (S/.176 million) and recorded them as other financial liabilities and other accounts payable, respectively, in our consolidated financial statements as of December 31, 2016. We also recorded an account receivable for the same amounts, since we have the right to collect these amounts from GSP. According to our estimates, under the terms of the concession contract, taking into account the subordination arrangement, and based on receiving payment equal to 72.25% of the net carrying amount, in accordance with IFRS, we recorded a provision related to the equity investment in GSP project in the amount of S/.593.1 million (approximately US$176.5 million) to reflect a write-
off of equity value in GSP. Although GSP’s right to compensation pursuant to the concession contract, due to the Peruvian government’s failure to pay, is 100% of the net carrying amount, the company has accounted for 72.25% due to political uncertainty, the bankruptcy process at INDECOPI, and disagreements with the other GSP shareholders. In addition, the gross profit decreased by S/.15.2 million (US$4.5 million) due to the impact of the early termination of the construction consortium (Consorcio Ductos del Sur), in accordance with IFRS. Also, we registered a discount of the related long term account receivable in financial expenses of S/.76.9 million (US$22.9 million). Adding these three effects, plus the deferred tax effect, we had a net impact of S/.498.0 (US$148.2 million) on our income statement for the year ended December 31, 2016.
The following table shows the effects of the termination of the GSP gas pipeline concession on our results of operations for the year ended December 31, 2016.
GSP Effects | ||||||||||||||||
Financial Results | 2016 (Millions of Soles) | 2016 without GSP effects | Millions of Soles | US$ Millions | ||||||||||||
Revenues | 6,469.6 | 6,469.6 | ||||||||||||||
GROSS PROFIT | 603.4 | 618.6 | (15.2 | ) | (4.5 | ) | ||||||||||
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General Expenses | (399.4 | ) | (399.4 | ) | ||||||||||||
Other Operational Expenses | (13.3 | ) | (13.3 | ) | ||||||||||||
Profit from sale of investments in subsidiaries | 46.3 | 46.3 | ||||||||||||||
OPERATIONAL INCOME | 237.1 | 252.2 | ||||||||||||||
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Financial Expenses | (198.3 | ) | (121.4 | ) | (76.9 | ) | (22.9 | ) | ||||||||
Participation in Associates | (589.7 | ) | 3.4 | (593.1 | ) | (176.5 | ) | |||||||||
Exchange rate difference | (12.5 | ) | (12.5 | ) | ||||||||||||
PRETAX INCOME | (563.4 | ) | 121.7 | |||||||||||||
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Taxes | 111.8 | (75.3 | ) | 187.1 | 55.7 | |||||||||||
Minority Interests | (58.1 | ) | (58.1 | ) | ||||||||||||
NET INCOME | (509.7 | ) | (11.7 | ) | (498.0 | ) | (148.2 | ) | ||||||||
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EBITDA | (64.4 | ) | 543.9 | (608.3 | ) | (181.0 | ) | |||||||||
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In addition, the termination of the GSP gas pipeline concession has reduced our backlog as of December 31, 2016, by US$855 million, representing 30.2% of our E&C backlog and 21.4% of our total backlog.
The effects of the termination of the GSP gas pipeline concession recorded in our consolidated financial statements as of and for the year ended December 31, 2016 are based on our estimates, based on the terms of the concession contract, taking into account the subordination arrangement, receiving payment equal to 72.25% of the net carrying amount and with the information that we have available to date. The actual impact on our results, however, could change materially from our estimates. Moreover, we cannot assure you that we will receive the government payment provided for under the GSP gas pipeline concession contract on a timely basis or at all.
Investigations
TheLava Jato commission of the Peruvian congress, which was formed in November 2016 to investigate alleged bribes made by Brazilian companies to Peruvian public officials, has initiated congressional inquiries into the company and other construction companies in Peru. These investigations have required certain of the company’s former board members and executive officers to provide testimony at hearings before the commission.
In July 2017, media reports alleged that certain construction companies in Peru, Brazil and Spain, including our company, colluded as a “construction club” to receive public contracts. As a result of these reports, INDECOPI has initiated an investigation regarding the anti-competitive activities of construction companies in Peru, including our company. In July 2017, the Peruvian government conducted a search of our facilities related to these allegations. We have provided the information requested by INDECOPI.
In December 2017, Peruvian prosecutors included José Graña Miró Quesada, the former Chairman of the company, in an investigation for the crime of collusion, and Hernando Graña Acuña, a former board member of the company, for the crime of money laundering against the Peruvian government, each in connection with the IIRSA South project concession (tranches II and III), in which we participated. Both were placed in preventive detention and have since been released. Gonzalo Ferraro Rey, the former Chief Infrastructure Officer of the company, has also been included in an investigation for the crime of money laundering in connection with the same project.
In December 2017, we received a notification from Peruvian criminal prosecutors seeking to include the company as a criminal defendant in the investigation relating to the IIRSA South project concession (tranches II and III). On March 5, 2018, the Peruvian First National Preparatory Investigation Court (Primer Juzgado de Investigación Preparatoria Nacional) notified us of its decision to formally include the company and GyM in its criminal investigation. We have appealed the court’s decision to include the company and GyM in the criminal investigation. Separately, the Ad Hoc Prosecutor has also moved to directly include the company as a civilly-responsible third party in connection with the project. A decision from the Peruvian judiciary on whether our company constitutes a civilly-responsible third party remains pending. We cannot assure you that our position in these proceedings will prevail.
On January 12, 2018 criminal prosecutors conducted a search of our facilities regarding the “construction club” investigation. We have provided the information requested by the Ad Hoc Prosecutor and the Peruvian criminal prosecutors. A former employee of GyM has been included in the investigation for collusion. To date, there is no formal investigation of the company. We have provided the information requested by the Ad Hoc Prosecutor.
On February 19, 2018, we also received notice from the Ad Hoc Prosecutor seeking to directly include our subsidiary, GyM S.A., as a civilly-responsible third party in the investigation relating to Tranches 1 and 2 of Line 1 of the Lima Metro. If our subsidiary’s officer or former or current officers are included and convicted, it may be required to pay civil damages to the Peruvian government. A decision from the Peruvian judiciary regarding these matters remains pending, and we cannot assure you that our subsidiary will not be included or that our position would ultimately prevail.
We cannot assure you that other of our former or current board members and executive officers will not be included in the foregoing proceedings as civilly-responsible third parties or criminal defendants as well.
A conviction of corruption or resolutions with government authorities may lead to criminal and civil fines as well as penalties, sanctions, injunctions against future conduct, profit disgorgement, disqualifications from directly and indirectly engaging in certain types of business, the loss of business licenses or permits or other restrictions. Moreover, our involvement in corruption investigations, and any findings of wrongdoing in such investigations, could further damage our reputation and have a material adverse impact on our ability to compete for business. Such investigations may also adversely affect our ability to pursue strategic projects, and could potentially result in the termination or modification of certain existing contracts or relationships.
Emergency Decree and Subsequent Legislation
On February 13, 2017, the President of Peru issued an emergency decree (decreto de urgencia N°003-2017), prohibiting groups that have been, or whose officers or representatives have been convicted of, or have admitted to, corruption, money-laundering or similar crimes (whether in Peru or elsewhere) from, among other things, transferring or selling any assets related to investments in Peru, including the proceeds of asset or equity sales, or sending money abroad without a governmental authorization. Section II of Law 30737, promulgated in March 2018 to replace the aforementioned emergency decree, includes companies that have been consortium partners of groups that have been, or whose officers or representatives have been, convicted of, or have admitted to, corruption, money-laundering or similar crimes. Our company and our subsidiary GyM are two such companies. The law requires that they: suspend money transfers abroad; implement a compliance program and disclose information to competent authorities; and create a trust of assets to guarantee eventual compensation in favor of the Peruvian government. A Peruvian prosecutor will determine the amount of such guarantee, pursuant to Law 30733. On May 9, 2018, Supreme Decree No.096-2018-EF was passed, which provides guidelines for such determination. We estimate that we will be required to include in the trust assets worth approximately US$41 million and that our potential liability should not exceed approximately US$51 million, based on the guidelines. We cannot assure you of the amount of this potential liability, nor can we assure you that the company will have sufficient assets to include in the trust. Furthermore, we cannot assure you that these laws will not be expanded, or that subsequent laws will not be passed, that impose further obligations or restrictions on our company and our subsidiaries.
Strategic Action Plan
In response to the recent events described above, we have instituted a multi-step strategic action plan that we are currently in the process of implementing.
Negotiation with Creditors
We have renegotiated three debt instruments related to GSP as follows:
• | Syndicated Loan Related to our Equity Investment in GSP: As a result of the termination of the GSP gas pipeline concession, our syndicated loan used to finance our equity investment in GSP became due. The principal amount outstanding under our syndicated loan was US$150 million (S/.504 million) as of December 31, 2016, and is US$76.3 million (S/.256.45 million) as of the date of this annual report. On June 27, 2017, we entered into an amendment to the credit agreement. According to the terms of the amendment our syndicated loan matures on 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year of the amendment. The syndicated loan continues to accrue interest at LIBOR plus 4.90% per year. In addition, we are prohibited from paying dividends until the loan is repaid in full. Also, we have provided additional security interests, including: (i) a first lien on our shares of GyM and Concar; (ii) a second priority lien on our shares of Almonte; (iii) a first lien on certain real estate properties in Surquillo; (iv) liens on certain related amounts; (v) a second priority lien on our shares of CAM and CAM Servicios del Perú S.A.; and (vi) a first lien on cash flows from the sale of certain assets. For additional information on our syndicated loan, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources”; |
• | Proportional guarantee of the GSP Bridge Loan: As a result of the termination of the GSP gas pipeline concession, our proportional guarantee of the GSP bridge loan became due. As of December 31, 2016, there was US$129 million (S/.433.3 million) of principal amount outstanding under our corporate guarantee. As of the date of this annual report the principal amount outstanding under the GSP bridge loan has been entirely paid. On June 27, 2017 we entered in a new, US$78.7 million (S/.264.8 million) term loan with Natixis, BBVA, SMBC and MUFJ, the proceeds of which were used to repay the GSP bridge loan. The new term loan matures on 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year of the closing date. The term loan accrues interest at LIBOR plus 4.50% per year, which will increase to 5.00% during the second year and to 5.50% during the third year. In addition, we will be prohibited from paying dividends until our guarantee is repaid in full. Also, we have provided the following security interests to secure repayment of the term loan: (i) a first lien on our rights to receive the termination payment derived from the GSP termination, (ii) a second priority lien on our shares of GyM and Concar; (iii) a second priority lien on our shares of Almonte; (iv) a second priority lien on certain real estate properties in Surquillo; (v) a second priority lien on our shares of CAM and CAM Servicios del Perú S.A.; and (vi) a first lien on cash flows from the sale of certain assets. As of the date of this annual report, there is US$72.4 million outstanding on the term loan; and |
• | Proportional Repayment Obligations under the GSP Performance Guarantee:As a result of the termination of the GSP gas pipeline concession, the government exercised the GSP performance guarantee. As of December 31, 2016, we had US$52.5 million (S/.176.4 million) in obligations outstanding and, as of the date of this annual report, we have US$15.6 million (S/.52.55 million) in obligations outstanding. On March 31, 2017, we renegotiated the terms of our repayment obligations owed to Chubb Insurance Company regarding our proportional share of the performance guarantee issued in connection with the GSP gas pipeline concession. The new terms required repayment by March 31, 2018, extended until June 30, 2018, with interest accruing at 6% per year, and provide a security interest over our shares in CAM and over the cash flows from the sale of certain assets. |
We are currently in default of certain of the covenants under these financial instruments. For more information, see “Item 13. Defaults, Dividend Arrearages and Delinquencies.”
Asset Sales
In order to strengthen our liquidity and financial flexibility, particularly in the event of potential delays in receiving the government payment contemplated under the GSP gas pipeline concession contract, and make payments on our debt related to the GSP project, our board has approved the sale ofnon-strategic assets in the amount of up to US$350 million (S/.1,176 million) in proceeds.
As of the date of this annual report, we have entered into the following transactions:
• | Sale of Cuartel San Martin: On February 3, 2017, our subsidiary Viva GyM sold all of its interests in the Cuartel San Martin real estate project, which represented a 50% stake in the project, to its partner Urbi Propiedades S.A. for US$50 million (S/.163 million); |
• | Sale of Promoción Inmobiliaria del Sur: On February 24, 2017, our subsidiary Viva GyM sold all of its interests in Promoción Inmobiliaria del Sur S.A. (PRINSUR), which owns undeveloped land located in Lurin, representing 22.5% of the share capital, to its partner Inversiones Centenario S.A.A. for US$25 million (S/.81 million); |
• | Sale of Shares in Red Eagle Mining Corporation: In February and March 2017, our subsidiary Stracon GyM sold shares of Red Eagle Mining Corporation, representing 9.97% of the share capital, in a stock exchange transaction for US$13.3 million (S/.43.0 million). Stracon GyM continues to own 2.70% of the share capital of Red Eagle Mining Corporation; |
• | Sale of our Interest in COGA: On April 24, 2017, we sold our 51% interest in COGA to our partners Enagas and Carmen Corporation for a price of US$21.5 million (S/.69.8 million). COGA is in charge of the operation and maintenance of TGP, the trans-Andean gas pipeline from Camisea to the Pacific coast in Peru; |
• | Sale of our Interest in GMD: On June 6, 2017, we sold our 89.19% interest in GMD, our IT services subsidiary, to Advent International for a price of US$84.7 million (S/.276.9 million); |
• | Sale of the building Petit Thouars: On September 29, 2017, we sold a building located in block 49 of Petit Thouars Avenue to VOLCOMCAPITAL Deuda Perú for a price of US$20.5 million (S/.68.9 million); |
• | Sale of Interest in Stracon GyM: On April 11, 2018, we sold our 88% interest in Stracon GyM for a price of US$77 million (S/.249 million); and |
• | Sale of Almonte Properties. On March 22, 2018, Almonte signed an agreement to sell certain properties owned by Almonte related to the “Almonte” industrial and logistics center project for a price of US$100 million. |
Internal Investigation
In light of the recent events described above, we conducted an internal investigation led by external counsel with respect to our participation in consortia with Odebrecht. The new Risk, Compliance and Sustainability Committee of our board of directors was charged with monitoring the progress of the internal investigation. The internal investigation identified no evidence to conclude that any company personnel engaged in bribery in connection with any of the company’s public projects in Peru with Odebrecht or its subsidiaries, or that any company personnel was aware of or knowingly participated in any corrupt payments made in relation to such projects.
Strengthening of Anti-Corruption Program
We have approved a plan to continue strengthening our anti-corruption compliance program. This has included the creation of a Risk, Compliance and Sustainability Committee of our board of directors, the creation of a Corporate Risk and Compliance Function, the hiring of a Chief Risk and Compliance Officer, and the reinforcement of our procedures related to the third-party risk evaluation and mitigation.
New CEO, New Board of Directors and Board Committee
On February 27, 2017, our former chairman of the board, our former CEO and board member, and our board member and the former chairman of the board of our subsidiary GyM resigned from their positions.
Effective March 2, 2017, we appointed a new CEO. On March 31, 2017, our shareholders at the annual shareholders’ meeting appointed a new board of directors, replacing seven of our nine existing directors. For more information, see “Item 6. Directors, Senior Management and Employees.”
Securities Class Action
Two securities class action complaints have been filed against us and certain of our current and former executive officers in the Eastern District of New York during the first quarter of 2017. These complaints are consolidated into a single class action. We believe that we have meritorious defenses to the claims asserted, and we intend to defend ourselves vigorously in these matters.
Restatement of Financial Results for Fiscal Year 2015
As more fully described in “Item 16.F. Change in Registrant’s Certifying Accountant,” we appointed Moore Stephens tore-audit our financial results for fiscal year 2015. The previously issued consolidated financial statements of the company for the 2015 fiscal year (and the related audit opinion) included in the company’s annual report on Form20-F for the year ended December 31, 2015 should not be relied upon. The restatement of the 2015 fiscal year has resulted in certain significant changes to the company’s consolidated financial statements. For more information on the effects of the restatement, see note 2.30 to the company’s consolidated financial statements included in this annual report.
Factors Affecting Our Results of Operations
General
Peruvian, Chilean and ChileanColombian Economic Conditions
83.6%80.1%, 82.7%72.9%, and 85.0%72.6% of our revenues in 2011, 20122014, 2015 and 20132016 were derived from activities in Peru. Accordingly, our results of operations are substantially affected by economic conditions in the country and our growth is driven in significant part by growth in the Peruvian economy. In addition 8.8%14.4%, 12.6%12.1%, and 10.6%12.13% of our revenues in 2011, 20122014, 2015 and 20132016 were derived from activities in Chile, primarily as a result of the acquisition of a controlling interestChile. We commenced operations in CAMColombia in February 2011. We expect our percentage of Chilean revenues to continue to grow as a resultDecember 2014, and 9.3% and 9.4% of our acquisition of Vial y Vivesrevenues in October 20122015 and DSD Construcciones y Montajes2016, respectively, were derived from activities in August 2013.Colombia.
The Peruvian economy has been one of the fastest growing economies globally, with the Peruvian real GDP growinghas grown at an average rate of 6.1%3.2% during the three years from 20112014 to 2013 as a result of, among other factors, robust domestic demand and increased private and public investment.2016. With increasing disposable income and an expanding middle class, private consumption grew at an average annual rate of 5.8%4.8% in real terms from 20112014 to 2013. Also, during this period,2016. In 2014, 2015 and 2016 private investment increaseddecreased at an average annual rate of 9.9%2.1%, 4.1% and 6.1%, respectively, in real terms, driven by an increaseprimarily due to lower investment in projects primarily in the mining, oil and gas, energy, transportation, telecommunications and manufacturing sectors.mining. Inflation in Peru, as measured by the change in the consumer price index, was 4.7%3.2% in 2011, 2.6%2014, 4.4% in 20122015 and 2.9%3.2% in 2013.2016. The nuevo sol appreciateddepreciated versus the U.S. dollar by 4.0%6.9% in 2014 and 5.4%14.2% in 20112015, and 2012, and depreciatedappreciated by 9.6%1.6% in 2013. Given its recent performance with regard to fiscal balance, debt/GDP ratio, net reserves and high liquidity,2016. Peru’s sovereign debt ishas been rated investment grade by S&P, Fitch and was upgraded toMoody’s. At the end of 2016, Peruvian sovereign debt had one of the highest credit ratings in the South American region, rated BBB+ by S&P (August 2013) and Fitch in August 2013(October 2013), and October 2013, respectively, and Baa2A3 by Moody’s in August 2012. According to the IMF the Peruvian economy is projected to grow at rates of 6.0% and 6.1% in 2014 and 2015, respectively.(July 2014).
The Chilean economy grew at an average annual rate of 5.2%1.9% during the three years from 20112014 to 20132016 in real terms, mainly driven by strong domestic demand.terms. Total fixed investment grewdeclined at an annual average rate of 38.5%2.1% in real terms during the three years from 20112014 to 2013.2016. Inflation in Chile, as measured by the change in the consumer price index, was 4.6% in 2014, 4.4% in 2011, 1.5%2015 and 2.7% in 2012 and 3.0% in 2013.2016. The Chilean peso fluctuateddepreciated versus the U.S. dollar decreasing by 11.3%16.0% in 2011, increasing2014 and 16.5% in 2015, and appreciated by 8.2%5.7% in 20122016. Chilean sovereign debt has the highest rating in the South America region, ratedAA- by S&P (January 2017), Aa3 by Moody’s (July 2016) and increasingA+ by 9.3%Fitch (December 2016).
The Colombian real GDP grew at an average annual rate of 3.2% during the three years from 2014 to 2016. Inflation has increased during recent years, with inflation of 3.7% in 2013. Chilean2014, 6.8% in 2015 and 5.8% in 2016. The Colombian peso depreciated against the U.S. dollar by 24.2% in 2014, 31.6% in 2015, and appreciated by 4.7% in 2016. Colombia’s sovereign debt was rated A+BBB by Fitch in October 2013, AA- byMarch 2017 and S&P in December 2013February 2016, and Aa3Baa2 by Moody’s in October 2013, the highest sovereign debt ratings in Latin America.July 2014.
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From 20042012 to 2009,2016 our revenues grew at a CAGRcompound annual growth rate (CAGR) of 19.1% under Peruvian GAAP, and3.7% ((0.3)% excluding acquisitions). Our organic revenues decreased 22.7% in 2016 from 2010 to 20132015, principally as a result of lower activity levels in our revenues grew at a CAGR of 33.6% (27.5% excluding acquisitions) under IFRS. We expect, but cannot assure you, thatE&C segment in the future our business will tend to grow in line with the performance of and investment in the end-markets we serve.2016.
Fluctuations in Exchanges Rates
We estimate that in 2013, 31.6%2016, 46%, 59.8%33% and 8.6%21% of our revenues were denominated in nuevos soles, U.S. dollars and other currencies (principally Chilean pesos), respectively, while 67.2%55%, 24.2%22% and 8.6%23% of our cost of sales during the year were denominated in nuevos soles, U.S. dollars and other currencies. In addition, as of December 31, 2013, 18.2%2016, 46.7%, 72.8%45.6% and 9.0%7.6% of our total debt was denominated in nuevos soles, U.S. dollars and other currencies, respectively. Accordingly, fluctuations in the value of these currencies can materially affect our results of operations. When the nuevo sol appreciates against the U.S. dollar, our operating margins tend to decrease; when the nuevo sol depreciates against the U.S. dollar, our operating margins tend to increase.increase (if everything else were held equal). Conversely, the appreciation of the nuevo sol against the U.S. dollar tends to decrease our indebtedness and financial expenses as expressed in nuevos soles; and the depreciation of the nuevo sol against the
U.S. dollar tends to increase our indebtedness and financial expenses as expressed in nuevos soles. We enter into derivatives, from time to time, to hedge part of our financial exposure to currency fluctuations. The value of the nuevo sol to the U.S. dollar appreciated in 2011 and 2012 and depreciated in 2013,2014 and 2015, and appreciated slightly in 2016, which impacted our results of operations. See “Item 3.A. Key Information—Selected Financial Data—Exchange Rates.”
We have included estimates of the approximate effects of fluctuations in exchange rates on our consolidated and segment revenues and costs of sales in “—Results of Operations.” These estimates were calculated based on daily average exchange rates and estimated aggregate revenues and cost of sales denominated in U.S. dollars, Chilean pesos and ChileanColombian pesos, and were not calculated on a transaction by transaction basis. For additional information on the effect of exchange rate fluctuations on our results of operations, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Exchange Rate Risk.”
Cost of Labor, Third PartyThird-Party Services and Inputs
The largest components of our costs are: labor, which in 20132016 represented 30.8%26.3% of our cost of sales and 46.8%61.0% of our administrative expenses; services provided by third parties, which in 20132016 represented 30.6%40.6% of our cost of sales and 25.9%27.9% of our administrative expenses; and inputs (including raw materials), which in 20132016 represented 22.9%16.1% of our cost of sales. For a breakdown of our cost of sales and administrative expenses, see note 2527 to our audited annual consolidated financial statements included in this annual report.
Our cost of labor is influenced by, among other factors, the number of our employees, as well as inflation, competition we face for personnel in each of our business segments and the availability of qualified candidates. From 20112014 to 20122015 our personnel charges increased by 38.1%,14.2% and from 20122015 to 20132016 our personnel charges increased 4.7%decreased by 27.4%. Services provided by third parties include: subcontracting in our E&C segment, such as carpentry work; advisory and consultancy work, including external audit and legal services; and renting of equipment. From 20112014 to 20122015 our costs related to services provided by third parties increased by 0.7%,38.9% and from 20122015 to 20132016 our costs related to services provided by third parties increaseddecreased by 9.4%18.5%. The principal inputs we use are fuel, cement and steel, which in the aggregate represented a majority18% of our total input costs in 2013.2016. Our costs for these inputs are affected by, among other factors, the growth or decline of our operations, market prices, including global prices in the case of fuel, and transportation costs. We do not have long-term contracts for the supply of our key inputs. From 20112014 to 2012, our input costs increased by 46.5%, and from 2012 to 20132015, our input costs decreased by 0.4%4.7% and from 2015 to 2016, our input costs decreased by 13.9%. These increasesOur cost of labor, third-party services and inputs decreased in our costs during the years from 2011 to 2013 were2016 primarily due to our acquisition of a controlling interest in CAM in February 2011 and high organic growthlower activity levels in our business. Excluding the acquisition of CAM, our personnel charges, costs related to services provided by third partiesE&C segment.
Acquisitions and input costs in the aggregate increased by 28.4% in 2012 and by 10.7% in 2013.
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AcquisitionsDispositions
We acquired a 75.0% interest in CAM in February 2011 for US$10.8 million, after post-closing adjustments. In 2013, CAM represented 8.6% of our consolidated revenues, 8.5% of our consolidated gross profit and 5.9% of our consolidated operating profit. The inclusion of CAM has increased our revenues and diversified our company in geographic terms; however, it has also impacted our consolidated gross margins as CAM’s gross margins tend to be significantly lower than those of our other business lines, reducing our consolidated gross margin by 136 basis points in 2012 and 100 basis points in 2013. In 2011, as a result of the excess of the fair value of the assets and liabilitiesNovember 2014, we acquired an additional 13.5% interest of Stracon GyM for S/.74.7 million (US$25 million), increasing our stake in the CAM acquisition over the consideration paid, we recognized a gain of S/.45.2 million, which is reflected in “gain from business combination.”Stracon GyM to 87.6%. In 2012 and 2013, we reversed provisions amounting to S/.68.0 million and S/.13.7 million, respectively, relating to labor and tax contingencies and trade liabilities that we had reflected on our balance sheet in connection with the CAM acquisition because we determined that the underlying contingencies and liabilities had become remote, expired or been resolved; these reversals are reflected under “other income (expenses).” For further information, see notes 27 and 31 to our audited annual consolidated financial statements included in this annual report.
In addition,December 2014, we acquired a 74.0%70% interest in Vial y VivesMorelco for S/.277.1 million (US$93.7 million). This transaction represents our first acquisition in October 2012 for US$55.6 million and an additional 6.4% interest in Vial y Vives between June and August 2013 for US$3.4 million. Accordingly, Vial y Vives’Colombia, which is a key part of our international strategy. The results of Morelco are only fully reflectedincluded in our results of operations beginning in January 2015.
In December 2014, we also acquired 51% of the share capital of Tecgas, which holds 100% the share capital of COGA for two monthsa total of S/.75.8 million (US$25.4 million). This investment included goodwill resulting from the purchase amounting to S/.61.4 million. COGA is a jointly controlled entity and accordingly we reflected its results in 2012“Share of the profit or loss in associates and joint ventures under the equity method of accounting.” On April 24, 2017, we sold our 51% interest in COGA to our partners Enagas and Carmen Corporation for the full year in 2013. In 2013, Vial y Vives represented 3.1%a price of our consolildated revenues, 5.2% of our consolidated gross profitUS$21.5 million (S/.69.8 million). For more information, see “Item 5.A. Operating and 3.7% of our consolidated operating income. The inclusion of Vial y Vives further increasedFinancial Review and diversified our revenues, in addition to complementing our expertise in the E&C mining sector; however, the historic operating margins of Vial y Vives have tended to be lower than those of our E&C segment because of its relatively higher administrative expenses.Prospects—Operating Results—Recent Developments.”
In August 2013,2015, we acquired 44% of Adexus S.A., an 86.0% interest in DSD Construcciones y Montajes for US$37.2 million. DSD Construcciones y Montajes is an entity domiciledinformation technology firm in Chile, whose main business activities are electromechanical works and assembliesfor an approximate value of US$13.8 million (S/.44.1 million) through a participation in construction projects of oil refineries, pulp and paper, power plants and mining plants in Chile and Latin America. This acquisition is part of our plan to increase our presence in markets that present high growth potential, such as Chile, and in attractive industries, such as energy and mining. Accordingly, DSD Construcciones y Montajes results are only reflected in our results of operations for four months in 2013.
In December 2013, we acquired from one of the TGP’s shareholders, Pluspetrol, an additional 1.04% interest in TGP paying a consideration of US$20 million (equivalent to S/.56.1 million). Together with the acquisition of the 1.04% interest, we acquired from Pluspetrol on behalf of the CPPIB an additional indirect interest of 11.34% in TGP. The investment for US$217 million was funded entirely by CPPIB. The risk and rewards of the entire investment are assumed by CPPIB.capital increase. In January 2014, we sold a 10.4% equity interest in TGP to CPPIB for US$200 million, and we also sold a 0.9% equity interest to Corporación Financiera de Inversiones for US$17.3 million. As a result, we hold a 1.6% equity interest in TGP. See “Item 5.E Off-Balance Sheet Arrangements.” Additionally, we reached an agreement with CPPIB, for the purchase of a 51% equity interest in COGA, the operator of TGP, for a total amount of US$25.5 million. CPPIB will also sell 30% of COGA to Enagás, and will retain 19%. This purchase is still pending and we cannot assure you that we will be able to consummate the transaction. For a description of our alliance with CCPIB, see “Item 4.B. Information on the Company—Business Overview—Infrastructure.”
In December 2013,2016 we acquired an additional 16.9% interest8% stake in Norvial from the former shareholder Besco S.A.Adexus for S/.51.4an approximate value of US$2.5 million (US$18.4(S/.8.3 million). This increases, and in August 2016 we increased our stake in NorvialAdexus to 67.0%91% for an approximate value of US$4.2 million (S/.14 million).
In September 2015, we acquired a 20% participation in the shareholder´s equity of Gasoducto Sur Peruano, the concessionaire of the southern gas pipeline project for a total of US$215 million (S/.722 million). In addition, our subsidiary GyM S.A. participates with a 29% stake in the construction consortium for this project (Consorcio Ductos del Sur), which represented approximately US$1.0 billion of our backlog as of December 31, 2015. The GSP gas pipeline concession was terminated on January 24, 2017, and as a result, we recognized impairment with respect to our investment in GSP and our participation in the related construction consortium (Consorcio Constructor Ductos del Sur). For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
As of the date of this annual report, in order to strengthen our liquidity and financial flexibility, particularly in the event of potential delays in receiving the government payment contemplated under the GSP gas pipeline concession contract, and make payments on our debt related to the GSP project, our board has approved the sale ofnon-strategic assets in the amount of up to US$350 million (S/.1,176 million) in proceeds. For a detailed description of the sale of thesenon-strategic assets, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
Cyclicality
Our Engineering and Construction segment is cyclical as a result of being closely linked to the conditions, performance and growth of theend-markets we serve, which include, among others, the mining, power, oil and gas, transportation, real estate and other infrastructure sectors in Peru, as well as the mining sector in Chile.Chile and, the energy sector in Colombia. These industries tend to be cyclical in nature and tend to be affected by factors such as macroeconomic conditions, climate
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conditions, the level of private and public investment, the availability of credit, changes in laws and regulations and political and social stability. As a result, although downturns impact our entire company, our Engineering and Construction segment has historically been subject to periods of very high and low demand. For example, between 2000 and 2003, there was a significant decline in activity in the Peruvian real estate and construction sectors, which consequently affected our and our competitors’ business and financial performance during that time. The mining and oil and gas sectors, in particular, are also driven by worldwide demand for the underlying commodities, including, among others, silver, gold, copper, oil and gas, which can be affected by such other factors as global economic conditions and geopolitical affairs. Furthermore, prevailing prices and expectations about future prices for minerals or oil and gas, costs of exploration, production and delivery of product and similar factors can have a significant impact on our clients’ exploration and production activities and, as a result, on their demand for our engineering and construction services.
Our Real Estate segment is also cyclical and is significantly affected by changes in general and local economic conditions, such as employment levels and job growth, availability of financing for home buyers, interest rates, foreclosure rates, inflation, consumer confidence and housing demand. In addition, in our Infrastructure segment, our Energy line of business is cyclical and affected by global supply and demand for oil.
Seasonality
Our business, on a consolidated basis, has not historically experienced seasonality. In our Infrastructure segment, we have experienced moderate seasonality at (i) Norvial, due to heightened vehicular traffic activity during the summer season in the first quarter of the year, and (ii) GMP’s gas processing plant, which typically closes for maintenance during the rainy season in the first quarter of the year, as demand for gas is lower during this time.
Internal Control over Financial Reporting
In 2016, we identified material weaknesses regarding our internal control over financial reporting. For more information, see “Item 3. Key Information— D. Risk Factors—We have identified material weaknesses in our internal control over financial reporting, and if we cannot maintain effective internal control or provide reliable financial and other information in the future, investors may lose confidence in the reliability of our consolidated financial statements, which could result in a decrease in the value of our ADSs.” and “Item 15. Controls and Procedures.”
Engineering and Construction
The principal driver of our E&C results is economic growth in Peru, particularly private and public investment in the country’s mining, power, oil and gas, transportation, real estate and other infrastructure sectors. See “—Peruvian and Chilean Economic Conditions.”
Appropriate pricing and budgeting of our engineering and construction projects is also key to our results of operations in our E&C segment and can be affected by such factors as competition, direct negotiations with clients as opposed to competitive bidding processes, the accuracy of our estimation of project costs and unexpected cost overruns. The types of contracts in this segment consist of cost-plus fee, unit price,lump-sum and EPC contracts. For a description of our E&C contracts, see “Item 4.B. Information on the Company—Business Overview—Engineering and Construction—Contracts.” The nature of our contractual arrangements can affect our margins, both because, depending on the type of contract, the burden of cost overruns may be placed on the client or on us, and because certain contractual arrangements tend to have lower gross margins. For the years from 20112014 to 2013,2016, our E&C segment has trended towards more contractual arrangements that pose less risk for us (i.e.,based on cost—plus fee and to a lesser extent, unit price), which provide more stability to our results but lower gross margins.EPC contracts. The types of contractual arrangements we enter into in our E&C segment vary significantly from period to period.
During 2015, we suffered losses of S/.138.2 million from a dispute with respect to an E&C contract with Hochschild Mining for the Inmaculada mining project, which affected our operating results. The dispute was terminated in August 2015, and we expect no further losses to be incurred on account of this project. Additionally, we incurred losses for a total amount of S/.59.7 million because
of the cancellation of the El Nuble hydroelectric project, for which our subsidiary Vial y Vives was carrying on civil works in Chile. As a consequence of the cancellation of this project, we also wrote down US$155 million of our consolidated backlog. We expect no further losses to be incurred on account of this project. Delays in obtaining payments from our E&C clients during 2015, in particular in the mining sector, increased financing needs for working capital. We managed to stabilize working capital requirements by the end of 2015.
During 2016, we suffered lower activity levels in our E&C segment due to the completion of two large mining projects at the end of 2015 (Las Bambas and Cerro Verde). These lower activity levels were not fully compensated by new works at the GSP gas pipeline project in Peru and, to a lesser extent, works in Chile and Colombia. Additionally, Stracon GyM completed one mining services contract for our E&C segment, which was not renewed, and had another contract reduced in scope. The 2016 presidential elections in Peru and the subsequent change in administration also contributed to lower activity levels in our E&C segment during 2016. Activity levels in our E&C segment remained low during 2017.
Infrastructure
Traffic and Fees for Toll Roads
The majority of our toll roads revenues derive from the Norvial concession. Unlike our other toll road concessions, our revenues from the Norvial concession depend on traffic volume. Traffic volume on the Norvial road increased 7.4%6.6% from 20112014 to 20122015 and 5.0%7.1% from 20122015 to 20132016 (based on vehicle equivalents, as defined in “Item 4.B. Information on the Company—Business Overview—Infrastructure—Principal Infrastructure Activities—Toll Roads—Norvial”) and such increases are largely driven by economic activity levels in Peru. For the Norvial toll road, the toll rate is set out in the Norvial concession agreement and adjusted in accordance with a contractual formula that takes into account the nuevo sol/U.S. dollar exchange rate and Peruvian and United States inflation. Under our Survial and Canchaque road concessions, our revenues consist of annual fees paid by the Peruvian Ministry of Transport and Communications in consideration for the operation and maintenance of the roads, which can vary depending on the amount of road maintenance required due to road wear and tear.
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Under the Norvial concession, we are required to expand certain stretches of the highway, by, among other things, adding two additional lanes. The first stage of construction was completed in 2008 and the second stage started on April 2014 and is expected to beginbe completed by July 2018 due to delays in second quarterthe government’s delivery of 2014.lands required for the project. We estimate that Norvial’s capital investment for the second stage will be approximately US$105 million.95 million (S/.319.2 million).
Mass Transit
We generate revenue from our Lima Metro concession based on kilometers travelled per train, with the fee per kilometer, the number of trains required to be in operation and the number of kilometers that we are required to travel established by the terms of the concession. Our revenues do not depend on passenger traffic volume. Our results in this concession are directlybetween 2014 and 2016 were influenced by the timely acquisition, set up, reliability and proper operation of our trains as well as by the timing of the government’s completion of the 12.1 kilometer second stretch of Line One (which is being constructed by a joint operation in which our E&C segment participates). In the second half of 2011, we incurred expenses during the pre-operation phase of the Lima Metro, a period during which we did not generate revenues. In 2012, we generated losses as a result of the limited number of trains (five) we initially operated. In 2013, we also generated losses as a result of delays in the start of operations of new trains, which was postponed because of delays in approvals from the Ministry of Transportation. However, during the fourth quarter of 2013, with a larger quantity of trains in operation, our results improved and generated operating profits for the year.One. We currently have 14all 24 trains in operation (including two backup trains), of which nine are new. We have received the remaining trains and we expect these additional trains to start operating once. In addition, the second tranche of Line One iswas completed which according to the government is estimated forin the third quarter of 2014. As of December 31, 2013,2016, GyM Ferrovías has spent a total of S/.549.8US$196 million (US$196.6(S/.659 million) in capital expenditures in connection with the Lima Metro.
On July 11, 2016, we entered into the fourth addendum to the Lima Metro concession contract in order to expand the transportation capacity of Line One. In accordance with the fourth addendum, the expansion project involves: (i) the purchase of 20 new trains withfive-car from Alstom; (ii) the purchase of 39 new cars from Alstom, to be coupled with the 19 existing Alstom trains and 20 new Alstom trains, resulting in a consolidated fleet of 39 Alstom trains with asix-car configuration; and (iii) the expansion and improvement of the existing infrastructure, including revamping and improvement of five stations, improvements in the electrical systems, a new access route to the maintenance workshop and new switches on the main track.
Energy
A significant part of the revenues in our Infrastructure segment depends on global prices for oil. Under our hydrocarbon extraction service contracts, we are entitled to a variable fee, which is based on the level of production of each field and a basket of international crude oil prices. Under our contracts, we acquire the extracted hydrocarbons and pay royalties, which are also based on a basket of international crude prices and the level of production. Historically, oil prices have been volatile and are likely to be volatile again in the future. During 2011, 20122014, 2015 and 2013,2016 average Brent crude prices were approximately US$111.26,99.02, US$111.6552.46, and US$108.6443.55 per barrel and the average fee we received in these years was US$84.00,77.33, US$86.1345.59, and US$84.9938.54 per barrel of extracted oil, respectively. During the first quarter of 2018, the Brent crude price was approximately US$68.81 per barrel and our fee was approximately US$64.37 per barrel of extracted oil. Because our activities are conducted in mature oil fields, which have been producing oil for over 100 years in the case of Block I, and over 50approximately 100 years in the case of Block III, approximately 95 years in the case of Block IV and for over 50 in the case of years Block V, our oil production depends primarily on the level of our capital expenditures undertaken for drilling and production purposes.activities.
Our Pariñas gas processing plant has a long-term delivery and gas processing and fractionation contract with Empresa Eléctrica de Piura S.A. (“EEPSA”), a thermal power generation subsidiary of the Endesa group. Under thethis contract, EEPSA delivers wet natural gas that it purchases from onshore and offshore gas operatorsproducers in the Talara area. We are responsible for all operating costs of the gas processing plant but are entitled to keep revenues from the sale of all resulting natural gas liquids to third parties after delivery of all dry gas and payment of a variable royalty to EEPSA. VolumesApproximately 75% of the total volume of natural gas processed by our Pariñas gas processing plant depend upon gas volumes demanded by EEPSA for itsgas-fired turbines, which can vary significantly. The other 25% of the volume of natural gas is extracted from our Block I. Prices for natural gas liquids can also fluctuate significantly and are affected by market prices for crude oil. We processed 31.427.3 MMcf per day during 2011, 26.32014, 31.7 MMcf per day during 20122015 and 18.133.2 MMcf per day during 2013. This decline in2016.These volumes vary per month and depend upon the gas we processed at our plant is duepower dispatch curve of EEPSA among Peruvian power generation plants. In rainy months (December to increased use ofApril) where hydroelectric power generation in the country as a resultPeru is typically higher, gas volumes demanded by EEPSA are lower than in dryer months (May to November) in which activity of higher rainfall.thermal generators tends to be higher.
In connection with our fuel storage terminal business, under a contractthree operation contracts with Petroperú,Petroperu, we receive revenues related to monthly reserved volume in storage tanks for refined crude products (storage fee) and for volumes loaded and delivered into railroad cars or cistern trucks to each terminal (throughput fee). These fees are adjusted annually to account for U.S. inflation. Our fuel storage activities in the North and Central terminals are carried out under a 15-year20-year contracts, which expire in 2034. Our contract which expiresfor the operation of the South terminals was to expire in August 2014. Consequently, the results of operations of our Infrastructure segment will be adversely affected if this contract is not2017 but was extended or renewed. For a description of the revenues and Adjusted EBITDA contribution of our fuel storage terminal business, see “Item 4.B. Information on the Company—Business Overview—Infrastructure—Energy.”for an additional year until August 2018.
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Awarding and Timing of Infrastructure Concessions and Government Contracts
The results of operations of our Infrastructure segment are affected by our ability to win new concessions and government contracts, which depend in part on government policies and our ability to compete effectively. We currentlyAs of December 31, 2016, we have sixseven concessions as well as long-term government contracts in this segment, includingsegment. These include the concession for Via Expresa Sur, for which contract negotiations are currently stalled, and the termsconcession for Chavimochic, for which Chavimochic has requested the termination of which was agreedthe concession in August 2013.light of the government’s failure to deliver the required lands for the project. Joint operations in which we participate have been awarded twoone additional concessions, and are currently negotiating the respective contracts,concession for Via Expresa Javier Prado for the expansion of another major highway within the city of Lima and for an irrigation project in Peru.Lima. We believe these concessions will increase the results of operations of our Infrastructure segment. However, we cannot assure you that we will be able to negotiate these contractsthe pending concessions on favorable terms or at all. In addition, our government contract to operate nine fuel storage terminals is scheduled to expireA consortium led by Odebrecht Latinvest, in Augustwhich we acquired a 20% stake in September 2015, was awarded the concession for the southern gas pipeline project in July 2014, however, the GSP gas pipeline concession was terminated by the Peruvian Ministry of Energy and we cannot assure you that it will be extended or renewedMines on favorable terms or at all.January 24, 2017. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
Our results in our Infrastructure segment are also affected by the timing of the commencement of operations under our concessions, as well as when we arewere required to undertake significant capital investments or major construction works under the terms of our concessions. Under our Norvial and Lima Metro concessions, we are required to undertake capital investments during the initial years of the concessions for which we are compensated throughout the term of the concessions by our toll rate in the case of the Norvial concession and tariffs in the case of the Lima Metro concession. Under our Survial, Canchaque and La Chira concessions, we generate revenues in our Infrastructure segment from our construction activities during thepre-operational phase, and once operations commence we generate revenues from fees related to operation and maintenance. Survial, Canchaque and La Chira have financed their construction costs through the sale of government certificates of construction to financial institutions at a discount from face value. Certificates of construction are negotiable instruments that the Peruvian government typically delivers upon completion of each stage of a project and which entitle the holder to receive payment from the government equal to the capital investment made in the corresponding stage upon completion of the entire project. Accordingly, the results of our Infrastructure segment may be affected by the discount rates obtained on the sale of government certificates of construction. For more information on our obligations and compensation under our concessions, see “Item 4.B. Information on the Company—Business Overview—Infrastructure.”
Real Estate
The results of operations of our Real Estate segment are driven by the number of units we develop and deliver in a reporting period, our mix of unit sales (affordable housing versus housing), unit prices, land purchase prices and our costs of construction. These results are also affected by a number of factors that may impact the Peruvian real estate sector as a whole, including: the availability of government subsidies for affordable housing; prices of suitable land in particular areas; regulation of real estate development imposed by national, regional and local laws and regulators, and the time required to obtain applicable construction permits and licenses; the unemployment rate and wage levels; prevailing interest rates and availability of financing; the supply in the market; the level of customer interest in our new projects; and our costs, such as the price of labor, materials, insurance, taxes and other public charges. We delivered 1,244, 1,368831, 835, and 1,757934 units in 2011, 20122014, 2015 and 2013,2016, respectively.
The results of operations of our Real Estate segment are also significantly affected by our sales of land parcels. Due to the appreciation of land prices in Peru, and because we record our land holdings at book value (i.e., without marking to market), our recent land sales have resulted in high margins. Our board has approved the sale ofnon-strategic assets and, consequently, we have sold our interests in certain real estate projects as fully described in “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
In addition, the net profit attributable to controlling interests of our Real Estate segment is significantly affected by the financing and commercial arrangements we use to purchase land and to develop real estate projects. Depending on the level ofnon-controlling interests used to finance our real estate projects, our Real Estate segment tends to have significant net profit attributable tonon-controlling interests. See “—Results of Operations—General—Real Estate.”
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Technical Services
The results of operations of our Technical Services segment, especially our activities relating to IT and electricity networks services, are affected by the economic growth of the countries in which we operate. As companies expand in response to economic growth, they tend to outsource certain activities in order to focus on their core businesses.
Our results in the operation and maintenance of infrastructure assets depend on our ability to obtain contracts from the government or infrastructure concessionaires, such as those in our Infrastructure segment, which depend on government policies and our ability to compete effectively. We obtained three public-sector roadhad one of the contracts at the end of 2010 as well as three new public-sector road contracts at the end of 2012; however, two public sector road contracts expiredwith a regional government terminated in December 2012 and were not renewed until May and June, respectively, of 2013, and, as a result,2014, which impacted our results of operations during 2013.for the year.In 2015, we obtained four new contracts (Sullana, La Merced, Iacapal and Bappo) and in 2016 two new contracts (Chiquibambilla and Chincaypuijio) each with Provías Nacional. We typically obtain higher revenues from these contracts during the commencement of services as we bring the road to proper operating condition, and lower revenues at the end of the contract term as services wind down.
The results of operations of our Electricity Networks Services are affected by our ongoing restructuring of the business after our acquisition of a controlling interest in CAM in February 2011.
Critical Accounting Estimates and Judgments
EstimatesFor information on critical accounting estimates and judgments, used in connection with the preparation of our financial statements are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Critical Accounting Estimates and Assumptions
We make estimates and assumptions concerning our future economic performance. These estimates and assumptions are required to be made because the information used in the presentation of the financial information is currently not available, is dependent on future events, or cannot be calculated with a high degree of accuracy. The resulting accounting estimates will, by definition, seldom equal the related actual results. If outcomes in the next fiscal year are much different than current assumptions, a material adjustment might be required to the carrying amount of the assets and liabilities. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in subsequent years are addressed below.
Estimated Impairment of Goodwill
Goodwill arises from the acquisition of subsidiaries and represents the excess of the cost of acquisition over the fair value of the acquiree’s net identifiable assets at the acquisition date.
Impairment reviews are undertaken annually, or more frequently if there is an undertaking event, to determine if goodwill arising from business acquisitions has suffered any impairment, in accordance with the policy described insee note 2.164 to our audited annual consolidated financial statements included in this annual report.
New Accounting Pronouncements, Amendments and Interpretations
For this purpose, goodwill is attributedinformation on new accounting pronouncements, amendments and interpretations, see note 2.30 to the different cash-generating units to which it relates. The recoverable amount of the cash-generating units has been determined based on its value-in-use calculations. This evaluation requires the exercise of our management’s professional judgment to analyze any potential indicators of impairment as well as the use of estimates in determining the value in use, including the preparation of future cash flows, macro-economic forecasts as well as defining the interest rate at which said cash flows will be discounted.
Value-in-use is usually determined on the basis of discounted estimated future net cash flows. Determination as to whether and how much an asset is impaired involves our management’s estimates of highly uncertain matters such as future commodity prices, the effects of inflation on operating expenses, discount rates, production profiles and the outlook for global or regional market supply-and-demand conditions for crude oil, natural gas and refined products.
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If we experience a significant drop in revenues or a drastic increase in costs or changes in other factors, the fair value of business units might decrease. If our management determines the factors that reduce the fair value of the business are permanent, those economic factors will be taken into consideration to determine the recoverable amount of the business units and, therefore, goodwill may be deemed to be impaired, which may cause a write-down of goodwill to be necessary.
As of December 31, 2013, based on the impairment tests performed by our management, no goodwill impairment losses were required to be recognized because the recoverable amount of the cash-generating units subject to testing was substantially higher than their related carrying amounts. We have not had any impairment to goodwill over the last three years.
The most significant assumptions are gross margin, growth rate and discount rate which are included in note 17 of our audited annual consolidated financial statements included in this annual report. We have performed a sensitivity analysis on the gross margin and discount rate which is included below:
a) Gross Margin: our fair value is significantly above its book value. If the gross margin were adjusted down by 10%, the fair value would be 188% higher than the book value; conversely, if the gross margin were adjusted up by 10%, the fair value would be 262.5% higher than book value. Therefore our businesses would still be greater than the book value even under a significant decline in our gross margin and we would not need to impair our goodwill.
b) Discount rate: our fair value is significantly above our book value. If the discount rate were adjusted down by 10%, the fair value would be 193% higher than the book value; conversely, if the discount rate were adjusted up by 10%, the fair value would be 264% higher than book value. Therefore our businesses would still be greater than the book value even under a significant upward adjustment to the discount rate and we would not need to impair our goodwill.
Income Taxes
Determination of the tax obligations and expenses requires interpretations of the applicable tax laws and regulations. We seek legal tax counsel’s advice before making any decision on tax matters. Although our management considers its estimates to be prudent and appropriate, differences of interpretation may arise with the Peruvian tax authorities which may require future tax adjustments.
Deferred tax assets and liabilities are calculated by taking the temporary differences of the tax basis of assets and liabilities and the financial statement basis using the tax rates in effect for each of the years in which the differences are expected to reverse. Any change in tax rates will affect the deferred tax assets and liabilities. This change will be recognized in income in the period the change takes effect.
Our management makes estimates for our deferred income tax asset valuation allowance. This allowance may be increased or decreased if we determine it to be more likely than not that our valuation allowance needs to be adjusted. If a tax position is not more likely than not to ultimately be realized, no tax benefit is recorded.
We base estimates for the valuation allowance on all available evidence which includes historical data, projected income, current operations and tax planning strategies. The deferred tax asset is supported by the assumption that we will continue to generate income in the future. If our management determines that in the future revenues will not be sufficient to cover the deferred tax asset, we would adjust the valuation account for deferred income tax asset.
Our maximum exposure related to tax contingencies amounts to S/.35.9 million.
Percentage-of-Completion Revenue Recognition
Revenue from construction contracts is recognized under the percentage-of-completion method which requires the final margin from construction contracts to be estimated. Projections of these margins are performed by our management based on work execution budgets and adjusted periodically based on updated information
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reflecting the actual performance of work. The estimated contract revenue and total cost estimates are reviewed often as work advances and change orders are initiated and approved. In this regard, our management considers that the estimates made as of December 31, 2013 are reasonable. When unapproved change orders are presented, revenue is recognized equal to costs incurred (no profit component recognized) until the additional work has been approved.
Contract revenue is recognized as revenue in the income statement in the accounting periods in which the work is performed. Contract costs are recognized as cost of sales in the income statement in the accounting period in which the work to which they relate is performed. However, any expected and probable excess of total contract costs over total contract revenue for the contract is recognized as an expense immediately. Furthermore, any changes in contract estimates are recognized as a change in accounting estimates and recognized in the period the change is made and in future periods, as applicable. In certain construction contracts, the terms of these agreements allow for an amount to be withheld by the clients until construction has been completed. Under these contracts the full amount may not be recognized until the next operating cycle. As of December 31, 2011, 2012 and 2013, a sensitivity analysis was performed considering a 10% increase or decrease in our gross margin (i.e., gross profit as a percentage of revenues). As of December 31, 2013, a 10% positive or negative change in our gross margin would result in a S/.46.7 million increase or decrease, respectively, in our profit before taxes.
Provision for Well Closure Costs
We estimate the present value of our future obligation for well closure costs, and increase the carrying amount of the asset that will be withdrawn in the future and that is reflected under “intangibles” in our statement of financial position. The discount pre-tax rate used for the present value calculation was 2.74%, based on the 10-year bond rate as of December 2013 (1.78% as of December, 2012). On December 31, 2013, the present value of the estimated provision for closure activities for the 83 wells amounted to S/. 4.85 million (S/.4.9 million as of December, 2012 for closure activities for the 85 wells). Subsequently, this liability is attributed to profit or loss during the useful life of the assets that gave rise to it. The well closure liability is adjusted to reflect the changes that resulted from the passage of time and from revisions of either the date of occurrence or the amount of the present value of the obligations originally estimated.
If, at December 31, 2013, the estimated rate would have increased or decreased by 10%, with all variables held constant, the pre-tax profit for the year would result in a S/.59 million increase or decrease, respectively.
During 2013, we recorded S/.0.5 million, charged to the intangible asset account, credited to the well closure liability. This is to reflect estimated obligations to close productive wells included in the service agreements for Blocks I and V. This provision is increased monthly and charged to results, on an incremental value basis.
Critical Judgments in Applying Accounting Policies
Consolidation of Entities in Which We Hold Less Than 50% -
We own certain direct and indirect subsidiaries that we control even though we have less than 50% of the voting rights. These are mainly related to indirect subsidiaries in our Real Estate segment that are owned through Viva GyM, where, even though we hold an interest between 30% and 50%, we have the ability to influence the activities that mostly impact such subsidiaries’ returns. Additionally, we have de facto control of Promotora Larcomar S.A. in which we hold 42.8% of equity interest, considering the fact there is no history of other shareholders forming a group to exercise their votes collectively.
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New Accounting Pronouncements, amendments and interpretations
New and Amended Standards Adopted by us in 2013
The following standards have been adopted by us for the first time for our 2013 financial statements. Most of the impact of the adoption of these standards was restricted to presentation and disclosures in our financial statements:
New Standards and Interpretations Not Yet Effective and Not Early Adopted
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a significant impact on our financial statements.
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Results of Operations
General
Accounting for Subsidiaries, Joint Operations, Joint Ventures and Associated Companies
Results of our subsidiaries, joint operations, joint ventures and associated companies are reflected in our financial results. We refer to our subsidiaries as those entities over which we exercise control. We consolidate the results of our subsidiaries in our financial statements and we reflect the profit corresponding to the minority interests in our subsidiaries under “profit attributable tonon-controlling interests” in our income statement. Our consolidation of the results of our subsidiaries include subsidiaries in which we have less than 50% of the equity. We refer to business activities in which we share control with unrelated entities as joint operations. Ourarrangements, including joint operations and joint ventures, which are typically conducted through an agreement with a third party to carry out specific projects. We contribute our assets to these projects and derive revenue from their use. In our financial statements we recognize, in relation to our interest in a joint operation, our assets and liabilities, including our share of any asset or liability we hold jointly with our partner, as well as our share of revenue and expense from the joint operation. We refer to our associated companies as those entities over which we have significant influence but do not control. We reflect the results of our associated companies and joint ventures under the equity method of accounting in our financial statements under the line item “share of the profit and loss in associates” in our income statement. For further information, see note 2.2 to our audited annual consolidated financial statements included in this annual report.
On March 1, 2012, asincluding a resultlist of our acquisition of control of Stracon GyM, we began to consolidate Stracon GyM’s resultssubsidiaries, joint operations, joint ventures and reflect net profit attributable to the non-controlling interests with respect to the other owner of the company in our income statement. Prior to that date, the business operated by Stracon GyM was a joint operation, and, accordingly, we accounted for our share of revenue and expenses from Stracon GyM along with our assets and liabilities, including our share of any of the assets we held jointly, in our financial statements and did not reflect any non-controlling interests. For further information,associated companies, see notes 275a, 5c and 3115 to our audited annual consolidated financial statements included in this annual report.
Intersegment Transactions
Some of our segments from time to time provide services to our other segments. In 2013,2016, we obtained 2.2%5.2% of the revenues in our E&C segment from the construction of La Chira waste water treatment plant and the second stage of the highway at Norvial for our Infrastructure segment and the construction of real estate for our Real Estate segment; 30.3%37.7% of the revenues in our operation and
maintenance of infrastructure assets line of business derived from services provided to Norvial, Survial, Canchaque and the Lima Metro; and 3.7%6.6% of the revenues in our IT services line of business derived from IT and outsourcing services provided to several of our other lines of businesses. Accordingly, in such circumstances, the segment providing services recognizes revenues and the segment receiving such services recognizes costs of sales relating to the services provided. For example, in the case of La Chira, in which our E&C segment provides services to our Infrastructure segment, our E&C segment recognizes revenues and our Infrastructure segment recognizes costs of sales with respect to the fees charged by our E&C segment for those services. In consolidation, these intersegment revenues and cost of sales are eliminated in our financial results. Nonetheless, our Infrastructure segment, in particular, may recognize gross profits or losses based on the difference between the fees the segment charges in accordance with concession terms and costs it incurs relating to services provided by our other segments. For more information on our segments, see note 67 to our audited annual consolidated financial statements.
Engineering and Construction
We obtain revenues in our E&C segment from the engineering and construction services we provide to our clients, which we recognize under thepercentage-of-completion method of accounting. For further information, see note 2.25 to our audited annual consolidated financial statements included in this annual report. We receive unrestricted client advances in a substantial majority of our E&C projects, on average equal to approximately 16%12% of the contract price in 2016, which we record as an account payable. We typically invoice our clients on a periodic basis as each project progresses, deducting from the related advances on a proportional basis. For further information, see note 2021 to our audited annual consolidated financial statements included in this annual report. Our cost of sales in our E&C segment includes labor, subcontractor expenses, materials, equipment, and project-specific general expenses.
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Infrastructure
In our Infrastructure segment, we recognize revenues and cost of sales as follows:
(1) Toll Roads:
For further information, see notes 2.16(c) and 17to our audited annual consolidated financial statements included in this annual report.
(2) Mass Transit: We obtain revenues from our Lima Metro concession based on a tariff per kilometer traveled by our trains in operation in accordance with a schedule established in our concession agreement, which we recognize in the period in which the services are performed. Under the concession, the tariff is comprised of three components: (i) fees related to our operation and maintenance services; (ii) fees related to the Peruvian government’s repayment of the amounts we invest to purchase trains, ongoing capital expenditures and other infrastructure for the Peruvian government; and (iii) fees related to interest we charge to the Peruvian government in connection with the amounts we invest to purchase such trains, ongoing capital expenditures and other infrastructure. In 2013,2016, the fees related to items (i), (ii) and (iii) were S/.82.6.166.1 million, S/.0.0.9.4 million and S/.33.3.42.4 million, respectively. We only recognize in our income statement the portion of the tariff that relates to items (i) and (iii). We record the amounts paid by us that relate to item (ii) as long-term accounts receivables from the Peruvian government. Accordingly, tariff payments received relating to item (ii) reduce our accounts receivables but do not impact our income statement, and we do not amortize our investments in our income statement as our investment in the concession is recorded as an account receivable with the government rather than a depreciable investment.
We entered into the fourth addendum to the Lima Metro concession contract on July 11, 2016, in order to expand transportation capacity. In accordance with the fourth addendum, the expansion project will involve: (i) the purchase of 20 new trains; (ii) the purchase of 39 new cars; and (iii) the improvement and expansion of the existing infrastructure. As compensation for the investments of the expansion project, we will be entitled to receive the following: (i) an advance payment of 30% of each investment component; and (ii) the balance of 70% of each investment component, compensated through the annual payment for additional investments (pago anual por inversiones complementarias). We register the estimated compensation related to the direct cost in the income statement, plus a margin in the same period. In 2016, the income related to the investment components was S/.32.1 million.
For further information, see note 10 to our audited annual consolidated financial statements included in this annual report. Cost of sales for the Lima Metro include fees paid to third parties (primarily our E&C segment, our subsidiary Concar and other subcontractors) for construction and operation and maintenance services, energy, and our financing costs related to the purchase of trains.
(3) Water Treatment: Beginning in March 2012, we obtainedWe obtain revenues from the engineering design and construction of La Chira waste water treatment plant, which we recognize based on thepercentage-of-completion method of accounting. Once the plant begins operations, which is expected to occur at the beginning of 2015,began operating in August 2016, we will obtain revenues only for operation and maintenance services, which we will recognize in the period in which the services are performed. During the construction phase, cost of sales for La Chira includesincluded fees paid to third parties, primarily our E&C segment, for engineering and construction services. During the operation phase, cost of sales for La Chira will include personnel charges and maintenance of infrastructure.
(4) Energy: We obtain revenues from extraction services and license contracts related to oil and gas production, fuel storage services, and the sale of natural gas liquids derived from our gas processing and fractionation services, which we recognize in the period in which the services are performed and, in the case of sale of natural gas liquids, when the sale is made. Cost of sales for our energy line of business includes labor, materials, amortization of oil wells, depreciation of the gas plant, maintenance and general expenses.
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Real Estate
We obtain revenues in our Real Estate segment from sales of affordable housing and housing units, commercial buildings and land parcels, which we recognize at the time of delivery of the unit or building and, in the case of land parcels, at the time of the sale. We typicallypre-sell our affordable housing and housing units prior to and during construction, and use the related proceeds we receive to finance the construction of the units. Thesepre-sale funds are restricted and released from escrow to us periodically as construction progresses. Our Real Estate cost of sales includes the cost to purchase land, costs of architectural design and construction (which usually includes payments to third parties, primarily our E&C segment), licensing and permit costs, personnel costs, and fees to third parties related to sanitation or electrical engineering. In 2013,2016, our cost of land that is allocated to units delivered during these periods amounted to S/.40.1.45 million. We recognize land purchases as inventory, and, accordingly, do notmark-to-market the value of our land for changes in fair value. For further information, see note 14 to our audited annual consolidated financial statements included in this annual report.
In our Real Estate segment, we have significant net profit attributable tonon-controlling interests. We hold a significant portion of our land bank through Almonte in which we have a 50.4% interest, and we consolidate Almonte’s results in our financial statements. In addition, we undertake a significant number of our real estate projects through entities in which we may have a majority interest,co-equal interest or minority interest; when we have control over these entities, we consolidate their results in our financial statements regardless of whether we own a majority of the capital. Furthermore, in connection with our affordable housing projects, we generally partner with real estate investment funds and insurance companies that provide between 60% and 70% of the total capital required to purchase the land and cover certainpre-construction costs in exchange for equity in the project. Although we typically own a minority interest in these projects, we consolidate their results in our financial statements because we exercise control over the project. Accordingly, we reflect the profit corresponding to our real estate partners under net profit attributable tonon-controlling interests in our income statement. See “—Accounting for Subsidiaries, Joint Operations, Joint Ventures and Associated Companies.”
Technical Services
In our Technical Services segment, we recognize revenues and cost of sales as follows:
(1) Operation and Maintenance of Infrastructure Assets: We obtain revenues from our operation and maintenance of infrastructure assets line of business for the operation and maintenance services we provide to the government and concessionaires (currently concessions within our Infrastructure segment), which we recognize in the period in which the services are performed. We receive unrestricted advances with respect to our service contracts with the government, that vary from approximately 10% to 30% of the contract price, which we record as an account payable. We typically invoice our clients on a periodic basis as the project progresses, deducting from the related advances on a proportional basis. For further information, see note 2021 to our audited annual consolidated financial statements included in this annual report. Our cost of sales in this line of business includes personnel costs, services provided by third parties, machinery and other materials (primarily trucks), and depreciation of equipment utilized to provide services. Beginning on April 1, 2017, we have transferred Concar from our Technical Services segment to our Infrastructure segment.
(2) IT Services: We obtain revenues from our IT services line of business for IT and outsourcing services we perform for government and private sector clients, which we recognize in the period in which the services are performed. Our IT services cost of sales includes personnel costs, services provided by third parties, equipment and other materials, depreciation of equipment utilized to provide services, and amortization of software.
(3) Electricity Networks Services: We obtain revenues from the electrical services we provide to our clients, which we recognize in the period in which the services are performed. Our cost of sales in this line of business includes personnel costs, services provided by third parties, machinery and other materials (primarily trucks and meters), and depreciation of equipment utilized to provide services.
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Comparison of Results of Operations of 20122015 and 20132016
The following table sets forth the components of our consolidated income statement for 20122015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 5,231.9 | 5,967.3 | 14.1 | 7,815.5 | 6,469.6 | (17.2 | )% | |||||||||||||||||
Cost of sales | (4,519.8 | ) | (4,962.7 | ) | 9.8 | (7,165.5 | ) | (5,866.2 | ) | (18.1 | )% | |||||||||||||
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Gross profit | 712.1 | 1,004.6 | 41.1 | 650.0 | 603.4 | (7.2 | )% | |||||||||||||||||
Administrative expenses | (257.2 | ) | (361.8 | ) | 40.7 | (413.4 | ) | (399.4 | ) | (3.4 | )% | |||||||||||||
Other income (expenses) | 75.9 | 26.0 | (65.7 | ) | 57.4 | (12.6 | ) | (122.0 | )% | |||||||||||||||
Other (losses) gains, net | (0.3 | ) | (0.7 | ) | 133.3 | (0.1 | ) | (0.7 | ) | NM | ||||||||||||||
Profit from sale of investments | — | 5.7 | N/M | (8.3 | ) | 46.3 | NM | |||||||||||||||||
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Operating profit | 530.6 | 673.8 | 27.0 | 285.6 | 237.0 | (17.0 | )% | |||||||||||||||||
Financial (expense) income, net | (10.3 | ) | (112.4 | ) | 991.3 | (138.7 | ) | (210.8 | ) | (52.0 | )% | |||||||||||||
Share of profit and loss in associates | 0.6 | 33.6 | 5,500.0 | 7.7 | (589.7 | ) | NM | |||||||||||||||||
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Profit before income tax | 520.8 | 595.0 | 14.2 | |||||||||||||||||||||
Profit (loss) before income tax | 154.6 | (563.5 | ) | NM | ||||||||||||||||||||
Income tax | (154.6 | ) | (182.4 | ) | 18.0 | (99.0 | ) | 111.8 | NM | |||||||||||||||
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Net profit | 366.3 | 412.6 | 12.7 | |||||||||||||||||||||
Net profit attributable to controlling interest | 290.0 | 320.4 | 10.5 | |||||||||||||||||||||
Net profit (loss) | 55.6 | (451.7 | ) | NM | ||||||||||||||||||||
Net profit (loss) attributable to controlling interest | 7.1 | (509.7 | ) | NM | ||||||||||||||||||||
Net profit attributable to non-controlling interest | 76.3 | 92.2 | 20.8 | 48.5 | 58.1 | 19.8 | % |
Revenues
Our total revenues increaseddecreased by 14.1%17.2%, or S/.735.4.1,345.9 million, from S/.5,231.9.7,815.5 million for 20122015 to S/.5,967.3.6,469.6 million for 2013. This increase was2016. Revenues decreased due mainly to growthlower revenues in our E&C segment primarily due to an increase in contract mining, as a result of the timingcompletion of the development stages of thetwo large mining projects at the end of 2015 (Las Bambas and Cerro Verde), which were not fully compensated by new works at the GSP project in Peru and, to a lesser extent, works in Chile and Colombia. The 2016 presidential elections in Peru and the revenues of Vial y Vives and DSD Construcciones y Montajes, companies acquiredsubsequent change in October 2012 and August 2013, respectively. In addition, we experienced growthadministration also contributed to lower activity levels in our E&C segment during 2016. Additionally, Stracon GyM completed one mining services contract for our E&C segment, which was not renewed, and had another contract reduced in scope. On the other hand, in the Infrastructure segment, primarilyrevenues decreased mainly due to anthe timing of works on the second stage of the Norvial toll road and lower amount of maintenance works on the Survial highway. This reduction is partially offset by: the increase in revenues fromin the Lima Metro, as aReal Estate segment, which is the result of the increasesale of land in trainsAlmonte for S/.97.0 million in operation, and Survial, as a result of higher levels of mantainance for the road,2016 compared to S/.12.0 million in 2015, as well as growthby more units delivered in our Real Estate2016 (938 units versus 835 units in the previous year), and the increase in revenues of the Technical Services segment primarily due to an increasethe consolidation of Adexus acquisition as of August 2016 and higher revenues in units delivered.CAM for the new contracts awarded during the year.
We estimate that fluctuations among the nuevo sol and the U.S. dollar and the Chilean peso between the 2012 and 2013 resulted in an increase in our consolidated revenues, as expressed in nuevos soles, of approximately S/.318.9 million, or 5.3%, during 2013, as the nuevo sol depreciated against the U.S. dollar by approximately 9.6% and appreciated against the Chilean peso by approximately 0.4%.
The following table sets forth a breakdown of our revenues by segment for 20122015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | (in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | |||||||||||||||||||||||||||||||
Engineering and Construction | 3,524.6 | 67.4 | 4,075.1 | 68.3 | 15.6 | 5,829.4 | 74.6 | 4,159.5 | 64.3 | % | (28.6 | )% | ||||||||||||||||||||||||||||
Infrastructure | 524.5 | 10.0 | 681.0 | 11.4 | 29.8 | 1,018.3 | 13.0 | 912.1 | 14.1 | % | (10.4 | )% | ||||||||||||||||||||||||||||
Real Estate | 240.1 | 4.6 | 313.7 | 5.3 | 30.7 | 215.8 | 2.8 | 411.5 | 6.3 | % | 90.7 | % | ||||||||||||||||||||||||||||
Technical Services | 1,083.3 | 20.7 | 1,169.1 | 19.6 | 7.9 | 1,152.5 | 14.7 | 1,401.8 | 21.7 | % | 21.6 | % | ||||||||||||||||||||||||||||
Corporate | 44.7 | 0.9 | 51.5 | 0.9 | 15.2 | 70.5 | 0.9 | 62.1 | 1.0 | % | (11.9 | )% | ||||||||||||||||||||||||||||
Eliminations | (185.2 | ) | (3.5 | ) | (323.1 | ) | (5.4 | ) | 74.5 | (471.0 | ) | (6.0 | ) | (477.4 | ) | (7.4 | )% | 1.3 | % | |||||||||||||||||||||
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Total | 5,231.9 | 100.0 | 5,967.3 | 100.0 | 14.1 | 7,815.5 | 100.0 | 6,469.6 | 100.0 | % | (17.2 | )% |
Cost of Sales
Our total cost of sales increaseddecreased by 9.8%18.1%, or S/.442.9.1,299.3 million, from S/.4,519.8.7,165.5 million for 20122015 to S/.4,962.7.5,866.2 million for 2013.2016. This increase was relateddecrease is mainly due to the growth in ourreduction of revenues.
We estimate that fluctuations among the nuevo sol and the U.S. dollar and the Chilean peso between 2012 and 2013 resulted in an increase in our consolidated cost of sales, as expressed in nuevos soles, of approximately S/.107.2 million, or 2.2%, during 2013.
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Gross Profit
Our gross profit increaseddecreased by 41.1%,7.2% or S/.292.5.46.6 million, from S/.712.1.650.0 million for 20122015 to S/.1,004.6.603.4 million for 2013.2016. Our gross margin (i.e. gross profit as a percentage of revenues) for 20132016 was 16.8%9.3% compared to 13.6%8.3% for 2012. This increase2015. In 2015 gross profit was impacted by losses incurred from a dispute with respect to an E&C contract with Hochschild Mining for the Inmaculada mining project and losses incurred because of the cancellation of the El Nuble hydroelectric plant project, for which our subsidiary Vial y Vives was carrying on civil works in ourChile. In 2016, gross marginprofit was mainly due to higher gross marginsimpacted by the early termination of GSP construction consortium in our E&C segment primarily due to higher margins in contract mining activities as a resultand partially offset by the profit generated by the sale of the stageland of execution of certain projects, our Technical Services segment, primarily due to higher margins in CAM as a result of the improvement of operating processes implemented since its acquisition and higher margins in the units deliveredAlmonte in our Real Estate segment. During 2016, gross profit was also impacted in our Infrastructure segment by the decrease in oil price.
The following table sets forth a breakdown of our gross profit by segment for 20122015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | (in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | |||||||||||||||||||||||||||||||
Engineering and Construction | 408.0 | 57.3 | 560.1 | 55.7 | 37.3 | 312.8 | 48.1 | 224.6 | 37.2 | (28.2 | )% | |||||||||||||||||||||||||||||
Infrastructure | 172.6 | 24.2 | 186.8 | 18.6 | 8.2 | 184.8 | 28.4 | 166.1 | 27.5 | (10.1 | )% | |||||||||||||||||||||||||||||
Real Estate | 86.7 | 12.2 | 113.7 | 11.3 | 31.1 | 51.8 | 8.0 | 136.5 | 22.6 | 163.5 | % | |||||||||||||||||||||||||||||
Technical Services | 103.9 | 14.6 | 179.2 | 17.8 | 72.5 | 178.3 | 27.4 | 171.8 | 28.5 | (3.6 | )% | |||||||||||||||||||||||||||||
Corporate | (0.0 | ) | 0.0 | (4.0 | ) | (0.4 | ) | N/M | (7.0 | ) | (1.0 | ) | (0.2 | ) | 0.0 | (97.1 | )% | |||||||||||||||||||||||
Eliminations | (59.2 | ) | (8.3 | ) | (31.1 | ) | (3.1 | ) | (47.5 | ) | (70.7 | ) | (10.9 | ) | (95.5 | ) | -15.8 | 35.3 | % | |||||||||||||||||||||
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Total | 712.1 | 100.0 | 1,004.7 | 100.0 | 41.1 | 650.0 | 100.0 | 603.3 | 100.0 | % | (7.2 | )% |
Administrative Expenses
Our administrative expenses increaseddecreased by 40.7%3.4%, or S/.104.6.14.0 million, from S/.257.2413.4 million for 20122015 to S/.361.8.399.4 million for 2013, primarily2016. This decrease is mainly due to the consolidation of Vial y Vivesa reduction in services provided by third parties principally relating to legal, accounting and DSD Construcciones y Montajes, in which we acquired controlling interests in October 2012 and August 2013, respectively, and which increased our administrative expenses by S/.13.5 million; the increase of administrative expenses in the E&C segment is in line with the growth in revenues in this segment; and, to a lesser extent, an increase in administrative expenses in our Technical Services segment as a result of the preparation of concession bids.tax consultancy. As a percentage of revenues, our administrative expenses grewincreased to 6.1%6.2% in 20132016 from 4.9%5.3% in 2012.2015.
Other Income (Expenses)
Our other income (expenses) decreased by 122.0%, or S/.49.9.70.0 million, from S/.75.9.57.4 million in income for 20122015 to S/.26.0.12.6 million in expenses for 2013. This decrease was primarily due to a lower reversal2016. In 2015 our other income included the reversion of tax and labor provisions in connection with the acquisition of CAM, the sale of machinery, equipment and scrap and dividend payments from our subsidiary TGP, and in 2016, our other income included the sale of machinery and equipment, price adjustments as well as a reversion of legal and tax provisions in connection with the acquisition of Morelco, and extraordinary income from the settlement agreement reached in connection with the legal proceeding related to the Collahuasi project in Chile.
Profit from Sale of Investments
We registered a profit of S/.68.0.46.3 million from the sale of the certain investments, mainly the sale of our 1.64% stake in 2012 to S/.13.6 millionTGP in 2013. For further information, see “—Factors Affecting Our Results of Operations—Acquisitions.”April 2016.
Operating Profit
Our operating profit increased 27.0%decreased 17.0%, or S/.143.3.48.6 million, from S/.530.5.285.6 million for 20122015 to S/.673.8.237.0 million for 2013.2016. Our operating margin (i.e., operating profit as a percentage of revenues) was 11.3%3.7% for 2013 compared to 10.1%2016 and 3.7% for 2012. Despite the increase in administrative expenses in our E&C and Technical Services segments and lower other income (expenses), our operating profit increased in 2013 due to higher gross profit, mainly in our E&C and Real Estate segments.2015 as well.
The following table sets forth a breakdown of our operating profit by segment for 20122015 and 2013.2016.
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2012 | 2013 | Variation | ||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | ||||||||||||||||
Engineering and Construction | 247.6 | 46.7 | 352.9 | 52.4 | 42.5 | |||||||||||||||
Infrastructure | 139.6 | 26.3 | 153.0 | 22.7 | 9.6 | |||||||||||||||
Real Estate | 67.6 | 12.7 | 94.2 | 14.0 | 39.3 |
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2012 | 2013 | Variation | ||||||||||||||||||
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Technical Services | 72.2 | 13.6 | 71.4 | 10.6 | (1.1 | ) | ||||||||||||||
Corporate | 4.4 | 0.8 | (12.8 | ) | (1.9 | ) | (390.9 | ) | ||||||||||||
Eliminations | (0.9 | ) | (0.2 | ) | 15.3 | 2.3 | (1,800.0 | ) | ||||||||||||
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Total | 530.5 | 100.0 | 674.0 | 100.0 | 27.0 |
Business Segments
Year ended December 31, | ||||||||||||||||||||
2015 Restated | 2016 | Variation | ||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | ||||||||||||||||
Engineering and Construction | 54.2 | 19.0 | (43.2 | ) | (18.2 | ) | (179.7 | ) | ||||||||||||
Infrastructure | 146.8 | 51.4 | 125.6 | 53.0 | (14.4 | ) | ||||||||||||||
Real Estate | 33.0 | 11.6 | 108.9 | 45.9 | 230.0 | |||||||||||||||
Technical Services | 70.3 | 24.6 | 57.1 | 24.1 | (18.8 | ) | ||||||||||||||
Corporate | (25.8 | ) | (9.0 | ) | 4.6 | 1.9 | (117.8 | ) | ||||||||||||
Eliminations | 7.0 | 2.5 | (15.9 | ) | (6.7 | ) | (327.1 | ) | ||||||||||||
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Total | 285.6 | 100.0 | 237.1 | 100 | (17.0 | ) |
The following discussion analyzes our key results of operations on a segment basis. For further information on our business segments, see note 67 to our audited annual consolidated financial statements included in this annual report.
Engineering and Construction
The table below sets forth selected financial information related to our E&C segment.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 3,524.6 | 4,075.1 | 15.6 | |||||||||||||||||||||
Revenue | 5,829.4 | 4,159.5 | (28.6 | ) | ||||||||||||||||||||
Gross profit | 408.0 | 560.1 | 37.3 | 312.8 | 224.6 | (28.2 | ) | |||||||||||||||||
Operating profit | 247.6 | 352.9 | 42.5 | 54.2 | (43.2 | ) | (179.7 | ) |
Revenues. Our E&C revenues increased 15.6%decreased 28.6%, or S/.550.5.1,669.9 million, from S/.3,524.6.5,829.4 million for 20122015 to S/.4,075.1.4,159.5 million for 2013, primarily due to2016. This decrease is the growthresult of the completion of two large mining projects at the end of 2015 (Las Bambas and Cerro Verde), which were not fully compensated by the works at the GSP project in revenues in our contract mining and civil works activitiesPeru and, to a lesser extent, the S/.187.3 millionworks in revenues from Vial y VivesChile and S/.84.6 million in revenues from DSD Construcciones y Montajes in 2013, in which we acquired controlling interests in October 2012 and August 2013, respectively. Excluding revenues from Vial y Vives and DSD Construcciones y Montajes,Colombia. Additionally, Stracon GyM completed one mining services contract for our E&C revenues increased 8.7%segment, which was not renewed, and had another contract reduced in 2013 as compared to 2012.
We estimate that fluctuations among the nuevo solscope. The 2016 presidential elections in Peru and the U.S. dollar between 2012 and 2013 resultedsubsequent change in an increaseadministration also contributed to lower activity levels in our E&C revenues, as expressed in nuevos soles, of approximately S/.277.3 million, or 6.8%,segment during 2013.2016.
The following describestables set forth variations in our E&C revenues by business activities, types of contracts andend-markets:
E&C Activities: For 2013, approximately 6.4%, 17.8%, 29.5%, 29.3% and 17.0% of our E&C revenues were derived from: engineering services; electromechanic construction; civil construction; contract mining; and building construction activities, respectively. For 2012, approximately 5.0%, 25.0%, 32.4%, 18.8% and 18.7% of our E&C revenues were derived from: engineering services; electromechanic construction; civil construction; contract mining; and building construction activities, respectively. Despite variations in the proportional weight of our various E&C activities, the revenues derived from each of our E&C activities increased in absolute terms during 2013, with contract mining increasing significantly due to an increase in project awards. For a description of our E&C business activities, see “Item 4.B. Information on the Company—Business Overview—Engineering and Construction—Principal Engineering and Construction Activities”;
E&C Contracts: For 2013, approximately 53.0%, 30.9%, 7.3% and 8.8% of our E&C revenues were derived from: cost-plus fee; unit price; lump-sum; and EPC contracts, respectively. For 2012, approximately 37.9%, 48.5%, 5.0% and 8.6% of our E&C revenues were derived from: cost-plus fee; unit price; lump-sum; and EPC contracts, respectively. During 2013 we continued to derive significant revenues from cost-plus fee and unit price contracts, with a significant increase in cost-plus fee contracts. For a description of our contractual arrangements, see “Item 4.B. Information on the Company—Business Overview—Engineering and Construction—Contracts” and “—Factors Affecting our Results of Operations—Engineering and Construction”; and
Engineering services Electromechanic construction Civil construction117 Year ended December 31, (in millions of S/.) 2015 2016 Variation % % % 169.3 2.9 128.1 3.1 (24.4 ) 1,603.2 27.6 1,343.3 32.2 (16.2 ) 1,360.1 23.3 1,029.9 24.8 (24.3 )
Year ended December 31, | ||||||||||||||||||||
(in millions of S/.) | ||||||||||||||||||||
2015 Restated | 2016 | Variation | ||||||||||||||||||
% | % | % | ||||||||||||||||||
Contract mining | 2,066.4 | 35.4 | 1,222.2 | 29.4 | (40.9 | ) | ||||||||||||||
Building construction activities | 630.4 | 10.8 | 436.0 | 10.5 | (30.8 | ) | ||||||||||||||
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Total | 5,829.4 | 100.0 | 4,159.5 | 100.0 |
E&C End-Markets: For 2013, approximately 54.5%, 17.1%, 7.6%, 6.6%, 9.3%, 4.4% and 0.6%, of our E&C revenues were derived from: mining; real estate buildings; power; oil and gas; transportation; water and sewage; and other end-markets, respectively. For 2012, approximately 40.0%, 18.7%, 16.2%, 8.6%, 9.4%, 2.2% and 4.8%, of our E&C revenues were derived from: mining; real estate buildings; power; oil and gas; transportation; water and sewage; and other end-markets, respectively. During 2013 we experienced growth in the revenues from the mining end-market, and we maintain substantially similar levels in real estate buildings and transportation end-markets. Revenues in 2013 derived from the power and oil and gas end-market decreased in comparison with 2012.
Year ended December 31, | ||||||||
2015 Restated | 2016 | |||||||
% | % | |||||||
Cost + fee | 28.0 | 32.0 | ||||||
Unit price | 49.0 | 25.6 | ||||||
Lump sum | 11.0 | 35.1 | ||||||
EPC contracts | 12.0 | 7.3 | ||||||
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Total | 100.0 | 100.0 |
Year ended December 31, | ||||||||
2015 Restated | 2016 | |||||||
% | % | |||||||
Mining | 60.1 | 38.3 | ||||||
Real estate buildings | 9.0 | 11.0 | ||||||
Power | 10.0 | 12.6 | ||||||
Oil and gas | 15.9 | 30.9 | ||||||
Transportation | 3.0 | 3.9 | ||||||
Water and sewage | 2.0 | 3.1 | ||||||
Other end markets | — | 0.2 | ||||||
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Total | 100.0 | 100.0 |
The breakdown of E&C revenues by different business activities, types of contracts andend-markets tends to vary from period to period due to a variety of factors, including the timing of the execution of larger projects in any particular period, which is typically outside of our control.
Gross Profit. Our E&C gross profit increased 37.3%decreased 28.2%, or S/.152.1.88.2 million, from S/.408.0.312.8 million for 20122015 to S/.560.1.224.6 million for 2013.2016. Our E&C gross margin for 20132015 was 13.7% compared to 11.6%5.4% and for 2012. This increase in E&C gross margin2016 was due to both the growth in revenue in this segment5.4% as well as higher margins in contract mining due to the stage of execution of certain projects, as we typically obtain higher margins during the early stages of these projects.
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2012 and 2013 resulted in an increasewell. The decrease in our E&C costgross profit was mainly due to a decline in revenues and the impact of sales, as expressed in nuevos soles,the early termination of approximately S/.78.6 million, or 2.2%, during 2013.the GSP construction consortium.
Operating Profit. Our E&C operating profit increased 42.5%decreased 179.7%, or S/.105.3.97.4 million, from S/.247.6.54.2 million profit for 20122015 to S/.352.9.43.2 million loss for 2013. Our E&C administrative expenses increased 36.3%, or S/.58.1 million, which resulted2016, due to reduction of gross profit, partially offset by the decrease in administrative expenses, asrelated to a percentage revenuesreduction of 5.3% for 2013 compared to 4.5% for 2012, due in part to the consolidation of Vial y Vivespersonnel and DSD Construcciones y Montajes, in which we acquired a controlling interest in October 2012 and August 2013, respectively, in addition to an increase of administrativelower expenses in line with the growth of revenues for the period. Our E&C operating profit for 2013 was positively impacted by S/.10.5 million in other income, mainly resulting from the reversal of provisions amounting to S/.4.8 million relating to labor contingencies in Vial y Vives and S/.1.1 million from the recovery of insurance claims in Stracon GyM.bid proposals. Our E&C operating margin was 1.0 for 2013 was 8.7%2016 compared to 7.0%0.9% for 2012.2015.
Other income (expenses). Other income (expenses) increased in our E&C segment, from S/.30.8 million income for 2015 to S/.9.2 million in expenses in 2016, mainly as a result of the settlement agreement reached in connection with the legal proceeding related to the Collahuasi project in Chile and the reversion of legal and tax provisions in connection with the acquisition of Morelco.
In addition, our E&C segment had S/.42.0.5.7 million in profit fromexpenses in 2016, compared to S/.9.3 million in income in 2015, relating to minority interests held by Vial y Vives in several of its projects undertaken in Chile, as well as the minority participation of GyM in Viva GyM reflected under “share of profit and loss in associates” in our audited annual consolidated financial statements.
Infrastructure
The table below sets forth selected financial information related to our Infrastructure segment.
Year ended December 31, | ||||||||||||
2012 | 2013 | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Revenues | 524.5 | 681.0 | 29.8 | |||||||||
Gross profit | 172.6 | 186.8 | 8.2 | |||||||||
Operating profit | 139.6 | 153.0 | 9.6 |
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Year ended December 31, | ||||||||||||
2015 Restated | 2016 | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Revenue | 1,018.3 | 912.1 | (10.4 | ) | ||||||||
Gross profit | 184.8 | 166.1 | (10.1 | ) | ||||||||
Operating profit | 146.8 | 125.6 | (14.4 | ) |
Revenues. The table below sets forth the breakdown of our Infrastructure revenues by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Toll Roads | 123.3 | 195.9 | 58.9 | 394.5 | 264.4 | (33.0 | ) | |||||||||||||||||
Mass Transit | 73.1 | 118.5 | 62.1 | 206.5 | 247.0 | 19.6 | ||||||||||||||||||
Water Treatment | 41.0 | 45.5 | 11.0 | 28.0 | 18.5 | (33.9 | ) | |||||||||||||||||
Energy | 287.0 | 321.1 | 11.9 | 389.4 | 382.2 | (1.8 | ) | |||||||||||||||||
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Total | 524.5 | 681.0 | 29.8 | 1,018.3 | 912.1 | (10.4 | ) |
Our Infrastructure revenues increased 29.8%decreased 10.4% or S/.156.5.106.2 million, from S/.524.5.1,018.3 million for 20122015 to S/.681.0.912.1 million for 2013.2016. The variation in our Infrastructure revenues principally reflected the following:
• | Toll Roads: a |
• | Mass Transit: a |
• | Water Treatment: a |
• | Energy:a |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2012 and 2013 resulted in an increase in our Infrastructure revenues, as expressed in nuevos soles, of approximately S/.32.9 million, or 4.9%, during 2013.
Gross Profit. The table below sets forth the breakdown of our Infrastructure gross profit by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Toll Roads | 53.3 | 66.5 | 24.7 | 78.5 | 75.8 | (3.4 | )% | |||||||||||||||||
Mass Transit | (2.7 | ) | 19.7 | 828.5 | 40.5 | 42.5 | 4.9 | % | ||||||||||||||||
Water Treatment | 11.2 | 3.2 | (71.6 | ) | 2.2 | 5.7 | 159.1 | % | ||||||||||||||||
Energy | 110.8 | 97.5 | (12.0 | ) | 63.5 | 42.1 | (33.7 | )% | ||||||||||||||||
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Total | 172.6 | 186.8 | 8.2 | 184.7 | 166.1 | (10.1 | )% |
Our Infrastructure gross profit increased 8.2%decreased 10.1%, or S/.14.2.18.6 million, from S/.172.6.184.7 million for 20122015 to S/.186.8.166.1 million for 2013.2016. Our Infrastructure gross margin was 27.4%18.2% for 20132016 compared to 32.9%18.1% for 2012.2015. The variation in our Infrastructure gross profit principally reflected the following:
• | Toll |
• | Mass Transit: a 4.9%, or S/.2.0 million, increase in gross profit, from S/ |
• | Water Treatment: a 159.1%, or S/.3.5 million, increase in |
119
• | Energy: a 33.7%, or S/.21.4 million, decrease in gross profit, from S/.63.5 million for 2015 to S/.42.1 million for 2016, primarily due to lower fees resulting from the decrease of international oil prices. Our Energy gross margin was 11.0% for 2016 compared to 16.3% for 2015. |
Operating ProfitProfit.. The table below sets forth the breakdown of our Infrastructure operating profit by principal lines of business.business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Toll Roads | 47.0 | 59.8 | 27.1 | 68.3 | 65.7 | (3.8 | )% | |||||||||||||||||
Mass Transit | (10.7 | ) | 12.4 | 216.3 | 29.9 | 29.5 | (1.3 | )% | ||||||||||||||||
Water Treatment | 9.7 | 3.0 | (69.0 | ) | 1.9 | 4.9 | 157.9 | |||||||||||||||||
Energy | 93.6 | 77.8 | (16.9 | ) | 46.7 | 25.4 | (45.6 | )% | ||||||||||||||||
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Total | 139.6 | 153.0 | 9.6 | 146.8 | 125.6 | (14.5 | )% |
Our Infrastructure operating profit increased 9.6%decreased 14.5%, or S/.13.4.21.2 million, from S/.139.6.146.8 million for 20122015 to S/.153.0.125.6 million for 2013.2016. Our Infrastructure operating margin was 22.5%13.8% for 20132016 compared to 26.6%14.4% for 2012.2015. The variation in our Infrastructure operating profit principally reflected the following:
• | Toll |
• | Mass Transit: a |
• | Water Treatment: a |
• | Energy: a |
Real Estate
The table below sets forth selected financial information related to our Real Estate segment.
Year ended December 31, | ||||||||||||
2012 | 2013 | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Revenues | 240.1 | 313.7 | 30.7 | |||||||||
Gross profit | 86.7 | 113.7 | 31.1 | |||||||||
Operating profit | 67.6 | 94.2 | 39.3 |
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Year ended December 31, | ||||||||||||
2015 Restated | 2016 | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Revenue | 215.8 | 411.5 | 90.7 | % | ||||||||
Gross profit | 51.8 | 136.5 | 163.5 | % | ||||||||
Operating profit | 33.0 | 108.9 | 230.0 | % |
Revenues. Our Real Estate revenues increased 30.7%90.7%, or S/.73.6.195.7 million, from S/.240.1.215.8 million for 20122015 to S/.313.7.411.5 million for 2013. This2016. The increase wasis primarily due to a 29.0% increasethe sale of land in the number of affordable housing units delivered, with 1,619Almonte for S/.97.0 million in 2016, compared to S/.12.0 million from land sales in 2015, as well as more units delivered in 2013 compared to 1,2552016 (938 units delivered in 2012. This increase2016 and 835 units in delivered units is due to the timing of completion of units.
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2012 and 2013 resulted in an increase in our Real Estate revenues, as expressed in nuevos soles, of approximately S/.2.5 million, or 0.8%, during 2013.2015).
Gross Profit.Profit. Our Real Estate gross profit increased 31.1%163.5%, or S/.27.0.84.7 million, from S/.86.7.51.8 million for 20122015 to S/.113.7.136.5 million for 2013,2016, mainly as a result of the increasesale of land in Almonte, partially offset by lower margins in units delivered in 2016, specifically the number of affordableRancho project, compared to 2015, when more housing units with higher margins were delivered. Our Real Estate gross margin was 27.0%33.2% for 20132016 compared to 31.1%24.0% for 2012.
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2012 and 2013 resulted in an increase in our Real Estate cost of sales, as expressed in nuevos soles, of approximately S/.2.6 million, or 1.3%, during 2013.2015.
Operating Profit.Profit. Our Real Estate operating profit increased 39.3%230.0%, or S/.26.6.75.9 million, from S/.67.6.33.0 million for 20122015 to S/.94.2.108.9 million for 2013,2016, primarily as a result of the increase in our Real Estate gross profit.profit partially offset by an increase in administrative expenses due to write-offs ofpre-operational costs for projects that were not executed.
Technical Services
The table below sets forth selected financial information related to our Technical Services segment.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 1,083.3 | 1,169.1 | 7.9 | |||||||||||||||||||||
Revenue | 1,152.5 | 1,401.8 | 21.6 | % | ||||||||||||||||||||
Gross profit | 103.9 | 179.2 | 72.5 | 178.3 | 171.8 | (3.6 | )% | |||||||||||||||||
Operating profit | 72.2 | 71.4 | (1.1 | ) | 70.3 | 57.1 | (18.8 | )% |
Revenues. The table below sets forth the breakdown of our Technical Services revenues by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Operation and Maintenance of Infrastructure Assets | 242.8 | 428.9 | 76.6 | 334.8 | 262.7 | (21.5 | )% | |||||||||||||||||
IT Services | 208.0 | 226.4 | 8.8 | 253.9 | 411.1 | 61.9 | % | |||||||||||||||||
Electricity Networks Services | 632.5 | 513.8 | (18.8 | ) | 563.9 | 727.9 | 29.1 | % | ||||||||||||||||
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Total | 1,083.3 | 1,169.1 | 7.9 | 1,152.5 | 1,401.8 | 21.6 | % |
Our Technical Services revenues increased 7.9%,21.6% or S/.85.8.249.3 million, from S/.1,083.3.1,152.5 million for 20122015 to S/.1,169.1.1,401.8 million for 2013.2016. The variation in our Technical Services revenues principally reflected the following:
• | Operation and Maintenance of Infrastructure Assets: a |
121
• | IT |
• | Electricity Networks |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2012 and 2013 resulted in an increase in our Technical Services revenues, as expressed in nuevos soles, of approximately S/.8.0 million, or 1.2%, during 2013. We estimate that fluctuations among the nuevo sol and the Chilean peso between 2012 and 2013 resulted in a decrease in our Technical Services revenues, as expressed in nuevos soles, of approximately S/.1.8 million, or 0.4%, during 2013.
Gross Profit.The table below sets forth the breakdown of our Technical Services gross profit by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Operation and Maintenance of Infrastructure Assets | 41.2 | 46.3 | 12.4 | 61.1 | 45.3 | (25.9 | )% | |||||||||||||||||
IT Services | 39.0 | 47.1 | 20.5 | 40.4 | 65.0 | 61.0 | % | |||||||||||||||||
Electricity Networks Services | 23.7 | 85.9 | 261.6 | 76.7 | 61.6 | (19.7 | )% | |||||||||||||||||
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Total | 103.9 | 179.2 | 72.4 | 178.3 | 171.8 | (3.5 | )% |
Our Technical Services gross profit increased 72.4%decreased 3.5%, or S/.75.2.6.5 million, from S/.103.9.178.3 million for 20122015 to S/.179.2.171.8 million for 2013.2016. Our Technical Services gross margin was 15.3%12.3% for 20132016 compared to 9.6%15.5% for 2012.2015. The variation in our Technical Services gross profit principally reflected the following:
• | Operation and Maintenance of Infrastructure |
• | IT |
• | Electricity Networks |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2012 and 2013 resulted in an increase in our Technical Services cost of sales, as expressed in nuevos soles, of approximately S/.10.3 million, or 1.8%, during 2013. We estimate that fluctuations among the nuevo sol and the Chilean peso between 2012 and 2013 resulted in an decrease in our Technical Services cost of sales, as expressed in nuevos soles, of approximately S/.1.5 million, or 0.4%, during 2013.
Operating Profit.The table below sets forth the breakdown of our Technical Services operating profit by principal lines of business.
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Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2012 | 2013 | Variation | 2015 Restated | 2016 | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Operation and Maintenance of Infrastructure Assets | 18.1 | 12.4 | (31.5 | ) | 34.0 | 20.6 | (39.4 | )% | ||||||||||||||||
IT Services | 18.6 | 19.4 | 4.3 | 16.5 | 24.4 | 47.5 | % | |||||||||||||||||
Electricity Networks Services | 35.5 | 39.6 | 11.5 | 19.8 | 12.1 | (38.9 | )% | |||||||||||||||||
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Total | 72.2 | 71.4 | (1.1 | ) | 70.3 | 57.1 | (18.8 | )% |
Our Technical Services operating profit decreased 1.1%18.8%, or S/.0.8.13.2 million, from S/.72.2.70.3 million for 20122015 to S/.71.4.57.1 million for 2013.2016. Our Technical Services operating margin for 20132016 was 6.1%4.1% compared to 6.7%6.1% for 2012.2015. The variation in our Technical Services operating profit principally reflected the following:
• | Operation and Maintenance of Infrastructure |
• | IT |
• | Electricity Networks |
Financial (Expense) Income, Net
Our net financial expense increased S/.102.1.72.1 million from net financial expenses of S/.10.3.138.7 million in 20122015 to net financial expenses of S/.112.4.210.8 million in 2013.2016. Excluding foreign exchange differences, our net financial expense increased 33.8%255.4%, or S/.10.6.142.5 million, from net financial expenses of S/.31.4.55.8 million for 20122015 to net financial expenses of S/.42.0.198.3 million for 2013. This increase was primarily2016 due to financial expenses fromthe interest paid on our syndicated loan which we repaid in September 2013.and a discount of the long term account receivable related to the termination of the GSP gas pipeline concession. Our net exchange difference net decreased S/.91.5.70.4 million, from a gainloss of S/.21.1.82.9 million for 20122015 to a loss of S/.70.4.12.5 million for 2013.2016. This decrease is due to both the depreciationappreciation of the nuevo sol against the U.S. dollar from 20122015 to 2013, as well as our higher U.S. dollar liabilities in 2013.2016.
Share of Profit and Loss in Associates
Our share of profit and loss in associates increaseddecreased S/.33.0.597.4 million from a profit of S/.0.6.7.7 million in 20122015 to a profitloss of S/.33.6.589.7 million in 2013.2016. This increasedecrease is primarily due to the results from engineeringimpairment of our investment in GSP as a consequence of the cancellation of the concession on January 24, 2017. For more information, see “Item 5.A. Operating and construction projects in which Vial y Vives, which we acquired in October 2012, has a minority participation.Financial Review and Prospects—Operating Results—Recent Developments.”
Income Tax
Our income tax increased 18.0%decreased 212.9%, or S/.27.8.210.8 million, from S/.154.6.(99.0) million for 20122015 to S/.182.4.111.8 million for 2013.2016. This increasedecrease in income tax was primarily due to an increasea decrease in profit before tax. Our effective tax rates for 20122016 and 20132015 were 29.7%(19.8)% and 30.7%64.0%, respectively.
123
Net Profit
Our net profit increased 12.7%, ordecreased S/.46.4.507.3 million, from S/.366.2.55.6 million profit for 20122015 to a S/.412.6.451.7 million loss for 2013.2016. Net profit attributable to controlling interests increased 10.5%,decreased S/.516.8 million, while net profit attributable tonon-controlling interests increased 20.8%.S/9.6 million. Net profit attributable tonon-controlling interests increased primarily as a result of the consolidation of Vial y Vives for a complete year in 2013 and consolidation of DSD Construcciones y Maquinaria for the last two months of 2013, which were not included in 2012.due to our Real Estate segment. See “—General—Accounting for Subsidiaries, Joint Operations, Joint Ventures and Associated Companies.”
Comparison of Results of Operations for 2011of 2014 and 20122015
The following table sets forth the components of our consolidated income statement for 20112014 and 2012.2015.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 4,241.3 | 5,231.9 | 23.4 | 7,008.7 | 7,815.5 | 11.5 | ||||||||||||||||||
Cost of sales | (3,609.5 | ) | (4,519.8 | ) | 25.2 | (6,057.1 | ) | (7,165.5 | ) | 18.3 | ||||||||||||||
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Gross profit | 631.7 | 712.1 | 12.7 | 951.6 | 650.0 | (31.7 | ) | |||||||||||||||||
Administrative expenses | (199.6 | ) | (257.2 | ) | 28.9 | (421.4 | ) | (413.4 | ) | (1.9 | ) | |||||||||||||
Other income (expenses) | 4.3 | 75.9 | 1,665.1 | 15.2 | 57.4 | 277.6 | ||||||||||||||||||
Profit from the sale of investments | 4.8 | — | N/M | |||||||||||||||||||||
Other (losses) gains, net | (2.8 | ) | (0.3 | ) | (89.3 | ) | (0.1 | ) | (0.1 | ) | NM | |||||||||||||
Gain from business combination | 45.2 | — | N/M | |||||||||||||||||||||
Profit from sale of investments | 0.0 | (8.3 | ) | NM | ||||||||||||||||||||
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Operating profit | 483.6 | 530.6 | 9.7 | 545.3 | 285.6 | (47.6 | ) | |||||||||||||||||
Financial (expense) income, net | (6.2 | ) | (10.3 | ) | 66.1 | (91.4 | ) | (138.7 | ) | 51.8 | ||||||||||||||
Share of profit and loss in associates | 0.2 | 0.6 | 200.0 | 53.4 | 7.7 | (85.6 | ) | |||||||||||||||||
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Profit before income tax | 477.6 | 520.8 | 9.0 | |||||||||||||||||||||
Profit (loss) before income tax | 507.3 | 154.6 | (69.5 | ) | ||||||||||||||||||||
Income tax | (141.4 | ) | (154.6 | ) | 9.3 | (146.2 | ) | (99.0 | ) | (32.3 | ) | |||||||||||||
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Net profit | 336.2 | 366.3 | 9.0 | |||||||||||||||||||||
Net profit attributable to controlling interest | 289.1 | 290.0 | 0.3 | |||||||||||||||||||||
Net profit attributable to non-controlling interest | 47.1 | 76.3 | 62.0 |
Net profit Net profit attributable to controlling interest Net profit attributable tonon-controlling interest Year ended December 31, 2014 2015 Restated Variation (in millions of S/.) % 361.1 55.6 (84.6 ) 299.7 7.1 (97.6 ) 61.5 48.5 (21.1 )
Revenues
Our total revenues increased by 23.4%11.5%, or S/.990.6.806.8 million, from S/.4,241.3.7,008.7 million for 20112014 to S/.5,231.9.7,815.5 million for 2012.2015. This increase was due mainly to growth in each of our business segments, particularly our E&C segment.
We estimate that fluctuations amongsegment, primarily due to the nuevo solacquisition of Morelco in December 2014 and the U.S. dollarincrease in electromechanic construction and contract mining services activities, and in our Infrastructure segment, primarily due to higher revenues of Norvial, the increase of trains in operation in the Lima Metro, and the Chilean peso between 2011commencement of operations in Blocks III and 2012 resultedIV in a decreaseApril 2015 in our consolidated revenues, as expressed in nuevos soles, of approximately S/.168.9 million, or 3.1%, during 2012, as the nuevo sol appreciated against the U.S. dollar by approximately 4.2% and the nuevo sol depreciated against the Chilean peso by approximately 4.9%.GMP.
The following table sets forth a breakdown of our revenues by segment for 20112014 and 2012.2015.
Year ended December 31, | ||||||||||||||||||||
2011 | 2012 | Variation | ||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | ||||||||||||||||
Engineering and Construction | 2,784.2 | 65.6 | 3,524.6 | 67.4 | 26.6 | |||||||||||||||
Infrastructure | 404.2 | 9.5 | 524.5 | 10.0 | 29.7 | |||||||||||||||
Real Estate | 152.3 | 3.6 | 240.1 | 4.6 | 57.6 | |||||||||||||||
Technical Services | 977.0 | 23.0 | 1,083.3 | 20.7 | 10.9 | |||||||||||||||
Corporate | 39.8 | 0.9 | 44.7 | 0.9 | 12.2 | |||||||||||||||
Eliminations | (116.2 | ) | (2.7 | ) | (185.2 | ) | (3.5 | ) | 59.4 | |||||||||||
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Total | 4,241.3 | 100.0 | 5,231.9 | 100.0 | 23.4 |
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Year ended December 31, | ||||||||||||||||||||
2014 | 2015 Restated | Variation | ||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | ||||||||||||||||
Engineering and Construction | 5,035.7 | 71.8 | 5,829.4 | 74.6 | 15.8 | |||||||||||||||
Infrastructure | 884.8 | 12.6 | 1,018.3 | 13.0 | 15.1 | |||||||||||||||
Real Estate | 224.6 | 3.2 | 215.8 | 2.8 | (3.9 | ) | ||||||||||||||
Technical Services | 1,208.2 | 17.2 | 1,152.5 | 14.7 | (4.6 | ) | ||||||||||||||
Corporate | 53.2 | 0.8 | 70.5 | 0.9 | 32.5 | |||||||||||||||
Eliminations | (397.8 | ) | (5.7 | ) | (471.0 | ) | (6.0 | ) | 18.5 | |||||||||||
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Total | 7,008.7 | 100.0 | 7,815.5 | 100.0 | 11.5 |
Cost of Sales
Our total cost of sales increased by 25.2%18.3%, or S/.910.3.1,108.4 million, from S/.3,609.5.6,057.1 million for 20112014 to S/.4,519.8.7,165.5 million for 2012.2015. This increase was primarily related to the growth in our revenues and, to a lesser extent,as well as in our E&C segment, an increase in costscost in certain civil construction projects, losses incurred from a dispute with respect to an E&C contract with Hochschild Mining for the Inmaculada mining project and losses incurred because of the cancellation of the El Nuble hydroelectric project, for which our Technical Services segment, as described below.
We estimate that fluctuations among the nuevo sol and the U.S. dollar and the Chilean peso between 2011 and 2012 resultedsubsidiary Vial y Vives was carrying on civil works in a decrease in our consolidated cost of sales, as expressed in nuevos soles, of approximately S/.113.5 million, or 2.4%, during 2012.Chile.
Gross Profit
Our gross profit increaseddecreased by 12.7%31.7%, or S/.80.3.301.6 million, from S/.631.7.951.6 million for 20112014 to S/.712.1.650.0 million for 2012.2015. Our gross margin (i.e., gross profit as a percentage of revenues) for 20122015 was 13.6%8.3% compared to 14.9%13.6% for 2011.2014. This decrease in our gross margin was primarilymainly due to the full year impact of CAM in our Technical Services segment which reduced ourlower gross margins in that segment and resulted in a decrease of 140 basis points in our consolidated gross margin; changes in the mix of contracting arrangements in our E&C segment, with the proportion of less risky contracts for us (i.e., cost-plus fee and,primarily due to a lesser extent, unit price) increasing, thereby depressing ourlower margins in that segment;certain civil construction projects and lower production and prices at our gas processing plant in our Infrastructure segment; partially offset by higher margins in our Real Estate segment. Our gross margin was also adversely affectedsegment, primarily due to expenses relatinglower margins in the units delivered and the lower number of units. In 2015 our E&C margins were impacted by losses incurred from a dispute (errors in the engineering, which led to the pre-operation phasereworks and extension of the Lima Metro during the second half of 2011, a period during which we did not generate revenues, and, in 2012, as a resultterm of the limited numberproject which carries out more general expenses) with respect to an E&C contract with Hochschild Mining for the Inmaculada mining project and losses incurred because of trains we operated during the first yearcancellation of operation.the El Nuble hydroelectric plant project, for which our subsidiary Vial y Vives was carrying out civil works in Chile. These two contracts werelump-sum contracts. As of December 2015, both projects have been completed, therefore all the impact was registered that year.
The following table sets forth a breakdown of our gross profit by segment for 20112014 and 2012.2015.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | (in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | |||||||||||||||||||||||||||||||
Engineering and Construction | 329.3 | 52.1 | 408.0 | 57.3 | 23.9 | 535.4 | 56.3 | 312.8 | 48.1 | (41.6 | ) | |||||||||||||||||||||||||||||
Infrastructure | 146.2 | 23.1 | 172.6 | 24.2 | 18.1 | 245.6 | 25.8 | 184.8 | 28.4 | (24.8 | ) | |||||||||||||||||||||||||||||
Real Estate | 45.3 | 7.2 | 86.7 | 12.2 | 91.3 | 62.4 | 6.6 | 51.8 | 8.0 | (17.0 | ) | |||||||||||||||||||||||||||||
Technical Services | 109.7 | 17.4 | 103.9 | 14.6 | (5.2 | ) | 142.3 | 15.0 | 178.3 | 27.4 | 25.3 | |||||||||||||||||||||||||||||
Corporate | 2.0 | 0.3 | (0.03 | ) | 0.0 | (101.3 | ) | (7.6 | ) | (0.8 | ) | (7.0 | ) | (1.1 | ) | (7.9 | ) | |||||||||||||||||||||||
Eliminations | (0.7 | ) | (0.1 | ) | (59.2 | ) | (8.3 | ) | 8,357.1 | (26.5 | ) | (2.8 | ) | (70.6 | ) | (10.9 | ) | 166.4 | ||||||||||||||||||||||
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Total | 631.7 | 100.0 | 712.1 | 100.0 | 12.7 | 951.6 | 100.0 | 650.0 | 100.0 | (31.7 | ) |
Administrative Expenses
Our administrative expenses increaseddecreased by 28.9%1.9%, or S/.57.6.8.0 million, from S/.199.6.421.4 million for 20112014 to S/.257.2.413.4 million for 2012,2015, primarily due to the expansiondecrease of our administrative structure to supportexpenses in the growth of our businessTechnical Services segment, specifically in each of our segments, particularly in our E&C segment.CAM and GMD. As a percentage of revenues, our administrative expenses grewdecreased to 4.9%5.3% in 20122015 from 4.7%6.0% in 2011.2014.
Other Income (Expenses)
Our other income (expenses) increased S/.71.6.42.2 million, from S/.4.3.15.1 million for 20112014 to S/.75.9.57.4 million for 2012.2015. This increase was primarily due to the reversalan increase in 2012 ofour E&C segment, from a S/.72.8.9.8 million in provisions recognized in connection with our acquisitionloss to a S/.30.8 million profit as a result of a controlling interest in CAM. In addition, in 2011, we recognized a S/.45.2 million gain from sale of business combination in connection with the excess ofon the fair value of the assets and liabilities acquiredliability for a put option related to the Morelco acquisition in 2014, the reversal of provisions in connection with the CAM acquisition, over the consideration paid, which is reflected under “gaindividends received from business combination.” For further information, see “—Factors Affecting Our ResultsTGP and the sale of Operations—Acquisitions”certain machinery and notes 27 and 31(c) to our audited annual consolidated financial statements included in this annual report.equipment.
125
Operating Profit
Our operating profit increased 9.7%,decreased 47.6% or S/.47.0.259.7 million, from S/.483.6.545.3 million for 20112014 to S/.530.6.285.6 million for 2012.2015. Our operating margin (i.e., operating profit as a percentage of revenues) was 10.1%3.7% for 20122015 compared to 11.4%7.8% for 2011, reflecting2014. This decrease is primarily due to the decrease in gross margin, as well as higherprofit, partially offset by our decrease in administrative expenses and our increase in 2012 in our E&C segment relating to our acquisitionother income (expenses). The following table sets forth a breakdown of Vial y Vives; and extraordinary income in 2011 for Concar in our Technical Services segment arising from a S/.7.2 million arbitration award related to the Arequipa-Matarani road. Excluding the effects of the CAM acquisition, our operating profit increased by 8.1%segment for 2014 and our operating margin for 2012 was 10.13% compared to 11.4% for 2011.2015.
The following table sets forth a breakdown of our operating profit by segment for 20112014 and 2012.2015.
Year ended December 31, | ||||||||||||||||||||
2011 | 2012 | Variation | ||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | ||||||||||||||||
Engineering and Construction | 227.5 | 47.0 | 247.6 | 46.7 | 8.8 | |||||||||||||||
Infrastructure | 118.3 | 24.5 | 139.7 | 26.3 | 18.1 | |||||||||||||||
Real Estate | 34.9 | 7.2 | 67.6 | 12.7 | 93.7 | |||||||||||||||
Technical Services | 89.4 | 18.5 | 72.2 | 13.6 | (19.2 | ) | ||||||||||||||
Corporate | (8.9 | ) | (1.8 | ) | 4.4 | 0.8 | 149.4 | |||||||||||||
Eliminations | 22.4 | 4.6 | (0.9 | ) | (0.2 | ) | (103.9 | ) | ||||||||||||
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Total | 483.6 | 100.0 | 530.6 | 100.0 | 9.7 |
Business Segments
Year ended December 31, | ||||||||||||||||||||
2014 | 2015 Restated | Variation | ||||||||||||||||||
(in millions of S/.) | % of Total | (in millions of S/.) | % of Total | % | ||||||||||||||||
Engineering and Construction | 267.0 | 49.0 | 54.2 | 19.0 | (79.9 | ) | ||||||||||||||
Infrastructure | 201.9 | 37.0 | 146.8 | 51.4 | (27.3 | ) | ||||||||||||||
Real Estate | 40.5 | 7.4 | 33.0 | 11.6 | (18.5 | ) | ||||||||||||||
Technical Services | 25.7 | 4.7 | 70.3 | 24.6 | 173.5 | |||||||||||||||
Corporate | (21.0 | ) | (3.9 | ) | (25.8 | ) | (9.0 | ) | 22.9 | |||||||||||
Eliminations | 31.2 | 5.7 | 7.0 | 2.5 | (77.5 | ) | ||||||||||||||
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Total | 545.3 | 100.0 | 285.6 | 100.0 | (47.6 | ) |
The following discussion analyzes our key results of operations on a segment basis. For further information on our business segments, see note 6 to our audited annual consolidated financial statements included in this annual report.
Engineering and Construction
The table below sets forth selected financial information related to our E&C segment.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 2,784.2 | 3,524.6 | 26.6 | |||||||||||||||||||||
Revenue | 5,035.7 | 5,829.4 | 15.8 | |||||||||||||||||||||
Gross profit | 329.3 | 408.0 | 23.9 | 535.4 | 312.8 | (41.6 | ) | |||||||||||||||||
Operating profit | 227.5 | 247.6 | 8.8 | 267.0 | 54.2 | (79.7 | ) |
Revenues. Our E&C revenues increased 26.6%15.8%, or S/.740.4.793.7 million, from S/.2,784.2.5,035.7 million for 20112014 to S/.3,524.6.5,829.4 million for 2012,2015, primarily due to a greater numberthe acquisition of projects undertaken and an increaseMorelco in average project size, driven by economic growth and increased investment in Peru.
We estimate that fluctuations among the nuevo solDecember 2014 and the U.S. dollar between 2011 and 2012 resultedgrowth in a decreaserevenues in our E&C revenues, as expressed in nuevos soles, of approximately S/.116.3 million, or 3.2%, during 2012.electromechanic and contract mining activities.
The following describes variations in our E&C revenues by business activities, types of contracts andend-markets:
E&C Activities: For 2012, approximately 5.4%, 26.5%, 25.4%, 21.6% and 21.1% of our E&C revenues were derived from: engineering services; electromechanic construction; civil construction; contract mining; and building construction activities, respectively. For 2011, approximately 4.4%, 16.9%, 35.8%, 15.1% and 27.9% of our E&C revenues were derived from: engineering construction; electromechanic construction;
Year ended December 31, | ||||||||||||||||||||
(in millions of S/.) | ||||||||||||||||||||
2014 | 2015 Restated | Variation | ||||||||||||||||||
% | % | % | ||||||||||||||||||
Engineering services | 361.1 | 7.2 | 169.3 | 2.9 | 53.1 | |||||||||||||||
Electromechanic construction | 1,082.9 | 21.6 | 1,603.2 | 27.6 | 48.1 | |||||||||||||||
Civil construction | 1,754.1 | 35.0 | 1,360.1 | 23.3 | 22.5 | |||||||||||||||
Contract mining | 1,312.7 | 26.2 | 2,066.4 | 35.4 | 57.4 | |||||||||||||||
Building construction activities | 505.9 | 10.1 | 630.4 | 10.8 | 24.6 | |||||||||||||||
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Total | 5,035.7 | 100.0 | 5,829.4 | 100.0 |
126
Year ended December 31, | ||||||||
2014 | 2015 Restated | |||||||
% | % | |||||||
Cost + fee | 43.9 | 28.0 | ||||||
Unit price | 29.5 | 49.0 | ||||||
Lump sum | 11.4 | 11.0 | ||||||
EPC contracts | 15.3 | 12.0 | ||||||
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| |||||
Total | 100.0 | 100.0 |
Year ended December 31, | ||||||||
2014 | 2015 Restated | |||||||
% | % | |||||||
Mining | 70.4 | 60.1 | ||||||
Real estate buildings | 10.4 | 9.0 | ||||||
Power | 10.2 | 10.0 | ||||||
Oil and gas | 2.6 | 15.9 | ||||||
Transportation | 4.2 | 3.0 | ||||||
Water and sewage | 1.2 | 2.0 | ||||||
Other end markets | 1.1 | — | ||||||
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| |||||
Total | 100.0 | 100.0 |
civil construction; contract mining; and building construction activities, respectively. Revenues relating to electromechanic construction increased in part as a result of the temporary postponement in the execution of certain projects during 2011, and revenues relating to contract mining activity increased mainly as a result of an increase in project awards and the consolidation of Stracon GyM. Revenues in 2012 from civil construction declined moderately in absolute terms, and revenues from building construction were flat in absolute terms, despite the decrease in the proportional weight of these activities. For a description of our E&C business activities, see “Item 4.B. Information on the Company—Business Overview—Engineering and Construction—Principal Engineering and Construction Activities”;
E&C Contracts: For 2012, approximately 37.9%, 48.5%, 5.0% and 8.6% of our E&C revenues were derived from: cost-plus fee; unit price; lump-sum; and EPC contracts, respectively. For 2011, approximately 23.9%, 61.7%, 14.2% and 0.2% of our E&C revenues were derived from: cost-plus fee; unit price; lump-sum; and EPC contracts, respectively. The growth in cost-plus fee contracts resulted in part from a trend towards the use of this contractual arrangement for complex projects. For a description of our contractual arrangements, see “Item 4.B. Information on the Company—Business Overview—Engineering and Construction—Contracts” and “—Factors Affecting Our Results of Operations—Engineering and Construction”; and
E&C End-Markets: For 2012, approximately 40.0%, 18.7%, 16.2%, 8.7%, 9.4%, 2.2% and 4.8%, of our E&C revenues were derived from: mining; real estate buildings; power; oil and gas; transportation; water and sewage; and other end-markets, respectively. For 2011, approximately 40.3%, 27.5%, 9.8%, 4.0%, 12.1%, 5.1% and 1.2%, of our E&C revenues were derived from: mining; real estate buildings; power; oil and gas; transportation; water and sewage; and other end-markets, respectively. During 2012 we continued to derive significant revenues from the mining sector, and we experienced growth in revenues particularly from the power as well as the oil and gas sectors. Revenues in 2012 derived from the real estate and transportation end-markets declined moderately in absolute terms, despite the decrease in the proportional weight of these end-markets.
The breakdown of E&C revenues by different business activities, types of contracts andend-markets tends to vary from yearperiod to yearperiod due to a variety of factors, including the timing of the execution of larger projects in any particular year,period, which is typically outside of our control.
Gross Profit.Profit. Our E&C gross profit increased 23.9%decreased 41.6%, or S/.78.7.222.6 million, from S/.329.3.535.4 million for 20112014 to S/.408.0.312.8 million for 2012. The increase in our E&C cost of sales was largely in line with our revenue growth in this segment.2015. Our E&C gross margin for 20122015 was 11.6%5.4% compared to 11.8%10.6% for 2011. Our E&C gross margin was affected by the trend in our contractual arrangements toward less risky contracts for us (i.e., cost-plus fee and, to a lesser extent, unit price) which provide more stable results at lower profit margins. See “—Factors Affecting Our Results of Operations—Engineering and Construction.”
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a2014. The decrease in ourgross profit was due to losses incurred from a dispute (errors in the engineering, which led to reworks and extension of the term of the project which carries out more general expenses) with respect to an E&C costcontract with Hochschild Mining for the Inmaculada mining project and losses incurred because of sales, as expressedthe cancellation of the El Nuble hydroelectric plant project, for which our subsidiary Vial y Vives was carrying out civil works in nuevos soles,Chile. As of approximately S/.67.0 million, or 2.1%, during 2012.December 2015, both projects have been completed, therefore all the impact was register that year.
Operating Profit.Profit. Our E&C operating profit increased 8.8%decreased 79.7%, or S/.20.1.212.8 million, from S/.227.5.267.0 million for 20112014 to S/.247.6.54.2 million for 2012.2015. Our E&C administrative expenses increased 53.2%decreased 11.8%, or S/.55.5.30.6 million, which resulted in administrative expenses as a percentage of revenues of 4.5%5.0% for 20122015 compared to 3.7%5.1% for 2011,2014, due mainly to a decrease in part to extraordinary costs, including restructuring costs, incurred related to our acquisitionthe administrative expenses of Vial y Vives. Our E&C operating profit was also impacted by S/.2.6 million in other income in 2011 and S/.0.6 million in other expenses in 2012, in each case from the sale of equipment and machinery.GyM. Our E&C operating margin for 20122015 was 7.0% (7.1% excluding0.9% compared to 5.3% for 2014.
In addition, our E&C segment had S/.12.9 million in profit from minority interests held by Vial y Vives) compared to 8.2% for 2011.Vives in several of its projects undertaken in 2015 in Chile, as well as the minority participation of GyM in Viva GyM reflected under “share of profit and loss in associates” in our audited annual consolidated financial statements.
127
Infrastructure
The table below sets forth selected financial information related to our Infrastructure segment.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 404.2 | 524.5 | 29.7 | |||||||||||||||||||||
Revenue | 884.8 | 1,018.3 | 15.1 | |||||||||||||||||||||
Gross profit | 146.2 | 172.6 | 18.1 | 245.6 | 184.8 | (24.8 | ) | |||||||||||||||||
Operating profit | 118.3 | 139.7 | 18.1 | 201.9 | 146.8 | (27.3 | ) |
Revenues. The table below sets forth the breakdown of our Infrastructure revenues by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Toll Roads | 115.2 | 123.3 | 7.1 | 338.2 | 394.5 | 16.6 | ||||||||||||||||||
Mass Transit | — | 73.1 | N/M | 167.0 | 206.5 | 23.7 | ||||||||||||||||||
Water Treatment | — | 41.0 | N/M | 29.3 | 28.0 | (4.4 | ) | |||||||||||||||||
Energy | 289.0 | 287.0 | (0.7 | ) | 350.3 | 389.4 | 11.2 | |||||||||||||||||
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Total | 404.2 | 524.5 | 29.7 | 884.8 | 1,018.3 | 15.1 |
Our Infrastructure revenues increased 29.7%,15.1% or S/.120.2.133.5 million, from S/.404.2.884.8 million for 20112014 to S/.524.5.1,018.3 million for 2012.2015. The variation in our Infrastructure revenues principally reflected the following:
• | Toll |
• | Mass |
• | Water |
• | Energy:a |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a decrease in our Infrastructure revenues, as expressed in nuevos soles, of approximately S/.11.4 million, or 2.1%, during 2012.
Gross Profit.Profit. The table below sets forth the breakdown of our Infrastructure gross profit by principal lines of business.
Year ended December 31, | ||||||||||||
2011 | 2012 | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Toll Roads | 40.1 | 53.3 | 32.9 | |||||||||
Mass Transit | (9.9 | ) | (2.7 | ) | 72.6 | |||||||
Water Treatment | — | 11.2 | N/M | |||||||||
Energy | 116.0 | 110.8 | (4.4 | ) | ||||||||
|
|
|
| |||||||||
Total | 146.2 | 172.6 | 18.1 |
128
Year ended December 31, | ||||||||||||
2014 | 2015 Restated | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Toll Roads | 76.7 | 78.5 | 2.4 | |||||||||
Mass Transit | 42.1 | 40.5 | (3.8 | ) | ||||||||
Water Treatment | 2.3 | 2.2 | (4.6 | ) | ||||||||
Energy | 124.5 | 63.5 | (49.0 | ) | ||||||||
|
|
|
| |||||||||
Total | 245.6 | 184.8 | (24.8 | ) |
Our Infrastructure gross profit increased 18.1%decreased 24.8%, or S/.26.4.60.8 million, from S/.146.2.245.6 million for 20112014 to S/.172.6.184.8 million for 2012.2015. Our Infrastructure gross margin was 32.9%18.1% for 20122015 compared to 36.2%27.8% for 2011.2014. The variation in our Infrastructure gross profit principally reflected the following:
• | Toll Roads:a |
• | Mass Transit: a 3.8%, or S/ |
• | Water Treatment: a 4.6%, or S/ |
• | Energy: a |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a decrease in our Infrastructure cost of sales, as expressed in nuevos soles, of approximately S/.4.1 million, or 1.1%, during 2012.
Operating Profit.Profit. The table below sets forth the breakdown of our Infrastructure operating profit by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Toll Roads | 33.1 | 47.0 | 42.0 | 68.7 | 68.3 | (0.6 | ) | |||||||||||||||||
Mass Transit | (15.1 | ) | (10.6 | ) | 29.8 | 27.4 | 29.9 | 9.1 | ||||||||||||||||
Water Treatment | (0.3 | ) | 9.7 | N/M | 2.0 | 1.9 | (5.0 | ) | ||||||||||||||||
Energy | 100.5 | 93.6 | (6.9 | ) | 103.8 | 46.7 | (55.1 | ) | ||||||||||||||||
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| |||||||||||||||||||||
Total | 118.3 | 139.7 | 18.1 | 201.9 | 146.8 | (27.3 | ) |
Our Infrastructure operating profit increased 18.1%decreased 27.3%, or S/.21.4.55.1 million, from S/.118.3.201.9 million for 20112014 to S/.139.7.146.8 million for 2012.2015. Our Infrastructure operating margin was 26.6%14.4% for 20122015 compared to 29.3%22.8% for 2011.2014. The variation in our Infrastructure operating profit principally reflected the following:
• | Toll Roads:a |
• | Mass Transit: a 9.1%, or S/.2.5 million, increase in operating profit, from an operating profit of S/ |
• |
129
• |
Real Estate
The table below sets forth selected financial information related to our Real Estate segment.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 152.3 | 240.1 | 57.7 | |||||||||||||||||||||
Revenue | 224.6 | 215.8 | (3.9 | ) | ||||||||||||||||||||
Gross profit | 45.3 | 86.7 | 91.3 | 62.4 | 51.8 | (17.0 | ) | |||||||||||||||||
Operating profit | 34.9 | 67.6 | 93.6 | 40.5 | 33.0 | (18.5 | ) |
Revenues. Our Real Estate revenues increased 57.7%decreased 3.9%, or S/.87.8.8.8 million, from S/.152.3.224.6 million for 20112014 to S/.240.1.215.8 million for 2012. This increase2015. Even though the total units (housing plus affordable housing) delivered increased by 1.0%, the decrease in revenue was primarily due to a 10.0% increase29.2 % decrease in the number of affordable housing and housing units delivered, with 1,36842 units delivered in 20122015 compared to 1,24459 units delivered in 2011; and a shift in the mix of units delivered towards housing (as opposed to affordable housing) units, which have higher prices per unit; as well as an increase in land parcels sold by Almonte. We generated S/.10.1 million in 2011 and S/.45.6 million in 2012 from the sale of land parcels by Almonte.
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a decrease in our Real Estate revenues, as expressed in nuevos soles, of approximately S/.3.3 million, or 1.3%, during 2012.2014.
Gross Profit. Our Real Estate gross profit increased 91.3%decreased 17.0%, or S/.41.4.10.6 million, from S/.45.3.62.4 million for 20112014 to S/.86.7.51.8 million for 2012, primarily2015, mainly as a result of the land parcel sales by Almonte at a significant increaselower margins in land pricesunits delivered in 2015 compared to the book value at which we had these assets recorded in our financial statements of S/.2.1 million.2014, when more housing units with higher margins were delivered. Our Real Estate gross margin was 36.1% for 2012 compared to 29.8% for 2011. Excluding the sale of land parcels by Almonte, our Real Estate gross profit increased 25.3% and our Real Estate gross margin was 24.0% for 20122015 compared to 25.9%27.8% for 2011. This decrease in gross margin, after excluding the sales of land parcels by Almonte, was primarily due to costs in certain commercial real estate projects that initiated operations in 2012.
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a decrease in our Real Estate cost of sales, as expressed in nuevos soles, of approximately S/.5.7 million, or 3.6%, during 2012.2014.
Operating Profit. Our Real Estate operating profit increased 93.6%decreased 18.5%, or S/.32.7.7.5 million, from S/.34.9.40.5 million for 20112014 to S/.67.6.33.0 million for 2012,2015, primarily as a result of the increasedecrease in our Real Estate gross profit described above. Our Real Estate operating margin was 28.1% for 2012 compared to 22.9% for 2011. Excluding the sale of land parcels by Almonte, our Real Estate operating margin was 14.0% for 2012 compared to 18.6% for 2011, primarily due to the lower gross margin and marketing costs in 2012 relating to a greater number of housing projects initiated in 2012.profit.
130
Technical Services
The table below sets forth selected financial information related to our Technical Services segment.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Revenues | 977.0 | 1,083.3 | 10.9 | |||||||||||||||||||||
Revenue | 1,208.2 | 1,152.5 | (4.6 | ) | ||||||||||||||||||||
Gross profit | 109.7 | 103.9 | 95.2 | ) | 142.3 | 178.3 | 25.3 | |||||||||||||||||
Operating profit | 89.4 | 72.2 | (19.3 | ) | 25.7 | 70.3 | 173.5 |
Revenues.Revenues. The table below sets forth the breakdown of our Technical Services revenues by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Operation and Maintenance of Infrastructure Assets | �� | 232.9 | 242.8 | 4.2 | 364.4 | 334.8 | (8.1 | ) | ||||||||||||||||
IT Services | 185.9 | 208.0 | 11.9 | 247.9 | 253.9 | 2.4 | ||||||||||||||||||
Electricity Networks Services | 558.2 | 632.5 | 13.3 | 595.9 | 563.9 | (5.4 | ) | |||||||||||||||||
|
|
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| |||||||||||||||||||||
Total | 977.0 | 1,083.3 | 10.9 | 1,208.2 | 1,152.5 | (4.6 | ) |
Our Technical Services revenues increased 10.9%,decreased 4.6% or S/.106.4.55.6 million, from S/.977.0.1,208.2 million for 20112014 to S/.1,083.3.1,152.5 million for 2012.2015. The variation in our Technical Services revenues principally reflected the following:
• | Operation and Maintenance of Infrastructure |
• | IT |
• | Electricity Networks |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a decrease in our Technical Services revenues, as expressed in nuevos soles, of approximately S/.4.5 million, or 1.0%, during 2012. We estimate that fluctuations among the nuevo sol and the Chilean peso between 2011 and 2012 resulted in a decrease in our Technical Services revenues, as expressed in nuevos soles, of approximately S/.33.4 million, or 5.1%, during 2012.
Gross ProfitProfit.. The table below sets forth the breakdown of our Technical Services gross profit by principal lines of business.
Year ended December 31, | ||||||||||||
2011 | 2012 | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Operation and Maintenance of Infrastructure Assets | 55.6 | 41.2 | (26.0 | ) | ||||||||
IT Services | 29.6 | 39.0 | 31.76 | |||||||||
Electricity Networks Services | 24.5 | 23.7 | (3.2 | ) | ||||||||
|
|
|
| |||||||||
Total | 109.7 | 103.9 | (5.2 | ) |
131
Year ended December 31, | ||||||||||||
2014 | 2015 Restated | Variation | ||||||||||
(in millions of S/.) | % | |||||||||||
Operation and Maintenance of Infrastructure Assets | 8.2 | 61.1 | 648.0 | |||||||||
IT Services | 46.5 | 40.4 | (13.1 | ) | ||||||||
Electricity Networks Services | 87.7 | 76.7 | (12.6 | ) | ||||||||
|
|
|
| |||||||||
Total | 142.3 | 178.2 | 25.2 |
Our Technical Services gross profit decreased 5.2%increased 25.2%, or S/.5.7.36.0 million, from S/.109.7.142.3 million for 20112014 to S/.103.9.178.3 million for 2012.2015. Our Technical Services gross margin was 9.6%15.5% for 20122015 compared to 11.2%11.8% for 2011.2014. The variation in our Technical Services gross profit principally reflected the following:
• | Operation and Maintenance of Infrastructure |
• | IT |
• | Electricity Networks |
We estimate that fluctuations among the nuevo sol and the U.S. dollar between 2011 and 2012 resulted in a decrease in our Technical Services cost of sales, as expressed in nuevos soles, of approximately S/.4.6 million, or 1.2%, during 2012. We estimate that fluctuations among the nuevo sol and the Chilean peso between 2011 and 2012 resulted in a decrease in our Technical Services cost of sales, as expressed in nuevos soles, of approximately S/.32.1 million, or 5.1%, during 2012.
Operating ProfitProfit.. The table below sets forth the breakdown of our Technical Services operating profit by principal lines of business.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | Variation | 2014 | 2015 Restated | Variation | |||||||||||||||||||
(in millions of S/.) | % | (in millions of S/.) | % | |||||||||||||||||||||
Operation and Maintenance of Infrastructure Assets | 49.6 | 18.1 | (63.4 | ) | (22.4 | ) | 34.0 | N/M | ||||||||||||||||
IT Services | 14.4 | 18.6 | 29.3 | 15.8 | 16.5 | 4.7 | ||||||||||||||||||
Electricity Networks Services | 25.5 | 35.5 | 39.1 | 32.3 | 19.8 | (38.7 | ) | |||||||||||||||||
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|
|
| |||||||||||||||||||||
Total | 89.4 | 72.2 | (19.3 | ) | 25.7 | 70.3 | 173.7 |
Our Technical Services operating profit decreased 19.3%increased 173.7%, or S/.17.3.44.6 million, from S/.89.4.25.7 million for 20112014 to S/.72.2.70.3 million for 2012.2015. Our Technical Services operating margin for 20122015 was 6.7%6.1% compared to 9.2%2.1% for 2011.2014. The variation in our Technical Services operating profit principally reflected the following:
• | Operation and Maintenance of Infrastructure |
• | IT |
• | Electricity Networks |
132
Financial (Expense) Income, Net
Our net financial expense increased 68.0%, or S/.4.2.47.3 million from net financial expenses of S/.6.2.91.4 million in 20112014 to net financial expenses of S/.10.3.138.7 million in 2012.2015. This increase is a consequence of the increase of the working capital debt in the E&C area throughout the year due to delays in obtaining payments from our E&C clients during 2015, in particular in the mining sector. Excluding foreign exchange difference,differences, our net financial expense increased 290.9%decreased 18.5%, or S/.23.4.8.7 million, from net financial expenses of S/.8.0.47.1 million for 20112014 to net financial expenses of S/.31.5.55.8 million for 2012.2015. Our net exchange difference increased S/.38.6 million, from a loss of S/.44.3 million for 2014 to a loss of S/.82.9 million for 2015. This increase wasis due to both the depreciation of the sol against the U.S. dollar from 2014 to 2015, partially offset by the replacement of dollar-denominated debt with soles denominated debt.
Share of Profit and Loss in Associates
Our share of profit and loss in associates decreased S/.45.7 million from a profit of S/.53.4 million in 2014 to a profit of S/.7.7 million in 2015. This decrease is primarily due to an increaselower profits generated in indebtedness incurred to finance our investments from S/.529.8 million as of December 31, 2011 to S/.845.5 million as of December 31, 2012. Our exchange difference, net increased S/.19.2 million, from a gain of S/.1.9 million for 2011 to a gain of S/.21.1 million for 2012. This increase in gain from exchange difference, net was primarily due to the appreciation of the nuevo sol versus the U.S. dollar in 2012, which decreased the value of our U.S. dollar liabilities in nuevos soles. For a breakdown of our financial expensesprojects where Vial y Vives –DSD, Viva GyM and income, see note 26 to our audited annual consolidated financial statements included in this annual report.CAM have minority participation and are not consolidated.
Income Tax
Our income tax increased 9.3%decreased 32.3%, or S/.13.1.47.2 million, from S/.141.4.146.2 million for 20112014 to S/.154.6.99.0 million for 2012.2015. This increasedecrease in income tax was primarily due to an increasea decrease in profit before income tax. Our effective tax rates for 20122015 and 20112014 were 29.7%64.0% and 29.6%28.8%, respectively.
Net Profit
Our net profit increased 8.9%decreased 84.6%, or S/.30.1.305.5 million, from S/.336.2.361.1 million for 20112014 to S/.366.3.55.6 million for 2012.2015. Net profit attributable to controlling interests increased 0.3%decreased 97.6%, while net profit attributable tonon-controlling interests increased 61.9%decreased 21.1%. Net profit attributable tonon-controlling interests increaseddecreased primarily as a result of the consolidation in 2012 of the results of Stracon GyM, as compareddue to the 2011 accounting for Stracon GyM as a joint operation, whereby we only recognized our share of the revenuesE&C and expenses from the joint operation, as well as the 49.6% non-controlling interest in Almonte, which provided significant profit from the sale of land parcels in 2012.Real Estate segments. See “—General—Accounting for Subsidiaries, Joint Operations, Joint Ventures and Associated Companies.”
B. Liquidity and Capital Resources
Our principal sources of liquidity have historically been cash flows from operating activities and, to a lesser extent, equity capitalization and indebtedness. We conducted an initial public offering of ADSs in July 2013 from which we received approximately US$411.3 million in net proceeds. During 2015 we entered into a medium term loan credit agreement for up to US$200 million (S/.672 million) with Credit Suisse and our subsidiaries GyM Ferrovías and Norvial issued bonds for S/.629 million (US$184.3 million) and S/.365 million (US$106.9 million), respectively.
As a result of the termination of the GSP gas pipeline concession, we have renegotiated three debt instruments as follows: (i) we amended the terms of our syndicated loan related to our equity investment in GSP; (ii) we repaid our proportional guarantee of the GSP bridge loan and entered a new term loan in a principal amount of US$78.7 million (S/.264.8 million); and (iii) we amended the terms of our proportional repayment obligations under the GSP performance guarantee. In order to strengthen our liquidity and financial flexibility, particularly in the event of potential delays in receiving the government payment contemplated under the GSP gas pipeline concession contract, and make payments on our debt related to the GSP project, our board has approved the sale ofnon-strategic assets in the amount of up to US$350 million (S/.1,176 million) in proceeds. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
Our principal uses of cash (other than in connection with our operating activities) have historically been: capital expenditures in all our business segments, including acquisitions and investments in our infrastructure concessions; servicing of our debt; and payment of dividends. We believe that these sources of cash will be sufficient to cover our working capital needs in the ordinary course of business. We believe that our cash from operations, the net proceeds from our offering of ADSs in July 2013 and our current financing sources and the sale ofnon-strategic assets, as described in “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments”, are sufficient to satisfy our current capital expenditures and debt service obligations through the next four years. 12 months.
We anticipate financing future acquisitions, infrastructure investmentshad credit lines with various financial institutions for a total amount of US$2,877.4 million as of December 31, 2016 and land purchases withfor a combinationtotal amount of cashUS$2,659.9 million as of December 31, 2015. Our available lines of credit as of December 31, 2017 totaled US$1,427.33 million. However, our banks have currently restricted us from operations, net proceeds from our offeringtaking out further lines of ADSscredit to finance new operations. See “Recent Developments— Emergency Decree and Subsequent Legislation.”
We are currently in July 2013, additional indebtedness and/ordefault of certain of the covenants under these financial contributions from partners.instruments. For more information, see “Item 13. Defaults, Dividend Arrearages and Delinquencies.”
At December 31, 2013,2016, our cash and cash equivalents totaled S/.959.4.606.9 million (US$343.1180.6 million), of which S/.128.3.16.2 million (US$45.94.8 million) was held by our foreign subsidiaries. We currently intend to distribute these funds to our company to the extent we believe they are not required for the local operations. We are not currently required to accrue or pay any material taxes associated with the repatriation of these funds. In addition, our foreign subsidiaries have no contractual restrictions, and we are not aware of any material legal restrictions, on their ability to transfer funds to us in the form of cash dividends, loans or advances.
133
Cash Flows
The table below sets forth certain components of our cash flows for 2011, 20122014, 2015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
(in millions of S/.) | (in millions of S/.) | |||||||||||||||||||||||
Net cash provided by (used in) operating activities | 133.3 | 542.7 | (367.7 | ) | (23.2 | ) | (286.8 | ) | 377.4 | |||||||||||||||
Net cash provided by (used in) investing activities | (85.6 | ) | (400.0 | ) | (340.0 | ) | (530.1 | ) | (568.7 | ) | (373.7 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (72.5 | ) | (20.8 | ) | 892.1 | 412.3 | 573.5 | 85.8 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net increase (net decrease) in cash | (24.8 | ) | 121.9 | 184.5 | (141.0 | ) | (281.9 | ) | 89.4 |
Cash Flow from Operating Activities
Net cash flow used in operating activities in 20132016 was lower than in 2015. For 2016 this reflects a reduction in the account receivables in the E&C segment mainly explained by the termination of two significant mining projects to the end of 2015.
Net cash flow used in operating activities in 2015 was higher than in 2012.2014. For 20132015 this reflects a decreasean increase in accounts payable, other accounts payable of S/.145.4 millionreceivables, account receivables from related parties and inventory, mainly related to the reductionproportional consolidation of the advance payments from clients in our E&C segment,GSP construction consortium, and the increase in accounts receivables. Additionally, cash flow provided by operating activities was used to pay taxes inadvances of work of the amountexpansion of S/.190.6 million.Norvials Toll Road.
Net cash flow provided by operating activities in 2012 was significantly higher than in 2011. This primarily reflects an increase in trade accounts payable of S/.224.9 million principally related to payments due to suppliers in our E&C segment mainly related to growth in our operations, and other accounts payable of S/.373.6 million mainly related to an increase in advance payments from clients of our E&C, Technical Services and Infrastructure segments, partially offset by an increase in other accounts receivables of S/.346.4 million mainly related to the purchase of trains for the Lima Metro in an amount equal to S/.305.8 million and an increase in inventory of S/.197.8 million mainly due to the purchase of land in our Real Estate segment in an amount equal to S/.126.8 million. Additionally, cash flow provided by operating activities was used to pay taxes in the amount of S/.159.4 million.
Cash Flow from Investing Activities
Net cash flow used in investing activities in 20132016 was lower than in 2012. It mainly includes2015. In 2016 we continued with the purchase of machinery and equipment ,equity contribution to the acquisition of DSD Construcciones y Maquinaria, and the acquisition of an additional stake in Norvial and TGP.GSP consortium.
Net cash flow used in investing activities in 20122015 was significantly higher than in 2011.2014. This primarilymainly reflects an increasethe purchase of a 20% stake in payments for investment purchases in 2012, principally related to the acquisition of Vial y Vives, higher investment in oil drilling activities and a greater amount of purchases of machinery and equipment. Net cash flow used in investing activities in 2011 was significantly higher than in 2010, primarily due to the cash inflow in 2010 from the sale of the Larcomar shopping center and compensation received from the expropriation of our oil and gas assets in Bolivia, while in 2011 we acquired CAM, purchased a greater amount of machinery and equipment and made higher investments in oil drilling activities.GSP consortium.
Cash Flow from Financing Activities
Net cash flow provided by financing activities in 20132016 was lower than in 2015. This is primarily due to a reduction of indebtedness in our E&C segment due to the collection of account receivables and a reduction of debt in the Real Estate segment due to more projects in execution, with sufficient cash flows to repay their debt, partially offset by an increase in the Infrastructure and Technical Services segments, mainly due to the increase in the Norvial bond and consolidation of Adexus. Additionally, in 2016 less dividends were paid and there was an increase in the participation of Vial y Vives –DSD.
Net cash flow provided by financing activities in 2015 was higher than in 2012.2014. This is primarily reflectsdue to a 60.0% increase in the loans received because of higher levels of indebtedness in our issuance of ADSs in July 2013, partially offset by the cancelation of our syndicated loan in September 2013.
Net cash flow used in financing activities in 2012 was lower than in 2011. This primarily reflects an increased indebtedness incurred during the year.E&C segment.
134
Indebtedness
As of December 31, 2013,2016, we had a total outstanding indebtedness of S/.795.7.3,348.3 million (US$284.6996.5 million) as set forth in the table below.
Currency | Total in millions of S/. | Total in millions of US$ | Weighted average interest rate | Range of Maturity Dates | Currency | Range of Maturity Dates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment | Type | (in millions of US$) | (in millions of S/.) | (in millions of CLP)(1) | Earliest | Latest | Type | (in millions of US$) | (in millions of S/. | (in millions of CLP)(1) | (in millions of COP) | Total in millions of S/. | Total in millions of US$ | Weighted average interest rate | Earliest | Latest | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Engineering and Construction: | Leasing Promissory note | 76.5 | 5.1 | — | 219.0 | 78.3 | 5.0 | % | 01/01/2014 | 01/02/2023 | Leasing | 37.9 | 1.8 | 2,210.0 | 5,853.7 | 146.7 | 43.7 | 3.91 | % | 01/01/2017 | 02/01/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
33.6 | 9.3 | — | 103.2 | 36.9 | 2.0 | % | 01/03/2014 | 03/28/2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Promissory note | 86.2 | 309.6 | 7,031.7 | 42,572.3 | 681.9 | 202.9 | 4.12 | % | 01/01/2017 | 06/07/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Infrastructure: | Leasing Long-term loan Promissory note | 6.7 | — | — | 18.7 | 6.7 | 4.8 | % | 07/01/2014 | 08/01/2016 | Leasing | 3.9 | 13.2 | 3.9 | 6.93 | % | 20/03/2017 | 01/04/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
39.0 | — | — | 109.0 | 39.0 | 4.0 | % | 11/15/2016 | 08/31/2020 | Long-term loan | 28.6 | 967.7 | 1,063.7 | 316.6 | 5.79 | % | 03/09/2017 | 25/11/2039 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
17.3 | 5.9 | — | 54.2 | 19.4 | 5.6 | % | 01/31/2014 | 09/03/2017 | Promissory note | 15.9 | 53.4 | 15.9 | 2.58 | % | 06/01/2017 | 18/02/2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate: | Leasing Promissory note | 7.5 | — | — | 20.9 | 7.5 | 6.7 | % | 07/01/2022 | 07/01/2022 | Leasing | 21.4 | 21.4 | 6.4 | 7.84 | % | 01/06/2018 | 01/07/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
19.9 | 53.7 | — | 109.3 | 39.1 | 5.9 | % | 02/28/2014 | 11/01/2015 | Promissory note | 201.6 | 201.6 | 60.0 | 7.28 | % | 01/01/2017 | 13/08/2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Technical Services: | Leasing | 5.0 | — | 661.0 | 17.6 | 6.3 | 5.3 | % | 03/01/2014 | 09/25/2017 | Leasing | 1.8 | 22.7 | 5,755.8 | 6,947.0 | 65.4 | 19.5 | 7.40 | % | 17/01/2017 | 30/10/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Promissory note | 0.7 | 70.9 | 12,710.1 | 140.6 | 50.3 | 6.4 | % | 01/07/2014 | 12/26/2018 | Promissory note | 18.3 | 25,299.8 | 21,137.9 | 168.9 | 50.3 | 7.76 | % | 03/01/2017 | 27/10/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate: | Leasing Promissory note | 1.2 | — | — | 3.4 | 1.2 | 7.7 | % | 12/04/2018 | 12/04/2018 | Long- term loans(2) | 277.4 | 932.1 | 277.4 | 6.19 | % | 27/06/2020 | 10/12/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 207.3 | 144.8 | 13,371.0 | 795.7 | 284.6 | 451.7 | 1,543.1 | 40,297.2 | 76,510.9 | 3,348.3 | 996.5 |
(1) | Includes debt held by CAM and its subsidiaries that is denominated in Chilean pesos, Colombian pesos and Brazilian reais, all of which is presented in Chilean pesos in the table above. |
(2) | Does not include our payable to Chubb Insurance Company related to our proportional repayment obligation under the GSP performance guarantee. |
As of MarchDecember 31, 2014,2017, S/. 190.3.808.5 million (US$67.7240.6 million) of our total indebtedness indicated in the table above has matured, of which S/. 158.0.562.1 million (US$56.3167.3 million) was repaid and S/. 32.3.246.4 million (US$11.573.3 million) was renewed by extending the maturities. The weighted average interest rate of this renewed indebtedness and additional indebtedness was 6.5%4.8% and the maturity dates ranged from April 1, 2014January 5, 2018 to January 2, 2023.December 18, 2019.
On February 27, 2013, Graña y Montero entered into aIn June 2017, we renegotiated the terms of our syndicated loan and our obligations with certain lenders and BBVA Bancomer S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, as administrative agent, for an aggregate amount of uprespect to US$150 million, to be used to repay the US$60 millionGSP bridge loan entered into with BBVA Banco Continental, for investments in and funding the operations of GyM Ferrovías and other general corporate purposes. This loan accrued interest at an annual rate of three month LIBOR plus 4.25% and was scheduled to mature on February 27, 2018. Certain of our subsidiaries (GyM, GMP, Concar and Viva GyM) were guarantors under the loan. On September 27, 2013, we repaid in full this syndicated loan.
GSP performance guarantee. In January 2014,July 2017, we entered into a bridge loan with Banco de Crédito del Perúfinancial stability framework agreement providing for the financingnew lines of the construction of the second stretch of the Norvial road. The loan is for an amount of S/. 150 million, with a maturity of one year and an interest rate of 6.32% per year. This bridge loan is intended to be converted to a project financing in the local capital markets.credit.
Below is a description of our material outstanding indebtedness as of December 31, 2013.2016. As of December 31, 2013,such date, we were not in compliance with certain of the financial covenants related to our syndicated loan. We subsequently entered into an amendment of the syndicated loan, which modified the effective date of compliance with the covenants. However, as of the date of this annual report, we were in compliancecontinuing default under the syndicated loan and certain of our other debt instruments due to, among other things, the delay in all material respects withfurnishing the company’s 2016 audited consolidated financial covenants corresponding to our outstanding indebtedness.
We expect to finance future infrastructure investments, acquisitionsstatements. See “Item 5.A. Operating and land purchases with a combination of cash from operations, net proceeds from the offering of ADSs in July 2013, new indebtedness and/or financial contributions from partners. Accordingly, we expect to incur additional indebtedness in the future.Financial Review and Prospects—Operating Results—Recent Developments,” and “Item 13. Defaults, Dividends, Arreages and Delinquencies.”
Leasing. As of December 31, 2013,2016, we were party to numerous leasing agreements with several financial institutions which in the aggregate amounted to approximately S/.279.6 million.246.8 (US$100.073.5 million).We entered into such agreements primarily for the purpose of leasing the equipment and other assets necessary to run our operations. Upon maturity of each leasing agreement, we have the option to purchase or return the equipment or assets to the lessor. The amounts owed under these leasing agreements are generally repaid in monthly installments, subject to a minimum guaranteed payment corresponding to the minimum amount for which the equipment or assets could be sold to a third-party.
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Citibank, N.A. Secured Loan. Our subsidiary GMP has a secured loan with Citibank, N.A. under a loan agreement dated September 19, 2008 and amended on August 27, 2012 in an outstanding principal amount of S/.66.4.44.1 million (US$23.713.1 million) as of December 31, 2013. 2016.This loan accrues interest at an annual rate of three month LIBOR plus: (i) 1.75%1.70% if, at the installment payment date, the exchange rate between the nuevo sol and U.S. dollar remains between S/.2.60 to S/.2.75 per US$1.00 or (ii) 1.95%, if otherwise. The loan matures in August 2020. The proceeds of the loan were used by our subsidiary GMP to finance the construction, equipment and operation of the Gas Pariñas plant in Talara. The agreement is secured by certain land, equipment and accounts receivable of GMP. The agreement contains certain customary covenants, including restrictions on the ability of GMP to pay dividends if it is in default under the loan and the obligation by GMP to maintain the following financial covenants during the term of the agreement: (1)(a) Leverage Ratio (as defined therein) shall not be greater than 1.50; (2)(b) DebtService Coverage Ratio (as defined therein) shall not be less than 1.20; (3)(c) Liquidity Ratio (as defined therein) shall not be less than 1.10; and (4)(d) Debt Coverage Ratio (as defined therein) shall not be greater than 2.20.
Norvial Corporate Bonds.In July 2015, Norvial established its first corporate bond program on the Lima Stock Exchange, for a total amount of S/.365 million (US$106.9 million). The first tranche under this program was issued for an amount of S/.80 million, due 2020 with an annual interest rate of 6.75%. The second tranche was issued for an amount of S/.285 million, due 2027 with an annual interest rate of 8.375%, structured in three disbursements. In July 2015 we received the first disbursement for S/.105 million, in January 2016 we received the second disbursement for S/.100 million and in July 2016 we received the third disbursement of S/.80 million. These bonds are secured by: (i) certain cash flows; (ii) a mortgage on the Norvial concession; (iii) a lien over Norvial shares; (iv) the assignment of Norvial’s rights over a performance bond provided by GMP; and (v) any additional guarantees granted in favor of other secured creditors. The proceeds of these bonds were used to pay S/.85 million of debt outstanding under a short-term loan agreement with Banco de Crédito del Perú (BCP) for a total S/.150 million, and the rest was used to finance the construction of the second stage of Ancon – Huacho Pativilca highway and the value added tax linked to the implementation of the project expenses. As of December 31, 2016, Norvial had S/.363 million (US$108.1 million) outstanding under these bonds.
Senior Secured Notes.On February 2015, GyM Ferrovías issued a total of S/.629,000,000 (US$184.3 million) Series A Senior SecuredVAC-Indexed Notes due 2039, with an annual interest rate of 4.75% plus adjustments for inflation. The bonds are secured by (i) a mortgage on the Lima Metro concession, (ii) a lien on GyM Ferrovías shares, (iii) certain collection rights, (iv) certain cash flows and (v) liens on certain accounts.The proceeds from the issuance were used to repay a short term loan provide by Banco de Crédito delPerú-BCP for S/.400 million, funding of the reserve accounts, payment of the issuance expenses, and for the partial repayment of a subordinated loan provided by certain shareholders of GyM Ferrovias to GyM Ferrovías. According to the indenture, in order to make any payment of a subordinated loan or distribute any dividends, our Debt Service Coverage Ratio (as defined therein) should be at least 1.2x. Under the indenture GyM Ferrovías has fund the debt service reserve account on a quarterly basis with the equivalent of the amounts due in the next two succeeding interest payment dates. Moreover, the operation and maintenance reserve account must be funded annually with an amount equal to twenty-five percent (25%) of operation and maintenance costs of the corresponding current annual budget. As of December 31, 2016, GyM Ferrovías had S/.604 million (US$179.5 million) outstanding under these notes.
Financing of the Expansion Project of the Lima Metro Concession. On August 23, 2017, GyM Ferrovias entered into a US$396 million financing structure with Mizuho Bank, Ltd and Sumitomo Mitsui Banking Corporation. The particular structure for the expansion project of the Lima Metro involves the securitization of irrevocable and unconditional payment obligations of the Government of Peru (CPAOs), which have been sold by GyM Ferrovias to a borrower under a long-term loan facility. The expansion project includes the improvement of civil works and the purchase of additional rolling stock, including trains and cars that will be designed, built, operated and maintained by GyM Ferrovías, as concessionaire under the Lima Metro concession. The financing is structured as a long-term loan facility and a working capital facility.
As of the date of this annual report, GyM Ferrovias is in continuing default under the financing of the expansion project due to thenon-delivery of our audited consolidated financial statements for the 2016 fiscal year, in our capacity as guarantor of the obligations of GyM Ferrovias under the agreement. We have initiated the process of obtaining a waiver from lenders.
BCP Loan.In December 2015, our subsidiary GMP S.A. and Oiltanking Peru S.A.C. subscribed in equal parts to a medium term loan credit agreement for up to US$100 million with Banco de Credito del Peru, comprised of (i) a medium term tranche for up to US$70 million (for additional investments) with an annual interest rate of 6.04% and a term of five years, and (ii) a medium term tranche for up to US$30 million (for committed investments) with an annual interest rate of 6.32% and a term of eight years. The tranches of the loan mature in 2024 and 2027, respectively. The proceeds of this loan are to finance Terminales del Peru’s obligations in the operation contracts that it maintains with Petroperu in regards to the Central Terminal (corresponding to the Callao Port), and North Terminals (corresponding to the Etén, Salaverry, Chimbote and Supe Ports).As of December 31, 2016, GMP S.A. had US$8.2 million (S/.27.6 million) outstanding under this loan.
Syndicated Loan. In December 2015 we entered into a medium term loan credit agreement for up to US$200 million (S/.672 million) with Credit Suisse AG, Cayman Islands Branch, and Credit Suisse Securities (USA) LLC. The term of the loan is five years, with quarterly installments starting on the 18th month. The loan accrued interest at a rate of three months Libor plus 3.9% per year. The proceeds were used to finance our equity participation in Gasoducto Sur Peruano (“GSP”), which was the concessionaire of the southern gas pipeline project. As of December 31, 2016, the principal amount outstanding under this loan was US$150 million (S/.504 million) and, as of the date of this annual report, the principal amount outstanding under this loan is US$76.3 million (S/.256.5 million).
As a result of the termination of the GSP gas pipeline concession, in June 2017, we entered into an amendment to the credit agreement. According to the terms of the amendment, our syndicated loan matures in December 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year of the amendment. The syndicated loan continues to accrue interest at LIBOR plus 4.90% per year. In addition, we are prohibited from paying dividends until the loan is repaid in full. Also, we have provided additional security interests, so that the amended syndicated loan will be secured by: (i) a first lien on our shares of GyM and Concar; (ii) a first lien on our shares of Almonte; (iii) a first lien on certain real estate properties in Surquillo; (iv) liens on certain related accounts; (v) a second priority lien on our shares of CAM and CAM Servicios del Perú S.A.; and (vi) a first lien on cash flows from the sale of certain assets.
The amendment to the credit agreement contains certain covenants, including the obligation by us to maintain the following financial ratios during the term of the agreement: (i) the Consolidated EBITDA to Consolidated Interest Expense Ratio (as defined therein) shall not be less than 3.5:1.0 commencing on April 1, 2018 and thereafter; (ii) the Consolidated Leverage Ratio (as defined therein) shall not be greater than (a) 3.5:1.0 at any time during the period commencing on December 31, 2016 and ending on March 31, 2017; (b) 3.5:1.0 at any time during the period commencing on April 1, 2017 and ending on June 30, 2017; (c) 3.0:1.0 at any time during the period commencing on July 1, 2017 and ending on September 30, 2017; and (d) 2.5:1.0 at any time thereafter; and (iii) the Debt Service Coverage Ratio (as defined therein) as of the last day of any fiscal quarter of the borrower, falling on or after the first anniversary of the closing date, shall not be less than 1.5:1.0 commencing on April 1, 2018 and thereafter. Furthermore, the agreement contains a covenant restricting the CAM Chile Leverage Ratio (as defined therein) from exceeding 2.5:1.0 at any time. The agreement also imposes limitations, in an event of default, on ours and our subsidiaries’ ability to distribute dividends, including, among others, that we may only distribute cash dividends to our stockholders out of 40% of our net income available for distribution in accordance with IFRS, as reflected in our audited consolidated financial statements for the fiscal year most recently ended.
As of the date of this annual report, and due to the accounting adjustments in connection to the termination of the GSP concession, we are again under certain continuing defaults under the syndicated loan with respect to the financial ratios and thenon-delivery of the company’s audited consolidated financial statements for the fiscal years 2016 and 2017 on time. We are in the process of requesting waivers from the lenders.
GSP Bridge Loan and New Term Loan.With the termination of the GSP gas pipeline concession, our proportional guarantee under the GSP bridge loan became due. As of December 31, 2016, there was US$129 million (S/.433.4 million) of principal amount outstanding under our corporate guarantee. As of the date of this annual report the principal amount outstanding under the GSP bridge loan has been entirely paid. On June 27, 2017 we entered into a new US$78.7 million (S/.264.8 million) term loan with Natixis, BBVA, SMBC and MUFJ, the proceeds of which were used to prepay GSP bridge loan. The new term loan matures on 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year of the amendment. The agreement with respect to such term loan contains a covenant restricting the Consolidated Leverage Ratio (as defined therein) from exceeding 3.5:1.0 at any time and the CAM Chile Leverage Ratio (as defined therein) from exceeding 2.5:1.0 at any time. The term loan accrues interest at LIBOR plus 4.50% per year, which will increase to 5.00% during the second year and to 5.50% during the third year. In addition, we will be prohibited from paying dividends until the loan is repaid in full. Also, the term loan will be secured by: (i) a first lien on our rights to receive the termination payment derived from the GSP termination (the “VCN”); (ii) a second priority lien on our shares of GyM and Concar; (iii) a second priority lien on our shares of Almonte; (iv) a second priority lien on certain real estate properties in Surquillo; (v) a second priority lien on our shares of CAM; (vi) a second priority lien on our shares of CAM Servicios del Perú S.A.; and (vii) a first lien on cash flows from the sale of certain assets. As of the date of this annual report, there is US$72.5 million outstanding on the GSP bridge loan.
As of the date of this annual report, we wereare under certain continuing defaults under the term loan with respect to the financial ratios and thenon-delivery of the audited consolidated financial statements of the company for the 2016 and 2017 fiscal years on time. We are in compliance with thesethe process of requesting waivers from the lenders.
GSP Performance Guarantee.Upon the termination of the GSP gas pipeline concession, our proportional repayment obligations under the GSP performance guarantee from Chubb Insurance Company became due. As of December 31, 2016, we had US$52.5 million (S/.176.4 million) in obligations outstanding and, as of the date of this annual report, we had US$15.6 million (S/.52.6 million) in obligations outstanding. We recorded this amount as other accounts payable in our financial covenants.
Inter-American Development Bank and International Finance Corporation Loans. Norvial has two loans with the Inter-American Development Bank and with the International Finance Corporation under loan agreements entered into in April 2005, each in an outstanding principal amount of US$7.6 millionstatements as of December 31, 2013. These loans accrue2016. On March 31, 2017, we renegotiated the terms of our repayment obligations. The new terms required repayment by March 31, 2018 and were extended until June 30, 2018, with interest accruing at an annual rate of 6.9%6% per year. The new terms also provide a security interest over our shares in CAM and mature in November 2016. These loans benefit from a trust through which theover cash flows from Norvial’s toll fees are collected.the sale of certain assets.
Financial Stability Framework Agreement
On July 31, 2017, we, and certain of our subsidiaries, GyM, CAM Peru S.A., Vial y Vives—DSD and Concesionaria Vía Expresa Sur S.A., entered into a Financial Stability Framework Agreement (together with certain complementary contracts, the “Framework Agreement”) with the following financial entities: Scotiabank Peru S.A.A., Banco Internacional del Perú S.A.A., BBVA Banco Continenal, Banco de Crédito del Perú, Citibank del Perú S.A. and Citibank N.A. The Framework Agreement aims to: (i) grant GyM a syndicated revolving line of credit for working capital for up to US$1,630,538 and S/.143,934,533, which may be increased by an additional US$14,000,000 subject to certain conditions; (ii) grant GyM a line of credit of up to US$51,566,849 and S/.33,563,807; (iii) grant us, GyM, CAM Peru S.A., Vial y Vives – DSD and Concesionaria Vía Expresa Sur S.A. anon-revolving line of credit to finance reimbursement obligations under performance bonds; (iv) grant a syndicated line of credit in favor of us and GyM for the issuance of performance bonds up to an amount of US$100,000,000 (which may be increased by an additional US$50,000,000, subject to compliance with certain conditions); and (v) to commit to maintain existing standby letters of credit issued at the request of GyM and us, as well as the request of CAM Peru S.A., Vial y Vives – DSD and Concesionaria Vía Expresa Sur S.A. In April of 2018, we repaid US$73.9 million of the facility with the proceeds of these loans were usedthe sale of Stracon.
As of the date of this annual report, we are under continuing default due to thenon-delivery of our audited consolidated financial statements and those of our subsidiary, GyM, for the construction, rehabilitation2016 and maintenance2017 fiscal years. We are in the process of requesting waivers from the Norvial road. The loan agreements contain certain customary covenants, including restrictions on Norvial’s ability to pay dividends and incur additional debt. In January 2014, we repaid this loan in full.lenders.
Derivative Financial Instruments
In February 2012, our subsidiary GyM Ferrovías entered into a forward rate agreement with BBVA S.A. for an initial amount of EUR 98.6 million to hedge the foreign exchange risk pertaining to expenditures incurred in euros to a foreign supplier for the development, maintenance and operation of the Lima Metro. GyM Ferrovías received EUR39.2 million outstanding under the agreement at a fixed exchange rate of S/.3.5952 per euro beginning in March 2013 and up to S/.3.6412 per euro in January 2014.
In August 2012, our subsidiary GMP entered into two interest rate swaps with Citibank, N.A. to hedge its exposure to fluctuations in LIBOR under its unsecured loan with Citibank, N.A. described above. These interest rate swaps establish a fixed annual rate of 5.05%, payable at each interest payment date under the loan.
In September 2012, our subsidiary Viva GyM entered into a forward foreign exchange agreement with Banco de Crédito del Peru to hedge the foreign exchange risk on the amount to be received in U.S. dollars as proceeds from a loan agreement with Banco de Crédito del Peru in connection with the construction of the Torre Real 8 project. Under the agreement, Viva GyM received in nuevos soles the equivalent of US$3.6 million in 12 equal installments payments of US$300,000 determined at a fixed exchange rate of S/.2.5921 per U.S. dollar on the first installment in October 2012 and up to S/.2.6242 per U.S. dollar on the final installment in September 2013. In February 2013, Viva GyM settled a second forward exchange agreement with Banco de Crédito related to the same project pursuant to which it received in nuevos soles the equivalent of US$3.3 million in scheduled installments (between July 2013 and January 2014).
In August 2014, our subsidiary CAM Chile entered into two forward foreign exchange agreements for US$0.9 million and US$0.8 million, respectively. In addition, in February 2015, CAM entered into two forward foreign exchange agreements for US$0.9 million and US$0.5 million respectively.
For additional information about our derivative financial instruments and borrowings, see notes 7.12.9, 18 and 1819 to our audited annual consolidated financial statements included in this annual report.
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Capital Expenditures
The table below provides our total capital expenditures incurred in 2011, 20122014, 2015 and 2013.2016.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2013 | 2014 | 2015 Restated | 2016 | 2016 | |||||||||||||||||||||||||
(in millions of S/.) | (in millions of US$) | (in millions of S/.) | (in millions of US$) | |||||||||||||||||||||||||||||
Engineering and Construction(1)(2) | 183.7 | 417.1 | 204.3 | 73.1 | 485.0 | 124.2 | 115.0 | 34.2 | ||||||||||||||||||||||||
Infrastructure | 172.0 | 301.9 | 365.6 | 130.8 | 226.8 | 247.4 | 141.5 | 42.1 | ||||||||||||||||||||||||
Real Estate | 73.6 | 128.3 | 75.7 | 27.1 | 119.4 | 41.4 | 49.7 | 14.8 | ||||||||||||||||||||||||
Technical Services | 57.5 | 39.8 | 37.5 | 13.4 | 120.9 | 65.9 | 59.5 | 17.7 | ||||||||||||||||||||||||
Corporate | 6.9 | 11.6 | 134.6 | 48.1 | 200.1 | 469.1 | 421.9 | 125.6 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | 493.7 | 898.7 | 817.6 | 292.4 | 1,152.2 | 948.0 | 787.55 | 234.40 |
(1) | In our consolidated financial statements, in accordance with IFRS, we record in “cash flow used in investing activities” with respect to equipment leases only the amounts paid during the period as opposed to the total amount of lease payments, which is included in the table above. |
(2) | Includes S/ |
(3) | Includes |
In our consolidated financial statements, in accordance with IFRS, we record as “cash flow used in investing activities” with respect to equipment leases only the amounts paid during the period as opposed to the total amount of lease payments which is included in the table above. |
Capital expenditures for our E&C segment of approximately S/.183.7.485.0 million (US$68.1162.2 million), S/.417.1.124.2 million (US$163.536.4 million) and S/.204.3.115.0 million (US$73.134.23 million) in 2011, 20122014, 2015 and 2013,2016, respectively, primarily correspond to the purchase of equipment and machinery and, to a lesser extent, investments relating to mining services contracts. In 2012 and 2013,2014, capital investments in thisthe E&C segment also includeincluded S/.141.8.74.7 million (US$55.625 million) and S/.9.1 million (US$3.3 million), respectively, with respect to the acquisitionadditional stake of a majorityStracon GyM, S/.17.9 million (US$6 million) with respect to an additional stake in Vial y VivesCAM Peru and in 2013 S/.103.9.234.3 million (US$37.278.4 million) with respect to the acquisition of DSD ConstruccionesMorelco. In 2015 capital investments in the E&C segment also included S/.22.0 million (US$7.3 million), with respect to the acquisition of 20% of the participation of Red Eagle in the San Ramon Project (Colombia). In 2016 capital investments in the E&C segment also included S/.51.38 million (US$15.1 million) with respect to an additional stake in Vial y Montajes in 2013. Vives- DSD.
Capital expenditures for our Infrastructure segment of approximately S/.172.0.226.8 million (US$63.875.9 million), S/.301.9.247.4 million (US$118.372.4 million), and S/.365.6.141.5 million (US$130.842.1 million) in 2011, 20122014, 2015 and 2013,2016, respectively, correspond to periodic maintenance relating toand the construction of the second stage of our Norvial toll road concession and, in our Energy line of business, oil development drilling activities and, in 2012 and 2013,as well as improvements for our gas processing plant and investments in Metro de Lima. In 2011, 20122014 and 2013,2015 capital expenditures for our Infrastructure segment also included the purchase of trains for Line One of the Lima Metro and the construction of the railway maintenance and repair yard. yard, while in 2016 we only had capital expenditures relating to work maintenance of our trains and infrastructure.
Capital expenditures for our Real Estate segment of approximately S/.73.6.119.4 million (US$27.340.0 million), S/.128.3.41.4 million (US$50.312.4 million) and S/.75.7.49.7 million (US$27.114.8 million) in 2011, 20122014, 2015, and 2013,2016, respectively, primarily correspond to the purchase of land for real estate projects, including the Parques de CaquetaEl Tigre, Panorama and PezetHuancayo projects in 2011,2014, the Villa El Salvador, Barranco, San Isidro office building and Parques de Callao projectsAncon project in 2012,2015, and the Pezet Nuevo Chimbote, Canta Callao and Chiclayo BolognesiPaul Harris projects in 2013. 2016.
Capital expenditures for our Technical Services segment of approximately S/.57.5.120.9 million (US$21.340.4 million), S/.39.8.65.9 million (US$15.619.3 million), and S/.37.5.59.5 million (US$13.417.7 million) in 2011, 20122014, 2015 and 2013,2016, respectively, primarily correspond to maintenance of equipment relating to Concar, CAM and GMD.
In 2011, capital investments in this segment also include S/.29.1 million (US$10.8 million) with respect to the acquisition of a controlling stake in CAM. In 2013,2014, Corporate segment investments include S/. 51.4.75.8 million (US$25.4 million) for anthe acquisition of COGA and S/.88.3 million (US$29.5 million) for additional stake in NorvialGyM and S/. 55.92 for an additional stake in TGP,Viva GyM plus the construction of the new office building for corporate use. In 2015, investments include S/.346.5 million (US$115.9) for the acquisition of a 20% stake of Concesionaria Gasoducto Sur Peruano S.A. and S/.47.4 million (US$13.9 million) for the acquisition of Adexus. In 2016, investments include S/.426.7 million (US$127 million) for the acquisition of our 20% stake in GSP and S/.22.3 million (US$6.7 million) for an additional stake in Adexus.
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Divestitures in 20112014 consisted of approximately S/.33.0.43.0 million (US$12.214.4 million) relating to the sale of our participation in the IIRSA South and North concessions. Divestitures in 2012 consisted of approximately S/.23.5 million (US$9.2 million) relating to the sale of equipment fromby GyM toand Stracon GyM. Divestitures in 20132015 consisted of approximately S/.22.7.10.4 million (US$8.12.9 million) relating to sale of equipment of GyM and Stracon GyM andDivestitures in 2016 consisted of S/.107.6 million (US$32.0 million) relating to the sale of our participation1.64% stake in a parking lot located in San Isidro, Lima.Transportadora de Gas del Perú S.A. (TGP) and S/.107.0 million (US$31.8 million) relating to sale of equipment of GyM.
We have budgeted S/.1,402.2.352.6 million (US$501.5103.7 million) in capital expenditures for 2014.2017. Our current plans for our E&C segment contemplate capital expenditures in 20142017 of approximately S/.252.2.94.2 million (US$90.2 million)27.7) million mainly for the purchase of equipment and machinery. Our current plans for our Infrastructure segment contemplate capital expenditures in 20142017 of approximately S/.476.5.185.1 million (US$170.454.5 million) principally for the construction of the second stage of Norvial, investments in our new concession Via Expresa Sur, as well asthe expansion of the Line 1 of the Lima Metro and for investments in oil development drilling activities and approximately S/.240.4 million (US$86.0 million) for new infrastructure projects.activities. Our current plans for our Real Estate segment contemplate capital expenditures in 20142017 of approximately S/.214.9.7.2 million (US$76.82.1 million) for the purchase of land for real estate development projects. Our current plans for our Technical Services segment contemplate capital expenditures in 20142017 of approximately S/.108.680.4 million (US$38.923.7 million) principally for the purchase of equipment used in our operations. Our current plans for our Corporate segment contemplate capital expendituresdivestitures in 20142017 of approximately S/.350.1.291.6 million (US$125.285.7 million), including S/.338.3 million (US$121.0 million). In addition, we have entered into a financial stability framework agreement providing for potential acquisitionsnew lines of credit. For more information, see “Item 5.A. Operating and S/.11.8 million (US$4.2 million) for corporate purposes. As we determine the capital expenditures currently reflected in our Corporate segment, we will assign these expenditures to the corresponding segment.Financial Review and Prospects—Operating Results—Recent Developments.”
These estimates are subject to change. We routinely evaluate acquisitions, new infrastructure concessions, land purchases and other investment or divestiture opportunities that are aligned with our strategic goals, particularly in Peru, Chile and Colombia. We cannot assure you that we will find opportunities on terms that we consider to be favorable to us, whether we will be able to take advantage of such opportunities should they arise, or the timing of and funds required by such opportunities. In addition, should we undertake any such investments, we expect to finance these opportunities with a combination of cash on hand, net proceeds from our offering of ADSs in July 2013, new borrowings and/or financial contributions from partners, depending on a variety of commercial considerations at such time. See Part“Part I. Introduction—Forward-Looking Statements.”
C. Research and Development, Patents and Licenses
Not applicable.
Our Main Market: Peru
The following sets forth key macroeconomic trends in our markets, Peru, Chile and Colombia. For additional information on trends in our business, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Factors Affecting our Results of Operations” and “Item 4.B. Business Overview—Backlog.”
Overview of the Peruvian Economy
Our results are substantially affected by economic conditions prevailing in Peru. The Peruvian economy has been one of the fastest growing economies globally during the period from 20092013 to 2013.2017. According to the Peruvian Central Bank, Peruvian real GDP grew at an average rate of 5.6%3.5% during that period, one of the highest raterates in South America. The economic expansion during this period was a result of robust domestic demand, increase in investment, price stability, increase in foreign direct investment, and an improvement in public finances, and lower external debt, among other factors.
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In addition, the country’s strong economic growth has led to a 53.0% increase inNominal GDP per capita has increased from US$4,361S/.17,645 in 20092013 to US$6,673S/.22,046 in 2013.2017, a 24.9% increase. Average annual inflation, measured by the change in the CPI index, was 2.5%3.0% in the period from 20092013 to 2013.2017. On the other hand, Peru’s price stability has also been reflected in its currency, the nuevo sol, which appreciatedSol, depreciated from an average of S/.3.01 per US$1.00 in 2009 to an average of S/.2.70 per US$1.00 in 2013 to an appreciationaverage of 10.3%S/.3.26 per US$1.00 in 2017, a depreciation of 21%. Peru’s sovereign debt has been granted investment grade rating by S&P, Fitch and Moody’s. At the end of 2012,2017, Peruvian sovereign debt had one of the highest credit ratings in the South American region, rated BBB+ by S&P (August 2013) and Fitch (October 2013) and Baa2A3 by Moody’s (August 2012)(July 2014).
The following table sets forth the main economic indicators of the Peruvian economy from 20092013 to 2013.2017:
In US$ billion, unless stated otherwise | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
Nominal GDP | 126.9 | 153.8 | 176.5 | 199.4 | 206.5 | |||||||||||||||
Nominal GDP / capita (US$) | 4,361.2 | 5,203.8 | 5,881.4 | 6,544.3 | 6,673.3 | |||||||||||||||
Real growth rates (% based on local currency GDP | 0.9 | % | 8.8 | % | 6.9 | % | 6.3 | % | 5.0 | % | ||||||||||
Private consumption | 2.4 | % | 6.3 | % | 6.2 | % | 5.8 | % | 5.2 | % | ||||||||||
Private investment | (15.1 | %) | 22.1 | % | 11.4 | % | 13.5 | % | 3.9 | % | ||||||||||
Foreign direct investment | (7.1 | %) | 31.5 | % | (2.6 | %) | 48.7 | % | (16.9 | %) | ||||||||||
Public expenditure (consumption and investment) | 18.1 | % | 14.8 | % | (3.5 | %) | 13.3 | % | 9.4 | % | ||||||||||
Total private and public fixed investment(1) | (9.2 | %) | 23.2 | % | 4.8 | % | 14.8 | % | 5.9 | % | ||||||||||
Exports | (3.2 | %) | 1.3 | % | 8.8 | % | 5.9 | % | 1.0 | % | ||||||||||
Imports | (18.6 | %) | 24.0 | % | 9.8 | % | 10.4 | % | 5.1 | % | ||||||||||
Inflation (measured by change in CPI) | 0.2 | % | 2.1 | % | 4.7 | % | 2.6 | % | 2.9 | % | ||||||||||
Average exchange rate (S/./US$) | 3.01 | 2.83 | 2.75 | 2.64 | 2.70 | |||||||||||||||
End of period exchange rate (S/./US$) | 2.89 | 2.81 | 2.70 | 2.55 | 2.80 | |||||||||||||||
Central Bank interest rate (end of period) | 1.25 | % | 3.00 | % | 4.25 | % | 4.25 | % | 4.00 | % | ||||||||||
Population (million)(1) | 29.1 | 29.6 | 30.0 | 30.5 | 30.9 | |||||||||||||||
Unemployment rate(1) | 8.4 | % | 7.9 | % | 7.7 | % | 6.8 | % | 6.0 | % | ||||||||||
Total public debt | 34.3 | 36.4 | 38.5 | 40.7 | 38.3 | |||||||||||||||
Public debt/nominal GDP (%) | 26.0 | % | 23.5 | % | 21.4 | % | 19.7 | % | 19.2 | % | ||||||||||
Net reserves | 33.1 | 44.1 | 48.8 | 64.0 | 65.7 | |||||||||||||||
Net reserves/nominal GDP (%) | 26.1 | % | 28.7 | % | 27.7 | % | 32.1 | % | 31.8 | % | ||||||||||
Fiscal surplus (deficit)/nominal GDP (%) | (1.3 | %) | (0.2 | %) | 2.0 | % | 2.1 | % | 0.8 | % |
2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||
Nominal GDP (US$ billions) | 202.1 | 202.8 | 192.3 | 195.3 | 215.1 | |||||||||||||||
Nominal GDP / capita (US$) | 6,529.6 | 6,455.0 | 6,172.7 | 6,204.5 | 6,756.7 | |||||||||||||||
Real GDP growth rates (% based on local currency GDP) | 5.0 | % | 2.4 | % | 3.3 | % | 4.0 | % | 2.5 | % | ||||||||||
Private consumption growth rate | 5.2 | % | 3.9 | % | 4.0 | % | 3.3 | % | 2.5 | % | ||||||||||
Private investment growth rate | 3.9 | % | (2.3 | %) | (4.3 | %) | (5.9 | %) | 0.1 | % | ||||||||||
Foreign direct investment growth rate | (24.0 | %) | (15.2 | %) | 4.9 | % | (17.0 | %) | (1.4 | %) | ||||||||||
Public expenditure (consumption and investment) growth rate | 9.4 | % | 3.6 | % | 3.6 | % | (0.2 | %) | 1.1 | % | ||||||||||
Total private and public fixed investment growth rate (1) | 5.9 | % | (2.1 | %) | (5.3 | %) | (4.6 | %) | 0.0 | % | ||||||||||
Exports growth rate | 1.0 | % | (0.9 | %) | 4.0 | % | 9.5 | % | 8.5 | % | ||||||||||
Imports growth rate | 5.1 | % | (1.4 | %) | 2.4 | % | (2.2 | %) | 4.0 | % | ||||||||||
Inflation (measured by change in CPI) | 2.9 | % | 3.2 | % | 4.4 | % | 3.2 | % | 1.4 | % | ||||||||||
Average exchange rate (S/./US$) | 2.70 | 2.84 | 3.19 | 3.38 | 3.26 | |||||||||||||||
End of period exchange rate (S/./US$) | 2.80 | 2.99 | 3.41 | 3.36 | 3.25 | |||||||||||||||
Central Bank interest rate (end of period) | 4.00 | % | 3.50 | % | 3.75 | % | 4.25 | % | 3.25 | % | ||||||||||
Population (million)(1) | 30.9 | 31.4 | 31.1 | 31.5 | 31.8 | |||||||||||||||
Unemployment rate(1) | 7.5 | % | 6.0 | % | 6.4 | % | 6.7 | % | 6.7 | % | ||||||||||
Total public debt (US$ billions) | 38.3 | 38.6 | 41.8 | 46.7 | 53.6 | |||||||||||||||
Public debt/nominal GDP (%) | 19.6 | % | 20.0 | % | 23.3 | % | 23.8 | % | 24.8 | % | ||||||||||
Net reserves (US$ billions) | 65.7 | 62.3 | 61.5 | 61.7 | 63.6 | |||||||||||||||
Net reserves/nominal GDP (%) | 32.5 | % | 30.7 | % | 32.0 | % | 31.6 | % | 29.6 | % | ||||||||||
Fiscal surplus (deficit)/nominal GDP (%) | 0.9 | % | (0.3 | %) | (2.1 | %) | (2.6 | %) | (3.1 | %) |
Source: Peruvian Central Bank, SBS, Ministry of Economy and Finance, National Statistical Institute of Peru (INEI), IMF.
(1) |
The following table sets forth real gross domestic product by expenditure for the years indicated.
GDP by Expenditure (% of GDP unless otherwise stated) | 2009 | 2010 | 2011 | 2012 | 2013 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||||||||||||
Government consumption | 10.3 | 9.9 | 9.8 | 10.3 | 10.6 | 11.2 | 12.2 | 12.6 | 12.0 | 11.8 | ||||||||||||||||||||||||||||||
Private consumption | 65.4 | 62.1 | 61.0 | 61.8 | 63.0 | 61.5 | 63.0 | 65.5 | 65.5 | 64.8 | ||||||||||||||||||||||||||||||
Total fixed investment | 22.9 | 25.1 | 24.0 | 26.6 | 27.3 | 27.9 | 26.3 | 24.6 | 22.6 | 21.1 | ||||||||||||||||||||||||||||||
Public sector | 5.2 | 5.9 | 4.5 | 5.2 | 5.8 | 5.8 | 5.6 | 5.0 | 4.8 | 4.6 | ||||||||||||||||||||||||||||||
Private sector | 17.7 | 19.2 | 19.6 | 21.4 | 21.5 | 20.7 | 20.1 | 19.3 | 17.8 | 16.9 | ||||||||||||||||||||||||||||||
Change in inventories (1) | (2.1 | ) | 0.1 | 1.3 | 0.1 | 0.3 | 1.4 | 0.6 | 0.3 | (0.0 | ) | (0.5 | ) | |||||||||||||||||||||||||||
Exports of goods and services | 24.0 | 25.5 | 28.7 | 25.7 | 23.1 | 24.1 | 22.4 | 21.0 | 22.1 | 24.3 | ||||||||||||||||||||||||||||||
Imports of goods and services | 20.4 | 22.8 | 24.8 | 24.4 | 24.3 | |||||||||||||||||||||||||||||||||||
Net exports | 3.6 | 2.7 | 3.9 | 1.3 | (1.2 | ) | ||||||||||||||||||||||||||||||||||
GDP (in billions of US$) | 126.9 | 153.8 | 176.5 | 199.4 | 206.5 |
GDP by Expenditure (% of GDP unless otherwise stated) Imports of goods and services Net exports GDP (in billions of US$) 2013 2014 2015 2016 2017 24.8 24.0 23.7 22.2 22.0 (0.7 ) (1.6 ) (2.7 ) (0.1 ) 2.3 202.1 202.8 192.3 195.3 215.1
Source: Peruvian Central Bank.Bank
(1) | Defined as the difference between the volume at the end of the period and the volume at the beginning of the period; valued at the average price over the period. |
Key Industry Sectors Relating to Our Business in Peru
Construction and Infrastructure
The Peruvian construction industry nominal GDP is estimated at US$1512.4 billion and accounted for 7.3%5.8% of the country’s nominal GDP in 20132017 according to the Peruvian Central Bank. Construction GDP grew at an average of 13.2%4.2% annually in nominal terms during the five years from 20092013 to 2013.2017. The following table illustrates, that from 20092013 to 2013,2017, the average real growth rate in both private investment and construction in Peru was approximately two timesvis-à-vis the average real GDP growth rate, historically moving in the same direction as the change in the growth rate of overall real GDP.rate.
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Growth of Real Private Investment GDP and Real Construction Sector GDP vs. Real GDP
Source: Peruvian Central Bank.
Mining
Peru is a poly-metallic resources producer and exports several metals including silver, copper, zinc, gold and lead, among others. Peru is also a major contributor to global metal reserves. According to the U.S. Geological Survey of 2013,2018, Peru holds 16.7%17.5% of global silver reserves, 10.1%12.2% of global zinc reserves, 10.3% of global copper reserves 9.6% of global zinc reserves and 3.5%4.3% of global gold reserves, as of February 2014.January 2018. According to the Peruvian Central Bank, mining exports reached approximately US$2427.2 billion and represented 56.8%60.5% of total Peruvian exports in 2013.2017.
Upcoming mining projects comprise estimated capital expenditures of approximately US$3618.9 billion from 20142015 to 2018,2017, according to APOYO Consultoría. As of January 2014,December 2017, the Peruvian Ministry of Energy and Mines estimates 5046 mining projects at various stages of development involving an estimated investment of US$59.646.1 billion.
Mining Investment Projects by Level of Development
Number of Projects | US$ billion | Number of Projects | US$ billion | |||||||||||||
Expansion | 8 | 8.8 | 5 | 5.2 | ||||||||||||
With approved Environmental Impact Assessment (“EIA”) | 13 | 20.5 | 14 | 15.7 | ||||||||||||
With EIA under evaluation | 3 | 2.1 | 2 | 0.6 | ||||||||||||
Exploration | 26 | 28.1 | 25 | 24.5 | ||||||||||||
|
| |||||||||||||||
Total | 50 | 59.6 | 46 | 46.1 |
Source: Peruvian Ministry of Energy and Mines.
Power and Utilities
The power and utilities market in Peru has shown sustained growth with maximum electricity demand reaching 5,5756,596 MW and growing at an average annual rate of 5.8%4.5% during the five years from 20092013 to 2013,2017, according to the Economic Operations Committee of Peru’s National Interconnected System. The growth of the power and utilities market has led to the construction of power generation facilities, as well as the expansion of the power transmission and distribution network.
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According to the Peruvian MinistryEconomic Operation Committee of Energy and Mines,the National Interconnected System (“COES SINAC”), Peru had an installed generation capacity of 7,77511,970 MW as of January 2014. TheDecember 2017. As of 2017, the Peruvian market iswas served by 35 major54 generation companies. As of 2013,December 2017, the nation’s power transmission network spanned approximately 23,89928,537 kilometers, according to COES.the COES SINAC. As of September 2013,2017, there were 2213 electric distribution companies across PeruPeru.
Oil and Gas
The oil and gas industryactivity in Peru has been one of the most dynamic sectors in Perudecreased with a sector nominal GDP average annual growth rate of 17.8%(1.6)% during the five years from 20092013 to 2013.2017. Oil and gas activity includes the exploration and production, and transportation and commercialization of hydrocarbon products and derivatives.
According to the Peruvian Ministry of Energy and Mines, during 2013,2017, local production of hydrocarbons was approximately 2316 MMbbl of petroleum, 38Petroleum, 33 MMboe of liquefied natural gas (LNG) and 11881 MMboe of natural gas. These levels have growndecreased an average of 14.8%3.3% annually from 20092013 to 2013.2017. Peruvian gas production increased considerably since 2004, when the Camisea project, the largest gas project in Peruvian history, began operations. The Peruvian Ministry of Energy and Mines reports that as of 20122016 proven reserves of oil and gas amountamounted to 3,9853,906 MMboe. These reserves have increased since 2007,2009, due to increased exploration activities, as evidenced in the chart below. The Peruvian government’s reserves methodology may differ materially from the one mandated by the SEC.
Hydrocarbons Proven Reserves and Production Evolution in Peru (in MMboe)
Source: Peruvian Ministry of Energy and Mines.Mines
Our Other Markets: Chile and Colombia
Chile
Overview of the Chilean Economy
Our activities in Chile span across the E&C and power services sectors. The following table sets forth the main economic indicators of the Chilean economy for the period from 20092013 to 2013.2017.
Values in nominal US$ billion unless otherwise stated | �� | 2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||
Nominal GDP | 173.0 | 216.3 | 248.7 | 268.2 | 277.2 | |||||||||||||||
Nominal GDP / capita (US$) | 10,216.7 | 12,650.9 | 14,421.5 | 15,408.9 | 15,788.5 | |||||||||||||||
Real GDP growth rate (%) | (0.9 | %) | 6.1 | % | 5.9 | % | 5.6 | % | 4.1 | % | ||||||||||
Inflation (%, measured by change in CPI) | (1.4 | %) | 3.0 | % | 4.4 | % | 1.5 | % | 3.0 | % | ||||||||||
Total private and public fixed investment | 37.6 | 45.9 | 56.1 | 63.9 | 65.4 | |||||||||||||||
Average exchange rate (CLP/US$) | 559.7 | 510.4 | 483.4 | 486.7 | 495.0 | |||||||||||||||
End of period exchange rate (CLP/US$) | 506.4 | 468.4 | 521.5 | 478.6 | 523.8 |
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Values in nominal US$ billion unless otherwise stated | 2009 | 2010 | 2011 | 2012 | 2013 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||||||||||||
Nominal GDP | 278.5 | 261.1 | 244.0 | 250.1 | 276.9 | |||||||||||||||||||||||||||||||||||
Nominal GDP / capita (US$) | 15,797.4 | 14,655.5 | 13,548.4 | 13,743.8 | 15,057.6 | |||||||||||||||||||||||||||||||||||
Real GDP growth rate (%) | 4.2 | % | 1.9 | % | 2.2 | % | 1.3 | % | 1.5 | % | ||||||||||||||||||||||||||||||
Inflation (%, measured by change in CPI) | 3.0 | % | 4.6 | % | 4.4 | % | 2.7 | % | 2.3 | % | ||||||||||||||||||||||||||||||
Total private and public fixed investment | 69.1 | 57.1 | 49.6 | 47.6 | 49.1 | |||||||||||||||||||||||||||||||||||
Average exchange rate (CLP/US$) | 495.0 | 570.0 | 654.2 | 676.8 | 649.3 | |||||||||||||||||||||||||||||||||||
End of period exchange rate (CLP/US$) | 523.8 | 607.4 | 707.3 | 667.3 | 615.2 | |||||||||||||||||||||||||||||||||||
Population (million) (1) | 16.9 | 17.1 | 17.2 | 17.4 | 17.6 | 17.6 | 17.8 | 18.0 | 18.2 | 18.4 | ||||||||||||||||||||||||||||||
Unemployment rate | 10.8 | 8.2 | 7.1 | 6.4 | 6.2 | |||||||||||||||||||||||||||||||||||
Unemployment rate (2) | 5.9 | % | 6.4 | % | 6.2 | % | 6.5 | % | 7.0 | % | ||||||||||||||||||||||||||||||
Public Debt / nominal GDP (%) | 20.8 | % | 19.4 | % | 27.4 | % | 26.2 | % | 25.5 | % | 12.0 | % | 14.0 | % | 16.0 | % | 21.3 | % | 24.9 | % | ||||||||||||||||||||
Net reserves / nominal GDP (%) | 14.7 | % | 12.9 | % | 16.9 | % | 15.5 | % | 14.8 | % | 14.8 | % | 15.5 | % | 15.8 | % | 16.2 | % | 14.1 | % | ||||||||||||||||||||
Fiscal surplus (deficit) / nominal GDP (%) | (4.3 | %) | (0.5 | %) | 1.3 | % | 0.6 | % | (0.6 | %) | (0.5 | %) | (1.5 | %) | (2.1 | %) | (2.7 | %) | (2.8 | %) |
Source: Chilean Central Bank, Chilean Government Budget Office, IMF, Global Insight.
Insight
(1) |
(2) | 2017 projected by the IMF |
The Chilean economyreal GDP grew at an average annual rate of 4.2%2.2% during the five years from 20092013 to 20132017 in real terms. Considering only the post-crisis period (the four yearsThe country’s nominal GDP per capita has increased 25.0% from 2010CLP 7,819,646 in 2013 to 2013), the annual growth rate rises to 5.4%, one of the highestCLP 9,777,343 in South America.2017. This expansion was mainly driven by a strong domestic demand in real terms: fixed investment grew on average at 5.4% per year and total consumption grew on average at 5.8%3.2% per year during the five years from 20092013 to 2013.2017. Inflation has remained stable since 2010,2013, averaging 2.1%3.4% between 20092013 and 2013,2017, in line with the Chilean Central Bank’s inflation target of 3% +/- 1%. Chile’s sovereign debt has the highest rating in the region, rated AA-A+ by S&P (December 2012)(July 2017), Aa3 by Moody’s (October 2013)(July 2016) and A+A by Fitch (October 2013)(February 2018).
Colombia
Overview of the Colombian Economy
Our current activities in Colombia involve technical services provided primarily to the power services sector. The following table sets forth the main economic indicators of the Colombian economy for the period from 20092013 to 2013.2017.
Values in nominal US$ billion unless otherwise stated | 2009 | 2010 | 2011 | 2012 | 2013 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||||||||||||
Nominal GDP | 233.9 | 287.0 | 336.4 | 370.2 | 377.6 | 380.0 | 377.9 | 288.4 | 280.4 | 309.2 | ||||||||||||||||||||||||||||||
Nominal GDP / capita (US$) | 5,200.2 | 6,305.0 | 7,304.1 | 7,943.7 | 8,007.3 | 8,065.2 | 7,928.1 | 5,983.0 | 5,751.6 | 6,272.4 | ||||||||||||||||||||||||||||||
Real GDP growth rate (%) | 1.7 | % | 4.0 | % | 6.6 | % | 4.2 | % | 4.0 | % | 4.9 | % | 4.6 | % | 3.1 | % | 2.0 | % | 1.8 | % | ||||||||||||||||||||
Inflation (%, measured by change in CPI) | 2.00 | % | 3.17 | % | 3.73 | % | 2.44 | % | 1.94 | % | 1.9 | % | 3.7 | % | 6.8 | % | 5.8 | % | 4.1 | % | ||||||||||||||||||||
Total private and public fixed investment | 53.1 | 62.7 | 79.3 | 87.4 | 90.5 | 92.2 | 97.6 | 76.2 | 68.9 | 70.7 | ||||||||||||||||||||||||||||||
Average exchange rate (COP/US$) | 2,157.6 | 1,899.0 | 1,848.0 | 1,798.0 | 1,868.9 | 1,868.9 | 2,001.1 | 2,771.5 | 3,051.0 | 2,951.3 | ||||||||||||||||||||||||||||||
End of period exchange rate (COP/US$) | 2,044.2 | 1,914.0 | 1,942.7 | 1,768.2 | 1,926.8 | 1,926.8 | 2,392.5 | 3,149.5 | 3,000.7 | 2,984.0 | ||||||||||||||||||||||||||||||
Population (million) | 45.0 | 45.5 | 46.1 | 46.6 | 47.2 | 47.1 | 47.7 | 48.2 | 48.7 | 49.3 | ||||||||||||||||||||||||||||||
Unemployment rate | 12.0 | % | 11.8 | % | 10.8 | % | 10.4 | % | 10.3 | % | 9.7 | % | 9.1 | % | 8.9 | % | 9.2 | % | 9.3 | % | ||||||||||||||||||||
Public Debt / nominal GDP (%) | 35.0 | % | 34.9 | % | 33.4 | % | 32.1 | % | 35.3 | % | 34.5 | % | 37.7 | % | 41.4 | % | 42.8 | % | 45.3 | % | ||||||||||||||||||||
Net reserves / nominal GDP (%) | 10.8 | % | 9.9 | % | 9.6 | % | 10.1 | % | 11.6 | % | 11.5 | % | 12.5 | % | 16.2 | % | 16.6 | % | 15.4 | % | ||||||||||||||||||||
Fiscal surplus (deficit) / nominal GDP (%) | (3.7 | %) | (3.5 | %) | (2.0 | %) | (1.9 | %) | (2.2 | %) | (2.2 | %) | (2.6 | %) | (3.1 | %) | (3.9 | %) | (3.3 | %) |
Source: Colombian National Department of Administration of Statistics (DANE), Colombian Central Bank, Colombian Treasury Department, IMF, Global Insight
Colombian real GDP grew at an average annual rate of 4.1%3.3% during the five years from 20092013 to 2013.2017. The country’s strong economic growth is evidenced by an increase innominal GDP per capita has increased 22.8% from US$5,200COP 15,073,046 in 20092013 to US$8,007COP 18,511,888 in 2013.2017. Inflation has remained stable overincreased in recent years, averaging 2.7%4.4% per year from 20092013 to 2013, in line with2017, higher than the Colombian Central Bank’s inflation target of 3% +/- 1%. Additionally, Colombia’s price stability has also been reflected in its currency,On the other hand, the Colombian peso which appreciateddepreciated from an average of COP 2,157.61,869 per US$1.00 in 20092013 to an average of COP 1,868.92,951 per US$1.00 in 2013.2017. Colombia’s credit ratings were upgraded in 2013 to investment grade by the three major rating agencies. Its sovereign debt currently holds BBB rating from Fitch (December 2013) and(October 2017)BBB- from S&P (April 2013)(December 2017), and Baa3Baa2 from Moody’s (July 2013)2014). Colombia is also recognized for its investor-friendly legal regime.
E.Off-Balance Sheet Arrangements
As of December 31, 2013,2016, we had did not haveoff-balance sheet arrangements relatingthat have or are reasonably likely to have a current or future effect on the company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
For information about performance guarantees and similar instruments that we obtained in the ordinary course of business, see note 31 to our acquisition and saleaudited annual consolidated financial statements.
F. Tabular Disclosure of interests in TGP, a Peruvian entity that operates gas transportation systems. As of December 31, 2012, our shares in TGP represented 0.6% of TGP’s capital. In December 2013, we acquired from one of the TGP’s shareholders, Pluspetrol, an additional 1.0% interest in TGP forContractual Obligations
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US$20 million. As of December 31, 2013, the fair value of our interest in TGP equaled S/.88.3 million. The change in fair value from 2012 to 2013 of S/.19.1 million, net of the income tax of S/.8.2 million, is recorded within other comprehensive income.
Together with the acquisition of the 1.0% interest, we acquired from Pluspetrol on behalf of the CPPIB an additional indirect interest of 11.3% in TGP. This investment for US$217 million was funded by CPPIB, and the risk and rewards of the investment were assumed by CPPIB. Given the features of the transaction, we have treated this acquisition and sale as an off-balance transaction because, in effect, we acted as an agent for CPPIB. Therefore, we have not recognized neither this investment in TGP nor any obligation to CPPIB. This transaction is part of an alliance entered into with CPPIB, whereby both parties commit themselves to initiate and develop projects in the oil and gas industry. On December 27, 2013 we announced our intention to transfer the previously acquired interest of 11.34% in TGP to two companies, CPPIB (10.43%) and to Corporación Financiera de Inversiones – CFI (0.91%), if none of the existing TGP shareholders exercised their right of first refusal. The transfer of interest to these entities took place in February 2014.
The following table sets forth our contractual obligations with payment terms as of December 31, 2013.2016.
Payments Due By Period | ||||||||||||||||||||||||||||||||||||||||
(in millions of S/.) | Payments Due By Period (in millions of S/.) | |||||||||||||||||||||||||||||||||||||||
Less than 1 year | 1-3 years | 3-5 years | More than 5 Years | Total | Less than 1 year | 1-2 years | 3-5 years | More than 5 Years | Total | |||||||||||||||||||||||||||||||
Indebtedness(1) | 381.0 | 71.7 | 61.5 | — | 514.2 | 1,223.7 | 411.2 | 672.0 | 801.1 | 3,108.0 | ||||||||||||||||||||||||||||||
Capitalized Lease Obligations(1) | 105.1 | 74.0 | 81.5 | 21.0 | 281.6 | 117.3 | 80.9 | 25.1 | 16.9 | 240.2 | ||||||||||||||||||||||||||||||
Interest(2) | 0.9 | 55.0 | 9.6 | 1.9 | 67.5 | 126.2 | 174.7 | 307.0 | 536.1 | 1,144.0 | ||||||||||||||||||||||||||||||
Purchase Obligations(3) | 4.2 | 4.1 | 1.6 | — | 9.9 | 176.4 | — | — | — | 176.4 | ||||||||||||||||||||||||||||||
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Total(4) | 491.2 | 204.9 | 154.1 | 22.9 | 873.1 | 1,643.7 | 666.8 | 1,004.1 | 1,354.0 | 4,668.6 |
(1) | Includes principal only of our indebtedness and capitalized lease obligations. |
(2) | Includes the effect of our interest swap agreements described in “—Derivative Financial Instruments.” |
(3) | Includes the |
(4) | Excludes building leases, which are not material. |
See “Part I. Introduction—Forward-Looking Statements.”
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. Directors and Senior Management
General
Our business and affairs are managed by our board of directors in accordance with ourby-laws, shareholder meeting rules of procedure, board of directors rules of procedure, internal rules of conduct and Peruvian Corporate Law No. 26887 (“Peruvian Corporate Law”). Our by-lawsbylaws provide for a board of directors of between five and nine members. Our shareholders may appoint an alternate director for each director to act on his or her behalf when absent from meetings or unable to exercise his or her duties. Alternate directors have the same responsibilities, duties and powers of directors to the extent they are called to replace them.
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Directors are elected at a shareholders’ meeting and hold office for three years. Directors may be elected to multiple terms. Our current board of directors is composed of nine directors and no alternates. If a director resigns or otherwise becomes unable to continue with the duties, a majority of our directors may appoint one of the alternate directors, or in the absence of alternate directors, any other person, to serve as director for the remaining term of the board. In the first board meeting held after the annual shareholders’ meeting where members of the board are elected, the board of directors must elect among its members a chairman and a vice chairman if the shareholders’ meeting did not elect them.
The board of directors typically meets in regularly scheduled quarterly meetings and when called by any director or our Chief Executive Officer. Resolutions must be adopted by a majority of the directors present at the meeting and the chairman is entitled to cast the deciding vote in the event of a tie.
Duties and Liabilities of Directors
Pursuant to Article 177 of Peruvian Corporate Law, directors are jointly and severally liable to a corporation, shareholders and third parties for any damages caused by abuse of power, fraud, willful misconduct or gross negligence. In addition, pursuant to Article 3 of Law No. 29720, as amended, directors of companies with common shares listed on the Lima Stock Exchange are liable to the company and its shareholders for damages caused by resolutions which are favorable to their individual interest (or the interest of a related party) to the detriment of the company’s interest if: (i) the listed company is a party to the transaction; (ii) the controlling
shareholder of the listed company controls the legal entity acting as counterparty; (iii) the transaction is not carried out on an arm’s length basis; and (iv) at least 10% of the listed company’s assets are involved in the transaction. A director cannot be found liable if he/she did not participate in the respective meeting or if the director’s express disagreement is noted in the corresponding record.
Article 180 of the Peruvian Corporate Law requires a director with a conflicting interest on a specific matter to disclose such interest and abstain from the deliberation and decision-making process with respect to such matter. A director who violates this requirement is liable for any damages caused to us and may be removed by a majority of the board of directors upon request of any member of the board or by a majority vote of the shareholders.
Pursuant to Article 181 of Peruvian Corporate Law, shareholders are entitled to protect the interest of a company through derivative law suits against directors in order to remedy or prevent a wrong to the corporation. In addition, pursuant to Article 4 of Law No. 29720, with respect to companies listed on the Lima Stock Exchange, a shareholder holding shares which represent at least 10% of the paid capital may bring said action against the directors.
Board of Directors
The following sets forth our directors and their respective positions as of the date of this annual report. All directors were elected at our annual shareholders’ meeting held on March 28, 2014,31, 2017, and their term expires in March 2017,2020, on the third anniversary from the date of election.
Name | Position | Year of Birth | Year of First Appointment | |||
José Graña | Chairman of the Board | 1945 | 1996 | |||
Carlos Montero | Vice Chairman of the Board | 1942 | 1996 | |||
Federico Cúneo | Director (Independent) | 1952 | 2014 | |||
José Chlimper | Director (Independent) | 1955 | 2006 | |||
Pedro Errazuriz | Director (Independent) | 1961 | 2014 | |||
Hugo Santa María | Director (Independent) | 1963 | 2011 | |||
Mark Hoffmann | Director (Independent) | 1969 | 2014 | |||
Mario Alvarado | Director, Chief Executive Officer | 1957 | 2003 | |||
Hernando Graña | Director | 1951 | 1996 |
Name | Position | Year of Birth | Year of First Appointment | |||||||
Augusto Baertl Rafael Venegas | Chairman of the Board (Independent)* Vice Chairman of the Board (Independent)** | | 1945 1950 |
| | 2017 2017 |
| |||
Carlos Montero | Director | 1942 | 1996 | |||||||
Pedro Pablo Errazuriz | Director (Independent)** | 1961 | 2014 | |||||||
Roberto Abusada | Director (Independent)** | 1946 | 2017 | |||||||
Alfonso de Orbegoso | Director (Independent)** | 1962 | 2017 | |||||||
Manuel del Río | Director (Independent)** | 1952 | 2017 | |||||||
Alfonso García Miró | Director | 1964 | 2017 | |||||||
José Antionio Rosas | Director (Independent)** | 1970 | 2017 |
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* | Independent member under Peruvian independence standards. |
** | Independent member under Peruvian and NYSE independence standards. |
The following sets forth selected biographical information for each of the members of our board of directors. The business address of each of our current directors is Av. Paseo de la República 4667, Surquillo, Lima 34, Perú.
José GrañaAugusto Baertl Montori. Mr. GrañBaertl is a joinedmine engineer from the group in 1968 and has been a director and Chairman of our board of directors since August 1996. He is an architect and graduated from Universidad Nacional de Ingeniería.a with postgraduate programs at Harvard Business School and at Northwestern University. He has assumed important senior management positions in Peruvian and international mining and oil companies. For graduate studies,30 years, Mr. Baertl held various positions in the mining company Milpo, ranging from mine superintendent, assistant manager and COO, to CEO. From 1997 to 2003, he attended ESANserved as president and CEO of Compañia Minera Antamina. Since 1997 he has been CEO of Agrícola Chapi S.A., and since 2003, he has been the Universidadexecutive president of Gestora de Piura Senior Management Program. In addition, Negocios e Inversiones.
Mr. Graña serves as ChairmanBaertl is the former chairman of the board of directors of our subsidiary Viva GyMthe National Society of Mining, Oil and Energy at the Institute of Mining Engineers of Peru, as a directorwell as of our subsidiaries GyMthe Latin American Business Council (CEAL) and GMD.of the Chamber of Commerce Canada- Peru. He has also been chairman of the board of Atlas Copco Peru, Downing Teal-Peru, and Petroperu. In addition, Mr.he has been member of the board of directors of different companies such as Milpo, Atacocha, Huarón, Chungar, Castrovirreyna Mining Corporation, Interbank, BISA, Graña serves as a directory Montero S.A.A., Norsemont and of Empresa Editora El Comercio S.A., Prensa Popular S.A., Servicios Especiales de Edición S.A., Mexichem Amanco Holdingthe Prospectors and Banco de Crédito de PerúDevelopers Association of Canada (PDAC). He has previously servedis currently chairman of the board of Agrícola Chapi, as well as a member of the board of directors of our subsidiaries Concar, GMP, as well as GMI Refinería La Pampilla S.A.A., Edegel S.A.A.Alturas Minerals, Chinalco International, FIMA, Stevia One and Telefónica S.A.A.Ligabue Catering Perú S.A.C. He served as Chairman and First Executive of Graña y Montero S.A.A. until March 2011, when he decided to retire from his executive responsibilities and the position of President was eliminated.
Carlos Montero. Mr. Montero has been a director since August 1996 and is currently the Vice Chairman of our board of directors. He graduated from Universidad Nacional de Ingeniería as a civil engineer. For graduate studies, he attended the Universidad de Piura Senior Management Program. Mr. Montero is also the Chairman of the board of directors of our subsidiary Concar and a director of our subsidiaries Survial and GyM. He has previously served as Vice Executive Chairman of our subsidiary GyM until 2007.
Federico Cúneo. Mr. Cúneo is a partner and director of AMROP Peru in Peru, Panama and Costa Rica since 2005 and previously served as Business Director of Ernst & Young from 2003 to 2005, and chief financial officer of Bank Boston from 1996 to 2002. Mr. Cúneo holds a degree in accounting from Eastern Michigan University Ypsilanti and a Finance PEE from Universidad ESAN with studies at the Top Management Program of Universidad de Piura and Corporate Governance at Harvard Business University and at Universidad del Pacífico. He is a member of the board of directors, since 2012 of Amrop Global, since 2011 of Grupo Osaka and Vice President of AmCham, since 2010 at Reforestadora Tununga and Club Sporting Cristal, since 2005 at four funds of AC Capitales, and since 2004 at Peru 2021. Mr. Cúneo was a member of the boards of Enersur, IPAE, Ethos Brasil, Forum Empresa, Forum Empresa, Mesa de Concertación de Lucha Contra la Pobreza, Programa Juntos and of La Pampilla Refinery.
José Chlimper. Mr. Chlimper has been a director since March 2006. He received a degree in Economics and Business Administration from North Carolina State University. In addition, Mr. Chlimper is the Chairman of the board of directors and CEO of Agrokasa S.A. and a member of the board of directors of Corporación Drokasa S.A., Maestro Home Center Perú S.A., Aeropuertos del Perú S.A., Comex Perú, Instituto de Formación Bancaria (IFB) and our subsidiary GyM. He is Chairman of the board of directors of Compec. He is a member of the Agrarian Consultative Council for the master’s degree in Agrobusiness at Universidad del Pacífico. He has previously served as councilman for the municipality of Lima, President of the Fondo de Las Américas, Peru’s Minister of Agriculture andan active member of the board of directors of the Peruvian Central Bank.National Society of Mining, Petroleum and Energy and COMEX. He has also participated in the board of directors of variousnon-profit institutions.
Rafael Venegas Vidaurre. Mr. Venegas is an industrial and systems engineer from Universidad Nacional de Ingeniería and holds post-graduate specializations in administrative and finance processes at A.Andersen School in Chicago, and has completed the Management and CEO programs at the Graduate School Kellogg, as well as the strategic planning, human management and marketing program at Harvard University. He has been CEO of Banco Internacional de Colombia, Citibank Peru, BankBoston Peru, Banco Sudamericano, Hermes/Brinks and, from 2010 to 2016, of Rimac Seguros y Reaseguros.
In addition, Mr. Venegas has served as director of several institutions and companies such as Diners Peru, Profuturo AFP, Banco Financiero, Scotiabank Perú, Compass Group Peru and as chairman of the board of directors in Citileasing, Citicorp S.A.B., Clínica Internacional and Rímac EPS.
Carlos Montero Graña. Mr. Montero is a civil engineer from Universidad Nacional de Ingeniería, and completed postgraduate studies in the senior management program at the University of Piura. He has been director of Graña y Montero S.A.A. since August 1996 to date. Mr. Montero is also chairman of the board of our subsidiary Concar S.A. and director of our subsidiary GMP S.A. He previously served as managing director of our subsidiary GyM until 2007, and was director of IPAE, GMD, GMI and UNICON.
Pedro Errazuriz.Pablo Errázuriz Domínguez.Mr. Errazuriz holdsErrázuriz is a civil engineering degreeengineer from Universidad Católica de Chile, with a Master’smaster’s degree in engineering sciences from the same university and a MScmaster’s degree in Administrative Sciences/Operations Research/Financeoperational research (Finance) from the London School of Economics. Mr. Errazuriz was theHe is currently a partner of Veta Tres and director of companies. Until March 2014, he served as Minister of TransportationTransport and Telecommunications forin the Chilean administration of President Sebastianpresident Sebastián Piñera, in Chile, a position he has held since 2011 and finished on March 11, 2014. Mr. Errazurizassumed in 2011. He has been a director of various firms on behalf of Holdingseveral companies representing the Ontario Teachers’ Pension Plan a fundHolding and CEO of whichits investments’ subsidiary in Chile, AndesCan, between 2009 and 2011. At the same time, he was chief executive officer from 2009 to 2011. During such period, he also served as chairman of the board of Biodiversa, of Esval, of Aguas del Valle and of Grupo SAESA.SAESA Group. He was also chief executive officerCEO and chairmanpresident of the board of the water and sewagehealth services company ESSBIO. He was chief executive officeralso CEO of LanExpress fromLan Express between 2000 toand 2006 and vice presidentVice President of corporate planning of LanChile fromfor Lan Chile between 1999 toand 2000.
Hugo Santa María. Mr. Santa MaríaErrázurriz has been a director since March 2011.member of the Graña y Montero board from 2014 to date.
Roberto Abusada Salah.Mr. Abusada studied Economics at Universidad Católica del Perú and at Cornell and Harvard Universities in the USA. He is an Economistholds a Bachelor’s degree in economics from Universidad Católica as well as a master’s and PhD in economics from Cornell University. He has been senior advisor to the Minister of Economy during the years of the Peruvian economic reform (1993 and 1997). In 1994 heco-founded the Peruvian Institute of Economics (IPE), which he presides over. Dr. Abusada has taught economics at Universidad Católica del Perú, Universidad del Pacífico, UPC, ESAN and has a doctorateBoston University. He was director of the program of graduates in Economics from Washington Universityeconomics of the Universidad Católica and in St. Louis, Missouri. He is also the Chairman1980s he held the positions of vice minister of commerce, vice minister of economy and member of the board of directors of MiBanco and athe Central Reserve Bank. He has been director of APOYO Comunicacióthe Corporación Corporativa,Andina de Fomento, as well as of Graña partnery Montero S.A.A. and chief economist at APOYO Consultoría. Mr. Santa María previously served as director of Fondo Consolidado de Reserva (FCR) and Compañía Minera Atacocha.
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Mark Hoffmann. Mr Hoffmann was chief executive officer of Duke Energy from 2008 to 2013, chief executive officer of Electroandes from 2003 to 2007, among other positions. He holds a degree in industrial engineering from the Georgia Institute of Technology, and an MBA in Finance from Cornell University.TECSUP. He has been a member of the Global Strategic Advisory Group (GSAG) of the Konrad Adenauer Foundation. He has been a consultant to the United Nations (UNIDO, Vienna) World Bank, Inter-American Development Bank and various governments. He is currently an Ad Honorem advisor of the Peruvian government for matters of the Pacific Alliance and representative of the presidency of the council of ministers to the board of directors, since 2012 at Financiera Universal, since 2010 at Radio Filarmoníathe fiscal stabilization fund and since 2007 at Colegio Markham. Mr. Hoffmann was a memberchairman of the boardsboard of Luz del Sur, ElectroandesGMD S.A., director in GMP S.A. and AmchamUNACEM S.A.A.
Dr. Abusada has written several books and vice president of Caminando Juntos,academic articles in various economic areas and of Sociedad Nacionalis currently writing a fortnightly opinion column at El Comercio newspaper in Lima, Peru.
Alfonso de Minería, Petróleo y Energía (the National Society of Mining, Petroleum and Energy).
Mario AlvaradoOrbegoso Baraybar. Mr. Alvarado joined the group in 1980de Orbegoso is a lawyer from Pontificia Universidad Católica del Perú. He holds a master’s degree from Duke University School of Law and has been Chief Executive Officercompleted specialization courses at the London School of Graña y Montero since 1996Economics, Georgetown University and a director since April 2003. HeThe McDonough School of Business. During 1991 and 1998 was partner of the Ludowieg, Andrade & Associates law firm and during 1998 to 2013 he served as legal vice president and regulatory affairs at Nextel del Perú S.A. During 2014 and 2015 he served as vice president legal, regulatory and interconnection at Nextel Telecomunicações Ltda, Brazil.
Manuel del Río Jiménez. Mr. Del Río is a Civil Engineer withmechanical engineer from Pontificia Universidad Católica del Perú and holds a master’s degree in Administration Engineeringindustrial management from George Washington Universitythe Krannert Graduate School of Management—Purdue University—Indiana, USA. Since October 2016, Mr. Del Río has been serving as manager of administration and graduate studiesfinance at MZM Mining. From July 2013 to September 2016, he was partner in tax & legal at KPMG in Peru and responsible for transactions, transfer pricing, corporate finance and business development.
During 2010 and 2013, he was the lead partner in the CEO Management programpractice of advisory at Kellogg School of Management, Northwestern University. In addition,KPMG in Peru. Previously, and since joining KPMG in 2004 until 2010, he is a memberwas the managing partner of the boardtransfer pricing division of directors of our subsidiaries GyM, Vial y Vives, Viva GyM, CAM Chile, Survial, GyM FerrovíKPMG Tax & Legal in Peru. He has more than nine years as Almonte, as well as Larrain Vial Safi. He is also a memberleader of the Consultive Councilfinancial control area and CFO of the Tecnológico de Monterrey (Peru Site)Citibank Perú. Mr. Alvarado has previously servedHe was vice president of Profuturo AFP as well as member of the boardexecutive committee and director for ten years. In addition to this, he has been in charge of directorsthe professional and medical equipment business unit at Philips for eight years. Moreover, for ten years he has held various positions in the industrial and internal consulting sectors of Amerika Financiera S.A.Philips Peruana. He has taught several courses and lectures at the ESAN School of Business for Graduates and at the Pontificia Universidad Católica del Perú, as well as in private companies.
Hernando GrañAlfonso García Miró Peschiera. Mr. GrañAlfonso Garcia Miro holds a joineddegree in economics and an MBA from the groupUniversidad de Piura, Peru. He is chairman and CEO of IPN Investments, a real assets investment & holding company based in 1977Peru. He also leads IPN Properties, a Peruvian real estate development firm, and Swissport GBH Honduras, an airport handling & cargo services company. Mr. Garcia Miro is Past President of CONFIEP, the National Confederation of Private Business Associations; board member and former president of COMEXPERU, the Peruvian Foreign Trade Association; board member of the Chilean-Peruvian business council, a private initiative tasked to foster the economic ties between these two countries.
He is also board member of Instituto Proeducación, an educational NGO; board member of IPE, the Peruvian Institute of Economics, a private think tank supporting free economy principles and practices; and board member of MALI, the Lima Art Museum. In the past, Mr. Garcia Miro sponsored, as founder, chairman and CEO of several infrastructure companies, such as GBH Investments, Swissport GBH Perú and Aeropuertos del Perú.
José Antonio Rosas Dulanto. Mr. Rosas holds a bachelor’s degree in business administration and accounting from Universidad del Pacífico. He also holds an MBA in finance from the Wharton School de University of Pennsylvania and has completed the high potential leadership program and the advanced management program at Harvard Business School. He has been a director since August 1996. He is an Industrial Engineer with a master’s degree in Mining Engineering from UniversityCFO of Minnesota.Supermercados Peruanos S.A. and of Intercorp Perú Ltd. In addition, he is the Chairman of the board of directors of our subsidiary GyM, as well as a director of our subsidiaries GMI, Stracon GyM, Norvial, Survial, CAM Chile, Vial y Vives and La Chira. Since 1996, Mr. Graña has served as Chief Commercial Officervice president of GyM.finance at Interbank and as CEO of Universidad Tecnológica del Perú. He is currently director of the MLW Institute for the Development of DreamFutures and managing partner at Nexus Group.
Executive Officers
Our executive officers oversee our business and are responsible for the execution of the decisions of the board of directors. Our executive officers are appointed for an indefinite period of time and their term of office may be terminated by our board of directors at its discretion. The following table presents information concerning the current executive officers of the company and their respective positions:
Name | Position | Year of Birth | Year of Appointment | Year of First Employment at the Company | ||||
Mario Alvarado | Chief Executive Officer | 1957 | 1996 | 1980 | ||||
Mónica Miloslavich | Chief Financial Officer | 1966 | 2009 | 1993 | ||||
Antonio Rodriguez | Corporate Investment Officer | 1963 | 2014 | 1999 | ||||
Claudia Drago | Chief Legal Officer | 1970 | 2007 | 1997 | ||||
Juan Arrieta | Corporate Social Responsibility Manager | 1954 | 2011 | 1999 | ||||
José Ascarza | Chief Human Resources Officer | 1975 | 2012 | 2004 | ||||
Dennis Gray | Corporate Finance and Investor Relations Officer | 1975 | 2011 | 2011 | ||||
Jorge Izquierdo | Operational Excellence Manager | 1973 | 2014 | 1999 | ||||
Gonzalo Ferraro | President of the Infrastructure Area | 1956 | 2013 | 1996 | ||||
Hernando Graña | Executive President of GyM | 1951 | 2005 | 1977 | ||||
Francisco Dulanto | Executive President of GMP | 1949 | 2011 | 1974 | ||||
Juan Lambarri | Corporate Engineering and Construction Officer | 1958 | 2014 | 1982 | ||||
Luis Díaz | Corporate Infrastructure Officer | 1970 | 2013 | 1993 | ||||
Jaime Dasso | Corporate Technical Services Officer | 1966 | 2014 | 1991 |
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Walter Silva Santisteban | Executive President of GMI | 1954 | 2014 | 1981 | ||||
Jaime Targarona | Chief Executive Officer of CONCAR | 1968 | 2005 | 1996 | ||||
Rolando Ponce | Chief Executive Officer of Viva GyM | 1963 | 2008 | 1993 | ||||
Corporate Real Estate Officer | 2014 | |||||||
Renato Rojas | Chief Executive Officer of GyM | 1972 | 2014 | 1995 | ||||
Hugo González | Chief Executive Officer of GMD | 1975 | 2014 | 1997 | ||||
Maritza Zavala | Corporative Technology Manager | 1968 | 2013 | 1997 | ||||
Reynaldo Llosa | Chief Executive Officer of GMP | 1960 | 2014 | 2014 | ||||
Eduardo Villa Corta | Chief Executive Officer of GMI | 1964 | 2014 | 1995 | ||||
Klaus Winkler | Executive Vice President of CAM; | 1968 | 2011 | 2011* | ||||
Country Manager—Chile | 2013 | |||||||
César Neyra | Manager of Internal Auditing and Management Processes | 1958 | 2003 | 2003 |
Name | Position | Year of Birth | Year of Appointment | Year of First Employment at the Company | ||||||||||
Luis Francisco Díaz Olivero | Chief Executive Officer | 1970 | 2017 | 1993 | ||||||||||
Mónica Miloslavich | Chief Financial Officer | 1966 | 2009 | 1993 | ||||||||||
Antonio Rodríguez | Chief Investment Officer | 1963 | 2017 | 1999 | ||||||||||
Daniel Urbina Pérez | Chief Legal Officer | 1969 | 2018 | 2018 | ||||||||||
Jorge Luis Izquierdo | Chief Human Resources Officer | 1973 | 2015 | 1999 | ||||||||||
Antonio Cueto | Chief Operating Officer | 1966 | 2017 | 1996 | ||||||||||
Rolando Ponce | Chief Executive Officer of Viva GyM | 1963 | 2008 | 1993 | ||||||||||
Renato Rojas | Chief Executive Officer of GyM | 1972 | 2014 | 1995 | ||||||||||
Eduardo Villa Corta | Chief Executive Officer of GMI | 1964 | 2014 | 1995 | ||||||||||
Reynaldo Llosa | Chief Executive Officer of GMP | 1960 | 2014 | 2014 | ||||||||||
Oscar Pando | Chief Executive Officer of CONCAR | 1973 | 2016 | 2016 | ||||||||||
Manuel Wu | Chief Executive Officer of GyM Ferrovías | 1977 | 2011 | 2001 | ||||||||||
Stephen Dixon | Chief Executive Officer of Stracon GyM | 1970 | 2015 | 2011 | ||||||||||
Arturo Serna | Chief Executive Officer of Morelco | 1957 | 2014 | 2014 | ||||||||||
Pablo Ruiz | Chief Executive Officer of Vial yVives-DSD | 1965 | 2017 | 2017 | ||||||||||
Luis Fukunaga | Roads Concessions Officer | 1970 | 2012 | 2002 | ||||||||||
Sergio Morales | Chief Executive Officer of Adexus | 1958 | 2017 | 2016 | ||||||||||
Carlos Gómez Pinto | Chief Audit Executive | 1961 | 2018 | 2018 | ||||||||||
Javier Vaca Terron | Regional Manager of Engineering and Construction | 1970 | 2018 | 2018 | ||||||||||
Fernando Dyer | Chief Risk and Compliance Officer | 1962 | 2017 | 2017 | ||||||||||
Manuel Fernández Pollan | Executive Director, CAM and Adexus | 1958 | 2017 | 2016 | ||||||||||
Julia Sobrevilla | Corporate Affairs Officer | 1969 | 2018 | 2018 |
* | Appointed by CAM in 2007. |
The following sets forth selected biographical information for each of our executive officers:
Mario Alvarado Pflucker. See “—BoardLuis Francisco Díaz Olivero. Mr. Díaz joined the group in 1993, and has been our chief executive officer since March 2, 2017 and was our deputy chief executive officer from February to March 2, 2017. Before that, he served as chief operating officer since 2015, as infrastructure officer between April 2013 and December 2014, and as the chief executive officer of Directors.”our subsidiary GMP between 2011 and April 2013. He holds a degree in industrial engineering, and an MBA from University of Pittsburgh. He also served as the deputy chief executive officer of GMP from 2009 to 2011; chief financial officer of Graña y Montero from 2004 to 2009; and chief financial officer of our subsidiary GyM from 2001 to 2004. He is a member of the boards of directors of GyM, GMP, Viva GyM, Adexus and Stracon GyM.
Mónica Miloslavich. Ms.Miloslavich. Mrs. Miloslavich joined the group in 1993 and she has beenserved as our Chief Financial Officerchief financial officer since 2009. She is an Economist graduatedholds a degree in economics from Universidad de Lima and received a postgraduate diploma from Tecnológico de Monterrey.Lima. She previously servedworked as Chief Financial Officerchief financial officer of Graña y Montero Edificaciones S.A.C. from 1998 to 2004, and Chief Financial Officeras chief financial officer of our subsidiary GyM from 2004 to 2009. Additionally, Ms. Miloslavich is a member of the board of directors of our subsidiary GyM Ferrovías.
Antonio Rodriguez.Rodriguez. Mr. Rodriguez joined the group in 1999 and he has been our Corporate Investment Officer since February 2014. He previously served as Chief Investment Officer from 2010 to 2014. He is an Accountant graduated from Universidad de Lima, with a master’s degree in Business Administration from ESAN and a master’s degree in Business Administration from The Birmingham Business School in the United Kingdom. He previously served as Chief Executive Officer of Larcomar from 1999 to 2010. Currently, he is a director of our subsidiaries Concar, CAM Chile, Survial and GMD.
Claudia Drago. Ms. Drago joined the group in 1997 and she has been our Chief Legal Officer since 2007. She received a Bachelor of Laws from Universidad de Lima and pursued postgraduate studies in Finance and Corporate Law at ESAN, received a postgraduate diploma from Tecnológico de Monterrey and completed the Management Program for Lawyers at Yale School of Management. She has previously served as Legal Counsel of Graña y Montero from 2000 to 2007 and of our subsidiary GMD from 1997 to 2000. Ms. Drago is Graña y Montero’s representative to the Lima Stock Exchange and the Secretary of the board of directors.
Juan Arrieta. Mr. ArrietaRodríguez joined the group in 1999, and has been our Corporate Social Responsibility Managerchief commercial officer since 2011.2017. Previously, he was our investment officer since 2017. Before that, he served as chief commercial officer since January 2015. He receivedpreviously served as chief investment officer, from 2010 to 2014. He holds a Bachelor’s degree in Sociologyaccounting from Pontificia Universidad Católica del Perú,de Lima, a postgraduate diplomamaster’s in Business Administrationbusiness administration from ESAN, and a postgraduate diplomamaster’s in business administration from Tecnológico de Monterrey.Birmingham Business School in the UK. He previously served as our Human Resources and Social Responsibility Manager from 2007 to 2011 and as Human Resources Managerwas the chief executive officer of our subsidiary GyMLarcomar from 1999 to 2007.2010, and is currently a director of our subsidiaries CAM and GMD.
José Ascarza.
Daniel Urbina Pérez. Mr. AscarzaUrbina joined the group in 2004 and has been our2018 as Chief Human Resources Officer since 2012. He is an Industrial Engineer graduated from Universidad de Lima and received a postgraduate diploma from Tecnológico de Monterrey. He previouslyLegal Officer. Before that, he served as Human Resources Manager at our subsidiary GyMgeneral counsel for Inkia Energy since 2008, as vice president for Standard Chartered Bank between July 2005 and October 2008, as head of legal and compliance for Banco Standard Chartered between March 2000 and July 2005, as director general of the legal department for the Ministry of the Presidency between June 1999 and March 2000, as advisor to the Minister for the Advancement of Women between July 1997 and July 1998 and as associate for Benites Mercado & Ugaz between July 1993 and July 1998. He holds a law degree and an LLM from 2007Columbia University and is authorized to 2012.practice law in Peru and New York.
Dennis Gray. Mr. Gray joined the group in 2011 and has since been our Corporate Finance and Investor Relations Manager. He is an Economist with a degree from Universidad del Pacífico specializing in Finance and received a postgraduate diploma from Tecnológico de Monterrey. He previously served as Corporate Vice President of Finance at Citibank del Perú, General Manager of Citicorp Perú S.A.B. and Product Development Manager at Banco de Crédito del Perú.
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Jorge Izquierdo.Luis Izquierdo. Mr. Izquierdo joined the group in 1999, and was appointed chief human resources management officer in December 2015. Prior to that, he has beenwas our Operational Excellence Manager since March 2014. Hechief operational excellence officer between 2011 and 2015. In addition, from 2011 to 2013, he worked as chief officer of the Learning Center (currently known as Academia), and had previously served as Corporate Learning Center Manager from 2011 to 2014, having previously served as manager of the Project Management Office.project management officer. He is a Civil Engineer withholds a degree in civil engineering from the Pontificia Universidad Católica del Perú, and a master’s degree in Construction Managementconstruction management from the University of California, Berkeley.
Gonzalo Ferraro.Antonio Cueto. Mr. FerraroCueto joined the group in 1996 and has been President ofour chief operating officer since 2017. Previously, he was our infrastructure area officer since January 2015. He formerly served as country manager in Chile and held different management positions in the Infrastructure Area since April 2013.group. He holds a degree in economics from Universidad Católica del Perú and has a Masters degree in business administration from Universidad del Pacífico. He also held a number of managerial positions, including Corporate Infrastructure Managerhas master’s in management and finance from 2010 to 2013.HEC (France). He is an Industrial Engineer graduated from Universidad Nacional de Ingeniería and Universidad de Lima, he completed additional graduate studies at the Universidad de Piura Senior Management Program and received a postgraduate diploma from Tecnológico de Monterrey. Mr. Ferraro is currently the Chairmandirector of the board of directors ofour subsidiaries Survial,GMP, GyM Ferrovías, Norvial, La Chira, GyM Ferrovías, as well as Concesionaria Vía Expresa Sur, and a member of the board of directors of our subsidiary GMP.
Hernando Graña. See “—Board of Directors.”
Francisco Dulanto. Mr. Dulanto joined the group in 1974 and is the Executive President and Chairman of the board of directors of GMP. He graduated from Universidad Nacional de Ingeniería and pursued graduate studies at ESAN and the Universidad de Piura Senior Management Program. He also received a postgraduate diploma from Tecnológico de Monterrey. He served as Chief Executive Officer of our subsidiary GMP between 1984 and 2011; as well as President of the Society of Petroleum Engineers (SPE), Lima Section, in 1991; and director of the Sociedad Nacional de Minería y Petróleo y Energía.
Juan Lambarri. Mr. Lambarri joined the group in 1982 and has been the Corporate Engineering and Construction Officer since February 2014. He previously served as Chief Executive Officer of our subsidiary GyM from 2001 to 2014. He is a Civil Engineer graduated from Pontificia Universidad Católica del Perú. He also pursued graduate studies from Universidad de Piura Senior Management Program and received a postgraduate diploma from Tecnológico de Monterrey. He is currently a member of the board of directors of our subsidiaries GyM, Stracon GyM, Vial y VivesSurvial and GMI.
Luis Díaz. Mr. Díaz joined the group in 1993 and has been the Corporate Infrastructure Officer since April 2013. He previously served as Chief Executive Officer of our subsidiary GMP from March 2011 to February 2014. He is also a member of the board of directors of GMP, GyM Ferrovías, Norvial, Survial, Vía Expresa Sur and La Chira. He is an Industrial Engineer with a master’s degree in Business Administration from the University of Pittsburgh and received a postgraduate diploma from Tecnológico de Monterrey. He previously served as Deputy Chief Executive Officer of GMP from 2009 to 2011, Chief Financial Officer of Graña y Montero from 2004 to 2009, and Financial Manager of our subsidiary GyM from 2001 to 2004.
Jaime Dasso. Mr. Dasso joined the group in 1991 and has been the Corporate Technical Service Officer since February 2014. He previously served as Chief Executive Officer of our subsidiary GMD from 2000 to 2014. He is an electronic engineer and received a master’s degree in Software Development from Stevens Institute of Technology in the United States of America and a postgraduate diploma from Tecnologico de Monterrey. He previously served as Commercial Manager of GMD from 1994 to 1999. Currently, he is a member of the board of directors of GMD, Concar and CAM, as well as the Chairman of the board of directors of our subsidiaries GSD.
Walter Silva Santisteban. Mr. Silva Santisteban joined the group in 1981 and has been the Executive President of GMI since February 2014. He previously served as Chief Executive Officer of GMI from 1998 to 2014. He is a Civil Engineer graduated from Universidad Nacional de Ingeniería and received a postgraduate diploma from Tecnológico de Monterrey. Currently, he is a member of the board of directors of GMI and Ecotec.
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Jaime Targarona. Mr. Targarona joined the group in 1996 and has been the Chief Executive Officer of Concar since 2005. He is a Civil Engineer graduated from Universidad Autónoma de Guadalajara (Mexico), with a master’s degree in Business Administration from Universidad San Ignacio de Loyola. He also completed the Universidad de Piura Senior Management Program and received a postgraduate diploma from Tecnológico de Monterrey. He previously held positions as Civil Engineer on different projects, Commercial Manager of our subsidiary GyM’s Special Projects Divisions and as Chief Executive Officer of Graña y Montero Mexico. Additionally, Mr. Targarona is a member of the board of directors of our subsidiaries Concar.
Rolando Ponce.Ponce. Mr. Ponce joined the group in 1993 and has beenserved as the Chief Executive Officerchief executive officer of our subsidiary Viva GyM since 2008, and Corporate Real Estate Officeras our chief real estate area officer since February 2014. He isholds a Civil Engineer graduateddegree in civil engineering from Universidad Ricardo Palma and receivedPalma. He also holds a master’s degree in Constructionconstruction and Real Estate Business Managementreal estate business management from Pontificia Universidad Católica de Chile—PolitéChile-Politécnica de Madrid, (Spain) and a postgraduate diploma from Tecnológico de Monterrey.Spain. He has previously served as manager of GyM’s Real Estate Division. Mr. Ponce joined the group in 1993 andreal estate division. He is currently a member of the boardboards of directors of our subsidiaries Viva GyM and Almonte.
Renato Rojas.Mr. Rojas joined usthe group in 1995, and ishas served as the Chief Executive Officerchief executive officer of GyM since February 2014. He previously served as ManagerPrior to that, he held the position of the Civil Works Divisionmanager of GyMGyM’s civil works division from 2010 to 2014, Sub Managerand of theassistant manager of that same Divisiondivision from 2002 to 2010. Mr. RojasHe holds a degree in civil engineering from Pontificia Universidad CatolicaCatólica del Peru.Perú. In addition, he pursued a master’s in company management at Universidad de Piura. He also completedis currently a Master’smember of the boards of directors of GMI and GyM.
Eduardo Villa Corta. Mr. Villa Corta joined the group in 1995, and has served as chief executive officer of GMI since February 2014. He was the chief technical officer of GyM from 2010 to 2014; and GMI’s manager of the industry division from 2003 to 2010. In 2000 he joined GyM Mexico as its chief executive officer. He holds a degree in Company Managementcivil engineering from Pontificia Universidad Católica del Perú. In addition, he pursued an MBA at the Universidad de Piura. He is currently a member of the board of directors of GMIour subsidiary GMI.
Reynaldo Llosa. Mr. Llosa joined the group in 2014, and GyM.
Hugo González. Mr. González joined us in 1997 and ishas served as the Chief Executive Officerchief executive officer of GMDGMP since February 2014. He previously served as Manager of the Technology Solutions Division of GMD from 2008 to 2014, Manager of the Outsourcing Technology Division from 2005 to 2008. He holds a degree in systemmechanical engineering from University of Houston, as well as an MBA from Universidad de Piura. He has completed several technical and executive programs, including certificate programs at Rice University and Northeastern Kellogg School of Management. He served as the chief executive officer of BPZ Energy from 2010 to 2013. Prior to that, he had worked in Schlumberger for 25 years, the last 15 of which he spent in management positions.
Oscar Pando. Mr. Pando joined the group in May 2016, and is the chief executive officer of our subsidiary Concar. He is a business administrator at the Universidad de Lima with a master’s degree from Georgetown University. He also completedMr. Pando has national and international experience of more than 20 years assuming various functional responsibilities, previously passed by Doe Run Perú, APC Corporation S.A., Philip Morris International, Securitas Peru, between other companies.
Manuel Wu. Mr. Wu is a Master’scivil engineer from the Pontificate Catholic University of Peru and holds a master’s degree in Generalbusiness administration from the University of Piura, Peru. He joined the group in 2001, and Strategic Management, with double degreeacted as chief technical officer for the oil and gas, electricity, infrastructure and sanitation areas of GyM S.A. from 2003 until 2007. He became manager of purchases and logistics of GyM S.A. in 2007, and general manager of the consortium Lima Actividades Comerciales comprised by GyM S.A. and Aguas de Barcelona from 2009 until 2011. Since 2011, he has worked as chief executive officer of GyM Ferrovias S.A.
Stephen Dixon. Mr. Dixon joined the group in 2012, and has served as chief executive officer of Stracon GyM S.A. since 2015. Prior to that, he held the position of chief operating officer of Stracon GyM from 2012 to 2014 and had served as chief executive officer of Stracon S.A.C. Mr. Dixon holds the New Zealand certificate of (civil) engineering from Wellington. In addition, he has pursued studies in finance at Maastricht School of Management (MSM) and Pontificia Universidad Católica del Perú (Centrum Catolica).London Business School. He is currently a member of the board of directors of GMD.Stracon GyM S.A.
Maritza Zavala. Ms. Zavala, joined us in 1997 and is
Arturo Serna. Mr. Serna has been part of the Corporative Technology Managergroup since September 2013. She holds2014, when we acquired the majority shareholding of Morelco where he now serves as chief executive officer. Mr. Serna has a degree in industrial engineering from University of Lima, with a Master’s degree in International Business Administration from Nova Southeastern University.
Reynaldo Llosa. Mr. Llosa joined us in 2014 and is the Chief Executive Officer of GMP since February 2014. He holds a degree mechanical engineering graduated from the University of Houston and holds a Senior Executive MBAchemistry from Universidad de Piura.del Valle, and over 35 years of experience. He has completed extensive technicalheld the position of chief executive officer of Morelco for 17 years.
Pablo Ruiz. Mr. Ruiz joined the group in 2017 and managementhas been the chief executive education programs including Certificate Programs at Rice University and Northwestern Kellogg Schoolofficer of Management. He previously served as deputy general manager at BPZ Energy from 2010 to 2013, and was employed by Schlumberger for 25 years where he held several managerment positions over the most recent 15 years.
Eduardo Villa Corta. Mr. Villa Corta joined us in 1995 and is the Chief Executive Officer of GMIVial y Vives – DSD S.A. since February 2014. He previously served as Technical Manager of GyM from 2010 to 2014, Manager of the Industry Division from 2003 to 2010. In the year 2000 he joined GyM Mexico as the General Director.2017. He holds a degree in civil engineering from Catholicthe Polytechnic University of Peru.Madrid, he has a master degree in business administration from the University of La Laguna (Canary Island) and a master in civil engineering from the Universidad de Chile. Mr. Ruiz has more than 27 years of national and international experience in the construction of highways, roads, bridges, tunnels, environmental works, hydraulic works, marine works, railways, subways, industrial mining, urbanization and residential building, as well as a large design-build public-private partnerships on road and building projects. Mr. Ruiz previously worked as construction director at Acciona Contruction and, chief operating officer of Habtoor Leighton Group and area southern cone area director of Dragados.
Luis Fukunaga. Mr. Fukunaga joined the group in 2002 and has been our roads concessions manager in the infrastructure area since October 2012. In addition, he has held several management positions, including chief executive officer of Survial S.A and Concesión Canchaque S.A.C. He is a civil engineer with a degree from Universidad de Piura. He also completed a MBA from at ESAN with studies at Kenan Flagler Business School–University of North Carolina at Chapel Hill, and completed a financial management Program at Universidad de Piura. He is currently serves as director of our subsidiaries Survial, Norvial, Concesionaria Vía member of the board of directors of GMI.Expresa Sur and Concar.
Klaus Winkler.Sergio Morales. Mr. WinklerMorales joined the group in 20112016, and has beenserved as the chief executive officer of Adexus S.A since April 2017. He holds a degree in civil industrial engineer from Santiago of Chile University. He has completed several technical and executive programs. He served as commercial manager of Adexus from June 2016 to April 2017. Prior to that, he worked at American Movil Group for nine years and also at Unisys Company for 11 years.
Javier Vaca Terron. Mr. Vaca graduated as a Civil Engineer, Channels and Ports from the Polytechnic University of Madrid in 1996. He joined the Spanish company, Ferrovial Agroman, participating in the study of international works and directing the execution of projects in Madrid. In 2004, he completed an Executive MBA master’s degree at IESE and joined Grupo Assignia as Director of International Production at the construction company, developing his work mainly in Latin America. In 2007, he was assigned new responsibilities within the Assignia group, as CEO of another group company, Eductrade, dedicated to foreign trade in the field of Health and Education. In 2014, he returned to the construction industry, this time directing the Business Development and Studies, Hiring and Institutional Relations Areas of the Spanish FCC. In 2016, he joined the OHL company as Southern Cone Zone Director, based in Santiago, Chile. In February 2018, he joined Graña y Montero as Regional Manager of the Engineering and Construction Area.
Carlos Gómez Pinto. Mr. Gomez has worked for Seagrams, Coca-Cola, Merril Lynch and Pacific Exploration & Production, in various leadership positions including as a CFO, Vice President of CAM Chile S.A. since 2007Internal Audit, Corporate Governance, Risks, Compliance, and Corporate Finance Manager. His experience includes responsibilities for implementingre-engineering processes, identifyingnon-value added activities and helping departments change their structure and improve work process efficiency. Currently, Mr. Gomez is a senior executive of Graña y Montero as well as Country Manager—Chile since April 2013.Corporate Internal Auditor. Mr. Gomez is a Licensed International Financial Advisor and board member of certain companies andnon-profit organizations. Mr Gomez earned a bachelor’s degree in Economics at Rosario University, a top private university in Colombia. He also obtained a MBA from Southern New Hampshire University in the USA.
Fernando Dyer. Mr. Dyer is the Chief Risk and Compliance Officer of Graña y Montero, and is responsible for the company’s Corporate Risk and Compliance Program. Fernando has more than 30 years of international experience in audit, finance, internal controls, governance, ethics, compliance and management at leading multinationals. His experience includes the design, implementation, management and leading international programs on risk assessment, code of conduct, whistle blower, due diligence, anti-corruption, anti-money-laundering and international sanctions aimed to deter, detect and protect companies from crimes (focused on FCPA and UK Bribery Act). Mr. Dyer holds an MBA form Université de Genève (Switzerland), specialized in International Management, and a BA in Accounting from the Universidad del Pacífico (Perú). He is a Commercial Engineer graduated from Universidad Gabriela MistralCertified Anti-Money Laundering Specialist (CAMS) by the Association of Certified Anti-Money Laundering Specialists (USA), a Certified Corporate Compliance & Ethics Professional (CCEP) by the Society of Corporate Compliance and Ethics (USA), and an International Faculty of the International Training Compliance and International Compliance Association – ICT/ICA – (United Kingdom). Mr. Dyer speaks English, French and Spanish fluently.
Manuel Fernández Pollan. Mr. Fernández joined the Group in December 2015 as chief executive officer of Adexus in Chile. He also hascurrently leads the Corporate Management of Services of GyM, is the President of Adexus and a master’sdirector of CAM. Mr. Fernández holds a Bachelor’s degree in Business AdministrationIndustrial Engineering from Stanfordthe Polytechnic University of Madrid, an MBA from CEPADE in Madrid and a postgraduate diplomaMaster’s in Strategic Planning and Finance from Tecnológico de Monterrey.IDE in Madrid. He previously servedhas worked for 10 years at Emerson Network Power, the last three years as Chief Executive OfficerVice President of CompañíSales and Regional Operations of Latin America. Before that he was chief executive officer for the Andean Countries (Colombia, Ecuador, Venezuela and Peru). Previously he worked in the Telefónica group, occupying different positions in Spain and Latin America, the last two years in Peru as chief executive officer of Telefónica Servicios Compartidos and Vice President of Resources of Telefónica del Perú.
Julia Sobrevilla Perea. Ms. Sobrevilla joined Graña Americana de Multiservicios Ltda. (currently, CAM Chile)y Montero in April 2018 as Corporate Affairs Officer. She joins Graña y Montero most recently from 2007Coca-Cola Perú, where she was Public Affairs Director from 2012 to 2011;2018. Before joining Coca-Cola Ms. Sobrevilla was Institutional Relations Manager at Grupo ACP, a Peruvian group dedicated to microfinance in Latin America. Prior to that, from 2002 to 2010 she was Country Representative for Population Services International, a Washington,DC-based not for profit, serving in Rwanda, Mexico and Mozambique. Previously she held several managerial positions over 15 years in Endesa groupMTV Networks and Nickelodeon Latin America from 1994 to 2001, based in Chile, SpainMiami, Florida. She holds a Bachelors in Linguistics and Literature from the United States. He is currently a member ofPontificia Universidad Católica del Perú and completed Masters Courses in Communication at Stanford University. She sits on the board of directors of Vial y Vives.
César Neyra. Mr. Neyra joined the group in 2003SERNANP (Servicio Nacional de Areas Naturales Protegidas), Kunan and has been our Manager of Internal Auditing and Management Processes since 2003. He received an Accounting degree from Universidad Nacional Federico Villareal and a master’s degree in Business Administration and Finance from UniversidadPremio Protagonistas del Pacífico. He has also studied Quality Improvement Systems and graduated from the Six Sigma Methodology program at Caterpillar University in Mexico and the United States of America.Cambio UPC.
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Executive Commission
The Executive Commission is currently comprised by our Chief Executive Officer, the Business Segment Executive Officer for each of the four segments, the President of the Infrastructure Areaour Chief Financial Officer, our Chief Investment Officer, our Chief Legal and theCorporate Affairs Officer, our Chief Human Resources Officer, our Chief Audit Executive, President of the E&C Area.our Chief Risk and Compliance Officer, and our Corporate Business Development Officer. The Executive Commission evaluates, at the management level, among other matters, our strategic plan, annual budget and annual investment plan.
Business Segments Executive Commission
The Business Segments Executive Commissions are comprised by the Business Segment Executive Officer and the CEOs of the companies in each of the relevant business segments. Each Business Segment Executive Commission evaluates the applicable business segment’s annual budget, finances and operations as well as a summary of the information discussed in the Executive Commission.
Kinship
Mr. José Graña Miró Quesada, the Chairmana significant shareholder and our former chairman of ourthe board of directors, is ahas first degree cousinkinship by blood with director HernandoMaría Teresa Graña Acuña.Canepa, a shareholder of our company; and third degree kinship by blood with Ms. Yamile Brahim Graña, a shareholder of our company.
Compensation of Directors and Executive Officers
Director compensation must be approved by a majority of shareholders at our annual shareholders’ meeting.
In 2013,2016, total compensation paid to our former board of directors amounted to S/.2,527,656.1,502,920 including compensation paid to directors that serve on our subsidiaries’ board of directors. In 20132016, total compensation paid to our executive officers amounted to S/.26,068,329..20,461,319. See “Item 4.B Information on the Company—Business Overview—Regulatory Matters—Labor Regulations” for additional information on profit sharing regulatory requirements.
Neither we nor any of our subsidiaries have entered into any agreement that provides for any benefit or compensation to any director or senior executive upon expiration of his or her term.term or termination of employment. Under Peruvian law, unless we dismiss someone for justified cause, we are required to pay the dismissed employee (but not directors) 1.5x annual salary for every year with the company for a period not to exceed 12 years. We are not required to make such payments in the event of voluntary termination. Although we have no ongoing obligation to do so, in the past we have provided, and in the future we may provide, such benefits to our executive officers upon their retirement. We have not set aside or reserved any amounts to provide for pension, retirement or other similar benefits.
Executive Compensation Plan
We establish and pay executive compensation in compliance with applicable labor and tax regulations and corporate governance standards and in accordance with market conditions.
We establish pay scales taking into consideration executives’ responsibilities, including the degree of complexity of those responsibilities, power of decision-making and scope of supervision entrusted.
The fixed salary component of compensation is established for each position based on a pay scale. Fixed salary includes family allowance and cost of living payments, if applicable. We evaluate executives at least once a year to develop action plans in furtherance of continuously improving management performance.
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The variable component of compensation is paid to executives and other employees for meeting specific goals, and is related both to his or her performance and our financial results. Variable compensation is typically paid as an annual bonus.
In addition, labor regulation establishes a mandatory profit sharing provision of 5% of our total annual taxable income, to be distributed among all employees, calculated based on a formula established by law that considers the days worked in the year and remuneration.
Our executives also receive additional benefits, typicallynon-pecuniary. The benefits granted include: (i) a vehicle owned and maintained by the company, with the purpose of facilitating transportation of executives in the performance of their functions; (ii) a fuel allowance to offset transportation costs in the performance of their functions; and (iii) an insurance policy, including work accident and high risk coverage.
In addition, we have established a plan for certain executives effective March 2013 that awards cash bonuses for the exclusive use of purchasing shares of our company or of our subsidiaries. The executive must agree to hold the shares for a specific period. If the executive is no longer employed with the company during such period, we are entitled to repurchase the shares at the original purchase price. This benefit is awarded at the discretion and subject to the approval of the Human Resource Management and Social Responsibility Committee of our board of directors.
Board Committees
We have threefour board committees comprised of members of our board of directors.
Audit and Process Committee
Our Audit and Process Committee is comprised of threefour directors, all of which are independent in accordance with the SEC rules applicable to foreign private issuers. The current members of our Audit and Process Committee are Mr.Federico Cúneo,Mr. Pedro Pablo Errazuriz Domínguez, Mr. Manuel del Rio, Mr. José ChlimperAntonio Rosas and Mr. Hugo Santa Maria.Alfonso de Orbegoso. These directors have extensive business and economic experience in Peru; however,Peru. Mr. Manuel del Rio and Mr. José Antonio Rosas each qualify as an “audit committee financial expert” in accordance with SEC rules, we disclose that only Mr. Federico Cúneo qualifies as a “financial expert.”rules. Our Audit and Process Committee oversees our corporate accounting and financial reporting process. Immediately prior to the closing of this offering, theThe Audit and Process Committee will beis responsible for:
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Our board of directors has adopted a written charter for our Audit and Process Committee, which is available on our website atwww.granaymontero.com.pe.
Human Resource Management and Social Responsibility Committee
Our Human Resource Management and Social Responsibility Committee is comprised of three directors, all of which are independent in accordance with SEC rules applicable to foreign private issuers.Peruvian and NYSE independence standards. The current members of the committee are Mr. José Chlimper,Rafael Venegas, Mr. Federico CúneoPedro Errázuriz and Mr. Mark Hoffman.Alfonso de Orbegoso. The Human Resource Management and Social Responsibility Committee is responsible for:
As a foreign private issuer, we are not required to maintain a compensation committee that complies with all of the U.S. laws and regulations and NYSE requirements applicable to U.S. issuers.
Investment and Risk Committee
Our Investment and Risk Committee is comprised of three directors.five directors, with independent members under Peruvian and NYSE independence standards, currently comprising the majority of the committee. The current members of the committee are Mr. José Graña,Antonio Rosas, Mr. Hugo Santa MariaManuel del Río, Mr. Alfonso Garcia-Miro, Mr. Augusto Baertl and Mr. Pedro Pablo Errazuriz. The Investment and Risk Committee is responsible for:
Risk, Compliance and Sustainability Committee
Our Risk, Compliance and Sustainability Committee is comprised of five directors, with independent members under Peruvian and NYSE independence standards, currently comprising the majority of the committee. The current members of the committee are Mr. Alfonso de Orbegoso Baraybar (chairman of the committee), Mr. Pedro Errázuriz, Mr. Augusto Baertl and Mr. Manuel del Río. The Risk, Compliance and Sustainability Committee is responsible for:
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Operating Board Committees
We also have fourtwo operating board committees that meet monthly and are comprised of members of our board of directors, including at least one independent member under Peruvian and NYSE independence standards per committee.
Engineering and Construction Committee
Our Engineering and Construction Committee supervises the operations of our E&C segment, and is comprised of fivesix directors. The current members of the committee are Mr. José Graña,Augusto Baertl, Mr. Mario Alvarado,Rafael Venegas, Mr. José Chlimper,Roberto Abusada, Mr. Hernando GrañaAlfonso de Orbegoso, Mr. Pedro Errázuriz and Mr. Carlos Montero.AlfonsoGarcía-Miro.
Infrastructure Committee
Our Infrastructure Committee supervises the operations of our Infrastructure segment and is comprised of five directors. The current members of the committee are Mr. Augusto Baertl, Mr. Rafael Venegas, Mr. José GrañAntonio Rosas, Mr. Alfonso García Mr. Mario Alvarado, Mr. Hugo Santa María, Pedro ErrazurizMiró and Mr. Hernando Graña.Manuel del Río.
Real Estate CommitteeD. Employees
Our Real Estate Committee supervises the operations of the Real Estate segment and is comprised of three directors. The current members of the committee are Mr. José Graña, Mr. Mario Alvarado and Mr. Federico Cúneo.
Technical Services Committee
Our Technical Services Committee supervises the operations of our Technical Services segment and is comprised of four directors. The current members of the committee are Mr. José Graña, Mr. Mario Alvarado, Mr. Mark Hoffman and Mr. Carlos Montero.
Employees
We have developed an extensive and talented team, including more than 3,800 engineers, thatwhich gives us the capability and scale to undertake large and complex projects. We also have access to a network of approximately 62,000156,000 manual laborers throughout Peru that can supplement our workforce when required by our projects. Moreover, we have the flexibility to engage our own workers on projects outside Peru, avoiding the need to seek new employees in other countries.
As of December 31, 2013,2016, we had a total of 33,16932,513 full-time employees, including approximately 12,0008,493 manual laborers, a number that fluctuates depending on our project backlog. At such date, we also worked with 4,7584,434 employees of subcontractors. Occasionally, we employ subcontractors for particular aspects of our projects, such as carpenters, specialists in elevator installation and specialists in glassworks. We are not dependent upon any particular subcontractor or group of subcontractors. As of December 31, 2013, 22%2016, 40.4% of our employees worked outside Peru. The following table sets forth a breakdown of our employees by category as of December 31, 2013.2016.
Salaried Employees | Engineering and Construction | Infrastructure | Real Estate | Technical Services | Corporate | Total | E&C | Infrastructure | Real Estate | Technical Services | Corporate | TOTAL | ||||||||||||||||||||||||||||||||||||
Engineers | 2,095 | 138 | 44 | 1,549 | 20 | 3,846 | 1,504 | 192 | 37 | 2,041 | 29 | 3,803 | ||||||||||||||||||||||||||||||||||||
Other professionals | 1,010 | 66 | 59 | 1,041 | 55 | 2,231 | ||||||||||||||||||||||||||||||||||||||||||
Other Professionals | 758 | 106 | 40 | 782 | 122 | 1,808 | ||||||||||||||||||||||||||||||||||||||||||
Technical specialists | 1,116 | 252 | 47 | 5,607 | 10 | 7,032 | 1,010 | 258 | 50 | 10,633 | 29 | 11,980 | ||||||||||||||||||||||||||||||||||||
Manual laborers(1) | 12,759 | 12,759 | ||||||||||||||||||||||||||||||||||||||||||||||
Joint operations employees(2) | 6,312 | 989 | 7,301 | |||||||||||||||||||||||||||||||||||||||||||||
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Manual Laborers(1) | 8,493 | — | — | — | — | 8,493 | ||||||||||||||||||||||||||||||||||||||||||
Joint operation employees(2) | 1,455 | — | — | 540 | — | 1,995 | ||||||||||||||||||||||||||||||||||||||||||
Subtotal | 23,292 | 456 | 150 | 9,186 | 85 | 33,169 | 13,220 | 556 | 127 | 13,996 | 180 | 28,079 | ||||||||||||||||||||||||||||||||||||
Subcontracted employees | 4,661 | 97 | — | — | — | 4,758 | 3,181 | 175 | — | 1,078 | — | 4,434 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
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| |||||||||||||||||||||||||||||||||||||||||||
Total | 27,953 | 553 | 150 | 9,186 | 85 | 37,927 | 16,401 | 731 | 127 | 15,074 | 180 | 32,513 |
(1) | The number of manual laborers, who form part of our network of approximately |
(2) | Includes engineers, professionals, technical specialists and manual laborers employed by our joint operations. |
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The following chart sets forth the growth of our total employees from December 31, 20112013 to December 31, 2013.2016.
Total Employees
Our talent development system has allowed us to develop a team of professionals who are able to design and implement sophisticated projects. Our talent development system is based on three main pillars: (i) specialized training for all levels, including senior management; (ii) mentoring; and (iii) feedback from managers to employees.
We have implemented programs to attract young and qualified candidates. Our Trainee, Academic Excellence and Young Engineers programs offer various types of internships and training opportunities to engineering students and recent graduates, rewarding the most successful candidates with the opportunity to work as full-time, permanent employees. Our focus is not only to attract talented people but also to retain them. Therefore, during the last sixeight years we have worked together with Great Place to Work®, a human resources consulting, research and training firm, to measure our employee’s satisfaction with the working environment. According to studies carried out by Great Place to Work® during 2013, 66%2016, 74% of our engineers, technical specialists and other professional employees confirmed that we are a “great place to work.” Moreover, our subsidiaries Viva GyM, Stracon GyM, GMP and GMPGMD were recognized by Great Place to Work® as being among the 45 best companies to work for in Peru. In April 2016, our subsidiary Viva GyM was recognized by Great Place to Work among the best 50 companies in Latin America.
Through our Corporate Learning Center,Graña y Montero Academy, we offer continuedcontinuing education opportunities through a wide selection of courses and training programs targeted at each level. We believe the knowledge that our employees gain through these programs is reflected in the way they work and relate to our clients, adding value in every step. During 2013,2016, we invested more than US$7.96.5 million in continuing education, reaching approximately 334,693380,617 hours of capacitation activities for our employees.
We place significant emphasis on instilling our core corporate values of quality, professionalism, reliability and efficiency on our employees, and on promoting safety, environmental sustainability and social responsibility throughout the entire organization. Our Code of Conduct and Charter of Ethics regulate the conduct of our employees while promoting the foregoing values. In addition, our employees participate in ethics seminars on a periodic basis.
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Substantially all of our manual laborers and some of our other employees are members of labor unions. Our practice is generally to extend the benefits we offer our unionized employees tonon-unionized employees. We consider our current relationship with unions to be positive.
In our E&C segment, collective bargaining agreements are negotiated at two levels: (i) on an annual basis between the National Federation of Civil Construction and the Peruvian Chamber of Construction, without our direct involvement; and (ii) on a per project basis directly between the unions and our project committees, in accordance with such annual agreement. In addition, some of our personnel in our gas processing plant belongs to the labor union Unicode Workers Union GMP S.A. We currently have collective bargaining agreements with some of our gas processing plant workers. In the case of our operation and maintenance of infrastructure assets business, some of our personnel in CAM Perú are subject to a collective bargaining agreement. These collective bargaining agreements are negotiated on an annual basis.
Safety
We safeguard the health and safety of our employees and of all the persons present in our operations and services. To that end, we provide safe work conditions, we manage risks in a timely manner and we promote a culture of prevention, starting from the leadership and commitment of our senior management.
In 2013,2016, our E&C subsidiary GyM hadcompany reached a total of 86,303,933 hours worked. During this period, we reported an accident incidence ratefrequency index (FI) of 0.41 calculated over 89,660,836 hours worked. In 2012, our E&C subsidiary GyM had an accident incidence rate of 0.29, calculated over 64,202,006 hours worked. In 2011, GyM had an accident incidence rate of 0.52, calculated over 52,979,6990.40 accidents for every 200,000 hours worked, which was lower than that of private construction companies inthus remaining at a level similar to 2015 (0.39) and confirming the United States forpositive trend over the year, which had an average of 3.90, as reported by the Bureau of Labor Statistics of the United States Department of Labor. In 2011, 2012 and 2013, we had one, two and seven fatalities, respectively.last three years.
Our occupational health and safety management system in our subsidiaries GyM, GMI, Stracon GyM, Morelco, GMP, GMI,CAM, GMD Adexus and Cam GyM isConcar (February 2017) are certified by OHSAS 18001. We believe a safe job site contributes to our reputation and ability to gain new business while enhancing employee morale and reducing costs and exposure to liability. We train
Under our employees in safety, environment, occupational health and related topics, and have trained and certified expertsframework, we provided over 100 thousand hours of training in risk managementprevention for managers and prevention who disseminatedirectors, 794 thousand hours of training for employees and regulate risk prevention standardsnearly 200 thousand hours of training for subcontractors. Additionally, to improve the leadership and procedures. We have more than 400 staff members acrosscommitment of our subsidiaries dedicatedchain of command, these training sessions were complemented with periodic manager’s visits to health,projects, the establishment of annual safety and environmental matters, and at least two and up to 40 health, safety and environmental employees are assigned to each E&C project we undertake dependinggoals based on the naturetype of activity, the projectgeneration of opportunities to share lessons learned, and the client’s requirements. Moreover, each project manager is responsible for compliance withmonitoring of safety panels by our safety requirements and for the protectionboard of our employees.directors.
To ensure safe conditions, we perform preventive and routine maintenance on all of our properties, worksites, systems and machinery, and make repairs and replacements when necessary or appropriate. We also conduct routine and required inspections of those properties in accordance with applicable regulation. Furthermore, we continually monitor, test, and record the effectiveness of our safety measures and assure that the highest risk segments receive the highest priority for scheduling internal inspections or tests for integrity.
As of December 31, 2013,April 30, 2018, persons who are currently members of our board of directors and our executive officers held as a group 205,200,57034,534,193 of our common shares. This amount represented 31.08%5.23% of our outstanding share capital as of such date.
Our directors and executive officers hold, in the aggregate, less than 1% of our outstanding share capital, with the exception of: Mr. José Graña who owns 117,538,203 common shares, representing 17.81% of our outstanding share capital, through GH Holding Group; Mr. Carlos Montero, who owns 33,785,285 common shares, representing 5.12% of our outstanding share capital, through Bethel Enterprises; Mr. Mario Alvarado who owns 22,432,223 common shares, representing 3.40% of our outstanding share capital, through Byron Development; Mr. Hernando Graña who owns 15,150,061 common shares, representing 2.30% of our outstanding share capital; and Mr. Francisco Dulanto who owns 12,684,187 common shares, representing 1.92% of our outstanding share capital.Enterprises.
Our other directors and executive officers who in the aggregate hold less than 1% interest in our company areare: Mr. Juan Manuel Lambarri,Pedro Pablo Errázuriz, Mr. Walter Silva Santisteban,Roberto Abusada, Mr. Luis Francisco Díaz Mr. Gonzalo Ferraro,Olivero, Mr. Antonio Rodríguez, Ms. Mónica Miloslavich Ms. Claudia Drago, Mr. Juan José Arrieta, Mr. Jaime Targarona and Mr. Roberto Abusada.Antonio Cueto.
Our directors and executive officers do not have different voting rights.
We have established a plan for certain executives effective since March 2013 that awards cash bonuses for the exclusive use of purchasing shares of our company or of our subsidiaries. The executive must agree to hold the shares for a specific period. If the executive is no longer employed with the company during such period, we are entitled to repurchase the shares at the original purchase price. This benefit is awarded at the discretion and subject to the approval of the Human Resource Management Committee of our board of directors.
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MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
As of December 31, 2013,2016, our issued and outstanding share capital was comprised of 660,053,790 common shares. The following table sets forth the beneficial ownership of our common shares as of December 31, 20132016, which is based on information provided to us by CAVALI S.A. ICLV, the Peruvian clearing house.house (“CAVALI”), except as set forth below.
Shareholder | Number of shares | Percentage owned | Number of shares | Percentage owned | ||||||||||||
GH Holding Group(1) | 117,538,203 | 17.81 | % | 117,538,203 | 17.81 | % | ||||||||||
IN-CARTADM (AFP Integra-Sura Group) | 41,154,651 | 6.24 | % | 38,384,976 | 5.82 | % | ||||||||||
Bethel Enterprises Inc.(2) | 33,785,285 | 5.12 | % | |||||||||||||
PR-CARTADM (Profuturo AFP-Grupo Scotiabank) | 35,107,053 | 5.32 | % | 36,968,166 | 5.60 | % | ||||||||||
Other Shareholders (3) | 165,942,958 | 25.14 | % | |||||||||||||
JPMorgan Chase Bank NA, as depositary for the holders of ADS | 266,525,640 | 40.38 | % | |||||||||||||
Aberdeen Asset Management PLC(2) | 35,501,465 | 5.38 | % | |||||||||||||
Bethel Enterprises Inc.(3) | 33,785,285 | 5.12 | % | |||||||||||||
Other Shareholders (4) | 168,192,125 | 25.48 | % | |||||||||||||
JPMorgan Chase Bank NA, as depositary for the holders of ADS(5) | 229,683,570 | 34.80 | % | |||||||||||||
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| |||||||||||||
Total | 660,053,790 | 100 | % | 660,053,790 | 100 | % |
(1) | Mr. José Graña Miró Quesada, our former chairman, indirectly owns 117,538,203 common shares, representing 17.81% of our outstanding share capital, through GH Holding Group. |
(2) | Based on Amendment No. 2 to a Schedule 13G filed by Aberdeen Asset Management PLC with the SEC on February 8, 2017, Aberdeen Asset Management PLC has shared voting power over 31,745,514 of our common shares and has shared dispositive power over 35,527,659 of our common shares, representing 5.38% as of February 8, 2017. |
(3) | Mr. Carlos Montero, through Bethel Enterprises Inc., indirectly owns 33,785,285 common shares, representing 5.12% of our outstanding share capital. |
(4) | Among other shareholders, the following directors and executive officers hold directly or indirectly common shares of our outstanding share capital: |
Mr. Roberto Abusada, a member of our board of directors, Mr. Pedro Pablo Errazuriz, a member of our board of directors, Mr. Luis Francisco Díaz Olivero, Chief Executive Officer, Ms. Mónica Miloslavich, our Chief Financial Officer, Mr. Antonio Rodríguez, Chief Investment Officer, Mr. Renato Rojas, Chief Executive Officer of GyM, and Mr. Antonio Cueto, Chief Operations Officer, hold in aggregate less than 1% of our outstanding share capital.
(5) | Excluding Aberdeen Asset Management PLC´s beneficial ownership of our common shares as of December 31, 2016. |
As of December 31, 2016, 38 record holders of our common shares were located in the United States (including JPMorgan Chase Bank NA, as depositary for the holders of ADS), according to CAVALI.
Certain of our directors and executive officers directly or indirectly own shares of our subsidiaries: Mr. Renato Rojas, Chief Executive Officer of GyM, owns 108,854 common shares of GyM, representing 0.04% of its outstanding capital share; Mr. Rolando Ponce, Chief Executive Officer of Viva GyM owns 1,111,690 shares of Viva GyM, representing 0.46% of its oustanding capital share; and Eduardo Villa Corta, chief executive officer of GMI, owns 108,854 shares of GyM, representing 0.0421% of its outstanding capital share.
The following table sets forth the changes in beneficial ownership of our common shares from December 31, 2014, to December 31, 2016, based on information provided to us by CAVALI.
As of December 31, 2014 | As of December 31, 2015 | As of December 31, 2016 | ||||||||||||||||||||||
Shareholders | No. of Shares | Percentage Owned | No. of Shares | Percentage Owned | No. of Shares | Percentage Owned | ||||||||||||||||||
GH Holding Group(1) | 117,538,203 | 17.81 | % | 117,538,203 | 17.81 | % | 117,538,203 | 17.81 | % | |||||||||||||||
IN-CARTADM (AFP Integra-Sura Group) | 40,304,651 | 6.11 | % | 39,656,375 | 6.01 | % | 38,384,976 | 5.82 | % | |||||||||||||||
PR-CARTADM (ProfuturoAFP-Grupo Scotiabank) | 37,488,166 | 5.68 | % | 36,968,166 | 5.60 | % | 36,968,166 | 5.60 | % | |||||||||||||||
Aberdeen Asset Management PLC(2) | 29,495,155 | 4.47 | % | 37,323,615 | 5.70 | % | 35,501,465 | 5.38 | % | |||||||||||||||
Bethel Enterprises Inc.(3) | 33,785,285 | 5.12 | % | 33,785,285 | 5.12 | % | 33,785,285 | 5.12 | % | |||||||||||||||
JPMorgan Chase Bank NA, as depositary for the holders of ADS(4) | 224,370,830 | 33.99 | % | 251,040,140 | 38.03 | % | 229,683,570 | 34.80 | % |
(1) | Mr. José Graña Miró Quesada, our former chairman, indirectly owns 117,538,203 common shares, representing 17.81% of our outstanding share capital, through GH Holding Group. |
(2) | Based on Amendment No. 2 to a Schedule 13G filed by Aberdeen Asset Management PLC with the SEC on February 8, 2017, Aberdeen Asset Management PLC has shared voting power over 31,745,514 of our common shares and has shared dispositive power over 35,527,659 of our common shares, representing 5.38% as of February 8, 2017. |
(3) | Mr. Carlos Montero indirectly owns 33,785,285 common shares, representing 5.12% of our outstanding share capital, through Bethel Enterprises Inc. |
Certain of ourOur major shareholders directly or indirectly own shares of our subsidiaries: Mr. Francisco Dulanto, Executive President of GMP, owns 5,060,105 common shares of GMP, representing 5.0% of its outstanding capital share; Mr. Juan Manuel Lambarri, Engineering and Construction Corporate Officer, owns 5,091,699 and 3,093,857 common shares of GyM and Viva GyM, representing 2.25% and 1.37% of their outstanding capital share, respectively; Mr. Jaime Targarona, Chief Executive Officer of Concar, owns 28,230 common shares of Concar, representing 0.25% of its outstanding capital share; Mr. Roberto Abusada, Chairman of the board of directors of GMD, owns 700,952 common shares of GMD, representing 5.47% of its outstanding capital share; and Mr. Rolando Ponce, Chief Executive Officer of Viva GyM and Real Estate Corporate Officer, owns 928,751 common shares of Viva GyM, representing 0.41% of its outstanding capital share. The following table sets forth the change in beneficial ownership of our common shares from December 31, 2010, to December 31, 2013, based on information provided to us by CAVALI, S.A. ICLV.
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As of December 31, 2010 | As of December 31, 2013 | |||||||||||||||
Shareholders | No. of Shares | Percentage Owned | No. of Shares | Percentage Owned | ||||||||||||
GH Holding Group(1) | 117,538,203 | 21.1 | % | 117,538,203 | 17.8 | % | ||||||||||
IN-CARTADM (AFP Integra-Sura Group) | 66,925,007 | 12.0 | % | 41,154,651 | 6.2 | % | ||||||||||
PRIMA AFP | 65,872,707 | 11.8 | % | 3,745,024 | 0.6 | % | ||||||||||
AFP HORIZONTE | 47,214,243 | 8.5 | % | — | 0 | % | ||||||||||
Bethel Enterprises Inc.(2) | 33,785,285 | 6.1 | % | 33,785,285 | 5.1 | % | ||||||||||
PR-CARTADM (Profuturo AFP-Grupo Scotiabank) | 31,414,443 | 5.6 | % | 35,107,053 | 5.3 | % | ||||||||||
JPMorgan Chase Bank NA, as depositary for the holders of ADS) | — | 0 | % | 266,525,640 | 40.38 | % |
Peruvian Law Concerning Related Party Transactions
Peruvian law sets forth certain restrictions and limitations on transactions with certain related parties.
For instance, from a tax standpoint, the value of those transactions must be equal to the fair market value assessed under transfer pricing rules, i.e., the value agreed to bynon-related parties under the same or similar circumstances. Similarly, companies with securities registered in the Peruvian Public Registry of Securities (Registro(Registro Público del Mercado de Valores)Valores), such as us, are required to comply with the following rules:
The external independent company that reviews the transaction should not be related to the parties involved therein, nor to directors, managers or shareholders that own at least 10% of the share capital of the company.
As a general policy, we do not enter into transactions with directors and executive officers on terms more favorable than what we would offer third parties. Any related party transaction we have entered into in the past has been in the ordinary course of business and on an arm’s length basis.
Article 3230 of the internal regulations of our board of directors establishes a review procedure for identifying, approving and accounting for related party transactions. Related party transactions are defined as any transaction that exceeds US$50,000 entered into by and among our company and any shareholder that owns 1% or more of our company’s or of our subsidiaries’ outstanding shares, directors, senior executives and persons related to them. The Human Resource Management and Social Responsibility Committee is responsible for identifying, analyzing and approving each such transaction considering market conditions and potential benefits for us and the related party. For ordinary course transactions carried out under market conditions, a general authorization for the operations of the business line is sufficient. For more information, see “Item 6. Directors Senior Management and Employees—Management”.Management.”
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Related Party Transactions
The following setsets forth theour related party transactions we have entered in 2011, 2012, and 2013:during 2016:
During the three years prior to the dateC. Interests of Experts and Counsel.
Not applicable.
A. Consolidated Statements and Other Financial Information.
See Item 18 of this annual report our subsidiary Viva GyM had entered into purchase agreements for an aggregate amount of US$10,295,047 for the sale of apartments with the following related parties: Mr. Hernando Graña, one of our directors and a director of GyM, GM and Stracon GyM, Vial y Vives, GMP, Norvial, La Chira, GyM Ferrovías and CAM Chile, and Executive Officer of GyM; Ms. Yamile Brahim, José Graña’s niece; Mr. Rolando Ponce, Chief Executive Officer and director of Viva GyM; Ms. Jenny Ponce, Rolando Ponce’s aunt; Mr. Daniel Graña, Hernando Graña’s son; Mr. Santiago Graña, Hernando Graña’s nephew; Mr. Sergio Graña, Hernando Graña’s son; Ms. Maria Teresa Saavedra, Rolando Ponce’s spouse; Mr. Juan Manuel Lambarri, Chief Executive Officer of GyM and director of GyM, Stracon GyM, Vial y Vives, Viva GyM and GMI; Ms. Viviana Figueroa, Juan Manuel Lambarri’s spouse; Mr. Luis Diaz, Luis Díaz’s father; Mr. Enrique Ponce and Ms. Mercedes Vergara, Rolando Ponce’s parents; Martin Ferraro; Gonzalo Ferraro’s son; Octavio Cabrera GyM’s Chief Executive Officer and Victor Cuadros our Engineer and Construction International Director.on Form20-F.
The description above in this Item 7.B. does not include transactions among the company and its subsidiaries, joint operations and associated companies. See note 12 to our audited annual consolidated financial statements included in this annual report.
Not applicable.
See exhibits to this annual report.
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Legal and Administrative Proceedings
We may, from time to time, become subject to various legal and administrative proceedings that are incidental to the ordinary conduct of our business. We are currently not party to any material legal or administrative proceedings.proceedings, other than as described below. As of December 31, 2013,2016, we had recorded provisions amounting to S/.12.2.19.4 million in connection with legal and administrative proceedings. See note 2130.e to our audited annual consolidated financial statements included in this annual report.
Two securities class action complaints have been filed against us and certain of our current and former executive officers in the Eastern District of New York during the first quarter of 2017. These complaints are consolidated into a single class action. We believe that we have meritorious defenses to the claims asserted, and we intend to defend ourselves vigorously in these matters.
In July 2017, media reports alleged that certain construction companies in Peru, Brazil and Spain, including our company, colluded as a “construction club” to receive public contracts. As a result of these reports, INDECOPI initiated an investigation regarding the anti-competitive activities of construction companies in Peru, including our company. To date, there is no pending investigation of the company.
TheLava Jato commission of the Peruvian congress, which was formed in November 2016 and tasked with investigating the alleged bribes of Brazilian companies to Peruvian public officials, has initiated congressional inquiries into the company and other construction companies in Peru. Certain of the company’s former board members and executive officers to have been required to give testimony at hearings before the commission, during which they have affirmed that the company was unaware of Odebrecht’s illicit activities.
Peruvian prosecutors have included José Graña Miró Quesada, the former Chairman of the company, in an investigation for the crime of collusion, and Hernando Graña Acuña, a former board member of the company, for the crime of money laundering against the Peruvian government, each in connection with the IIRSA South project concession (tranches II and III), in which we participated. Both were placed in preventive detention and have since been released. Gonzalo Ferraro Rey, the former Chief Infrastructure Officer of the company, has also been included in an investigation for the crime of money laundering in connection with the same project.
Also in connection with investigations relating to the IIRSA South project concession (tranches II and III), the Peruvian criminal prosecution has moved to charge the company and our construction subsidiary, GyM, as criminal defendants. Separately, the Ad Hoc Prosecutor has moved to directly include the company as a civilly-responsible third party in connection with the same projects. A decision from the Peruvian judiciary on whether our company constitutes a civilly-responsible third party remains pending. In response, the Peruvian First National Preparatory Investigation Court (Primer Juzgado de Investigación Preparatoria Nacional) notified us of its decision to formally include the company and GyM in its criminal investigation. We have appealed the court’s decision to include the company and GyM in the criminal investigation. We cannot assure you that our position in these proceedings will prevail.
The Ad Hoc Prosecutor has also moved to directly include our subsidiary, GyM S.A., as a civilly-responsible third party in the investigation relating to Tranches 1 and 2 of Line 1 of the Lima Metro. If our subsidiary’s former or current officers are included and convicted, it may be required to pay civil damages to the Peruvian government. A decision from the Peruvian judiciary regarding these matters remains pending, and we cannot assure you that our subsidiary will not be included or that our position would ultimately prevail.
A conviction of corruption or resolutions with government authorities may lead to criminal and civil fines as well as penalties, sanctions, injunctions against future conduct, profit disgorgement, disqualifications from directly and indirectly engaging in certain types of business, the loss of business licenses or permits or other restrictions. Moreover, our involvement in corruption investigations, and any findings of wrongdoing in such investigations, could further damage our reputation and have a material adverse impact on our ability to compete for business. Such investigations may also adversely affect our ability to pursue strategic projects, and could potentially result in the termination or modification of certain existing contracts or relationships.
Dividends and Dividend Policy
Dividend Policy
Our current dividend policy, adopted on March 26, 2013, is to distribute between 30% and 40% of the net profit from the preceding year.year, as long as we hold such net profit on a consolidated basis, subject to contractual restrictions on our indebtedness. Holders of our common shares are entitled to receive dividends on a pro rata basis in accordance with their respective number of shares held. Our dividend policy can be modified by a favorable vote of a majority of our shareholders and any changes become effective 30 days after approval.
Article 23 of ourby-laws establishes that dividends distribution must be approved by our shareholders during the annual shareholders’ meeting. The recommendation of our board of directors is required for the distribution of interim dividends, which must be subsequently ratified at a shareholders’ meeting.
Under Peruvian law, companies may distribute up to 100% of their profit (after payment of income tax) subject to a 10% legal reserve until the legal reserve equals 20% of shareholders’ equity.the total value of their capital stock. According to Article 40 of the Peruvian Corporate Law, in order to distribute dividends, profits must be determined in accordance with the individual financial statements of the company.
Payment of Dividends
Dividends are paid to holders of our common shares as of a record date determined by us. In order to allow for the settlement of securities, under the rules of the Peruvian Securities Commission, investors who purchase shares of a publicly-held company three business days prior to a dividend payment date do not have the right to receive such dividend payment. Dividends on issued and outstanding common shares are distributed pro rata.
OurWe may not make any dividend payments until all outstanding amounts under our repayment obligations of the GSP performance guarantee have been repaid in full. In addition, we may not be able to make any dividend payments until all outstanding amounts under our syndicated loan agreement containsand our corporate guarantee of the GSP bridge loan have been repaid or discharged, as the case may be, in full. For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
In addition, the indentures of the Senior Secured Notes issued by GyM Ferrovías and the Corporate Bonds issued by Norvial, contain, respectively, certain customary covenants, including restrictions on our ability to pay dividends if we are in default under the agreement. Our subsidiaries have also agreed toagreement, and our medium term loan with Credit Suisse imposes, certain limitations in an event of default, on theirour ability to pay dividends based on compliance with certain financial ratios.distribute cash dividends. See “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.”
Holders of common shares are not entitled to interest on accrued dividends. In addition, under Article 232 of the Peruvian Corporate Law, the right to collect accrued dividends declared by a publicly-held company expires ten years from the original dividend payment date.
Previous Dividend Payments
The following table sets forth the amounts of cash dividends declared and paid since 20082015 for our common shares.
Dividends Paid | Per Share | |||||||
(in S/.) | ||||||||
2009 | 29,437,792 | 0.05272905 | ||||||
2010 | 26,879,790 | 0.04814715 | ||||||
2011 | 55,015,923 | 0.098544656 | ||||||
2012 | 86,722,433 | 0.155337434 | ||||||
2013 | 112,126,908 | 0.169875409 |
Dividends Paid | Per Share | |||||||
(in S/.) | ||||||||
2015 | 104,910,523 | 0.158942384 | ||||||
2016 | 30,854,000 | 0.046700000 | ||||||
2017 | — | — |
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The Company isExcept as disclosed in our audited consolidated financial statements and in this annual report, we have not aware ofexperienced any significant changes bearing upon its financial condition since the date of theour audited consolidated financial statements included in this annual report.
THE OFFER AND LISTING |
Market Price of Our Common Shares and ADSs
Our ADSs
On July 29, 2013, we completed our initial equity offering in the United States of 19,534,884 ADSs, representing 97,674,420 common shares. Our ADSs are listed on the New York Stock Exchange under the symbol “GRAM.” On March 31, 2014,May 11, 2017, the closing price on the New York Stock Exchange was 17.26US$3.26 per ADS.
The following table sets forth, for each of the most recent nine months and for the current monthperiods indicated below, the high and low closingmarket prices for our ADSs in U.S. dollars, of our ADSs on the New York Stock Exchange as reported by the New York Stock Exchange.
High | Low | High | Low | |||||||||||||
2013 | ||||||||||||||||
July (from July 24 to July 31) | 21.13 | 20.90 | ||||||||||||||
August | 21.13 | 19.06 | ||||||||||||||
September | 21.70 | 19.96 | ||||||||||||||
October | 21.66 | 18.52 | ||||||||||||||
Full year: | in US$ | |||||||||||||||
2013 (since July 29) | 22.07 | 18.52 | ||||||||||||||
2014 | 21.97 | 11.70 | ||||||||||||||
2015 | 12.68 | 2.88 | ||||||||||||||
2016 | 8.79 | 2.20 | ||||||||||||||
2017 | 6.88 | 2.17 | ||||||||||||||
Quarters: | ||||||||||||||||
2016 | ||||||||||||||||
First Quarter | 4.20 | 2.20 | ||||||||||||||
Second Quarter | 7.64 | 3.93 | ||||||||||||||
Third Quarter | 8.79 | 7.10 | ||||||||||||||
Fourth Quarter | 8.67 | 6.35 | ||||||||||||||
2017 | ||||||||||||||||
First Quarter | 6.88 | 2.17 | ||||||||||||||
Second Quarter | 4.50 | 2.91 | ||||||||||||||
Third Quarter | 4.81 | 2.99 | ||||||||||||||
Fourth Quarter | 5.12 | 2.58 | ||||||||||||||
2018 | ||||||||||||||||
First Quarter | 3.16 | 2.29 | ||||||||||||||
High | Low | |||||||||||||||
Last Six Months: | in US$ | |||||||||||||||
2017 | ||||||||||||||||
November | 22.07 | 19.70 | 5.03 | 2.98 | ||||||||||||
December | 21.56 | 18.67 | 3.24 | 2.58 | ||||||||||||
2014 | ||||||||||||||||
2018 | ||||||||||||||||
January | 21.97 | 19.94 | 3.16 | 2.73 | ||||||||||||
February | 20.35 | 18.63 | 3.11 | 2.45 | ||||||||||||
March | 19.99 | 17.25 | 3.04 | 2.29 | ||||||||||||
April (through April 22) | 18.16 | 16.52 | ||||||||||||||
April | 3.70 | 2.95 | ||||||||||||||
May (through May 11, 2018) | 3.54 | 3.26 |
Our Shares
Our common shares are registered in the Public Registry of Securities held with the Peruvian Securities Commission and are listed on the Lima Stock Exchange under the symbols “GRAMONC1”. On DecemberMarch 31, 2013,2017, the closing price on the Lima Stock Exchange was S/.11.90.2.1 per common share. Our shares represent 6.31% of the General Index of the Lima Stock Exchange (IGBVL) 2014 portfolio. As of December 31, 2013, 702016, 38 record holders of our common shares were located in the United States, according to CAVALI.
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The following table sets forth, for the five most recent full years and for the current yearperiods indicated below, the high and low closing prices of our common shares on the Lima Stock Exchange as reported by the Lima Stock Exchange.
High | Low | |||||||
(in S/.) | ||||||||
2009 | 3.13 | 1.79 | ||||||
2010 | 7.21 | 2.90 | ||||||
2011 | 6.90 | 4.60 | ||||||
2012 | 9.70 | 6.30 | ||||||
2013 | 12.79 | 9.76 | ||||||
2014: | ||||||||
January | 12.30 | 11.30 | ||||||
February | 11.40 | 10.58 | ||||||
March | 11.26 | 9.65 | ||||||
April (through April 22) | 10.12 | 9.29 |
High | Low | |||||||
(in S/.) | ||||||||
2013 | 12.79 | 9.76 | ||||||
2014 | 12.30 | 6.90 | ||||||
2015 | 7.30 | 1.94 | ||||||
2016 | 5.90 | 1.60 | ||||||
2017 | 4.63 | 1.47 |
The following table sets forth, for each quarter of the two most recent years and for the current yearperiods indicated below, the high and low closingmarket prices, andas well as the average daily trading volume for such periods, of our common shares on the Lima Stock Exchange as reported by the Lima Stock Exchange.
High | Low | Average Daily Trading Volume | High | Low | Average Daily Trading Volume | |||||||||||||||||||
(in S/.) | (in S/.) | |||||||||||||||||||||||
2012: | ||||||||||||||||||||||||
Full year: | ||||||||||||||||||||||||
2015 | 7.30 | 1.94 | 150,100 | |||||||||||||||||||||
2016 | 5.90 | 1.60 | 307,874 | |||||||||||||||||||||
2017 | 4.63 | 1.47 | 467,517 | |||||||||||||||||||||
Quarters: | ||||||||||||||||||||||||
2015 | ||||||||||||||||||||||||
First quarter | 8.75 | 6.30 | 377,697 | 7.30 | 4.80 | 156,468 | ||||||||||||||||||
Second quarter | 9.12 | 8.00 | 363,810 | 5.45 | 4.55 | 110,936 | ||||||||||||||||||
Third quarter | 8.53 | 8.10 | 175,856 | 4.60 | 2.38 | 153,138 | ||||||||||||||||||
Fourth quarter | 9.70 | 8.65 | 189,604 | 2.68 | 1.94 | 181,680 | ||||||||||||||||||
2013: | ||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||
First quarter | 11.85 | 9.76 | 241,633 | 3.00 | 1.60 | 282,537 | ||||||||||||||||||
Second quarter | 12.79 | 10.50 | 264,746 | 5.00 | 2.70 | 353,154 | ||||||||||||||||||
Third quarter | 12.25 | 10.80 | 269,021 | 5.90 | 4.64 | 359,053 | ||||||||||||||||||
Fourth quarter | 12.30 | 10.40 | 294,719 | 5.84 | 4.35 | 231,603 | ||||||||||||||||||
2014: | ||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||
First quarter | 12.30 | 9.65 | 295,868 | 4.63 | 1.47 | 586,273 | ||||||||||||||||||
Second quarter | 2.90 | 1.88 | 630,419 | |||||||||||||||||||||
Third quarter | 3.10 | 1.98 | 212,057 | |||||||||||||||||||||
Fourth quarter | 3.39 | 1.70 | 442,321 | |||||||||||||||||||||
2018 | ||||||||||||||||||||||||
First quarter | 2.00 | 1.50 | 286,157 |
The following table sets forth for each of the most recent six months the high and low closing prices of our common shares on the Lima Stock Exchange as reported by the Lima Stock Exchange.
High | Low | |||||||
(in S/.) | ||||||||
2013: | ||||||||
October | 12.05 | 10.40 | ||||||
November | 12.30 | 10.95 | ||||||
December | 11.93 | 10.50 | ||||||
2014: | ||||||||
January | 12.30 | 11.30 | ||||||
February | 11.40 | 10.58 | ||||||
March | 11.26 | 9.65 | ||||||
April (through April 22) | 10.12 | 9.29 |
High | Low | |||||||
(in S/.) | ||||||||
2017 | ||||||||
November | 3.24 | 1.95 | ||||||
December | 1.99 | 1.70 | ||||||
2018 January | 2.00 | 1.81 | ||||||
February | 2.00 | 1.63 | ||||||
March | 1.91 | 1.50 | ||||||
April | 2.42 | 1.90 | ||||||
May (through May 11, 2018) | 2.35 | 2.25 |
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Not applicable.
Not applicable.
Our common shares are traded on the Lima Stock Exchange and our ADSs are traded on the New York Stock Exchange.
Trading in the Peruvian Securities Market
Lima Stock Exchange
As of December 31, 2013,the day of this annual report, there were 282280 companies listed on the Lima Stock Exchange. Established in 1970, the Lima Stock Exchange is Peru’s only securities exchange. On November 19, 2003, the members of the Lima Stock Exchange approved to convert its corporate status to a publicly held corporation. As of December 31, 2013,the day of this annual report, Lima Stock Exchange had a share capital of S/.59,715,840,.182,092,340, divided into 56,405,407173,659,481 class “A” shares and 3,310,4338,432,859 class “B” shares of par value S/.1.00 each. Class “A” shares are entitled to one vote per share while class “B” shares do not have voting rights. As of December 31, 2013,the day of this annual report, the Lima Stock Exchange had 125160 class “A” shareholders and 6964 class “B” shareholders.
Trading on the Lima Stock Exchange is primarily done on an electronic trading system that became operational in August 1995. From the first Monday of November through the second Sunday of March through the first Sunday of November of each year, trading hours are Monday through Friday (except holidays) as follows: 8:20a.m.-8:30 a.m. (pre-market(pre-market ordering); 8:30a.m.-2:55 p.m. (trading); 2:55p.m.-3:00 p.m. (after-market sales); and 3:00p.m.-3:10 p.m. (after-market trading). At all other times, trading hours are from Monday to Friday (except holidays) as follows: 9:00a.m.-9:30 a.m. (pre-market(pre-market ordering); 9:30a.m.-3:55 p.m. (trading); 3:55p.m.-4:00 p.m. (after-market sales); and 4:00p.m.-4:10 p.m. (after-market trading).
Substantially all of the transactions on the Lima Stock Exchange are traded on the electronic system. Transactions during the electronic sessions are executed through brokerage firms and stock brokers on behalf of their clients. Brokers submit orders in the order in which they are received. The orders must specify the type of security as well as the amount and price of the proposed sale or purchase. In order to control price volatility, the Lima Stock Exchange imposes a 15 minute15-minute suspension on trading when the price of a security varies on a single day by more than 15% for Peruvian companies and 30% fornon-Peruvian companies.
Certain information regarding trading on the Lima Stock Exchange is set forth in the table below:
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
Market capitalization (in millions of nuevos soles)(1) | 310,116 | 451,796 | 327,823 | 391,181 | 337,226 | |||||||||||||||
Volume (in millions of nuevos soles) | 16,944 | 19,013 | 21,587 | 19,951 | 16,124 | |||||||||||||||
Average daily trading volume (in millions of nuevos soles) | 68 | 76 | 86 | 79 | 64 |
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||
Market capitalization (in millions of soles)(1) | 391,181 | 337,226 | 360,960 | 309,412 | 416,787 | |||||||||||||||
Volume (in millions of soles) | 19,951 | 16,124 | 17,301 | 12,001 | 15,584 | |||||||||||||||
Average daily trading volume (in millions of soles) | 79 | 64 | 69 | 48 | 62 |
(1) | End-of-period figures for trading on the Lima Stock Exchange. |
The stock market capitalization of companies listed on the Lima Stock Exchange was US$120.7124.0 billion at the end of 2013,2016, compared to US$107.3153.4 billion, US$160.9120.7 billion, US$121.6120.8 billion, and US$153.490.7 billion at the end of 2009, 2010, 20112012, 2013, 2014, and 2012,2015 respectively.
Total market volume in 20132016 was US$ 6.04.6 billion, reflecting a 21.2% decrease29.86% increase compared with 2012.2015. Equity market volume, which represented 68.3%58.4% of total market volume, ended the year at US$4.12.7 billion, 32.9% less40.33% more than the previous year. The repo market, which represented 15.8%10.91% of total market volume, reported volume of US$949498 million in 2013,2016, reflecting an increasea decrease of 1.3%12.50%.
The total number of operations in the market in 2013 decreased2016 increased by 22.8%38.9%, closing the year at 192,355131,649 operations. The number of operations in the equity market in 2013 declined2016 increased by 24.3%45.6% amounting to 179,459122,216 operations.
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The S&P/BVL Peru General Index of the Lima Stock Exchange (Índice General de la Bolsa de Valores de Lima) increased, in U.S. dollars terms, 101.0% in 2009 and 65.0% in 2010, reaching 23,374(Indice S&P/BVL Peru General) reached 20,629 points as of December 31, 2010, the highest value over the past three years.2012. In 2011,2013, the index reported losses amounting to 16.7%,registered a decrease of 23.6% while 2012 registered an increase of 5.9%. In 2013,in 2014, it reached 15,75314,794 points, decreasing 23.6%6.1% compared to 2012.2013. In 2015, it reached 9,849 points, decreasing 33.4% compared to 2014. In 2016, it reached 15,567 points, increasing 58.1% compared to 2015.
Regulation of the Peruvian Securities Market
The regulatory framework for the Peruvian securities market is established in the Securities Market Law approved by Legislative Decree No. 861, whose unified sole text was enacted by Supreme Decree
No.093-2002-EF, as amended (Ley(Ley del Mercado de Valores)Valores), and the resolutions issued from time to time by the Peruvian Securities Commission. The purpose of the Securities Market Law is to promote the ordered development and transparency of the Peruvian securities markets, adequate protection for investors and the principles under which the Peruvian securities market is intended to operate. The Securities Market Law contains the general rules for: (i) primary and secondary public offerings of securities; (ii) public offering of securities for acquisitions;acquisitions and sales; (iii) local and international offerings, including simultaneous offerings; (iv) the Public Registry of Securities (the (Registro Público del Mercado de Valores)Valores); (v) reporting obligations of material information (hechos de importancia) by the issuers of securities recorded in the Public Registry of Securities and by the entities that are subject to the regulation and supervision of the Peruvian Securities Commission; (vi) the enforcement of insider trading; (vii) privileged information and confidentiality regulations and prohibitions against price manipulation,manipulation; (viii) the broker-dealers; (ix) the Lima Stock Exchange; (x) CAVALI (the settlement and registry entity for transactions executed on the Lima Stock Exchange); (xi) other entities that are required to be registered at the Peruvian securities market Public Registry of Securities; (xii) capital market instruments and operations, including securitizations; and (xiii) mutual funds and investments funds publicly placed and their respective management companies.
The Peruvian securities market is regulated and supervised by the Peruvian Securities Commission (Superintendencia de Mercado de Valores), a governmental entity reporting to the Peruvian Ministry of Economy and Finance, with functional, administrative, economic, technical and budgetary autonomy. The Peruvian Securities Commission is governed by the Superintendent, designated by the Peruvian Ministry of Economy and Finance, and by a five member board of directors convened by the Superintendent (who acts as Chairman of the board). The other four members are appointed by the government under applicable legislation. The Peruvian Securities Commission issues from time to time resolutions which provide specific regulations or may impose sanctions in cases of violations of the Securities Market Law or the resolutions issued by the Peruvian Securities Commission.
The Peruvian Securities Commission, in order to achieve the Securities Market Law´s purposes, has broad regulatory and supervisory powers, including (i) issuing general mandatory rules; (ii) supervision and oversight of compliance with applicable legislation (including the power to order inspections and require the submission of information and documentation by entities that are under its jurisdiction and summon and interrogate any person that may contribute to its investigations); (iii) imposing sanctions; (iv) managing the Public Registry of Securities;Peruvian securities market public registry; (v) authorizingverifying that public offerings ofmeet filing requirements and that the securities and the recordingsubject to such offerings are duly recorded at the Public RegistryPeruvian securities market public registry of Securities that may be the subject of such public offerings and the respective programs for issuances;securities; (vi) authorizing the incorporation and functioning of entities under its scope of supervision; and (vii) monitoring the content and accuracy of the financial and other information that is filed with the Peruvian Securities Commission. The Peruvian Securities Commission is responsible for the enactment, interpretation and enforcement of rules and regulations issued under the Securities Market Law.
Disclosure Obligations
Issuers of securities registered with the Peruvian Securities Commission are required to disclose material information relating to the issuer. Pursuant to the Securities Market Law and relevant regulations enacted thereunder, all material information in connection with the issuer of registered securities (such as our common shares), its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities must be disclosed. Accordingly, issuers must file with the Peruvian Securities Commission mainly two types of information: (a)(i) financial information, including unaudited interim financial statements on a quarterly basis (which are not required to be subject to limited review by external auditors), and audited annual consolidated financial statements on an annual basis, and (b)(ii) material information relating to the issuer and its activities that may significantly affect the price, offering or trading of the issued securities, and in general, all the information that may be relevant for investors to be able to make investment decisions.
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In order to comply with the foregoing disclosure obligations, issuers must disclose information to the Peruvian Securities Commission and, if the securities are listed, with the Lima Stock Exchange as soon as practicable but not later than one businessthe day after having becomeon which the event took place or the issuer became aware of such information.
Not applicable.
Not applicable.
Not applicable.
Not applicable.A. Share Capital
Not applicable.
ITEM 10. ADDITIONAL INFORMATIONB. Memorandum and Articles of Association
Not applicable
Set forth below is certain information relating to our share capital, including brief summaries of certain material provisions of our by-laws,bylaws, Peruvian Corporate Law and certain other laws and regulations of Peru, all as in effect as of the date hereof.
General
We are a publicly-held corporation under Peruvian Corporate Law and registered with the Public Registry of Corporations in Lima. We are currently listed on the Lima Stock Exchange and the New York Stock Exchange.
Ourby-laws provide that our principal corporate purposes are to engage in any and all activities related to the construction and real estate businesses; to provide services related to the mining and hydrocarbons industries; to participate in all stages of development of public services and other infrastructure concessions; and to provide management and corporate services to related and third parties. In addition, our company can realize investments and corporate transactions, including the acquisition, holding and transfer of securities of Peruvian and foreign companies.
Common Shares and ADSs
As of December 31, 2013,2016, we had 660,053,790 common shares outstanding. As of December 31, 2013,2016, there were 1,3382,000 owners of record of our common shares. Our common shares have a par value of S/.1.00 per share and have been fully subscribed and are fully paid. Our common shares are registered in the Securities Public Registry of the Peruvian Securities Commission and are listed on the Lima Stock Exchange. Our ADSs are listed on the New York Stock Exchange.
Shareholders’ Liability
Under Peruvian Corporate Law, holders of our common shares cannot vote on matters with respect to which they have a conflict of interest.
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Under Article 133 of the Peruvian Corporate Law, a shareholder must abstain from voting when faced with a conflict of interest. A resolution approved in disregard of this provision may be challenged under Article 139 of the Peruvian Corporate Law and the shareholders that participated in the determination in breach of this provision, if their vote was key in attaining the required majority, may be held jointly liable.
Redemption and Rights of Withdrawal
Under Article 200 of the Peruvian Corporate Law, holders of our common shares have redemption rights if: (i) we change our corporate purpose; (ii) a change occurs in the place of organization to a foreign country; or (iii) any transformation, merger or significantspin-off occurs with respect to our company.
Preemptive and Accretion Rights
If we increase our share capital, holders of our common shares have the right to subscribe to new common shares on a pro rata basis. Holders of common shares have preemptive rights in order to maintain their share interest in our share capital, unless the capital increase (i) results from a conversion of debt to common shares, (ii) is approved by shareholders representing at least 40% of the subscribed voting shares provided that the capital increase does not favor, directly or indirectly, certain shareholders to the detriment of others, or (iii) results from a corporate reorganization.
Shareholders who are in default of any payments relating to subscribed but unpaid shares may not exercise their preemptive rights.
Voting Rights and Dividends
Holders of common shares are entitled to one vote per share, with the exception of the election of the board of directors, where each holder is entitled to one vote per share per nominee. Each holder’s votes may be cast for a single nominee or distributed among the nominees at the holder’s discretion. To that effect, each of our common shares gives the holder the right to as many votes as there are directors to be elected. Shareholders may pool votes in favor of one person or distribute them among various persons. Those candidates for the board who receive the most votes are elected directors. Holders of common shares may attend and vote at shareholders’ meetings either in person or through a proxy.
Holders of common shares have the right to participate in the distribution of dividends and shareholder equity resulting from liquidation. Ourby-laws do not establish a maximum time limit for the payment of the dividends. However, according to Article 232 of the Peruvian Corporate Law, the right to collectpast-due dividends in the case of companies that are publicly held companies, such as ours, expires ten years after the date on which the dividend payment was due.
Our share capital may be increased by a decision of holders of common shares at a shareholders’ meeting. Capital reductions may be voluntary or mandatory and must be approved by holders of common shares at a shareholders’ meeting. Capital reductions are mandatory when accumulated losses exceed 50% of the capital and to the extent such accumulated losses are not offset by accumulated earnings and capital increases within the following fiscal year. Capital increases and reductions must be communicated to the Peruvian Securities Commission, the Lima Stock Exchange and SUNAT. Voluntary capital reductions must also be published in the official gazette El Peruano and in a widely circulated newspaper in the city in which we are located.
Liquidation Rights
If we are liquidated, our shareholders have the right to receive net assets resulting from the liquidation, after we comply with our obligation to pay all our creditors and after discounting any existing dividend liabilities. For this reason, we cannot assure that we will be able to reimburse 100% of the book value of the common shares in case of bankruptcy or liquidation.
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Ordinary and Extraordinary Meetings
Pursuant to Peruvian Corporate Law and ourby-laws, the annual shareholders’ meeting must be held during the three-month period after the end of each fiscal year. Additional shareholders’ meetings may be held during the year. Because we are a publicly-held corporation, we are subject to the special control of the Peruvian Securities Commission, as provided in Article 253 of the Peruvian Corporate Law. If we do not hold the annual shareholders’ meeting during the three-month period after the end of each fiscal year or any other shareholders’ meeting required by ourby-laws, a public notary or a competent judge shall call for such a meeting at the request of at least one shareholder of the common shares. Such meeting will take place within a reasonable period of time.
Pursuant to the Peruvian Corporate Law, other shareholders’ meetings are convened by the board of directors when deemed convenient by the company or when it is requested by notarized letter by the holders of at least 5% of our common shares which voting rights are not suspended according to Peruvian Law. Pursuant to section 255 of the Peruvian Corporate Law, if the board expressly or implicitly refuses to convene the shareholders’ meeting, a notary public or a competent judge will call for such meeting at the request of holders of at least 5% of our common shares. If a notary public or competent judge calls for a shareholders’ meeting, the place, date and hour of the meeting, the agenda, the person who will preside the meeting and the notary public who will certify the resolutions of the meeting shall be indicated in the meeting notice. If the meeting called is other than the annual shareholders’ meeting or a shareholders’ meeting required by the Peruvian Corporate Law or theby-laws, the agenda will contain those matters requested by the shareholders who requested the meeting.
Notices of Meetings
Since we are a publicly-held corporation, notice of shareholders’ meetings must be given by publication of a notice. The publication shall occur at least 25 days prior to any shareholders’ meeting in the Peruvian Official Gazette, El Peruano, and in a widely circulated newspaper in the city in which we are located.
Quorum and Voting Requirements
According to Article 33 of ourby-laws and Article 257 of the Peruvian Corporate Law, shareholders’ meetings called for the purpose of considering a capital increase or decrease, the issuance of obligations, a change in theby-laws, the sale in a single act of assets with an accounting value that exceeds 50% of our share capital, a merger, division, reorganization, transformation or dissolution, are subject to a first, second and third quorum call, with each of the second and third quorum call to occur upon the failure of the preceding one. A quorum for the first call requires the presence of shareholders holding 50% of our total common shares. For the second call, the presence of shareholders holding at least 25% of our total common shares is adequate, while for the third call there is no quorum requirement. These decisions require the approval of the majority of the common shares represented at the shareholders’ meeting. Shareholders’ meetings convened to consider all other matters are subject to a first and second quorum call, with the second quorum call to occur upon the failure of the first quorum.
In accordance with Peruvian Corporate Law, only those holders of common shares whose names are registered in the company’s stock ledger not less than 10 days in advance of a meeting will be entitled to attend the shareholders’ meeting and to exercise their rights.
Limitations on the Rights ofNon-Residents or Foreign Shareholders
There are no limitations under ourby-laws or Peruvian Corporate Law on the rights ofnon-residents or foreign shareholders to own securities or exercise voting rights with respect to our securities.
Disclosure of Shareholdings and Tender Offer Regulations
Disclosure of Shareholdings
There are no provisions in ourby-laws governing the ownership threshold above which share ownership must be disclosed.
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However, according to Article 10 of CONASEV Resolution Nº090-2005-EF-94.10, as amended, we must inform the Peruvian Securities Commission of the members of our economic group, comprised by our subsidiaries, and a list of our holders of common shares owning more than a 5% share interest, as well as any change to such information.
Tender Offer Regulations
Peruvian securities regulations include mandatory takeover rules applicable to the acquisition of control of a publicly held company.
Subject to certain conditions, such regulations generally establish the obligation to launch a tender offer when a person or group of persons acquires a significant interest in a publicly held company. According to the provisions set forth in CONASEV Resolution No.009-2006-EF-94.10, a person acquires a significant interest in a listed company when such person (a)(i) holds or has the power to exercise directly or indirectly 25%, 50% or 60% of the voting rights in a listed company, or (b)(ii) has the power to appoint or remove the majority of the board members or to amend itsby-laws.
A tender offer may be launched prior or following an acquisition of the significant interest. The tender offer may be launched after the “significant interest” is acquired if it is acquired (a)(i) by means of an indirect transaction, defined as a relevant acquisition or interest increase through the acquisition of securities issued by a company that in turn holds share capital of the target company; (b)(ii) as a consequence of a public sale offer, or (c)(iii) in no more than four transactions within a three-year period.
This mandatory procedure has the effect of alerting other shareholders and the market that an individual or financial group has acquired a significant percentage of a company’s voting shares, and gives other shareholders the opportunity to sell their shares at the price offered by the purchaser. The purchaser is required to launch a tender offer unless: (a)(i) shareholders representing 100% of the voting rights consent in writing, (b)(ii) voting shares are acquired by a depositary in order to subsequently issue ADSs, or (c)(iii) voting shares are acquired pursuant to the exercise of preemptive rights.
Changes in Capital
Ourby-laws do not establish special conditions to increase or reduce our share capital beyond what is required under Peruvian Corporate Law.
Anti-Takeover Provisions
Ourby-laws do not contain any provision that would have the effect of delaying, deferring or preventing a change of control.
Board of Directors
For additional information regarding our board of directors, see “Item 6. Directors, Senior Management and Employees—Directors and Senior Management.”
Form and Transfer
Common shares may be either physical share certificates in registered form or book-entry securities in the CAVALI S.A. ICLV book-entry settlement system also in registered form. Furthermore, in the case of shares represented in book entries, the issuance of new shares which result from share splits or similar corporate events must also be represented in said form.
Furthermore, the Peruvian Corporate Law forbids publicly-held corporations, such as us, from including in theirby-laws stipulations limiting the transfer of their shares or restraining their trading in other ways. According to Article 18 of ourby-laws, we cannot recognize a shareholders’ agreement that contemplates limitations, restrictions or preferential rights on the transfer of shares, even if such an agreement is recorded in our stock ledger (matrícula de acciones) or in CAVALI. As of the date of this annual report, no shareholders’ agreement is recorded in our stock ledger.
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Arbitration
Ourby-laws include an arbitration clause applicable to disputes arising from the interpretation of our bylaws or Peruvian Corporate Law and their complementary provisions, among our company, our management and our shareholders. Any such arbitration will be subject to the regulations of the ArbritrationArbitration Center of the Lima Chamber of Commerce. The material terms of the arbitration clause are as follows:
The arbitration clause does not apply to claims based on violations of U.S. securities laws.
We do not have any material contracts other than contractsSyndicated Loan
In December 2015 we entered into a medium term loan credit agreement for up to US$200 million (S/.672 million) with Credit Suisse AG, Cayman Islands Branch, and Credit Suisse Securities (USA) LLC. As a result of the termination of the GSP gas pipeline concession, in our ordinary course of business. For a description of our indebtedness and principal concessions or similar agreements, seeJune 2017, we entered into an amendment to the credit agreement. See “Item 5. Operating and Financial Review and Prospects—LiquirityLiquidity and Capital Resources—Indebtedness”Indebtedness.” This agreement and “Item 4. Informationthe amendments thereto have been filed as Exhibit 10.01 to this annual report.
Term Loan
As a result of the Company—Business Overview—Infrastructure—Oiltermination of the GSP gas pipeline concession, our proportional guarantee of the GSP bridge loan became due. On June 27, 2017 we entered into a new US$78.7 million (S/.264.8 million) term loan with Natixis, BBVA, SMBC and Gas Production.MUFJ, the proceeds of which were used to prepay GSP bridge loan in full. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.” This agreement and an amendment thereto has been filed as Exhibit 10.02 to this annual report.
Financial Stability Framework Agreement
On July 31, 2017, we, and certain of our subsidiaries, GyM, CAM Peru S.A., Vial y Vives—DSD and Concesionaria Vía Expresa Sur S.A., entered into a Financial Stability Framework Agreement with the following financial entities: Scotiabank Peru S.A.A., Banco Internacional del Perú S.A.A., BBVA Banco Continenal, Banco de Crédito del Perú, Citibank del Perú S.A. and Citibank N.A. In April 2018, we repaid US$73.9 million of the facility with the proceeds of the sale of Stracon. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.” This agreement has been filed as Exhibit 10.03 to this annual report.
GSP Concession and Subordination Arrangements
In November 2015 we acquired a 20% interest in GSP, an entity which, on July 22, 2014, signed a concession agreement with the government of Peru to build, operate and maintain the natural gas pipeline transportation system to satisfy the demand of certain cities in the southern region of Peru.
On January 24, 2017, the government of Peru terminated the contract, due to the impossibility of obtaining financial closing. In accordance with the concession contract, the Peruvian government is required to carry out an auction process to sell GSP’s assets and obtain a new concessionaire within one year of the contract termination, with the funds raised in the sale to be used to pay the existing concessionaire for its investment in the project. Although the concession contract provides that payment must be made within one year of termination, the Peruvian Ministry of Energy and Mines has not made payment or, to our knowledge, initiated the payment process. A summary of these provisions of the concession contract have been filed as Exhibit 10.04 to this annual report.
In 2016, in connection with efforts to restructure or sell Odebrecht’s participation in GSP, due to the corruption scandal surrounding Odebrecht, Odebrecht contractually agreed to subordinate its claims under the concession to the other project partners, Enagás and ourselves. As a result, we and Enagas may be entitled to repayment of our percentage payment under the concession contract prior to Odebrecht. However, on January 3, 2018, Odebrecht commenced arbitration proceedings against us, our subsidiary GyM and Enagás, seeking to invalidate the contractual subordination and certain voting and other arrangements. These contractual arrangements have been filed as Exhibit 10.05 to this annual report.
For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”
Since August 1990, there have been no exchange controls in Peru and all foreign exchange transactions are based on free market exchange rates. Prior to August 1990, the Peruvian foreign market consisted of several alternative exchange rates. Additionally, during the 1990s, the Peruvian currency has experienced a significant number of large devaluations, and Peru has consequently adopted, and operated under, various exchange rate control practices and exchange rate policies, ranging from strict control over exchange rates to market determination of rates. Current Peruvian regulations on foreign investment allow the foreign holders of equity shares of Peruvian companies to receive and repatriate 100 percent of the cash dividends distributed by such companies. Such investors are allowed to purchase foreign exchange at free market currency rates through any member of the Peruvian banking system and transfer such foreign currency rates through any member of the Peruvian banking system and transfer such foreign currency outside Peru without restriction.
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Peruvian Tax Considerations
The following is a general summary of material Peruvian tax matters under Peruvian law, as in effect on the date of this annual report, and describes the principal tax consequences of ownership of ADSs and common shares bynon-resident individuals or entities (“(“Non-Peruvian Holders”). Legislative, judicial or administrative changes or interpretations may, however, be forthcoming. Any such changes or interpretations could affect the tax consequences to holders of ADSs and common shares and could alter or modify the conclusions set forth herein. This summary is not intended to be a comprehensive description of all of the tax considerations that may be relevant to a decision to make an investment in the ADSs.ADSs or common shares. In addition, it does not describe any tax consequences arising under the laws of any taxing jurisdiction other than Peru or applicable to an individual or entity resident of Peru or to a person with a permanent establishment in Peru.
For purposes of Peruvian taxation:
Cash Dividends and Other Distributions
Cash dividends paid toNon-Peruvian Holders with respect to common shares and amounts distributed with respect to ADSs are currently subject to Peruvian withholding income tax at a rate of 6.8%. For distributions occurring in 2017 and 2018, the applicable withholding rate will be 8%, whereas from 2019 the applicable withholding rate will be 9.3%. Nevertheless, a 4.1%. withholding tax rate will apply on distributions of retained profits and other concepts distributable as dividends reflected in the accounting statements of 2014. As a general rule, the distribution of additional common shares representing profits, the distribution of shares which differ from the distribution of earnings or profits, as well as the distribution of preemptive rights with respect to common shares, which are carried out as part of a pro rata distribution to all shareholders, will not be subject to Peruvian income tax or withholding taxes.
Capital Gains
Pursuant to Article 6 of the Peruvian income tax law, individuals and domiciled entities resident in Peru are subject to Peruvian income tax on their worldwide income while Non-Peruvian Holdersnon-domiciled entities are subject to Peruvian income tax only on their Peruvian source income.
Peruvian income tax law provides that income derived from the disposal of securities issued by Peruvian entities is considered Peruvian source income and is therefore subject to income tax. Under current Peruvian income tax law, capital gains resulting from the disposal of ADRsAmerican Depositary Receipts (ADRs) that represent shares issued by Peruvian entities are considered Peruvian source income and therefore are subject to Peruvian income tax. Peruvian income tax law also provides that the taxable income resulting from the disposal of securities is equal to the difference between the sale price of the securities (which may not be less than their fair market value) and their tax basis.
Notwithstanding the foregoing, capital gains resulting from the disposal of ADSs or beneficial interest in ADSs that represent shares issued by a Peruvian entity are not considered Peruvian source income, and therefore are not subject to Peruvian income tax.
In the event ADSs are exchanged into common shares and such common shares are disposed of, capital gains resulting therefrom will be subject to an income tax rate of either 5% or 30%, depending on where the transaction takes place. If the transaction is consummated in Peru, any capital gain will be subject to an income tax
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rate of 5%; and if the transaction is consummatedperformed outside of Peru, any capital gain will be subject to a 30% income tax rate.
Peruvian income tax law regulations have stated with respect to the transfer of common shares, that transactions are deemed to be consummated in Peru if the common shares are transferred through the Lima Stock Exchange. From 2016 through December 31 of 2019, pursuant to the Law 30341, capital gains resulting from a transfer of: (i) Common shares and investment shares, (ii) ADRs and Global Depositary Receipts (GDRs), (iii) Exchange Trade Funds (ETF) units that have underlying shares and / or securities
representing debt, (iv) representative securities of debt, (v) Certificates of participation in mutual funds for investment in securities, (vi) Certificates of participation in investment Funds in Rent of Real Property (FIRBI) and certificates of participation in Trustee of Securitization for Investment in Rent of Real Estate (FIBRA), and (vii) Negotiable invoices, in each case, through the Lima Stock Exchange will be exempt from income tax, provided, however, that the following conditions are met:
(a) The transfer must be performed through a centralized trading mechanism supervised by the Securities Market Superintendence;
(b) In any 12 months period, neither the seller or any person related to him must dispose of more than 10% of the total number of common shares issued by the company through one or more simultaneous or successive operations; and
(c) The shares must have a “market presence”, meaning that transactions in respect of those shares for a value exceeding four Tax Units (currently, S/.16,200) shall have occurred in at least 27 business days out of any 180 business day period including the date of the transaction.
Any gain resulting from the conversion of ADSs into common shares or common shares into ADSs will not be subject to taxation in Peru.
Likewise, it is important to notice that if after applying the exemption, the issuer delisted the securities from the Registry of the Lima Stock Exchange, in whole or in part, in an act or progressively, within the next 12 months after the disposal is made, the exemption that is applied to the securities unlisted is lost.
AnyNon-Peruvian Holder entities who acquires common shares will have the following tax basis: (i) for common shares purchased by the transferor, the acquisition price paid for the shares; (ii) for common shares received by the transferor as a result of a share capital increase because of a capitalization of net profits, the par value of such common shares; (iii) for other common shares received free of any payment, tax basis will be: (x) zero or the cost borne by the transferor, in the case of individuals and (y) the fair market value at the time of the acquisition, in the case of entities,entities; and (iv) for common shares of the same type acquired at different opportunities and at different values, the tax basis will be the weighted average cost. In cases where common shares are sold byNon-Peruvian Holders outside the Lima Stock Exchange, the tax basis must be certified by the Peruvian tax administration prior to the time payment is made to the transferor; otherwise it would not be possible to deduct the tax basis and the 30% Peruvian income tax would apply to the total sale price. Under Peruvian income tax law, tax basis certification is granted by the Peruvian tax authorities within 30 business days after the filing of the corresponding application. If the Peruvian tax authorities do not respond within such 30 daythe abovementioned period, the tax basis calculation presented for approval by the transferor iswill be deemed automatically approved.
In any transaction relating to Peruvian securities through the Lima Stock Exchange, CAVALI (the Peruvian clearing house) will act as withholding agent of the Peruvian income tax. If the purchaser is a resident in Peru and the sale is not performed through the Lima Stock Exchange, the purchaser will act as withholding agent. In other cases, the transferor shall be obliged to self-assess the tax and pay it to the Peruvian tax authorities within the first 12 business days of the month following the transfer.
Other Considerations
No Peruvian estate or gift taxes are imposed on the gratuitous transfer of ADSs or common shares. No stamp, transfer or similar tax applies to any transfer of ADSs or common shares, except for commissions payable by seller and buyer to the Lima Stock Exchange (0.15%(0.021% of value sold), fees payable to the Peruvian Securities Commission (0.1%(0.0135% of value sold), brokers’ fees (about 0.05% to 0.50% of value sold) and value added tax (at the rate of 18%) on commissions and fees. Any investor who sells its common shares on the Lima Stock Exchange will incur these fees and taxes upon purchase and sale of the common shares.
United States Federal Income Tax Considerations
The following summary describes certain United States federal income tax consequences to a United States Holder (as defined below) of the purchase, ownership and disposition of our common shares and ADSs as of the date of this annual report. Except where noted, this summary deals only with common shares and ADSs held as capital assets (generally, property held for investment). As used herein, the term “United States Holder” means a beneficial owner of common shares or ADSs that is for United States federal income tax purposes:
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This summary does not represent a detailed description of the United States federal income tax consequences applicable to you in light of your particular circumstances and does not address the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:
The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. There is currently no income tax treaty between the United States and Peru that would provide for United States federal income tax consequences different than the consequences under the foregoing authorities. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.
If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) holds our common shares or ADSs, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common shares or ADSs, you should consult your tax advisors.
This summary does not contain a detailed descriptionaddress the effects of all the Medicare tax on net investment income or other United States income tax consequences such as United States federal incomeestate or gift tax consequences, to you in light of your particular circumstances and does not address the effects of any state, local ornon-United States tax laws. If you are considering the purchase, ownership or disposition of our common shares or ADSs, you should consult your own tax advisors concerning the United States federal income tax consequences to you in light of your particular situation as well as any consequences arising under the laws of any other taxing jurisdiction.
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ADSs
If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying common shares that are represented by such ADSs. Accordingly, deposits or withdrawals of common shares for ADSs will not be subject to United States federal income tax.
Taxation of Dividends
The gross amount of distributions, other than certain pro rata distributions of common shares, on the ADSs or common shares (including amounts withheld to reflect Peruvian withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles.
To the extent that the amount of any distribution (including amounts withheld to reflect Peruvian withholding taxes) exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as atax-free return of capital, causing a reduction in the adjusted basis of the ADSs or common shares, and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend. Such dividends (including any withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of the common shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code.
With respect tonon-corporate United States Holders, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. Anon-United States corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on common shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs, which are listed on the New York Stock Exchange, will be considered readily tradable on an established securities market in the United States. Based on existing guidance, it is not entirely clear whether our common shares will be considered readily tradable on an established securities market in the United States because only the ADSs, not the underlying common shares, will beare listed on a securities market in the United States. We believe that dividends we pay on our common shares that are represented by ADSs, but not our common shares that are not so represented, will meet such conditions required for the reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years.Non-corporate United States Holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You should consult your own tax advisors regarding the application of these rules given your particular circumstances.
The amount of any dividend paid in nuevos soles will equal the U.S. dollar value of the nuevos soles received, calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by you, in the case of the common shares, or by the depositary, in the case of ADSs, regardless of whether the nuevos soles are converted into U.S. dollars at that time. If the nuevos soles received as a dividend are converted into U.S. dollars on the date they are received, you generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the nuevos soles received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a tax basis in the nuevos soles equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the nuevos soles will be treated as United States source ordinary income or loss.
Subject to certain conditions and limitations, Peruvian withholding taxes on dividends may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or common shares will be treated as foreign source income and
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will generally constitute passive category income. However, in certain circumstances, if you have held the ADSs or common shares for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for any Peruvian withholding taxes imposed on dividends paid on the ADSs or common shares. If you do not elect to claim a United States foreign tax credit, you may instead claim a deduction for Peruvian income tax withheld, but only for a taxable year in which you elect to do so with respect to all foreign income taxes paid or accrued in such taxable year. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.
Taxation of Capital Gains
For United States federal income tax purposes, you will recognize taxable gain or loss on any sale or exchange of ADSs or common shares in an amount equal to the difference between the amount realized for the ADSs or common shares and your tax basis in the ADSs or common shares, in each case as determined in U.S. dollars. Such gain or loss will generally be capital gain or loss. Capital gains ofnon-corporate United States Holders derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
If a Peruvian income tax is withheld on the sale or other disposition of our ADSs or common shares, your amount realized will include the gross amount of the proceeds of that sale or other disposition before deduction of the Peruvian income tax. See “—Peruvian Tax Considerations—Capital Gains” for a description of when a sale or other disposition of our ADSs or common shares may be subject to taxation by Peru. Any gain or loss recognized by you will generally be treated as United States source gain or loss for foreign tax credit purposes. Consequently, in the case of gain from the disposition of ADSs or common shares that is subject to Peruvian income tax, you may not be able to benefit from the foreign tax credit for that Peruvian income tax (i.e., because the gain from the disposition would be United States source), unless you can apply the credit (subject to applicable limitations) against United States federal income tax payable on other income from foreign sources. Alternatively, you may take a deduction for the Peruvian income tax if you do not take a credit for any foreign taxes paid or accrued during the taxable year. You are urged to consult your tax advisors regarding the tax consequences if Peruvian income tax is imposed on a disposition of ADSs or common shares, including the availability of the foreign tax credit under your particular circumstances.
Passive Foreign Investment Company
We do not believe that we are, for United States federal income tax purposes, a passive foreign investment company (a “PFIC”), and we expect to operate in such a manner so as not to become a PFIC. If, however, we are or become a PFIC, you could be subject to additional United States federal income taxes on gain recognized with respect to the ADSs or common shares and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules.Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us (as discussed above under “—Taxation of Dividends”) if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.
Information Reporting and Backup Withholding
In general, information reporting will apply to dividends in respect of our ADSs or common shares and the proceeds from the sale, exchange or redemption of our ADSs or common shares that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient. Backup withholding may apply to such payments if you fail to provide a taxpayer identification number or certification of other exempt status or fail to report in full dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the Internal Revenue Service in a timely manner.
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The above description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership or disposition of our ADSs or common shares. You should consult your own tax advisors concerning the overall tax consequences to you, including the consequences under laws other than United States federal income tax laws, of an investment in our ADSs or common shares.
F. Dividends and Paying Agents
Not applicable.
Not applicable.
H. Documents |
We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-1 under the U.S. Securities Act. This annual report does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed.Display
We are subject to the informational requirements of the U.S. Securities Exchange Act of 1934, or the Exchange Act. Accordingly, we are required to filesubmit reports and other information withto the SEC, including annual reports on Form20-F and reports on Form6-K. You may inspect and copy reports and other information submitted to be filed with the SEC at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. Copies of the materials may be obtained from the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at1-800-SEC-0330. In addition, the SEC maintains an Internet website athttp://www.sec.gov, from which you can electronically access the registration statement and itsthese materials.
As a foreign private issuer, we are required to file with the SEC annual reports on Form20-F, but we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. For example, we are not required to prepare and issue quarterly reports. However, we have furnished, and intend to continue to furnish, our shareholders with annual reports containing consolidated financial statements audited by our independent auditors and to make available to our shareholders quarterly reports containing unaudited financial data for the first three quarters of each fiscal year. In addition, as a foreign issuer, we are not subject to the proxy rules under Section 14 of the Exchange Act and our officers and directors will not beare subject to Section 16 of the Exchange Act relating to insider short-swing profit disclosure and recovery regime.
We will send the depositary a copy of all notices that we give relating to meetings of our shareholders or to distributions to shareholders or the offering of rights and a copy of any other report or communication that we make generally available to our shareholders. The depositary will makemakes all these notices, reports and communications that it receives from us available for inspection by registered holders of ADSs at its office. The depositary will mailmails copies of those notices, reports and communications to you if we ask the depositary to do so and furnish sufficient copies of materials for that purpose.
We will file financial statements and other periodic reports with the Peruvian Securities Commission in Peru. Issuers of securities registered with the Peruvian Securities Commission are required to disclose material information relating to the issuer. Pursuant to the Securities Market Law and relevant regulations enacted thereunder, all material information in connection with the issuer of registered securities, its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities must be disclosed. Accordingly, issuers must file with the Peruvian Securities Commission mainly two types of information: (a) financial information, including unaudited interim financial statements on a quarterly basis (which are not required to be subject to limited review), and audited annual consolidated financial statements on an annual basis, and (b) material information relating to the issuer and its activities that may significantly affect the price, offering or negotiation of the issued securities, and in general, all the information that may be relevant for investors to be able to make investment decisions.
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See the notes 2.2 and 57 to our consolidated financial statements included in this annual report for a description of our subsidiaries.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are exposed to a number of market risks arising from our normal business activities, including the possibility that changes in currency exchange rates or interest rates will adversely affect future cash flows and profit or the value of our financial assets and liabilities. From time to time, we enter into derivative transactions to hedge against foreign currencies and interest rate fluctuations. For further information regarding our market risk, see note 3 to our audited annual consolidated financial statements included in this annual report.
Exchange Rate Risk
We are exposed to market risk associated with changes in foreign currency exchange rates. Our revenues and costs, and our assets and liabilities, are denominated in nuevos soles, U.S. dollars, Chilean pesos and, to a lesser extent, other currencies. In 2013, 31.6%2016, 46%, 59.8%33% and 8.6%21% of our revenues were denominated in nuevos soles, U.S. dollars and other currencies (principally Chilean pesos), respectively, while 67.2%55%, 24.2%22% and 8.6%23% of our cost of sales during the year were denominated in nuevos soles, U.S. dollars and other currencies. In addition, as of December 31, 2013, 18.2%2016, 46.7%, 72.8%45.6% and 9.0%7.6% of our total debt was denominated in nuevos soles, U.S. dollars and other currencies, respectively. If, at December 31, 2013,2016, the nuevo sol had strengthened/weakened by 2% against the U.S. dollar, with all other variables remaining constant, orpre-tax profit for the year would have increased/decreased by S/.1.4.0.2 million. This sensitivity analysis does not take into account our payable to Chubb Insurance Company relating to our reimbursement obligations under the GSP performance guarantee.
Interest Rate Risk
We may from time to time incur variable interest rate indebtedness, and accordingly our financial expenses are affected by changes in interest rates. Based upon our indebtedness at December 31, 2013,2016, and taking into account our interest rate derivative instruments, a change in interest rates of onefive percent (or 100500 basis points) would impact our net profit by S/.5.5.80.3 million annually. This sensitivity analysis does not take into account indebtedness that we incur subsequentour payable to December 31, 2013.Chubb Insurance Company relating to our reimbursement obligations under the GSP performance guarantee.
Commodity Price Risk
We are exposed to market risk associated with changes in commodity prices, primarily for oil, steel and cement, which in aggregate represented a majority of our total input cost in 2013.2016. We do not have long-term contracts for the supply of these key inputs. Based upon our consumption of these inputs during 2013,2016, a 10% increase/decrease in the prices of each of oil, steel and cement would have increased/decreased our costs of sales by S/.80.1.59.1 million, S/.11.7.15.2 million and S/.6.2.3.0 million, respectively. However, based on our production of oil during 2013,2016, a 10% increase/decrease in the price of oil would have increased/decreased our revenues by S/.96.3.66.0 million.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
For a description of our principal indebtedness, please see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Debt.”
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Not applicable.
Not applicable.
General
JPMorgan Chase Bank, N.A., as depositary, has issued ADSs. Each ADS represents an ownership interest in five common shares which deposited with the custodian, Citibank del Perú S.A., as agent of the depositary, under the deposit agreement among us, the depositary and you as an ADS holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but which they have not distributed directly to you. Unless certificated ADRs are specifically requested by you, all ADSs will be issued on the books of our depositary in book-entry form and periodic statements will be mailed to you which reflect your ownership interest in such ADSs. In this description, references to ADRs, shall include the statements you will receive which reflect your ownership of ADSs.Not applicable.
The depositary’s office is located at 1 Chase Plaza, Floor 58, New York, New York 10005-1401, United States.D. American Depositary Shares
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.
As an ADR holder, we will not treat you as a shareholder of ours and you will not have any shareholder rights. Peruvian law governs shareholder rights. ADR holders have no direct ownership interest in our common shares and only have such rights as specified in the deposit agreement. Your rights are those of an ADR holder. Such rights derive from the terms of the deposit agreement to be entered into among us, the depositary and all registered holders from time to time of ADSs issued under the deposit agreement. The obligations of the depositary and its agents are also set out in the deposit agreement. Because the depositary or its nominee will actually be the registered owner of the common shares, you must rely on the depositary or its nominee to exercise the rights of a shareholder on your behalf. The deposit agreement and the ADSs are governed by the law of the State of New York. However, our obligations to the holders of common shares represented by the ADSs will continue to be governed by the laws of Peru, which may be different from the law of the State of New York.
The following is a summary of what we believe to be the material terms of the deposit agreement. This summary is qualified in its entirety by reference to, and should be read in conjunction with, the entire deposit agreement and the form of ADR which contains the complete terms of your ADSs. You can read a copy of the deposit agreement, a form of which is filed as exhibit 4.2 to our registration statement, filed under number 333-189067. You may also obtain a copy of the deposit agreement at the SEC’s Public Reference Room which is located at 100 F Street, NE, Washington, DC 20549, United States. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. You may also find the registration statement and the attached deposit agreement on the SEC’s website at http://www.sec.gov.
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Dividends and Other Distributions
We may make various types of distributions with respect to our securities. The depositary has agreed that, to the extent practicable, it will pay to you the cash dividends or other distributions it or the custodian receives on common shares or other deposited securities, after converting any cash received into U.S. dollars and, in all cases, making any necessary deductions provided for in the deposit agreement. You will receive these distributions in proportion to the number of underlying securities that your ADSs represent.
Except as stated below, the depositary will deliver such distributions to ADR holders in proportion to their interests in the following manner:
Distribution of Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof (to the extent applicable), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain registered ADR holders, and (iii) deduction of the depositary’s and/or its agents’ expenses in (1) converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time, and (4) making any sale by public or private means in any commercially reasonable manner. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.
Distribution of Common Shares. In the case of a distribution of common shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such common shares. Only whole ADSs will be issued. Any common shares which would result in fractional ADSs will be sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto.
No distribution of ADRs as described above will be made if it violates U.S. securities laws, or any other law, or if it is not operationally practicable. If the depositary does not distribute new ADRs as described above, it will use its best efforts to sell the common shares received and distribute the proceeds of the sale in the same manner as a cash distribution.
Rights to Receive Additional Common Shares. In the case of a distribution of rights to subscribe for additional common shares or other rights, if we provide evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or other instruments in the discretion of the depositary representing such rights. If we do not furnish such evidence, the depositary may:
Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same manner it distributes cash. If the depositary determines that any distribution described above is not practicable with respect to any specific registered ADR holder, the depositary may choose any method of distribution that it deems practicable for such ADR holder, including the distribution of foreign currency, securities or property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities, in which case the ADSs will also represent the retained items.
U.S. dollars will be distributed by checks drawn on a bank in the United States for whole U.S. dollars and cents. Fractional cents will be withheld without liability and dealt with by the depositary in accordance with its then current practices.
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We have no obligation to file a registration statement under the Securities Act in order to make any rights, securities or other property available to ADR holders.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders.
The depositary may use a division, branch or affiliate of JPMorgan Chase Bank, N.A. to direct manage and/ or execute any public and/or private sale of securities.
There can be no assurance that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, common shares or other securities at a specified price, nor that any of such transactions can be completed within a specified time period.
Issuance of ADSs upon Deposit of Common Shares
The depositary will issue ADSs if you or your broker deposit common shares or evidence of rights to receive common shares with the custodian and pay the fees and expenses owing to the depositary in connection with such issuance.
Common shares deposited in the future with the custodian must be accompanied by the delivery of certain documentation and shall, at the time of such deposit, be registered in the name of JPMorgan Chase Bank, N.A., as depositary for the benefit of holders of ADRs or in such other name as the depositary shall direct.
The custodian will hold all deposited common shares for the account of the depositary. ADR holders thus have no direct ownership interest in our common shares and only have such rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited common shares. The deposited common shares and any such additional items are referred to as “deposited securities.”
Upon each deposit of common shares, receipt of related documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name or upon the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of the ADSs issued will, unless specifically requested to the contrary, be part of the depositary’s direct registration system, and a registered holder will receive periodic statements from the depositary which will show the number of ADSs registered in such holder’s name. An ADR holder can request that the ADSs not be held through the depositary’s direct registration system and that a certificated ADR be issued.
The term common shares in this section shall also refer to preliminary stock certificates (certificados provisionales), which will be converted to common shares once the capital increase is registered with the Peruvian public registry and new common shares are listed on the Lima Stock Exchange and registered in the CAVALI S.A. ICLV book-entry settlement system.
Withdrawal of Common Shares upon Cancellation of ADSs
When you turn in your ADR certificate at the depositary’s office, or when you provide proper instructions and documentation in the case of direct registration ADSs, the depositary will, upon payment of certain applicable fees, charges and taxes, deliver the underlying common shares to you upon your written order. Delivery of common shares in certificated form will be made at the custodian’s office. At your risk, expense and request, the depositary may deliver deposited securities at such other place as you may request.
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The depositary may only restrict the withdrawal of deposited securities in connection with:
Notwithstanding the foregoing, no withdrawal of deposited securities shall be permitted until the preliminary stock certificates (certificados provisionales) have been converted to common shares once the capital increase has been recorded with the Peruvian public registry.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Record Dates
The depositary may, after consultation with us if practicable, fix record dates for the determination of the registered ADR holders who will be entitled (or obligated, as the case may be) to:
Voting Rights
A holder of an ADR representing common shares will generally have the right under the deposit agreement to instruct the depositary to exercise the voting rights for the underlying common shares represented by such ADRs. The voting rights of holders of common shares are described under “Description of our Share Capital.”
If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting rights for the common shares which underlie your ADSs. As soon as practicable after receiving notice of any meeting or solicitation of consents or proxies from us, the depositary will distribute to the registered ADR holders a notice stating such information as is contained in the voting materials received by the depositary and describing how you may instruct the depositary to exercise the voting rights for the common shares which underlie your ADSs, including instructions for giving a discretionary proxy to a person designated by us. For instructions to be valid, the depositary must receive them in the manner and on or before the date specified. The depositary will try, as far as is practical, subject to the provisions of and governing the underlying common shares or other deposited securities and Peruvian law, to vote or to have its agents vote the common shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Furthermore, neither the depositary, nor its agents, are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote, other than for failure caused directly by gross negligence, bad faith or willful misconduct on the part of the depositary or its agents. Notwithstanding anything contained in the deposit agreement or any ADR, the depositary may, to the extent not prohibited by law or applicable regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of deposited securities, distribute to the registered holders of ADRs a notice that provides such holders with, or otherwise publicizes to such holders, instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).
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There is no assurance that you will receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
Reports and Other Communications
The depositary will make available for inspection by ADR holders at the offices of the depositary and the custodian the deposit agreement, the provisions of or governing deposited securities, and any written communications from us which are both received by the custodian or its nominee as a holder of deposited securities and made generally available to the holders of deposited securities.
Additionally, if we make any written communications generally available to holders of our common shares, and we furnish copies thereof (or English translations or summaries) to the depositary, it will distribute the same to registered ADR holders.
Fees and Expenses
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of common shares, issuances in respect of common share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason, US$5.00 or less for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property received in respect of a common share distribution, rights and/or other distribution prior to such deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing common shares or by any party surrendering ADSs or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADSs), whichever is applicable:
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We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.
Our depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations expenses and exchange application and listing fees. The amounts of reimbursements available to us are not based upon the amounts of fees the depositary collects from investors. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing common shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting on their behalf. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary.
Payment of Taxes
ADS holders or ADR holders, as the case may be, must pay any tax or other governmental charge (including any penalties and/or interest) payable by the custodian orDuring 2016, the depositary on any ADS or ADR, deposited security or distribution. By holding or having heldreimbursed us for expenses in an ADS or an ADR, as the case be, the holders agree to indemnify, defend and save harmless eachaggregate amount of the depositary and its agents in respect thereof. If an ADS holder or ADR holder, as the case may be, owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any cash distributions, or (ii) sell deposited securities (by public or private sale) and deduct the amount owing from the net proceeds of such sale. In either case the ADS holder or ADR holder, as the case may be, remains liable for any shortfall. If any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split up or combination of deposited securities or withdrawal of deposited securities until such payment is made. If any tax or governmental charge is required to be withheld on any cash distribution, the depositary may deduct the amount required to be withheld from any cash distribution or, in the case of a non-cash distribution, sell the distributed property or securities (by public or private sale) to pay such taxes and distribute any remaining net proceeds to the ADS holders or the ADR holders entitled thereto.
By holding an ADR or an ADS, as the case may be, or an interest therein, you will be agreeing to indemnify us, the depositary, the custodian and any of our or their respective directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.
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Reclassifications, Recapitalizations and Mergers
If we take certain actions that affect the deposited securities, including (i) any change in par value, split up, consolidation, cancellation or other reclassification of deposited securities or (ii) any distributions not made to holders of ADRs or (iii) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the depositary may choose to:
If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each ADS will then represent a proportionate interest in such property.
Amendment and Termination
We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days’ notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or otherwise prejudices any substantial existing right of ADR holders. Such notice need not describe in detail the specific amendments effectuated thereby, but must give ADR holders a means to access the text of such amendment. If an ADR holder continues to hold an ADR or ADRs after being so notified, such ADR holder is deemed to agree to such amendment and to be bound by the deposit agreement as so amended. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the deposit agreement or the form of ADR to ensure compliance therewith, we and the depositary may amend or supplement the deposit agreement and the ADR at any time in accordance with such changed laws, rules or regulations, which amendment or supplement may take effect before a notice is given or within any other period of time as required for compliance. No amendment, however, will impair your right to surrender your ADSs and receive the underlying securities, except in order to comply with mandatory provisions of applicable law.
The depositary may, and shall at our written direction, terminate the deposit agreement and the ADRs by mailing notice of such termination to the registered holders of ADRs at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositary shall have (1) resigned as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders unless a successor depositary shall not be operating under the deposit agreement within 60 days of the date of such resignation, and (2) been removed as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders of ADRs unless a successor depositary shall not be operating under the deposit agreement on the 60th day after our notice of removal was first provided to the depositary. After termination, the depositary’s only responsibility will be (1) to deliver deposited securities to ADR holders who surrender their ADRs, and (2) to hold or sell distributions received on deposited securities. As soon as practicable after the expiration of six months from the termination date, the depositary will sell the deposited securities which remain and hold the net proceeds of such sales (as long as it may lawfully do so), without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making such sale, the depositary shall have no obligations except to account for such proceeds and other cash.
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Limitations on Obligations and Liability to ADR Holders
Prior to the issue, registration, registration of transfer, split-up, combination, or cancellation of any ADRs, or the delivery of any distribution in respect thereof, and from time to time, we or the depositary or the custodian may require:
The issuance of ADRs, the acceptance of deposits of common shares, the registration, registration of transfer, split-up or combination of ADRs or the withdrawal of common shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities is closed or when any such action is deemed advisable by the depositary or when reasonably requested by us in order to enable us to comply with applicable law; provided that the ability to withdraw common shares may only be limited under the following circumstances: (i) temporary delays caused by closing transfer books of the depositary or our transfer books or the deposit of common shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and (iii) compliance with any laws or governmental regulations relating to ADRs or to the withdrawal of deposited securities.
The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents. Neither we nor the depositary nor any such agent will be liable if:
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Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. We and our agents shall only be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in our opinion may involve us in expense or liability, if indemnity satisfactory to us against all expense (including fees and disbursements of counsel) and liability is furnished as often as may be required. The depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the deposit agreement, any registered holder or holders of ADRs, any ADRs or otherwise related to the deposit agreement or ADRs to the extent such information is requested or required by or pursuant to any lawful authority, including, without limitation, laws, rules, regulations, administrative or judicial processes, banking, securities or other regulators. The depositary shall not be liable for the acts or omissions made by, or the insolvency of any securities depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of deposited securities or otherwise. Furthermore, the depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any custodian that is not a branch or affiliate of JPMorgan Chase Bank, N.A. The depositary and the custodian may use third party delivery services and providers of information regarding matters such as pricing, proxy voting, corporate actions, class action litigation and other services in connection with the ADRs and the deposit agreement, and use local agents to provide extraordinary services such as attendance at annual meetings of issuers of securities. The depositary and the custodian are required to use reasonable care in the selection and retention of such third party providers and local agents, but neither the depositary nor the custodian will be responsible for any error or omissions made by such third party providers or local agents in providing the relevant information or services. The depositary shall not be responsible for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the custodian except to the extent that (A) the custodian has been determined by a final non-appealable judgment of a court of competent jurisdiction to have (i) committed fraud or willful misconduct in the provision of custodial services to the depositary or (ii) failed to use reasonable care in the provision of custodial services to the depositary as determined in accordance with the standards prevailing in the jurisdiction in which the custodian is located and (B) we or the registered holders of ADRs have incurred direct damages as a result of such act or omission to get on the part of the custodian.
The depositary shall be under no obligation to inform holders of ADSs regarding the requirements of Peruvian law, rules or regulations or any changes therein or thereunder.
Additionally, none of us, the depositary or the custodian will be liable for the failure by any registered holder of ADRs or beneficial owner therein to obtain the benefits of credits on the basis of non-U.S. tax paid against such holder’s or beneficial owner’s income tax liability. Neither we nor the depositary shall incur any liability for any tax consequences that may be incurred by holders or beneficial owners on account of their ownership of ADRs or ADSs.
The depositary shall not incur any liability for the content of any information submitted to it by us or on our behalf for distribution to the holders of ADRs or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the deposited securities, for the validity or worth of the deposited securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the deposit agreement or for the failure or timeliness of any notice from us. Further, the depositary shall not have any liability for the price received in connection with any sale of securities or the timing thereof.
Neither the depositary nor its agents will be responsible for any failure to carry out any instructions to vote any of the deposited securities, for the manner in which any such vote is cast or for the effect of any such vote. None of us, the depositary, or our agents shall be liable to registered holders of ADRs or beneficial owners of interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation, lost profits) of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought.
The depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary, provided that in connection with the issue out of which such potential liability arises the depositary performed its obligations without negligence while it acted as depositary.
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In the deposit agreement each party thereto (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interests in ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit, action or proceeding against the depositary and/or us directly or indirectly arising out of or relating to the common shares or other deposited securities, the ADSs or the ADRs, the deposit agreement or any transaction contemplated therein, or the breach thereof (whether based on contract, tort, or common law or any other theory)US$89,950.06 (S/.302,232.20).
The depositary may rely upon instructions from us or our counsel in respect of any governmental or agency approval or license required for any currency conversion, transfer or distribution.
The depositary may own and deal in any class of our securities and in ADSs.
Disclosure of Interest in ADSs
To the extent that the provisions of, or governing, any deposited securities may require disclosure of or impose limits on beneficial or other ownership of deposited securities, other common shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, you agree to comply with all such disclosure requirements and ownership limitations and to comply with any reasonable instructions we may provide in respect thereof. We reserve the right to instruct you to deliver your ADSs for cancellation and withdrawal of the deposited securities so as to permit us to deal with you directly as a holder of common shares and, by holding an ADS or an interest therein, you will be agreeing to comply with such instructions.
Books of Depositary
The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, which register shall include the depositary’s direct registration system. Registered holders of ADRs may inspect such records at the depositary’s office at all reasonable times, but solely for the purpose of communicating with other holders in the interest of the business of our company or a matter relating to the deposit agreement. Such register may be closed from time to time, when deemed expedient by the depositary.
The depositary will maintain facilities for the delivery and receipt of ADRs.
Pre-Release of ADSs
In its capacity as depositary, the depositary shall not lend common shares or ADSs; provided, however, that the depositary may (i) issue ADSs prior to the receipt of common shares and (ii) deliver common shares prior to the receipt of ADSs for withdrawal of deposited securities, including ADSs which were issued under (i) above but for which common shares may not have been received (each such transaction a “pre-release”). The depositary may receive ADSs in lieu of common shares under (i) above (which ADSs will promptly be canceled by the depositary upon receipt by the depositary) and receive common shares in lieu of ADSs under (ii) above. Each such pre-release will be subject to a written agreement whereby the person or entity (the “applicant”) to whom ADSs or common shares are to be delivered (1) represents that at the time of the pre-release the applicant or its customer owns the common shares or ADSs that are to be delivered by the applicant under such pre-release, (2) agrees to indicate the depositary as owner of such common shares or ADSs in its records and to hold such common shares or ADSs in trust for the depositary until such common shares or ADSs are delivered to the depositary or the custodian, (3) unconditionally guarantees to deliver to the depositary or the custodian, as applicable, such common shares or ADSs, and (4) agrees to any additional restrictions or requirements that the depositary deems appropriate. Each such pre-release will be at all times fully collateralized with cash, U.S. government securities or such other collateral as the depositary deems appropriate, terminable by the depositary on not more than five business days’ notice and subject to such further indemnities and credit regulations as the depositary deems appropriate. The depositary will normally limit the number of ADSs and common shares involved in such pre-release at any one time to 30% of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the
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depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The depositary may also set limits with respect to the number of ADSs and common shares involved in pre-release with any one person on a case-by-case basis as it deems appropriate. The depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided in connection with pre-release transactions, but not the earnings thereon, shall be held for the benefit of the registered holders of ADRs (other than the applicant).
Appointment
In the deposit agreement, each registered holder of ADRs and each person holding an interest in ADSs, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the deposit agreement will be deemed for all purposes to:
Governing Law
The deposit agreement and the ADRs are governed by and construed in accordance with the laws of the State of New York. In the deposit agreement, we have submitted to the jurisdiction of the courts of the State of New York and appointed an agent for service of process on our behalf. By holding an ADS or an interest therein, registered holders of ADRs and beneficial owners of ADSs each irrevocably agree that any legal suit, action or proceeding against or involving us or the depositary, arising out of or based upon the deposit agreement or the transactions contemplated thereby, may only be instituted in a state or federal court in New York, New York, and each irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not applicable.Financing of the Expansion Project of the Lima Metro Concession
On August 23, 2017, GyM Ferrovias entered into a US$396 million financing structure with Mizuho Bank, Ltd and Sumitomo Mitsui Banking Corporation. The particular structure for the expansion project of the Lima Metro involves the securitization of irrevocable and unconditional payment obligations of the Government of Peru (CPAOs), which have been sold by GyM Ferrovias to a borrower under a long-term loan facility. The expansion project includes the improvement of civil works and the purchase of additional rolling stock, including trains and cars that will be designed, built, operated and maintained by GyM Ferrovías, as concessionaire under the Lima Metro concession. The financing is structured as a long-term loan facility and a working capital facility.
As of the date of this annual report, GyM Ferrovias is in continuing default under the financing of the expansion project due to thenon-delivery of our audited consolidated financial statements for the 2016 fiscal year, in our capacity as guarantor of the obligations of GyM Ferrovias under the agreement. The financing required that we provide the financial statements no later than April 4, 2018. Also, the financing requires that we deliver our audited consolidated financial statements for the 2017 fiscal year by May 15, 2018. We will not be able to deliver those financial statements on time. We have initiated the process of requesting a waiver from the lenders.
Syndicated Loan
Due to the termination of the GSP gas pipeline concession on January 24, 2017, we were in breach of our covenants under our syndicated loan as of December 31, 2016, as the effects on our financial condition and results of operations of the concession termination were taken into account for the purposes of calculating compliance with our financial covenants for 2016. As of December 31, 2016, (a) our Consolidated EBITDA to Consolidated Interest Expense (as defined therein) was 3.33x rather than at least 3.5x as required under the syndicated loan, (b) our Consolidated Leverage Ratio (as defined therein) was 5.75x rather than no more than 3.5x as required under the syndicated loan, and (c) our Debt Service Coverage Ratio (as defined therein) was 3.83x rather than at least 1.5x as required under the syndicated loan. Additionally, upon the termination of the GSP gas pipeline concession on January 24, 2017, we were required to prepay our syndicated loan. We amended the terms of our syndicated loan, including certain financial covenants and certain prepayment requirements.
As of the date of this annual report, and due to the accounting adjustments in connection to the termination of the GSP gas pipeline concession, we are again under certain continuing defaults under the syndicated loan with respect to certain financial ratios and thenon-delivery of our audited consolidated financial statements for the 2016 and 2017 fiscal years. The syndicated loan required that we provide the financial statements for the 2016 and 2017 fiscal years no later than April 30, 2018. As of March 2018, our Consolidated Leverage Ratio (as defined therein) was 2.62, rather than no more than 2.50 as required under the syndicated loan. We are in the process of requesting waivers from the lenders.
GSP Bridge Loan and New Term Loan.
With the termination of the GSP gas pipeline concession, our proportional guarantee under the GSP bridge loan became due. As of December 31, 2016, there was US$129 million (S/.433.4 million) of principal amount outstanding under our corporate guarantee. As of the date of this annual report the principal amount outstanding under the GSP bridge loan has been entirely paid. On June 27, 2017 we entered into a new US$78.7 million (S/.264.8 million) term loan with Natixis, BBVA, SMBC and MUFJ, the proceeds of which were used to prepay GSP bridge loan.
As of the date of this annual report, we are under certain continuing defaults under the term loan with respect to certain financial ratios and thenon-delivery of our audited consolidated financial statements for the 2016 and 2017 fiscal years. The term loan required that we provide the financial statements for the 2016 and 2017 fiscal years no later than April 30, 2018. As of the date hereof, our Consolidated Leverage Ratio (as defined therein) was 2.62, rather than no more than 2.50 as required under the syndicated loan. We are in the process of requesting waivers from the lenders.
Financial Stability Framework Agreement
As of the date of this annual report, we are under continuing default due to thenon-delivery of our audited consolidated financial statements and those of our subsidiary, GyM, for the 2016 and 2017 fiscal years. The loan required that we provide such financial statements no later than April 30, 2018. We are in the process of requesting waivers from the lenders.
For more information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments” and “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.”
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Material Modifications to the Rights of Security Holders
Not Applicable.None.
Use of Proceeds.Proceeds
On July 23 and 24, 2013, the Regristration Statements on Form F-1 (File No. 333-189067) filed by us with the SEC covering the initial public offering in the United States of up to 22,465,117 ADSs, representing 112,325,585 common shares, were declared effective. On July 29, 2013, we completed our initial public offering in the United States by issuing 20,353,920 ADSs, representing 101,769,600 common shares (including partial exercise of the underwriters’ over-allotment option on August 23, 2013)2013, for cash consideration of US$21.13 per ADS, through a syndicate of underwriters led by Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and BTG Pactual S.A. – Cayman Branch, as joint book-running managers. BBVA Banco Continental, BCP Capital Financial Services S.A. and Banco Internacional del Perú – Interbank acted as co-managers.
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ADS. We received approximately US$411.3 million in net proceeds from our initial public offering of ADSs in the United States. Fromoffering. We have used these net proceeds approximately US$232.6 million has,for capital investments, acquisitions and other general corporate purposes, consistent with our disclosure in the Registration Statement, been used as follows: in the Infrastructure segment, the purchase of trains for Line 1 of the Lima Metro (US$178.4 million), the purchase of an additional stake of Norvial (US$18.6 million), an investment in TGP (US$20 million), andregistration statement relating to the initial equity investment in Via Expresa Sur (US$0.5 million); and in the Real Estate segment, the purchase of land (US$15.2 million).
We expect to use the remaining net proceeds from the offering for capital expenditures, including potential investments and acquisitions, and other general corporate purposes in our business segments, in order to take advantage of growth opportunities that we foresee in our markets.public offering.
CONTROLS AND PROCEDURES |
A. Disclosure Controls and Procedures
As of the end of the period covered by this annual report, management,Management, with the participation of the company’s Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules13a-15(e) and15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013, the design and operation of2016, our disclosure controls and procedures were not effective atas a reasonable assurance level.
This annual report does not include a reportresult of management’s assessment regardingthe material weaknesses in internal control over financial reporting duedescribed below.
B. Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company as such term is defined by Exchange Act rules13(a)-15(f) and15(d)-15(f). In order to a transition period establishedevaluate the effectiveness of internal control over financial reporting, as required by rulesSection 404 of the SECSarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), management has conducted an assessment, including testing, using the criteria in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for newly public companies.external purposes in accordance with generally accepted accounting principles. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016, we have identified certain material weaknesses. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified are described below:
Control Environment
The control environment, which is the responsibility of senior management, helps set the tone of the organization, influences the control consciousness of its officers and employees, and is an important component affecting how the organization performs risk management, financial analysis, accounting and financial reporting. A proper organizational tone can be promoted through a variety of means, such as policies and codes of ethics, a commitment to hiring competent employees, the manner and content of oral and written communications, and structures that promote and reward openness, strong internal controls, effective governance, risk management, compliance and ethical behavior.
As of December 31, 2016, we did not maintain an effective control environment primarily attributable to the following identified material weaknesses:
These material weaknesses in the risk and control environment contributed to the following additional material weaknesses, including the material weaknesses in risk assessment, information and communication, and monitoring and evidential matter.
Risk Assessment
We identified deficiencies in the controls to address the risks of a material misstatement. Specifically, changes to existing controls or the implementation of new controls were not sufficient to respond to changes to the risks of material misstatements to financial reporting, due in part to acquisitions, dispositions and other changes to the business. These deficiencies contributed to the following additional material weaknesses:
Information and Communication
We identified deficiencies in the controls over information and communications. Specifically, we identified deficiencies in the process to verify all information necessary to be provided to the accounting department to achieve complete and accurate financial reporting from other operating departments were provided completely, accurately and on a timely basis.
Monitoring and Evidential Matter
Deficiencies in operational effectiveness of controls over SOX compliance: we identified deficiencies in design and operational effectiveness of the monitoring controls related to the design and operational effectiveness of our internal controls. Specifically, we did not maintain personnel and systems within the internal audit function that were sufficient to ensure the adequate monitoring of control activities. This control deficiency resulted in some instances of the internal audit function’s failure to identify or sufficiently follow through on the analysis of certain inappropriate accounting decisions and changes in accounting methodology.
We did not consistently maintain sufficient evidential matter, including documentation, to provide reasonable support for management’s assessment of the effectiveness of internal control over financial reporting.
Conclusion
These material weaknesses resulted in adjustments to the accounting for revenue and accounts receivable and a number of adjustments and reclassifications in other accounts receivables owed to prepaid expenses, acquired assets and liabilities as part of a step acquisition, the classification to calculate the exchange gains/losses related to loans with related entities, and intercompany transactions. Additionally, these material weaknesses could result in other misstatements in our financial results and disclosures, which could result in a material misstatement to our annual or interim consolidated financial statements not being prevented or detected. Because of these material weaknesses, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2016, based on criteria in Internal Control-Integrated Framework (2013) issued by the COSO.
Moore Stephens SCAI S.A. (a member firm of Moore Stephens International), an independent registered public accounting firm, due to a transition period established by ruleswhich has audited and reported on the consolidated financial statements as of the SEC for newly public companies.
As a result of errors we found in our consolidated statement of cash flowand for the year ended December 31, 2012, during 20132015 and 2016 contained in this annual report on Form20-F, has issued an attestation report on our internal control over financial reporting as of December 31, 2015 and 2016.
Remediation Plan
We continue to evaluate our internal control over financial reporting and are taking remedial actions to address the material weaknesses that have been identified.
Our board of directors established a new Risk, Compliance and Sustainability Committee in March 2017, which is charged with, among other things, risk management. We believe that the role of the new committee reflects, along with the role of the Audit and Process Committee and our senior management, the priority that our company gives to the improvement of our enterprise and fraud risk management, internal control environment and will reinforce from the top of our company a culture of compliance with internal controls across our subsidiaries and other entities.
In addition, our internal audit function is being reorganized, and new personnel with the appropriate training and experience is being hired by us to ensure that the internal control system and processes are executed in an adequate and timely manner.
Our management is communicating to employees the need for effective internal control over financial reporting and is having meetings with process owners to reinforce the purpose and importance of controls, review and analyze the identified deficiencies, and promotetop-down ownership and accountability over the control environment. Also, we will be conducting a formal training program, including related to IFRS, at our subsidiaries with employees responsible for our internal controls to ensure they have an appropriate level of knowledge of and build the experience with those controls, specifically, those relating to monitoring, evaluation and accountability, in order to execute their control responsibilities.
We are in the process of reviewing our employees’ access to our accounting and key systems and we are designing and implementing new information technology tools in order to improve our control process over the segregation of accounting duties and for the proper custody and recording of all supporting documentation, including information related to contracts.
Furthermore, moving forward, we will continue to monitor and assess our remediation activities to address the material weaknesses discussed above through remediation as soon as practicable.
The implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting described above. Such material weaknesses have not been, nor can we ensure by what date they will be, fully remediated. The process of designing and implementing an effective reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. See “Item 3. Key Information— D. Risk Factors—We have identified a material weaknessweaknesses in our internal control over financial reporting, and restated our consolidated statement of cash flow. These errors did not have any effect on the net increase (decrease) in cash for the year ended December 31, 2012. Furthermore, all underlying transactions were properly recordedif we cannot maintain effective internal control or provide reliable financial and other information in the 2012 statementfuture, investors may lose confidence in the reliability of financial position, income statement, statement of comprehensive income and statement of changes in shareholders’ equity, which did not need to be revised or restated. We implemented certain measures to address this material weakness, including: enhancing the IFRS knowledge base of our accounting personnel through additional training; additional training for our accounting personnel specifically on the preparation of cash flow statements; and completing the implementation of Hyperion, an automated consolidation system. In the process of preparing our audited consolidated financial statements, forwhich could result in a decrease in the year ended December 31, 2013,value of our ADSs.” If we did not identify anyfail to implement and maintain an effective system of internal control, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of our ADSs may be materially and adversely affected.
C. Attestation Report of the Registered Public Accounting Firm
See Item 18. Financial Statements.
D. Changes in Internal Control Over Financial Reporting
We identified material weaknessweaknesses in our internal control as described in Item 15.B. above. There were no other changes in our internal control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16A AUDIT COMMITTEE FINANCIAL EXPERT
The current members of our AuditMr. Manuel del Rio and Process Committee are Mr. José Chlimper, Mr. Federico CúneoAntonio Rosas each qualify as an “audit committee financial expert” and Mr. Hugo Santa María. Mr. Chlimper and Mr. Santa María have extensive business and economic experience in Peru, while Mr. Cúneo qualifies as a financial expertare independent in accordance with SEC rules.
Item 16B CODE OF BUSINESS CONDUCT AND ETHICS
We are committed to responsible, honest, transparent and ethical conduct. Our management system enables us to communicate our corporate values and principles to all levels of the organization, offers a confidential reporting mechanism (canal ético), and has a governance structure to investigate and remedy potential breaches of our code.
187
We have adopted a code of ethics thatconduct and it applies to our directors, officers and employees. Our code of ethicsconduct is available on our websitewww.granaymontero.com.pe. Information on our website is not incorporated by reference in this annual report.
If we make any substantive amendment to the code of ethicsconduct or if we grant any waivers,waiver, including any implicit waiver, from a provision of the code of ethics,conduct that applies to our chief executive officer, chief financial officer or controller, we will disclose the nature of such amendment or waiver in a Form 6-Kour website or in our next Form20-F to be filed with the SEC.SEC to the extent required under applicable rules. During the year ended December 31, 2013,2016, no such amendment was made or waiver granted.
In 2015, we reinforced our ethics management system as a preventative measure. Our board of directors approved an anti-corruption compliance program, which establishes the leadership and commitment of senior management on this matter, defines supervisory bodies and the reporting lines, establishes new policies and procedures, identifies additional internal controls, and proposes training plans for the entire organization. This program applies to all companies in the group and to any third parties that may act on our behalf. Within the program, the anti-corruption policy provides the guidelines required to avoid acts of corruption in our business or in our relations with any state entity, and reinforces the obligation to have accounting records and internal controls.
During 2016, our efforts regarding compliance and prevention were focused on the deployment of the anti-corruption program across our companies. As part of this process, we implemented in ourweb-based platform, a training program with respect to the principal anti-corruption guidelines. Additionally, we have included anti-corruption matters in our board of directors’ periodic agenda, and we also have established a compliance officer who reports to the Audit and Processes Committee. We continue performing due diligence in connection with acquisitions, and used the “Know Your Partner” initiative (2015), through which preventive assessments were performed on potential strategic partners, suppliers and potential recipients of grants in 2016. In this regard, anti-corruption clauses were included in contracts with suppliers and a specific procedure was implemented for charitable donations.
In February 2017, our board of directors created the Risk, Compliance and Sustainability Committee to enhance our ethics and compliance program. That committee then created the Risk and Compliance Corporate Function, which reports to the committee. A new Chief Risk and Compliance Officer for the Group was appointed to enhance and develop further our ethics and compliance program. Our board of directors also appointed an External Advisory Council to provide the Board with independent advice and recommendations on corporate governance and compliance matters. We launched in 2017 training sessions combined with specialized courses addressed to middle and senior managers as well as to all members of our board of directors.
In December 2017, the Group launched a project to renew our Code of Ethics. We are bringing together, in a single and enhanced document, our current Ethics Charter and our Code of Conduct. The launch of the new Code of Ethics is planned for the second half of 2018 and will come with revised training and communication campaigns on values, conduct, the compliance program and our confidential reporting mechanism.
In January 2018, we continued to reinforce our compliance program by launching new projects that include an enhanced due diligence policy, a revised policy on donations and a strengthened manual on relationships with government officials.
Item 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit andNon-Audit Fees
The following table sets forth the fees billed to the company by our current independent registered public accounting firm, Dongo, Soria, Gaveglio y Asociados Sociedad Civil de Responsabilidad Limitada, a memberMoore Stephens, in connection with its audit of PricewaterhouseCoopers, responsible for auditing theour annual consolidated financial statements included in the annual report, duringfor the fiscal years ended December 31, 20122015 and 2013.2016, which are included in this report.
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
(in thousands of S/.) | (in thousands of S/.) | |||||||||||||||
Audit fees | 1,552.3 | 2,437.9 | 4,709.9 | 5,107.2 | ||||||||||||
Audit-related fees | 549.6 | 3,110.2 | — | — | ||||||||||||
Tax fees | 755.3 | 446.0 | — | — | ||||||||||||
All other fees | 1,836.3 | 1,964.5 | — | — | ||||||||||||
|
| |||||||||||||||
Total fees | 4,693.5 | 7,958.6 | 4,709.9 | 5,107.2 | ||||||||||||
|
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The following table sets forth the fees billed to the company by our former independent registered public accounting firm, PwC, in connection with audit procedures in connection with our annual consolidated financial statements for the years ended December 31, 2015 and 2016. See “Item 16.F. Change in Registrant’s Certifying Accountant.”
Year Ended December 31, | ||||||||
2015 | 2016 | |||||||
(in thousands of S/.) | ||||||||
Audit fees | 5,843.5 | 8,703.4 | ||||||
Audit-related fees | 369.5 | 276.7 | ||||||
Tax fees | 920.0 | 1,945.9 | ||||||
All other fees | 1,797.6 | 1,040.4 | ||||||
Total fees | 8,930.6 | 11,966.4 |
Audit fees in the tables above table are the aggregate fees billed and billable by our current or former independent auditorsauditor, as the case may be, in connection with the audit of, or audit procedures in connection with, our annual consolidated financial statements and review of our quarterly financial information.internal controls.
Audit-related fees in 2013 primarily correspond2016 in each table above relates to review of IFRS adoption and fees related to the initial public offering of ADSs in the United States.accounting consultation.
Tax fees in the above tabletables are fees billed relating to tax compliance services.
All other fees in 20132015 primarily correspond to consultancy in respect of transfer pricing, consultancy in elaboration of acquisition agreements, assistance before SUNAT’s (Peruvian Tax Authorities) audit findings, tax consultancy, among others.others, while all other fees in 2016 primarily correspond to high-level methodological consultancy in respect of internal controls testing plans.
Our Audit and Process Committee is responsible for the oversight of the independent auditors and has establishedpre-approval procedures for the engagement of our registered public accounting firm for audit andnon-audit services. Such services can only be contracted if they are approved by the Audit and Process Committee, they comply with the restrictions provided under applicable rules and they do not jeopardize the independence of our auditors. All services provided by our current independent auditor for our fiscal years ended December 31, 2015 and 2016 werepre-approved by our Audit and Process Committee.
Not applicable.
Not applicable.None.
Item 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.None.
Item 16F CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
188(a) Dismissal of Independent Registered Public Accounting Firm
(b) New Audit of 2015
The independence issue described above did not affect the independence of PwC with respect to PwC’s audit of the company’s consolidated financial statements for the fiscal years 2014 and 2015. The audit reports of PwC on the company’s consolidated financial statements for the fiscal years 2014 and 2015 did not contain any adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
On or about March 23, 2018, PwC informed the company that it would not authorize the use of its 2015 audit opinion in connection with the filing of the company’s annual report on Form20-F without conducting substantial additional procedures. PwC could not give any assurance as to when it could complete such additional procedures and stated it could take several months. PwC informed the company that professional standards required the performance of substantial additional procedures with respect to the 2015 consolidated financial statements because of publicly reported procedural developments since the firm’s dismissal in October 2017 concerning the cumulative effect of the decision of the Peruvian court to include three former executives of the company and the company in its ongoing criminal investigation relating to projects involving Odebrecht, coupled with a 2015 agreement that was first provided to PwC in May 2017 while PwC was conducting the audit for the fiscal year 2016.
On April 17, 2018, to avoid further delay, the company appointed Moore Stephens SCAI S.A. (“Moore Stephens”) as its new independent registered public accounting firm for the fiscal year 2015 and announced that the previously issued consolidated financial statements of the company for the 2015 fiscal year (and the related audit opinion of PwC) should no longer be relied upon. Among other factors, as the company’s current auditor, Moore Stephens, was in the process of completing its audit work with respect to the 2016 fiscal year (see (d) below) and thus, in the company’s view, could more timely and efficiently complete the 2015 audit processes as well.
(c) Disagreements and Reportable Events
During the 2015 and 2016 fiscal years and the subsequent interim period through October 4, 2017, there were no “disagreements” (as described in Item 16.F(a)(1)(iv) of Form20-F) with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PwC, would have caused them to make reference thereto in their reports on the financial statements for such years.
During the 2015 and 2016 fiscal years and the subsequent interim period through October 4, 2017, there were “reportable events” (as that term is defined in Item 16.F(a)(1)(v) of Form20-F) as follows: (i) as disclosed in the company’s annual report on Form20-F for the 2015 fiscal year, the company’s management and PwC each concluded that the company did not maintain effective internal control over financial reporting as of December 31, 2015, because of a material weakness related to inadequate controls over segregation of duties in certain activities in some subsidiaries; (ii) PwC advised the company that the company did not maintain effective internal control over financial reporting as of December 31, 2016 as a result of the material weaknesses described in Item 15.B of this annual report, except that the following items were not advised by PwC: (1) inadequate oversight by the Audit Committee regarding the role of the Internal Audit Department, (2) a control environment not always sufficient to ensure adequate enterprise risk management (including fraud risk), and (3) the conclusion which states that there were no significant impacts in our consolidated financial statements because clarifying addendums were signed by the parties; and (iii) at the time of PwC’s dismissal, as described in (a) above, PwC’s audit of the consolidated financial statements for the fiscal year 2016 was not complete, including the final resolution of matters related to the accounting for two contracts and any related implications from the finalization of the internal investigation conducted by the company.
The Audit and Process Committee of the company discussed the subject matter of each of the reportable events with PwC. The company authorized PwC to fully respond to the inquiries of the successor accountant concerning these reportable events.
The company has requested that PwC furnish it with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter, dated May 15, 2018, is filed as Exhibit 16.01 to this annual report.
(d) Appointment of New Independent Registered Public Auditing Firm
A shareholders’ meeting of the company held on November 2, 2017 appointed Moore Stephens as the new independent auditor for the fiscal year 2016.
On April 17, 2018, the Audit and Process Committee of the company appointed Moore Stephens to audit the 2015 fiscal year. The shareholders’ meeting of the company held on May 14, 2018 ratified the appointment.
During the 2015 and 2016 fiscal years and the subsequent interim period through April 16, 2018, the company did not consult with Moore Stephens regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company’s consolidated financial statements, other than in connection with the ongoing audit work by Moore Stephens of the company’s consolidated financial statements for the 2016 fiscal year; or (ii) any matter that was either the subject of a disagreement or a reportable event.
We are a “foreign private issuer” within the meaning of the New York Stock Exchange corporate governance standards. Under New York Stock Exchange rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange.
We currently follow certain Peruvian practices concerning corporate governance and intend to continue to do so. There are significant differences in the Peruvian corporate governance practices as compared to those followed by United States domestic companies under the New York Stock Exchange’s listing standards.
The New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company”.directors. Under Peruvian corporate governance practices, a Peruvian company is not required to have a majority of independent members on its board of directors, howeverdirectors. However we docurrently have a majority of independent directors on our board in our board. Additionally, ouraccordance with Peruvian and NYSE independence standards. Our Audit and Process Committee is comprised completelyof independent directors under SEC rules applicable to foreign private issuers. Additionally, our Human Resources Management Committee is currently comprised of independent directors, while our Investment Committee and our Risk, Compliance and Sustainability Committee isare currently comprised byof a majority of independent directors.directors, in each case under Peruvian and NYSE independence standards. Our Human Resources Management Committee is not the equivalent of, or wholly comparable to, a U.S. compensation committee.
The listing standards for the New York Stock Exchange also require that U.S. listed companies at the time they cease to be “controlled companies”, have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Peruvian law, a Peruvian company may, but is not required to, form special governancesuch committees, which may be composed partially or entirely ofnon-independent directors. Accordingly, we do not have a nominating/corporate governance committee and a compensation committee.
In addition, New York Stock Exchange rules require the independentnon-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian law.law, accordingly, we do not have such meetings.
The New York Stock Exchange’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In July 2002, the Peruvian Securities Commission and a committee comprised of regulatory agencies and associations prepared and published a list of suggestednon-mandatory corporate governance guidelines called the “Principles of Good Governance for Peruvian Companies.” These principles are disclosed on the Peruvian Securities Commission web pagehttp://www.smv.gob.pe and the Lima Stock Exchange web pagehttp://www.bvl.com.pe. Although we have implemented a number of these measures and have been selected to form part of the Best Corporate Governance Practices Index of the Lima Stock Exchange, we are not required to comply with the referred corporate governance guidelines by law or regulation.
Item 16H MINE SAFETY DISCLOSURE
Not applicable.
Not applicable.
See our consolidated financial statements beginning at pageF-1 of this annual report.
See also Oil and Gas Supplementary Schedules beginning on pageS-1.189
The agreements and other documents filed as exhibits to this annual report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and for the benefit of the other parties to the agreements and they may not describe the actual state of affairs as of the date they were made or at any other time.
Exhibit Number | Description | |
By-Laws of the Registrant, as currently in effect | ||
2.01** | Registrant’s Form of American Depositary Receipt | |
2.02*** | Form of Deposit Agreement among the Registrant, JP Morgan Chase Bank, N.A., as depositary, and the holders from time to time of American depositary shares issued thereunder | |
Subsidiaries of the Registrant | ||
10.01 | Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.1 | Amendment No. 1, dated as of December 22, 2015, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.2 | Amendment No. 2, dated as of February 1, 2016, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.3 | Amendment No. 3, dated as of February 12, 2016, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.4 | Amendment No. 4, dated as of February 29, 2016, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.5 | Amendment No. 5, dated as of April 15, 2016, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.6 | Waiver and Amendment No. 6, dated as of September 15, 2016, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. |
Exhibit Number | Description | |
10.01.7 | Amendment No. 7, dated as of December 16, 2016, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.8 | Amendment No. 8, dated as of June 27, 2017, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.01.9 | Amendment No. 9, dated as of October 12, 2017, to the Credit Agreement, dated as of December 10, 2015, by and among,inter alia, the company, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent. | |
10.02 | Loan Agreement, dated as of June 27, 2017, by and among,inter alia, the company, as borrower, and Natixis, New York Branch, as administrative agent. | |
10.02.1 | Waiver and Amendment, dated as of March 26, 2018, to the Credit Agreement, dated as of June 27, 2017, by and among,inter alia, the company, as borrower, and Natixis, New York Branch, as administrative agent. | |
10.03 | English translation of Financial Stability Framework Agreement, dated as of July 31, 2017, by and among,inter alia, the company, as borrower, and Scotiabank Perú S.A.A., Banco Internacional del Perú S.A.A., BBVA Banco Continenal, Banco de Crédito del Perú, Citibank del Perú S.A. and Citibank, N.A., as lenders. | |
10.04 | English translation of Section 20 of Concession Agreement, dated as of July 22, 2014, by and among the Peruvian Minstry of Energy and Mines, as contracting authority and the concessionaire party thereto. | |
10.05 | English translation of Memorandum of Understanding, dated as of September 26, 2017, by and among the company, Negocios de Gas S.A., Enagás S.A., Odebrecht S.A., and Inversiones en Infraestructura de Transporte por Ductos S.A.C. | |
10.05.1 | English translation of Rights Subordination Agreement, dated as of April 29, 2016, by and among Odebrecht Latinvest Peru Ductos, S.A., Odebrecht S.A., Enagás, S.A., the company, Negocios de Gas S.A., Inversiones en Infraestructura de Transporte por Ductos S.A.C., and Gasoducto Sur Peruano S.A. | |
10.05.1.1 | English translation of Addendum No. 1, dated as of June 24, 2016, to the Rights Subordination Agreement, dated as of April 29, 2016, by and among,inter alia, Odebrecht Latinvest Peru Ductos, S.A., Odebrecht S.A., Enagás, S.A., the company, GyM S.A., Negocios de Gas S.A., Inversiones en Infraestructura de Transporte por Ductos S.A.C., Gasoducto Sur Peruano S.A., Odebrecht Perú Ingeniería y Construcción S.A.C., and Constructora Norberto Odebrecht S.A., Sucursal del Perú. | |
10.05.1.2 | English translation of Addendum No. 2 and Assignment Agreement, dated as of August 11, 2016, to the Rights Subordination Agreement, dated as of April 29, 2016, by and among,inter alia, Odebrecht Latinvest Peru Ductos, S.A., Odebrecht S.A., Enagás, S.A., the company, GyM S.A., Negocios de Gas S.A., Inversiones en Infraestructura de Transporte por Ductos S.A.C., Gasoducto Sur Peruano S.A., Odebrecht Perú Ingeniería y Construcción S.A.C., and Constructora Norberto Odebrecht S.A., Sucursal del Perú. | |
10.05.1.3 | English translation of Modification to Addendum No. 2 and Assignment Agreement, dated as of October 25, 2016, to the Rights Subordination Agreement, dated as of April 29, 2016, by and among,inter alia, Odebrecht Latinvest Peru Ductos, S.A., Odebrecht S.A., Enagás, S.A., the company, GyM S.A., Negocios de Gas S.A., Inversiones en Infraestructura de Transporte por Ductos S.A.C., Gasoducto Sur Peruano S.A., Odebrecht Perú Ingeniería y Construcción S.A.C., and Constructora Norberto Odebrecht S.A., Sucursal del Perú. | |
12.01 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
12.02 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
13.01**** | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act | |
13.02**** | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act |
Exhibit Number | Description | |
16.01 | Letter dated May 15, 2018 by Gaveglio, Aparicio y Asociados S.C. de R.L., a member firm of |
* | Incorporated herein by reference to exhibit 1.01 of the registrant’s Form20-F (FileNo. 333-172855) filed with the SEC on April 30, 2014. |
** | Incorporated herein by reference to the exhibit 4.1 to the registrant’s registration statement on FormF-1 (FileNo. 333-178922) filed with the SEC on June 4, 2013. |
*** | Incorporated herein by reference to the exhibit 4.2 to the registrant’s registration statement on FormF-1 (FileNo. 333-178922) filed with the SEC on June 4, 2013. |
**** | This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. §78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. |
+ | Confidential treatment requested. |
(Free translation from the original in Spanish)
190(All amounts expressed in thousands of S/ unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014, 2015 AND 2016
SIGNATURES(Free translation from the original in Spanish)
The registrant hereby certifies that it meets all(All amounts expressed in thousands of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf.S/ unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014, 2015 AND 2016
Date: April 30, 2014
191
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F-4 | |||||
F-5 | |||||
Consolidated | F-6 | ||||
F-9 | |||||
S/ = Peruvian Sol
US$ = United States dollar
F-1
Report of Independent Registered Public Accounting Firm
February 28, 2014
To the Board of Directors and Shareholders of Graña y Montero S.A.A. shareholders and Boardits subsidiaries
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of Directors:
financial position of Graña y Montero S.A.A. and its subsidiaries (the “Company”) as of December 31, 2015 and 2016, the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows for each of the years then ended, and the related notes. In our opinion, the accompanying consolidated statement of financial position and the related consolidated income statement, consolidated statements of comprehensive income, shareholder’s equity and cash flows present fairly, in all material respects, the financial position of Graña y Montero S.A.A. and its subsidiaries atthe Company as of December 31, 20132015 and December 31, 2012,2016, and the results of their operations and their cash flows for each of the three years in the periodthen ended, December 31, 2013 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. TheseAlso, in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2015 and 2016, based on criteria established inInternal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because the following material weaknesses in internal control over financial reporting existed as of those dates:
- | Lack of a formally established and documented process for enterprise and fraud risk management. |
- | Deficiencies in the design and operational effectiveness of controls over segregation of duties to help ensure that personnel with potential conflicts were not involved in incompatible activities. |
- | Deficiencies in the design and operational effectiveness of the controls established in the accounting closing process with respect to the review of the consolidated and separate financial statements, including controls over the review, approval and documentation related to journal entries. |
- | Deficiencies in the design and operational effectiveness of controls established with respect to the recognition of revenue and determination of related estimates, including construction contract revenues and contingent revenues, and the accounting for inventory. |
- | Deficiencies in the design of controls over the timely accounting for signed contracts. |
- | Deficiencies in design and operational effectiveness of the controls over the review and approval of the valuation of acquired assets and liabilities as part of a step acquisition. |
- | Lack of adequate supervision, monitoring andfollow-up by the Audit Committee regarding the role of the Internal Audit Department. |
- | Deficiencies in operational effectiveness of controls over SOX compliance. |
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management Report on Internal Control over Financial Reporting appearing under Item 15. We considered these material weaknesses in determining the responsibilitynature, timing, and extent of audit tests applied in our audits of the 2015 and 2016 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s management.internal control over financial reporting does not affect our opinion on those consolidated financial statements.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Emphasis of Certain Matters
As discussed in Note 1 to the financial statements, Peruvian prosecutors included three former executives of the Company in an investigation for the alleged crimes of collusion and money laundering, and included Graña y Montero S.A.A and GyM S.A. as subjects of investigation and as third parties responsible on a civil basis. The Note also describes the results of an independent investigation and estimates that the cases will be resolved in a manner favorable to their interests. We are not able to anticipate the final result of those undertakings and the possible contingencies which may arise.
As discussed in Note 2.30 to the consolidated financial statements, the Company made adjustments to the consolidated financial statements as of December 31, 2015, which were presented in the previous Form20-F. These adjustments consisted of reversals of estimates of work in progress and impairments of accounts receivable for S/ 44.7 million, as well as corrections in the recording of goodwill for S/ 14.7 million, reversal of deferred tax asset for S/ 23.4 million and other items for S/ 3.3 million.
Basis for Opinion
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the Management’s Report on Internal Control over Financial Reporting referred to above. Our responsibility is to express an opinionopinions on these financial statements and on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the overall financial statement presentation.design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.opinions.
/s/ Moore Stephens SCAI S.A. | ||
Moore Stephens SCAI S.A. | ||
Bogota, Colombia | ||
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
Gaveglio Aparicio y Asociados Sociedad Civil de Responsabilidad LimitadaCONSOLIDATED STATEMENT OF FINANCIAL POSITION
Av. Santo Toribio 143, 7th Floor, San Isidro, Lima, Peru T: +51 (1) 211 6500, F: +51 (1) 211-6565
www.pwc.com / pe
Gaveglio Aparicio y Asociados Sociedad Civil de Responsabilidad Limitada is a member firm of the global network PricewaterhouseCoopers International Limited (PwCIL). Each of the firms is a separate and independent legal entity and does not act on behalf of PwCIL or any other member firm of the network.
Entered in the Item No. 11028527, Registry of Legal Entities of Lima and Callao
F-2
(All amounts are expressed in thousands of S/. unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
ASSETS | ||||||||||||
As at December 31, | ||||||||||||
Note | 2015 | 2016 | ||||||||||
Restated see Note 2.30 | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 9 | 554,002 | 606,950 | |||||||||
Financial asset at fair value through profit or loss | 3,153 | 352 | ||||||||||
Trade accounts receivables, net | 11 | 1,042,455 | 1,031,270 | |||||||||
Unbilled work in progress, net | 12 | 1,278,227 | 680,929 | |||||||||
Accounts receivable from related parties | 13 | 280,153 | 181,664 | |||||||||
Other accounts receivable | 14 | 820,717 | 649,516 | |||||||||
Inventories, net | 15 | 1,159,154 | 1,104,293 | |||||||||
Prepaid expenses | 40,022 | 51,301 | ||||||||||
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|
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| |||||||||
5,177,883 | 4,306,275 | |||||||||||
Non-current assets classified as held for sale | 22,511 | 22,385 | ||||||||||
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| |||||||||
Total current assets | 5,200,394 | 4,328,660 | ||||||||||
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| |||||||||
Non-current assets | ||||||||||||
Long-term trade accounts receivable, net | 11 | 621,831 | 667,519 | |||||||||
Long-term unbilled work in progress, net | 12 | 59,754 | 197,586 | |||||||||
Long-term accounts receivable from related parties | 13 | — | 531,384 | |||||||||
Prepaid expenses | 22,386 | 23,526 | ||||||||||
Other long-term accounts receivable | 14 | 65,929 | 357,952 | |||||||||
Available-for-sale financial assets | 10 | 120,134 | — | |||||||||
Investments in associates and joint ventures | 16 | 637,005 | 389,759 | |||||||||
Investment property | 34,702 | 49,357 | ||||||||||
Property, plant and equipment, net | 17 | 1,111,757 | 1,113,599 | |||||||||
Intangible assets, net | 18 | 878,286 | 960,286 | |||||||||
Deferred income tax asset | 25 | 147,845 | 427,008 | |||||||||
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|
|
| |||||||||
Total non-current assets | 3,699,629 | 4,717,976 | ||||||||||
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|
|
| |||||||||
Total assets | 8,900,023 | 9,046,636 | ||||||||||
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As of December 31, | ||||||||||||
Current assets | Note | 2012 | 2013 | |||||||||
Cash and cash equivalents | 8 | 780,114 | 959,415 | |||||||||
Trade accounts receivables | 10 | 456,315 | 521,872 | |||||||||
Outstanding work in progress | 11 | 513,529 | 971,743 | |||||||||
Accounts receivable from related parties | 12 | 49,761 | 83,850 | |||||||||
Other accounts receivable | 13 | 447,208 | 553,218 | |||||||||
Inventories | 14 | 747,416 | 762,797 | |||||||||
Prepaid expenses | 22,839 | 25,686 | ||||||||||
Non-current assets classified as held for sale | 16 | — | 21,473 | |||||||||
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|
|
| |||||||||
Total current assets | 3,017,182 | 3,900,054 | ||||||||||
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| |||||||||
Non-current assets | ||||||||||||
Long-term trade accounts receivable | 10 | 305,887 | 591,917 | |||||||||
Other long-term accounts receivable | 13 | 93,489 | 38,151 | |||||||||
Available-for-sale financial assets | 9 | 5,005 | 88,333 | |||||||||
Investments in associates and joint ventures | 15 | 37,446 | 87,967 | |||||||||
Investment property | 35,972 | 36,945 | ||||||||||
Property, machinery and equipment | 16 | 953,531 | 952,596 | |||||||||
Intangible assets | 17 | 480,398 | 481,392 | |||||||||
Derivative financial instruments | 7 | 128 | — | |||||||||
Deferred income tax asset | 23 | 71,078 | 135,521 | |||||||||
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|
|
| |||||||||
Total non-current assets | 1,982,934 | 2,412,822 | ||||||||||
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|
|
| |||||||||
5,000,116 | 6,312,876 | |||||||||||
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|
| |||||||||
LIABILITIES AND EQUITY | ||||||||||||
As of December 31, | ||||||||||||
Current liabilities | Note | 2012 | 2013 | |||||||||
Borrowings | 18 | 452,819 | 486,119 | |||||||||
Trade accounts payable | 19 | 937,287 | 991,397 | |||||||||
Accounts payable to related parties | 12 | 42,734 | 25,585 | |||||||||
Current taxes | 158,834 | 159,235 | ||||||||||
Other accounts payable | 20 | 1,015,129 | 745,094 | |||||||||
Provisions | 21 | 11,312 | 8,895 | |||||||||
|
|
|
| |||||||||
Total current liabilities | 2,618,115 | 2,416,325 | ||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Borrowings | 18 | 392,655 | 309,703 | |||||||||
Long-term trade accounts payable | 19 | — | 2,157 | |||||||||
Other long-term accounts payable | 20 | 52,776 | 205,396 | |||||||||
Other provisions | 21 | 46,191 | 40,387 | |||||||||
Derivative financial instruments | 7 | 18,696 | 3,911 | |||||||||
Deferred income tax liability | 23 | 88,442 | 138,157 | |||||||||
|
|
|
| |||||||||
Total non-current liabilities | 598,760 | 699,711 | ||||||||||
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|
|
| |||||||||
Total liabilities | 3,216,875 | 3,116,036 | ||||||||||
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| |||||||||
Equity | 22 | |||||||||||
Capital | 558,284 | 660,054 | ||||||||||
Legal reserve | 107,011 | 111,657 | ||||||||||
Premium for share issuance | 6,656 | 1,027,533 | ||||||||||
Other comprehensive income | (3,716 | ) | 18,423 | |||||||||
Retained earnings | 723,972 | 948,112 | ||||||||||
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| |||||||||
Equity attributable to controlling interest in the Company | 1,392,207 | 2,765,779 | ||||||||||
Non-controlling interest | 391,034 | 431,061 | ||||||||||
|
|
|
| |||||||||
Total equity | 1,783,241 | 3,196,840 | ||||||||||
|
|
|
| |||||||||
5,000,116 | 6,312,876 | |||||||||||
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|
|
LIABILITIES AND EQUITY | ||||||||||||
As at December 31, | ||||||||||||
Note | 2015 | 2016 | ||||||||||
Restated see Note 2.30 | ||||||||||||
Current liabilities | ||||||||||||
Borrowings | 19 | 1,228,020 | 1,961,043 | |||||||||
Bonds | 20 | 37,083 | 46,091 | |||||||||
Trade accounts payable | 21 | 1,635,762 | 1,276,617 | |||||||||
Accounts payable to related parties | 13 | 77,832 | 80,217 | |||||||||
Current income tax | 34,116 | 62,160 | ||||||||||
Other accounts payable | 22 | 1,066,000 | 1,096,307 | |||||||||
Provisions | 23 | 13,468 | 14,531 | |||||||||
|
|
|
| |||||||||
Total current liabilities | 4,092,281 | 4,536,966 | ||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Borrowings | 19 | 553,336 | 419,395 | |||||||||
Long-term bonds | 20 | 757,008 | 921,623 | |||||||||
Other long-term accounts payable | 22 | 246,396 | 512,803 | |||||||||
Long-term accounts payable to related parties | 13 | 20,136 | 65,320 | |||||||||
Provisions | 23 | 47,460 | 26,542 | |||||||||
Derivative financial instruments | 2,331 | 1,081 | ||||||||||
Deferred income tax liability | 25 | 99,163 | 73,169 | |||||||||
|
|
|
| |||||||||
Total non-current liabilities | 1,725,830 | 2,019,933 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 5,818,111 | 6,556,899 | ||||||||||
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|
| |||||||||
Equity | 24 | |||||||||||
Capital | 660,054 | 660,054 | ||||||||||
Legal reserve | 132,011 | 132,011 | ||||||||||
Optional reserve | 29,974 | 29,974 | ||||||||||
Share Premium | 897,532 | 882,464 | ||||||||||
Other reserves | (143,784 | ) | (167,456 | ) | ||||||||
Retained earnings | 982,987 | 443,377 | ||||||||||
|
|
|
| |||||||||
Equity attributable to controlling interest in the Company |
| 2,558,774 | 1,980,424 | |||||||||
Non-controlling interest | 523,138 | 509,313 | ||||||||||
|
|
|
| |||||||||
Total equity | 3,081,912 | 2,489,737 | ||||||||||
|
|
|
| |||||||||
Total liabilities and equity | 8,900,023 | 9,046,636 | ||||||||||
|
|
|
|
The accompanying notes on pages 8 to 99XXX are an integral part of the consolidated financial statements.
(Free translation from the original in Spanish)
F-3GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
(All amounts are expressed in thousands of S/. unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
For the year ended December 31, | ||||||||||||||||||||||||||||
For the year ended December 31, | Note | 2014 | 2015 | 2016 | ||||||||||||||||||||||||
Note | 2011 | 2012 | 2013 | Restated see Note 2.30 | ||||||||||||||||||||||||
Revenues from construction activities | 2,650,334 | 3,341,539 | 3,820,208 | 4,749,159 | 5,501,537 | 3,945,599 | ||||||||||||||||||||||
Revenues from services provided | 1,316,682 | 1,536,275 | 1,748,128 | 1,912,646 | 1,896,678 | 1,880,634 | ||||||||||||||||||||||
Revenue from real estate and sale of goods | 274,250 | 354,071 | 398,979 | 346,875 | 417,280 | 643,373 | ||||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||
4,241,266 | 5,231,885 | 5,967,315 | 7,008,680 | 7,815,495 | 6,469,606 | |||||||||||||||||||||||
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| |||||||||||||||||||||||
Cost of construction activities | (2,360,521 | ) | (2,969,687 | ) | (3,353,696 | ) | (4,336,388 | ) | (5,342,379 | ) | (3,751,221 | ) | ||||||||||||||||
Cost of services provided | (1,077,236 | ) | (1,335,092 | ) | (1,349,850 | ) | (1,489,574 | ) | (1,526,875 | ) | (1,674,180 | ) | ||||||||||||||||
Cost of real estate and goods sold | (171,760 | ) | (215,040 | ) | (259,108 | ) | (231,150 | ) | (296,267 | ) | (440,786 | ) | ||||||||||||||||
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| |||||||||||||||||||||||
25 | (3,609,517 | ) | (4,519,819 | ) | (4,962,654 | ) | 27 | (6,057,112 | ) | (7,165,521 | ) | (5,866,187 | ) | |||||||||||||||
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| |||||||||||||||||||||||
Gross profit | 631,749 | 712,066 | 1,004,661 | 951,568 | 649,974 | 603,419 | ||||||||||||||||||||||
Administrative expenses | 25 | (199,582 | ) | (257,180 | ) | (361,792 | ) | 27 | (421,367 | ) | (413,385 | ) | (399,402 | ) | ||||||||||||||
Other income and expenses | 27 | 4,330 | 75,944 | 26,034 | ||||||||||||||||||||||||
Profit from the sale of investments | 15 | 4,769 | — | 5,722 | ||||||||||||||||||||||||
Other (losses) gains, net | (2,845 | ) | (325 | ) | (733 | ) | ||||||||||||||||||||||
Gain from business combination | 31-d | 45,152 | — | — | ||||||||||||||||||||||||
Other income and expenses, net | 29 | 15,136 | 57,287 | (13,270 | ) | |||||||||||||||||||||||
Gain from the sale of investments | 6 a) - 10 | — | (8,289 | ) | 46,336 | |||||||||||||||||||||||
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| |||||||||||||||||||||||
Operating profit | 483,573 | 530,505 | 673,892 | 545,337 | 285,587 | 237,083 | ||||||||||||||||||||||
Financial expenses | 26 | (188,456 | ) | (310,672 | ) | (583,452 | ) | 28 | (102,816 | ) | (176,802 | ) | (231,571 | ) | ||||||||||||||
Financial income | 26 | 182,305 | 300,389 | 471,003 | 28 | 11,462 | 38,107 | 20,794 | ||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | 15 | 223 | 604 | 33,562 | 16 | 53,445 | 7,724 | (589,710 | ) | |||||||||||||||||||
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| |||||||||||||||||||||||
Profit before income tax | 477,645 | 520,826 | 595,005 | |||||||||||||||||||||||||
Profit (Loss) before income tax | 507,428 | 154,616 | (563,404 | ) | ||||||||||||||||||||||||
Income tax | 28 | (141,447 | ) | (154,575 | ) | (182,430 | ) | 30 | (146,196 | ) | (99,027 | ) | 111,806 | |||||||||||||||
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Profit for the year | 336,198 | 366,251 | 412,575 | |||||||||||||||||||||||||
Profit (Loss) for the period | 361,232 | 55,589 | (451,598 | ) | ||||||||||||||||||||||||
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Profit attributable to: | ||||||||||||||||||||||||||||
Owners of the Company | 289,076 | 289,954 | 320,363 | |||||||||||||||||||||||||
Profit (Loss) attributable to: | ||||||||||||||||||||||||||||
Equity holders of the Company | 299,743 | 7,097 | (509,699 | ) | ||||||||||||||||||||||||
Non-controlling interest | 47,122 | 76,297 | 92,212 | 61,489 | 48,492 | 58,101 | ||||||||||||||||||||||
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| |||||||||||||||||||||||
336,198 | 366,251 | 412,575 | 361,232 | 55,589 | (451,598 | ) | ||||||||||||||||||||||
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| |||||||||||||||||||||||
Earnings per share from continuing operations attributable to owners of the Company during the year | 33 | 0.518 | 0.519 | 0.534 | ||||||||||||||||||||||||
Earnings per share from continuing operations attributable to owners of the Company during the period | 35 | 0.454 | 0.011 | (0.772 | ) | |||||||||||||||||||||||
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The accompanying notes on pages 8 to 99XXX are an integral part of the consolidated financial statements.
F-4
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(All amounts are expressed in thousands of S/. unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, | ||||||||||||||||
Note | 2011 | 2012 | 2013 | |||||||||||||
Profit for the year | 336,198 | 366,251 | 412,575 | |||||||||||||
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Other comprehensive income: | ||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||
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Adjustment for actuarial gains and losses, net of tax | 29 | — | (3,678 | ) | (6,121 | ) | ||||||||||
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| |||||||||||
Items that may be subsequently reclassified to profit or loss | ||||||||||||||||
Cash flow hedge, net of tax | 29 | 695 | (2,369 | ) | 3,733 | |||||||||||
Foreign currency translation adjustment, net of tax | (3,940 | ) | (2,019 | ) | (1,356 | ) | ||||||||||
Change in value of available-for-sale financial assets | 9 | — | — | 19,060 | ||||||||||||
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| |||||||||||
(3,245 | ) | (4,388 | ) | 21,437 | ||||||||||||
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Other comprenhensive income for the year, net of tax | (3,245 | ) | (8,066 | ) | 15,316 | |||||||||||
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| |||||||||||
Total comprehensive Income for the year | 332,953 | 358,185 | 427,891 | |||||||||||||
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Comprehensive income attributable to: | ||||||||||||||||
Controlling interest in the Company | 285,796 | 282,870 | 337,911 | |||||||||||||
Non-controlling interest | 47,157 | 75,315 | 89,980 | |||||||||||||
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| |||||||||||
332,953 | 358,185 | 427,891 | ||||||||||||||
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For the year ended December 31, | ||||||||||||||||
Note | 2014 | 2015 | 2016 | |||||||||||||
Restated see Note 2.30 | ||||||||||||||||
Profit (Loss) for the period | 361,232 | 55,589 | (451,598 | ) | ||||||||||||
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Other comprehensive income: | ||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||
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| |||||||||||
Re-assessment of actuarial gains and losses, net of tax | 31 | (1,777 | ) | (3,860 | ) | (1,531 | ) | |||||||||
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| |||||||||||
Items that may be subsequently reclassified to profit or loss | ||||||||||||||||
Cash flow hedge, net of tax | 31 | 568 | 723 | 883 | ||||||||||||
Currency translation adjustment, net of tax | (20,463 | ) | (59,660 | ) | 14,307 | |||||||||||
Impairment of available-for-sale financial assets | 10 | 4,649 | 19,973 | (2,220 | ) | |||||||||||
Impairment of financial assets available for sale, net of tax | 10 | — | — | (41,461 | ) | |||||||||||
Exchange movements on translation of foreign subsidiaries, net of tax | 31 | — | (5,220 | ) | 7,860 | |||||||||||
Exchange difference from foreign net investment, net of tax | 31 | (12,794 | ) | — | 1,563 | |||||||||||
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(28,040 | ) | (44,184 | ) | (19,068 | ) | |||||||||||
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|
|
| |||||||||||
Other comprenhensive income for the period, net of tax | (29,817 | ) | (48,044 | ) | (20,599 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income for the period | 331,415 | 7,545 | (472,197 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Comprehensive income attributable to: | ||||||||||||||||
Equity holders of the Company | 277,912 | (25,713 | ) | (534,492 | ) | |||||||||||
Non-controlling interest | 53,503 | 33,258 | 62,295 | |||||||||||||
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|
| |||||||||||
331,415 | 7,545 | (472,197 | ) | |||||||||||||
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The accompanying notes on pages 8 to 99XXX are an integral part of the consolidated financial statements.
(Free translation from the original in Spanish)
F-5GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2016
(All amounts are expressed in thousands of S/. unless otherwise stated)
Attributable to the controlling interests of the Company | ||||||||||||||||||||||||||||||||||||||||
Number of shares In thousands | Capital | Legal reserve | Optional reserve | Premium for issuance of shares | Other reserves | Retained earnings | Total | Non-controlling interest | Total | |||||||||||||||||||||||||||||||
Balances as of January 1, 2014 | 660,054 | 660,054 | 111,657 | — | 1,027,533 | 18,423 | 947,766 | 2,765,433 | 431,262 | 3,196,695 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | 299,743 | 299,743 | 61,489 | 361,232 | ||||||||||||||||||||||||||||||
Cash flow hedge | — | — | — | — | — | 540 | — | 540 | 28 | 568 | ||||||||||||||||||||||||||||||
Adjustment for actuarial gains and losses | — | — | — | — | — | — | (1,332 | ) | (1,332 | ) | (445 | ) | (1,777 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | (13,086 | ) | — | (13,086 | ) | (7,377 | ) | (20,463 | ) | ||||||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | — | 4,649 | — | 4,649 | — | 4,649 | ||||||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | — | — | — | — | — | (12,602 | ) | — | (12,602 | ) | (192 | ) | (12,794 | ) | ||||||||||||||||||||||||||
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| |||||||||||||||||||||
Comprehensive income of the year | — | — | — | — | — | (20,499 | ) | 298,411 | 277,912 | 53,503 | 331,415 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | 20,354 | — | — | — | (20,354 | ) | — | — | — | |||||||||||||||||||||||||||||
- Dividend distribution (Note 34 and 36 g) | — | — | — | — | — | — | (112,127 | ) | (112,127 | ) | (68,062 | ) | (180,189 | ) | ||||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 36 d) | — | — | — | — | — | — | — | — | 47,376 | 47,376 | ||||||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 36 a) | — | — | — | — | (128,222 | ) | — | — | (128,222 | ) | (50,109 | ) | (178,331 | ) | ||||||||||||||||||||||||||
- Sale to non-controlling interest in GyM Chile Spa (Note 36 b) | — | — | — | — | — | — | — | — | 1,627 | 1,627 | ||||||||||||||||||||||||||||||
- Deconsolidation of subsidiaries (Note 36 e) | — | — | — | — | — | — | — | — | 2,284 | 2,284 | ||||||||||||||||||||||||||||||
- Put option liability from acquisition of non-controlling (Note 22) | — | — | — | — | — | (111,819 | ) | — | (111,819 | ) | (2,010 | ) | (113,829 | ) | ||||||||||||||||||||||||||
- Purchase of subsidiaries (Note 33 a) | — | — | — | — | — | — | — | — | 66,659 | 66,659 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total transactions with shareholders | — | — | 20,354 | — | (128,222 | ) | (111,819 | ) | (132,481 | ) | (352,168 | ) | (2,235 | ) | (354,403 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of December 31, 2014 | 660,054 | 660,054 | 132,011 | — | 899,311 | (113,895 | ) | 1,113,696 | 2,691,177 | 482,530 | 3,173,707 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of January 1, 2015 | 660,054 | 660,054 | 132,011 | — | 899,311 | (113,895 | ) | 1,113,696 | 2,691,177 | 482,530 | 3,173,707 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | 7,097 | 7,097 | 48,492 | 55,589 | ||||||||||||||||||||||||||||||
Derivative instruments for cashflow | — | — | — | — | — | 687 | — | 687 | 36 | 723 | ||||||||||||||||||||||||||||||
Re-assessment of actuarial gains and losses | — | — | — | — | — | — | (2,921 | ) | (2,921 | ) | (939 | ) | (3,860 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | (45,411 | ) | — | (45,411 | ) | (14,249 | ) | (59,660 | ) | ||||||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | — | 19,973 | — | 19,973 | — | 19,973 | ||||||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | — | — | — | — | — | (5,138 | ) | — | (5,138 | ) | (82 | ) | (5,220 | ) | ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Comprehensive income of the year | — | — | — | — | — | (29,889 | ) | 4,176 | (25,713 | ) | 33,258 | 7,545 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | — | 29,974 | — | — | (29,974 | ) | — | — | — | |||||||||||||||||||||||||||||
- Dividend distribution (Note 34, 36 d) | — | — | — | — | — | — | (104,911 | ) | (104,911 | ) | (4,535 | ) | (109,446 | ) | ||||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 36 d) | — | — | — | — | — | — | — | — | 10,329 | 10,329 | ||||||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 36 a) | — | — | — | — | (894 | ) | — | — | (894 | ) | (971 | ) | (1,865 | ) | ||||||||||||||||||||||||||
- Sale to non-controlling interest (Note 36 b) | — | — | — | — | (885 | ) | — | — | (885 | ) | 2,527 | 1,642 | ||||||||||||||||||||||||||||
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|
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| |||||||||||||||||||||
Total transactions with shareholders | — | — | — | 29,974 | (1,779 | ) | — | (134,885 | ) | (106,690 | ) | 7,350 | (99,340 | ) | ||||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of December 31, 2015—Restated | 660,054 | 660,054 | 132,011 | 29,974 | 897,532 | (143,784 | ) | 982,987 | 2,558,774 | 523,138 | 3,081,912 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of January 1, 2016 | 660,054 | 660,054 | 132,011 | 29,974 | 897,532 | (143,784 | ) | 982,987 | 2,558,774 | 523,138 | 3,081,912 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Loss for the period | — | — | — | — | — | — | (509,699 | ) | (509,699 | ) | 58,101 | (451,598 | ) | |||||||||||||||||||||||||||
Derivative instruments for cashflow | — | — | — | — | — | 839 | — | 839 | 44 | 883 | ||||||||||||||||||||||||||||||
Re-assessment of actuarial gains and losses | — | — | — | — | — | — | (1,121 | ) | (1,121 | ) | (410 | ) | (1,531 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | 9,885 | — | 9,885 | 4,422 | 14,307 | ||||||||||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | — | (2,220 | ) | — | (2,220 | ) | — | (2,220 | ) | |||||||||||||||||||||||||||
Transfer to profit or loss of available-for-sale financial assets | — | — | — | — | — | (41,461 | ) | — | (41,461 | ) | — | (41,461 | ) | |||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | — | — | — | — | — | 7,722 | — | 7,722 | 138 | 7,860 | ||||||||||||||||||||||||||||||
Transfer to profit or loss of exchange difference from net investment in a foreign operation, net of tax | — | — | — | — | — | 1,563 | — | 1,563 | — | 1,563 | ||||||||||||||||||||||||||||||
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|
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| |||||||||||||||||||||
Comprehensive income of the period | — | — | — | — | — | (23,672 | ) | (510,820 | ) | (534,492 | ) | 62,295 | (472,197 | ) | ||||||||||||||||||||||||||
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| |||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Transfer to Optional reserve | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
- Dividend distribution (Note 34, 36 d) | — | — | — | — | — | — | (30,853 | ) | (30,853 | ) | (25,473 | ) | (56,326 | ) | ||||||||||||||||||||||||||
- Contributions (devolution) of non-controlling shareholders,net (Note 36 d) | — | — | — | — | — | — | — | — | (19,099 | ) | (19,099 | ) | ||||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 36 a) | — | — | — | — | (15,167 | ) | — | — | (15,167 | ) | (35,972 | ) | (51,139 | ) | ||||||||||||||||||||||||||
- Sale to non-controlling interest (Note 36 b) | — | — | — | — | 99 | — | — | 99 | 236 | 335 | ||||||||||||||||||||||||||||||
- Acquisition of subsidiary Adexus | — | — | — | — | — | — | — | — | 4,153 | 4,153 | ||||||||||||||||||||||||||||||
- Deconsolidation of former subsidiary | — | — | — | — | — | — | 2,063 | 2,063 | 35 | 2,098 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total transactions with shareholders | — | — | — | — | (15,068 | ) | — | (28,790 | ) | (43,858 | ) | (76,120 | ) | (119,978 | ) | |||||||||||||||||||||||||
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|
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| |||||||||||||||||||||
Balances as of December 31, 2016 | 660,054 | 660,054 | 132,011 | 29,974 | 882,464 | (167,456 | ) | 443,377 | 1,980,424 | 509,313 | 2,489,737 | |||||||||||||||||||||||||||||
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The accompanying notes on pages 8 to XXX are part of the consolidated financial statements.
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET SHAREHOLDERS’ EQUITYCASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
Attributable to the controlling interests of the Company | ||||||||||||||||||||||||||||||||||||
Number of shares in thousands | Capital | Legal reserve | Premium for issuance of shares | Other comprehen- sive income | Retained earnings | Total | Non- controlling interest | Total | ||||||||||||||||||||||||||||
In thousands | ||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2011 | 558,284 | 390,518 | 54,605 | 5,091 | 2,970 | 506,677 | 959,861 | 189,047 | 1,148,908 | |||||||||||||||||||||||||||
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|
|
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|
|
| |||||||||||||||||||
Profit for the year | — | — | — | — | — | 289,076 | 289,076 | 47,122 | 336,198 | |||||||||||||||||||||||||||
Cash flow hedge | — | — | — | — | 660 | — | 660 | 35 | 695 | |||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (3,940 | ) | — | (3,940 | ) | — | (3,940 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||
Comprehensive income of the year | — | — | — | — | (3,280 | ) | 289,076 | 285,796 | 47,157 | 332,953 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | 23,499 | — | — | (23,499 | ) | — | — | — | ||||||||||||||||||||||||||
- Dividend distribution (Note 32 and 34 g) | — | — | — | — | — | (55,015 | ) | (55,015 | ) | (14,850 | ) | (69,865 | ) | |||||||||||||||||||||||
- Purchase of subsidiaries (Note 31 d) | — | — | — | — | — | — | — | 24,722 | 24,722 | |||||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 34) | — | — | — | — | — | — | — | (13,328 | ) | (13,328 | ) | |||||||||||||||||||||||||
- Subsidiaries constitution | — | — | — | — | — | — | — | 30,776 | 30,776 | |||||||||||||||||||||||||||
- Sale and purchase of treasury shares | — | (30 | ) | — | (211 | ) | — | — | (241 | ) | — | (241 | ) | |||||||||||||||||||||||
- Others | — | — | — | — | — | (1,379 | ) | (1,379 | ) | 540 | (839 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total transactions with shareholders | — | (30 | ) | 23,499 | (211 | ) | — | (79,893 | ) | (56,635 | ) | 27,860 | (28,775 | ) | ||||||||||||||||||||||
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| |||||||||||||||||||
Balances as of December 31, 2011 | 558,284 | 390,488 | 78,104 | 4,880 | (310 | ) | 715,860 | 1,189,022 | 264,064 | 1,453,086 | ||||||||||||||||||||||||||
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Balances as of January 1, 2012 | 558,284 | 390,488 | 78,104 | 4,880 | (310 | ) | 715,860 | 1,189,022 | 264,064 | 1,453,086 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Profit for the year | — | — | — | — | — | 289,954 | 289,954 | 76,297 | 366,251 | |||||||||||||||||||||||||||
Cash flow hedge | — | — | — | — | (2,251 | ) | — | (2,251 | ) | (118 | ) | (2,369 | ) | |||||||||||||||||||||||
Adjustment for actuarial gains and losses | — | — | — | — | — | (3,678 | ) | (3,678 | ) | — | (3,678 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (1,155 | ) | — | (1,155 | ) | (864 | ) | (2,019 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||
Comprehensive income of the year | — | — | — | — | (3,406 | ) | 286,276 | 282,870 | 75,315 | 358,185 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | 28,907 | — | — | (28,907 | ) | — | — | — | ||||||||||||||||||||||||||
- Dividend distribution (Note 32 and 34 g) | — | — | — | — | — | (86,723 | ) | (86,723 | ) | (37,512 | ) | (124,235 | ) | |||||||||||||||||||||||
- Capitalization | — | 167,485 | — | — | — | (167,485 | ) | — | — | — | ||||||||||||||||||||||||||
- Subsidiaries constitution | — | — | — | — | — | — | — | 5,750 | 5,750 | |||||||||||||||||||||||||||
- Purchase of subsidiaries (Note 31 b-c) | — | — | — | — | — | — | — | 48,055 | 48,055 | |||||||||||||||||||||||||||
- Debt capitalization (Note 34 f) | — | — | — | — | — | — | — | 12,232 | 12,232 | |||||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 34 d) | — | — | — | — | — | — | — | 26,096 | 26,096 | |||||||||||||||||||||||||||
- Acquisition of non-controlling interest in Survial S.A. (Note 34 a.iii) | — | — | — | 364 | — | — | 364 | (4,757 | ) | (4,393 | ) | |||||||||||||||||||||||||
- Sale of non-controlling interest in GyM S.A. and Concar S.A. (Note 34 b) | — | — | — | 291 | — | — | 291 | 902 | 1,193 | |||||||||||||||||||||||||||
- Sale and purchase of treasury shares | — | 140 | — | 1,292 | — | — | 1,432 | — | 1,432 | |||||||||||||||||||||||||||
- Others | — | 171 | — | (171 | ) | — | 4,951 | 4,951 | 889 | 5,840 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Total transactions with shareholders | — | 167,796 | 28,907 | 1,776 | — | (278,164 | ) | (79,685 | ) | 51,655 | (28,030 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||
Balances as of December 31, 2012 | 558,284 | 558,284 | 107,011 | 6,656 | (3,716 | ) | 723,972 | 1,392,207 | 391,034 | 1,783,241 | ||||||||||||||||||||||||||
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F-6
(All amounts are expressed in thousands of S/. unless otherwise stated)
For the year ended December 31, | ||||||||||||||||
Note | 2014 | 2015 | 2016 | |||||||||||||
Restated see Note 2.30 | ||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||||||||||
Profit (Loss) before income tax | 507,428 | 154,616 | (563,404 | ) | ||||||||||||
Adjustments to profit not affecting cash flows from operating activities: | ||||||||||||||||
Depreciation | 17 | 185,310 | 217,070 | 205,522 | ||||||||||||
Amortization of other assets | 18 | 74,730 | 89,355 | 82,743 | ||||||||||||
Impairment of inventories | 17 | 62 | 17 | 36,353 | ||||||||||||
Impairment of accounts receivable and other accounts receivable | 11-12 | 71 | 5,806 | 419,584 | ||||||||||||
Debt forgiveness | — | — | (431,484 | ) | ||||||||||||
Impairment of property, plant and equipment | 17 | 2,415 | 3,796 | 9,263 | ||||||||||||
Impairment of other assets | 18 | 14,170 | — | 54,308 | ||||||||||||
Impairment of intangible assets | — | — | — | |||||||||||||
Recovery of impairment of inventory | (1,169 | ) | — | |||||||||||||
Financial expenses-CCDS | — | — | 7,004 | |||||||||||||
Expenses for liquidation of work in progress - CCDS | — | — | 164 | |||||||||||||
Indemnification for loss of profits | — | — | (33,600 | ) | ||||||||||||
Change on fair value of financial asset through profit or loss | — | (2,740 | ) | 31 | ||||||||||||
Change in the fair value of the liability for put option | 22 | — | (18,627 | ) | (984 | ) | ||||||||||
Provisions | 23 | 6,559 | 6,398 | 9,486 | ||||||||||||
Dividends from available-for-sale financial assets | (9,350 | ) | (7,215 | ) | — | |||||||||||
Income from return receipt from Morelco | — | — | (6,658 | ) | ||||||||||||
Re-assessment of purchase consideration of Morelco | 33 b) | — | — | (7,166 | ) | |||||||||||
Financial expense,net | 76,102 | 125,096 | 106,739 | |||||||||||||
Demobilization provisions in CCDS | — | — | 24,915 | |||||||||||||
Share of profit and loss in associates and joint ventures | — | — | ||||||||||||||
under equity method | 16 a) b) | (53,445 | ) | (24,993 | ) | 589,710 | ||||||||||
Reversal of provisions | 23 | (9,394 | ) | (7,796 | ) | (17,883 | ) | |||||||||
Disposal of property, plant and equipment | — | 5,881 | 3,951 | |||||||||||||
Disposal on fair value of financial asset through | — | |||||||||||||||
profit or loss | — | 2,755 | 1,227 | |||||||||||||
Profit on sale of property, plant and equipment | 16 | (4,845 | ) | (17,385 | ) | (18,393 | ) | |||||||||
Loss on financial asset at fair value through profit or loss | — | 450 | 221 | |||||||||||||
Loss on sale of non-current asset held for sale | — | — | 22 | |||||||||||||
Profit on sale from available-for-sale financial assets | 10 | — | — | (46,337 | ) | |||||||||||
Loss on sale of investments in subsidiaries | — | 8,289 | — | |||||||||||||
Loss on re-assessment of accounts receivable | — | — | 76,864 | |||||||||||||
Loss on re-assesment of investment | — | — | 6,832 | |||||||||||||
Increase / (decrease) in assets and liabilities: | ||||||||||||||||
Trade accounts receivable and Unbilled work in progress | (594,993 | ) | (50,150 | ) | 115,263 | |||||||||||
Other accounts receivable | 32,159 | (184,180 | ) | (85,234 | ) | |||||||||||
Accounts receivable from related parties | (15,291 | ) | (133,286 | ) | 84,448 | |||||||||||
Inventories | (51,489 | ) | (220,670 | ) | 33,709 | |||||||||||
Pre-paid expenses and other assets | (8,634 | ) | 11,667 | (99 | ) | |||||||||||
Trade accounts payable | 82,051 | 199,402 | (87,553 | ) | ||||||||||||
Other accounts payable | (19,731 | ) | (60,073 | ) | 114,666 | |||||||||||
Accounts payable to related parties | 55,316 | 14,777 | 45,902 | |||||||||||||
Provisions | (7,208 | ) | (6,770 | ) | (2,756 | ) | ||||||||||
Interest paid | (46,411 | ) | (110,884 | ) | (171,572 | ) | ||||||||||
Payments related to Norvial Concession | (82,698 | ) | (142,575 | ) | (97,711 | ) | ||||||||||
Payment of income tax | (154,878 | ) | (150,337 | ) | (125,619 | ) | ||||||||||
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Net cash applied to operating activities | (23,163 | ) | (292,306 | ) | 332,474 | |||||||||||
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GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET SHAREHOLDERS’ EQUITYCASH FLOW (continue)
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011(All amounts are expressed in thousands of S/. unless otherwise stated)
Attributable to the controlling interests of the Company | ||||||||||||||||||||||||||||||||||||
Number of shares In thousands | Capital | Legal reserve | Premium for issuance of shares | Other compre– hensive income | Retained earnings | Total | Non- controlling interest | Total | ||||||||||||||||||||||||||||
Balances as of January 1, 2013 | 558,284 | 558,284 | 107,011 | 6,656 | (3,716 | ) | 723,972 | 1,392,207 | 391,034 | 1,783,241 | ||||||||||||||||||||||||||
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Profit for the year | — | — | — | — | — | 320,363 | 320,363 | 92,212 | 412,575 | |||||||||||||||||||||||||||
Cash flow hedge | — | — | — | — | 3,546 | — | 3,546 | 187 | 3,733 | |||||||||||||||||||||||||||
Adjustment for actuarial gains and losses | — | — | — | — | — | (4,591 | ) | (4,591 | ) | (1,530 | ) | (6,121 | ) | |||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (467 | ) | — | (467 | ) | (889 | ) | (1,356 | ) | |||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | 19,060 | — | 19,060 | — | 19,060 | |||||||||||||||||||||||||||
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Comprehensive income of the year | — | — | — | — | 22,139 | 315,772 | 337,911 | 89,980 | 427,891 | |||||||||||||||||||||||||||
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Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | 4,646 | — | — | (4,646 | ) | — | — | — | ||||||||||||||||||||||||||
- Dividend distribution (Note 32 and 34 g) | — | — | — | — | — | (86,986 | ) | (86,986 | ) | (51,794 | ) | (138,780 | ) | |||||||||||||||||||||||
- Issuance of shares (Note 22 c) | 101,770 | 101,770 | — | 1,055,488 | — | 1,157,258 | — | 1,157,258 | ||||||||||||||||||||||||||||
- Purchase of subsidiaries (Note 31 a) | — | — | — | — | — | �� | — | — | 15,701 | 15,701 | ||||||||||||||||||||||||||
- Deconsolidation of subsidiaries (Note 34 e) | — | — | — | — | — | — | — | (19,377 | ) | (19,377 | ) | |||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 34 e) | — | — | — | — | — | — | — | 34,774 | 34,774 | |||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 34 a.i) | — | — | — | (2,905 | ) | — | — | (2,905 | ) | (9,528 | ) | (12,433 | ) | |||||||||||||||||||||||
- Additional acquisition of non-controlling—Norvial (Note 34 a.ii) | — | — | — | (31,706 | ) | — | — | (31,706 | ) | (19,729 | ) | (51,435 | ) | |||||||||||||||||||||||
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Total transactions with shareholders | 660,054 | 101,770 | 4,646 | 1,020,877 | — | (91,632 | ) | 1,035,661 | (49,953 | ) | 985,708 | |||||||||||||||||||||||||
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Balances as of December 31, 2013 | 660,054 | 660,054 | 111,657 | 1,027,533 | 18,423 | 948,112 | 2,765,779 | 431,061 | 3,196,840 | |||||||||||||||||||||||||||
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Note | For the year ended December 31, | |||||||||||||
2014 | 2015 | 2016 | ||||||||||||
Restated see Note 2.30 | ||||||||||||||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||||||||
Sale of available-for-sale investment | — | 5,613 | 107,341 | |||||||||||
Sale of a financial asset through profit or loss | — | — | — | |||||||||||
Sale of property, plant and equipment | 42,968 | 55,832 | 66,086 | |||||||||||
Sale of financial asset at fair value through profit or loss | — | — | 1,427 | |||||||||||
Sale of non-current assets held for sale | — | (13,496 | ) | 117 | ||||||||||
Refunding for price adjustment | — | — | 6,658 | |||||||||||
Return of contributions | — | 481 | 1,963 | |||||||||||
Interest received | 8,909 | 32,162 | 15,370 | |||||||||||
Dividends received | 16 b) 34 | 46,068 | 59,175 | 27,992 | ||||||||||
Payment for purchase of a non-current asset held for sale | — | — | — | |||||||||||
Payment for purchase of investments properties | (1,450 | ) | (748 | ) | (17,543 | ) | ||||||||
Payments for intangible purchase | (60,846 | ) | (32,883 | ) | (45,706 | ) | ||||||||
Payments for purchase and contributions on investment in associates and joint ventures | 16 a) b) | (129,859 | ) | (464,086 | ) | (389,657 | ) | |||||||
Direct cash outflow from acquisition of subsidiaries | (170,372 | ) | — | — | ||||||||||
Purchase of property, plant and equipment | (265,567 | ) | (193,156 | ) | (147,732 | ) | ||||||||
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Net cash flow from investing activities | (530,149 | ) | (551,106 | ) | (373,684 | ) | ||||||||
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CASH FLOW FROM FINANCING ACTIVITIES | ||||||||||||||
Loans received | 2,770,286 | 4,448,332 | 3,941,750 | |||||||||||
Bonds issued | 20 | — | 814,016 | 178,640 | ||||||||||
Amortization of loans received | (2,053,422 | ) | (4,549,000 | ) | (3,914,570 | ) | ||||||||
Amortization of bonds issued | — | (16,480 | ) | (25,281 | ) | |||||||||
Payment for debt cost transaction | — | (18,516 | ) | (650 | ) | |||||||||
Dividends paid to holders of the parent | (112,127 | ) | (104,911 | ) | (30,853 | ) | ||||||||
Dividends paid to non-controlling interest | (63,990 | ) | (4,535 | ) | (25,473 | ) | ||||||||
Cash received from non-controlling shareholders | 36 d) | 47,376 | 10,329 | (19,099 | ) | |||||||||
Acquisition or sale of interest in a subsidiary of non-controlling shareholders | 36 a) | (177,451 | ) | (223 | ) | (19,037 | ) | |||||||
Sale of interest in a subsidiary of non-controlling shareholders | 36 b) | 1,627 | — | 335 | ||||||||||
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Net cash provided by financing activities | 412,299 | 579,012 | 85,762 | |||||||||||
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Net increase (net decrease) in cash | (141,013 | ) | (264,400 | ) | 44,552 | |||||||||
Cash and cash equivalents at the beginning of the year | 959,415 | 818,402 | 554,002 | |||||||||||
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Cash and cash equivalents at the end of the period | 818,402 | 554,002 | 598,554 | |||||||||||
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NON-CASH TRANSACTIONS: | ||||||||||||||
Debt capitalization | — | — | 8,308 | |||||||||||
Acquisition of assets through finance leases | 163,399 | 92,093 | 65,336 | |||||||||||
Recognition of debt as guarantor | — | — | 608,247 | |||||||||||
Change in fair value of available-for-sale financial assets | 4,649 | 19,973 | — | |||||||||||
Adjustment for deconsolidation of former subsidiaries | 2,284 | 9,298 | — | |||||||||||
Establishment of joint operation - Panorama Plaza de negocios (net assets) | — | 36,180 | — | |||||||||||
Account payable - acquisition of Morelco | 45,684 | — | — | |||||||||||
Put option liability from acquisition of non-controlling | 113,829 | — | — |
The accompanying notes on pages 8 to 99XXX are an integral part of the consolidated financial statements.
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
F-7CONSOLIDATED INCOME STATEMENT
(All amounts are expressed in thousands of S/. unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, | ||||||||||||||||
Note | 2011 | 2012 | 2013 | |||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Profit before income tax | 477,645 | 520,826 | 595,005 | |||||||||||||
Adjustments to profit not affecting cash flows from operating activities: | ||||||||||||||||
Depreciation | 16 | 127,023 | 173,018 | 181,369 | ||||||||||||
Impairment of intangibles | 3,436 | — | — | |||||||||||||
Amortization of other assets | 17 | 51,223 | 71,485 | 77,770 | ||||||||||||
Impairment of inventory | 14 | — | 10,981 | 2,239 | ||||||||||||
Impairment of accounts receivable | 10 | — | 2,707 | 110 | ||||||||||||
Impairment of other assets | 774 | |||||||||||||||
Provisions | 21 | 15,084 | ||||||||||||||
Share of the profit and loss in associates under the equity method of accounting | 15a-b | (223 | ) | (604 | ) | (33,562 | ) | |||||||||
Business combination gain | 31d | (45,152 | ) | — | — | |||||||||||
Reversal of provisions | 27 | — | (67,556 | ) | (14,556 | ) | ||||||||||
Profit on sale of property, plant and equipment | 16 | 1,661 | (1,261 | ) | (734 | ) | ||||||||||
Profit on sale of investments in associates | 15a | (4,769 | ) | — | (5,722 | ) | ||||||||||
Net variations in assets and liabilities: | ||||||||||||||||
Decrease in trade accounts receivable | (177,076 | ) | (49,897 | ) | (783,780 | ) | ||||||||||
Decrease in other accounts receivable | (183,468 | ) | (346,429 | ) | (33,606 | ) | ||||||||||
Decrease in other accounts receivable from related parties | (812 | ) | (24,451 | ) | (34,089 | ) | ||||||||||
Decrease in inventories | (140,410 | ) | (197,802 | ) | (21,071 | ) | ||||||||||
Increase in pre-paid expenses and other assets | (4,256 | ) | 21,644 | (539 | ) | |||||||||||
Increase in trade accounts payable | 265,626 | 224,935 | 56,836 | |||||||||||||
Increase (decrease) in other accounts payable | (68,469 | ) | 373,637 | (145,376 | ) | |||||||||||
Increase in other accounts payable to related parties | 2,022 | 23,069 | (14,677 | ) | ||||||||||||
Decrease in other provisions | (5,973 | ) | (3,759 | ) | (16,269 | ) | ||||||||||
Payments for intangible purchase—Concessions | (25,378 | ) | (28,406 | ) | (2,329 | ) | ||||||||||
Payment of income tax | (139,311 | ) | (159,408 | ) | (190,556 | ) | ||||||||||
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Net cash provided by (applied to) operating activities | 133,339 | 542,729 | (367,679 | ) | ||||||||||||
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INVESTING ACTIVITIES | ||||||||||||||||
Sale of investment in associates | 26,565 | — | 6,800 | |||||||||||||
Sale of available-for-sale investment | — | 342 | — | |||||||||||||
Sale of property, machinery and equipment | 6,436 | 23,471 | 15,861 | |||||||||||||
Dividends received | 15-a,b | 34,709 | 2,057 | 4,688 | ||||||||||||
Payment for purchase of available-for-sale investment | — | — | (56,100 | ) | ||||||||||||
Payment for purchase of property investments | — | (956 | ) | (2,974 | ) | |||||||||||
Payments for intangible purchase | (44,146 | ) | (10,851 | ) | (22,375 | ) | ||||||||||
Direct cash inflow (outflow) from acquisition of subsidiaries | 31 | 31,660 | (133,648 | ) | (88,342 | ) | ||||||||||
Payments for fixed asset purchase | (140,803 | ) | (280,402 | ) | (197,553 | ) | ||||||||||
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Net cash applied to investing activities | (85,579 | ) | (399,987 | ) | (339,995 | ) | ||||||||||
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FINANCING ACTIVITIES | ||||||||||||||||
Loans received | 185,701 | 610,399 | 1,351,964 | |||||||||||||
Amortization of loans received | (181,307 | ) | (490,398 | ) | (1,378,359 | ) | ||||||||||
Interest payment | (24,198 | ) | (46,659 | ) | (61,013 | ) | ||||||||||
Dividends paid to owners of the parent | (55,015 | ) | (86,723 | ) | (86,986 | ) | ||||||||||
Dividends paid to non-controlling interest | (14,850 | ) | (37,512 | ) | (51,794 | ) | ||||||||||
Cash received (contribution return) to non-controlling shareholders | 34-d | (13,328 | ) | 26,096 | 34,774 | |||||||||||
Acquisition or sale of interest in a subsidiary of non-controlling shareholders | — | (3,200 | ) | (63,868 | ) | |||||||||||
Capital contribution | 30,776 | 5,750 | — | |||||||||||||
Issuance of shares, net of related expenses | — | — | 1,147,418 | |||||||||||||
Repurchase of shares | (241 | ) | 1,432 | — | ||||||||||||
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Net cash (applied to) provided by financing activities | (72,462 | ) | (20,815 | ) | 892,136 | |||||||||||
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(Net decrease) net increase in cash | (24,702 | ) | 121,927 | 184,463 | ||||||||||||
Cash decrease in deconsolidation | — | — | (5,162 | ) | ||||||||||||
Cash and cash equivalents at the beginning of the year | 682,889 | 658,187 | 780,114 | |||||||||||||
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Cash and cash equivalents at the end of the year | 658,187 | 780,114 | 959,415 | |||||||||||||
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NON-CASH TRANSACTIONS: | ||||||||||||||||
Capitalization of retained earnings | — | 167,485 | — | |||||||||||||
Debt capitalization | — | 12,232 | 7,989 | |||||||||||||
Acquisition of assets through finance leases | 146,580 | 123,815 | 43,812 | |||||||||||||
Net assets transferred for acquisition to Stracon GyM | — | 24,994 | — | |||||||||||||
Adjustment for deconsolidation LQS SA and SEC | (19,943 | ) | ||||||||||||||
Change in fair value of available-for-sale financial asset | — | — | 19,060 |
2015 | Profit Increase/ (decrease) | 2015 | ||||||||||
Restated see Note 2.30 | ||||||||||||
Revenues from construction activities | 5,501,537 | (12,118 | ) | 5,513,655 | ||||||||
Revenues from services provided | 1,896,678 | (4,820 | ) | 1,901,498 | ||||||||
Revenue from real estate and sale of goods | 417,280 | — | 417,280 | |||||||||
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7,815,495 | (16,938 | ) | 7,832,433 | |||||||||
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Cost of construction activities | (5,342,379 | ) | (32,376 | ) | (5,310,003 | ) | ||||||
Cost of services provided | (1,526,875 | ) | (3,517 | ) | (1,523,358 | ) | ||||||
Cost of real estate and goods sold | (296,267 | ) | — | (296,267 | ) | |||||||
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(7,165,521 | ) | (35,893 | ) | (7,129,628 | ) | |||||||
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| |||||||
Gross profit | 649,974 | (52,831 | ) | 702,805 | ||||||||
Administrative expenses | (413,385 | ) | (5 | ) | (413,380 | ) | ||||||
Other income and expenses, net | 57,287 | — | 57,287 | |||||||||
Gain from the sale of investments | (8,289 | ) | — | (8,289 | ) | |||||||
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| |||||||
Operating profit | 285,587 | (52,836 | ) | 338,423 | ||||||||
Financial expenses | (176,802 | ) | — | (176,802 | ) | |||||||
Financial income | 38,107 | — | 38,107 | |||||||||
Share of the profit or loss in associates and joint | — | — | ||||||||||
ventures under the equity method of accounting | 7,724 | (9,879 | ) | 17,603 | ||||||||
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Profit (Loss) before income tax | 154,616 | (62,715 | ) | 217,331 | ||||||||
Income tax | (99,027 | ) | (23,408 | ) | (75,619 | ) | ||||||
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Profit (Loss) for the period | 55,589 | (86,123 | ) | 141,712 | ||||||||
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Profit (Loss) attributable to: | ||||||||||||
Equity holders of the Company | 7,097 | (81,057 | ) | 88,154 | ||||||||
Non-controlling interest | 48,492 | (5,066 | ) | 53,558 | ||||||||
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55,589 | (86,123 | ) | 141,712 | |||||||||
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Earnings per share from continuing operations attributable to owners of the Company during the period | 0.011 | |||||||||||
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The accompanying notes on pages 89 to 101110 are an integral part of the consolidated financial statements.
F-8
(All amounts are expressed in thousands of S/. unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011, 20122014, 2015 AND 20132016
1 | GENERAL INFORMATION |
a) | Incorporation and operations |
Graña y Montero S.A.A. (hereinafter the Company or the Parent)Company) was established in Peru on August 12, 1996 as a result of the equityspin-off of Inversiones GyM S.A. (formerly Graña y Montero S.A.). The Company’s legal address is Av. Paseo de la República 4675, Surquillo Lima, Peru and it is listed on the Lima Stock Exchange and the New York Stock Exchange (NYSE).
The Company is the parent company of the Graña y Montero Group (hereinafter the Group)Group, which includes the Company and its principal activitysubsidiaries) and it is themainly engaged in holding of the investments in the different companies of the Group.Group companies. Additionally, the Company provides services of general management, financial management, commercial management, legal advisory and human resources management to the Group’sGroup companies; it is also engaged in the leasing of offices to the Group’s companies and third parties.Group companies.
The Group is a conglomerate of companies with operations including different business activities, of which the most significant are engineering and construction, infrastructure (public concession ownership and operation), real estate businesses and technical services. See details of operating segments in Note 6.7.
b) |
At the Board of Shareholders’ General Meeting held on March 26, 2013, and the subsequent Board of Directors’ meetings held on May 30, July 23 and August 22, 2013, shareholders agreed to the issuance of common shares through a public offering of American Depositary Shares (ADS) registered with the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE).
As a consequence in July and August 2013, the Company issued 101,769,600 new common shares, equivalent to 20,353,920 ADS in two tranches, with a unit price of US$21.13, resulting total proceeds of US$430,078, equivalent to S/.1,195,793 before the issuance related costs.
The total outstanding common shares as of the date of the financial statements are 660,053,790 shares, from these 101,769,600 are listed on the NYSE and 558,284,190 on the Lima Stock Exchange.
The excess of the total proceeds obtained by this transaction in comparison with the nominal value of these shares amounted to S/.1,055,488 (net of commissions, other related costs and tax effects for S/.38,536) recorded in the premium for issuance of shares in the consolidated statement of changes in equity (Note 22).
Authorization for issue of the financial statements |
The consolidated financial statements for the year ended December 31, 2013 have been2016 were prepared and authorized byissued with Management and Board of Directors authorization on January 30, 2014, which will submit them for the consideration of the BoardMay 15, 2018 and Annual Shareholders’ Meeting to be held within the term established by law. Management considers that the accompanying financial statements will be approved by the Boardsubmitted for consideration and approval at the General Shareholders’ MeetingMeeting. Management expects that the consolidated financial statements as of December 31, 2016 will be approved with no changes.
c) | Current situation of the Company |
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i) | Legal Status |
(A) | Projects conducted in association with Odebrecht |
Our company participated as minority shareholder in certain entities that developed six infrastructure projects in Peru with Odebrecht. In 2016, Odebrecht entered into a Plea Agreement with the authorities of the United States Department of Justice and the Office of the District Attorney for the Eastern District of New York by which it admitted the commission of corrupt acts in connection to two these projects (sections 2 and 3 of the Interoceánica Sur highway (“IIRSA Sur”) and the project to construct the Tren Eléctrico). As a consequence of this agreement, the Peruvian authorities initiated investigations.
(I) | IIRSA Sur |
With respect to the investigations conducted in relation to IIRSA Sur, the Public Prosecutor’s Office included the former Chairman of the Board of Directors, for bribery; a former Director, and a former executive of the company, for money laundering.
Subsequently, Graña and Montero S.A.A. and GyM S.A. were incorporated as subjects investigated in the case described above. The companies have appealed this judgment and the appeals are pending resolution by the Superior Court.
(All amounts are expressed in thousands of S/. unless otherwise stated)
In addition, the Peruvian authorities has requested incorporation of Graña y Montero S.A.A. as third party responsible on a civil basis and the Company has filed an opposition to the government’s motion. Oral arguments will be made before the court on a hearing that is yet to be scheduled.
The Company believes that it has a solid defense and that therefore, the case would be resolved in its favor.
(II) | Electric Train |
The Peruvian authorities also requested to incorporate GyM S.A. as a third party responsible on a civil basis in the case related to the project to construct the electric train. The Company has filed an opposition. Oral arguments will be made before the court on a hearing that is yet to be scheduled.
The Company believes that it has a solid defense and that therefore, the case would be resolved in its favor.
(B) | The Constructor Club |
On July 11, 2017, Commision de libre competence of “Indecopi” initiated an investigation against several construction companies, including GyM S.A., about the existence of an alleged cartel called the Constructor Club, gathering information from the Company. Throughout the investigation, the Company has provided to the Indecopi with all the information requested.
The Company’s former commercial manager is under a criminal investigation, as well as other individuals related to other construction companies. However, the Company is not included in this case.
To the date the result of the case described is uncertain because it is in the preliminary phase and depends on the action of the third parties that have been included in it, However, management believes that the contingency to which the Company is exposed should not have a significant financial impact due to the lack of links I has with the alleged facts.
(C) | Anticorruption Law application to the Company |
Law 30737 and its regulation issued by Supreme Decree096-2018-EF has mitigated the Company’s exposure to the cases described in sub sections (A) and (B) above. These rules set clear guidelines to estimate the potential compensation that would be paid by the Company in the improbable case that it would be convicted. Furthermore, these rules have significantly reduced the uncertainty derived from the legal proceedings, by among other things, preventing the imposition of liens or attachments of assets that would impair the ability of the Company to operate.
The benefits of the mentioned rules are subject to the fullfilment of the following obligations:
The Company has designed a robust compliance program which is currently under implementation. In addition, it fully cooperates with the authorities in its investigations of the alleged facts. It is also engaged in preliminary works necessary to set up the trust while it receives from the authorities the amount of the trust. Management estimated that it would need to assign to the trust assets worth approximately USD 41 million and that its potential liability should not exceed USD 51 million.
(All amounts expressed in thousands of S/ unless otherwise stated)
ii) | Independent Investigationrelated to Company business with Odebrecht S.A. |
On January 9, 2017, the Company Board of Directors approved a plan to conduct an independent investigation related to six projects executed in association with Odebrecht.
On March 30, 2018, the Board of Directors created a Risk, Compliance and Sustainability Committee who was in charge of the oversight of the investigation independent from management. The investigation was entrusted to Simpson, Thatcher and Bartlett that reported exclusively to the Risk, Compliance and Sustainability Committee to preserve its independence.
The independent investigation concluded on November 2, 2017, and found no evidence that the Group or any of its former or current directors or executives had intentionally or knowingly participated in acts of corruption related to the 6 projects developed in association with Odebrecht.
2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied toin all the years presented, unless otherwise stated.
2.1 | Basis of preparation |
The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRIC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board.IASB in force as of 31 December, 2015 and 2016 respectively.
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, and available-for-sale financial assets which areat fair value through profit and loss,available-for-sale financial assets measured at fair value. The financial statements are presented in thousands of New Peruvian Soles, unless otherwise stated.
The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires managementManagement to exercise its judgmentmake estimates and assumptions in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.5.
2.2 | Consolidation of financial statements |
a) | Subsidiaries |
Subsidiaries are all entities (including structured entities) over which the GroupCompany has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity instruments issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
(All amounts expressed in thousands of S/ unless otherwise stated)
The Group recognizes any evaluates measurement of thenon-controlling interest on anacquisition-by-acquisition basis. At December 31, 2015 and 2016, the measurement of thenon-controlling interest in the acquiree on an acquisition-by-acquisition basis, eitherGroup’s acquisitions was made at fair value or at thenon-controlling interest’s proportionate share of the recognized amounts of acquirer’sthe acquiree’s identifiable net assets.
Acquisition-relatedBusiness acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferredassumed by the groupGroup with the selling party is recognisedrecognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognisedrecognized in accordance with IAS 39 either inas profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
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(All amounts are expressed in thousands of S/. unless otherwise stated)
loss.
Goodwill is initially measured as the excess of the aggregateacquisition cost, the fair value at the acquisition date of the consideration transferred andany interest previously acquired plus the fair value of thenon-controlling interest, over the net identifiable assets acquired and liabilities and contingent liabilities assumed. If this considerationthe acquisition cost is lowerless than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss at the time of acquisition.
Balances,For consolidating subsidiaries, balances, income and expenses from transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognized as assets are also eliminated. AccountingIf required, accounting policies of subsidiaries have beenare changed where necessary to ensure consistency with the policies adopted by the Group.
b) | Changes in ownership interests in subsidiaries without change of control |
Transactions withnon-controlling interests that do not result in loss of control are accounted for as equity transactions—that is,transactions, in other words as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interests, interest, are also recorded in equity at the time of disposal.
c) | Disposal of subsidiaries |
When the Group ceases to have control over a subsidiary, any retained interest in the entity isre-measured to at its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss at such date. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amountsthe amount previously recognized in other comprehensive income areis reclassified to profit or loss.
d) | Joint arrangements |
TheContracts in which the Group has applied IFRS 11 to alland one or more of the contracting parties have joint arrangements as of January 1, 2012. Under IFRS 11 investmentscontrol on the relevant joint activities are called joint arrangements.
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be both joint ventures as well as joint operations.
Joint ventures are accounted for using the equity method (Note 2-e).method. Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition profits or losses and movements in otherthe comprehensive income. Whenincome statement.
(All amounts expressed in thousands of S/ unless otherwise stated)
The Group assesses on an annual basis whether there is any objective evidence that the Group’s share of losses in a joint venture equals or exceeds its interestsinvestment in the joint ventures (which includes any long-term interests that, in substance, form partand associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the group’s net investmentassociate and its carrying value and recognizes the impairment loss in ‘share of profit or loss in associates and joint ventures under the equity method of accounting in the joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the group’s interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the group.income statement.
Joint operation is aoperations are joint arrangementarrangements whereby the parties that have joint control of the arrangement, have rights toover the assets, and obligations for the liabilities, relating to the arrangement. Each party recognizes its assets, liabilities, revenue and expensescost and its share of any asset andor liability jointly held and ofon any revenue or expensecost arisen from the joint operation.
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(All amountsIn the Group, joint operations mainly relate to consortiums (entities without legal personality) created exclusively for the development of a construction contract. Considering that the only objective of the consortium is to develop a specific construction contract, all costs and revenue are expressed in thousandsincluded within revenue from construction activities and cost of S/. unless otherwise stated)
No significant effect has arisen from the application of IFRS 11 Joint Arrangements on the financial statements (on the Group’s statements of financial position, of comprehensive income and of cash flows) at January 1, 2012 and December 31, 2012.construction activities, respectively.
e) | Associates |
Associates are all entities over which the Group has significant influence but not control, generally accompanying a holding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
If ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate. The Group’s share of post-acquisition profit or loss is recognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the cost of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to its share of profit of an associate’ in the income statement.accounting (see section d above).
Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognized in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have beenare changed where necessary to ensure consistency with the policies adopted by the Group.
Dilution gainsImpairment losses are measured and losses arisingrecorded in investments in associates are recognized in the income statement.accordance with section d) above.
2.3 | Segment reporting |
Operating segments are reported in a consistent manner consistent with the internal reporting provided to the chief operating decision-makerManagement of the Group. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee, led by the Corporate General Manager.
If an entity changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the Group restates the information for earlier periods unless the information is not available.
2.4 | Foreign currency translation |
a) | Functional and presentation currency |
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The consolidated financial statements are presented in New Peruvian Soles, which is the Company’s
F-12
(All amounts are expressed in thousands of S/. unless otherwise stated)
functional currency and the Group’s presentation currency. All subsidiaries, joint arrangementarrangements and associates use the New Peruvian Sol as their functional currency, except for foreign entities, for which the functional currency is the currency of the country in which they operate.
b) | Transactions and balances |
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions or valuation when items arere-measured. Foreign exchange gains and losses resulting from the settlement of such transactions andare recognized in the consolidated income statement, except when deferred in other comprehensive income.
Exchange differences arising on loans from the changes at year-end exchange rates of monetary assets and liabilities denominatedCompany to its subsidiaries in foreign currencies are recognized in the separate financial statements of the Parent and individual financial statements of the subsidiaries. In the consolidated financial statements, such exchange differences are recognized in other comprehensive income and are subsequentlyre-classified in the income statement except when deferredon the disposal of the subsidiary or debt repayment, to the extent such loans qualify as part of the “net investment in equity as qualifying cash flow hedges.a foreign operation”.
(All amounts expressed in thousands of S/ unless otherwise stated)
Foreign exchange gains and losses of all monetary items are presentedincluded in the income statement within financial expenses and financial income.income or expense.
c) | Group companies |
The results assets and liabilitiesfinancial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows:
i) |
ii) | income and expenses for each income statement are translated at the average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are |
iii) | capital is translated by using the historical exchange rate for each capital contribution made; and |
iv) | all |
Goodwill and fair value adjustments arising because offrom the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate. Exchange differences arising are recognized in other comprehensive income.
2.5 | Public services concession agreements |
Concession agreements signed between the Group and the Peruvian Government entitlesentitle the Group, as a Concessionaire, to assume obligations for the construction or improvement of infrastructure and which qualify as public service concessions are accounted as defined by IFRIC 12, “Service Concession Arrangements”. The consideration to be received from the Government for the services of constructing or improving public infrastructure is recognized as a financial asset or as an intangible asset (bifurcated model), as set forth below.
Under these agreements, the government controls and regulates services provided by the Group with the infrastructure and dictates to whom it must provide them and at what price. The concession agreement establishes the obligation for the Group to return the infrastructure to the grantor at the end of the concession period or when there is an expiration event. This feature gives the grantor control of the risks and rewards of the residual value of the assets at the end of the concession period. For this reason, the Group will not recognize the infrastructure as part of its property, plant and equipment.
F-13
(All amounts are expressed in thousands of S/. unless otherwise stated)
The Group manages three types of concessions which accounting recognition is as follows:
The | Group manages three types of concessions, for which accounting treatment is as follows: |
a) | Recognizes a financial asset to the extent that it has a contractual right to receive cash or |
b) | Recognizes an intangible asset to the extent that the service agreement grants the Group a contractual right to charge users of the public service. The resulting intangible asset is measured at cost and is amortized as described in Note |
c) | Recognizes a financial asset and an intangible asset when the Group recovers its investment partially by a financial asset and partially by an intangible asset (the bifurcated model). |
2.6 | Cash and cash equivalents |
In the consolidated statementstatements of financial position and cash flows, cash and cash equivalents include cash on hand,on-demand bank deposits, other highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated statement of financial statements,position, bank overdrafts are included in the balance of financial obligations as current liabilitiesliabilities.
(All amounts expressed in the statementthousands of financial position.S/ unless otherwise stated)
2.7 | Financial assets |
2.7.1 | Classification |
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, financial assetsheld-to-maturity, loans and account receivables and financial assets available for sale.available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
As of the date of the consolidated financial statements, the Group has classified its financial assets in the following twothree categories:
a) | Financial assets at fair value through profit or loss |
Financial assets at fair value through profit or loss arenon-derivatives that are designated by the Group as at fair value upon initial recognition and areheld-for-trading. They are included in current assets in the consolidated statement of financial position. The derivative financial instruments policy is included at Note 2.9.
b) | Loans and accounts receivable |
Loans and receivables arenon-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those whichwhose maturity is greater than 12twelve months after the statementdate of the consolidated financial position.statements. These are classified asnon-current assets. assets on the consolidated financial position. The Group’s loans and receivables comprise ‘trade and other receivables’“trade accounts receivables”, ‘outstanding“accounts receivable from related parties”, “other accounts receivable”, “unbilled work in progress’ (Note 2.12)progress” and ‘cash“cash and cash equivalents’equivalents”.
Available-for-sale financial assets |
Available-for-sale financial assets arenon-derivatives that are either designated in this category or not classified in any of the other categories. They are included innon-current assets as “Other Financial Assets” unless Management intends to dispose of them within 12 months of the date of the statement of financial position. Available-for-sale financial assets are measured at fair value and changes in their value are recognized in other comprehensive income.
2.7.2 | Recognition and measurement |
Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets
F-14
(All amounts are expressed in thousands of S/. unless otherwise stated)
are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
IfGains or losses arising from changes in the fair value of available-for-salethe ‘financial assets cannot be estimated initially,at fair value through profit or loss’ category are presented in profit or loss within “Other income and expenses, net” in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of “Other income and expenses, net” when the Group’s right to receive payments is established.
(All amounts expressed in thousands of S/ unless otherwise stated)
Changes in the fair value of monetary securities classified as available for sale are maintained at cost.
recognized in other comprehensive income. When a financial asset classified as available for sale is sold or impaired, the accumulated fair value adjustments recognized in equity are recycled in the income statement.
reclassified to profit or loss. Dividends onavailable-for-sale equity instruments are recognized in the income statement as part of “other income”“Other income and expenses, net” when the Group’s right to receive payments is established.
2.8 |
Financial assets and liabilities are offset and its net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
Impairment of financial assets |
a) | Assets carried at amortized cost |
The Group assesses atAt the end of each reporting period the Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. If a financial asset or a group of financial assets is impaired, the impairment losses are incurredrecognized only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’“loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For the loans and receivables category, the amount of theany loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the statement of comprehensive income. If a loan or an account receivable has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the income statement.
b) | Assets classified as |
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets classified asavailable-for-saleis impaired.
For debt securities, the Group uses the criteria referred to in (a) above. In the case of equity investments, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such
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(All amounts are expressed in thousands of S/. unless otherwise stated)
evidence exists foravailable-for-sale financial assets, the cumulative loss—measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss—is removed from equity and recognized in profit or loss. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the income statement.
Derivative financial instruments and hedging activities |
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequentlyre-measured at their fair value.value at the end of each reporting period. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of a particular risk associated with a recognized asset or liability (fair value hedge) or a highly probable forecast transaction (cash flow hedge). Derivatives are initially recognized at fair value on the date of subscription of the contract and are subsequently recognized at their fair value. The method to recognize the gain or loss resulting from changes in the fair values of the derivatives depends on the nature of the item being covered.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
(All amounts expressed in thousands of S/ unless otherwise stated)
The fair values of various derivative instruments used for hedging purposes and changes in the account reserves for hedging in equity are disclosed in Note 7.8. The full fair value of a hedging derivative is classified as anon-current asset or liability when the remaining maturity period of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity period of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Cash flow hedge -
The effective portion of changes in the fair value of derivatives that are designated and qualify as fair value hedges is recognized as other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecasted sale that is hedged takes place).
The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the income statement as ‘Financial“Financial income and expenses’or Financial expenses”.
However, when the forecasted transaction that is hedged results in the recognition of anon-financial asset (for example, inventory or fixed assets), the gains andor losses previously deferred in equity are transferred from equity and are included in the initial measurement of the cost of thenon-financial asset. The deferred amounts are ultimately recognized in cost of goods sold in the case of inventory or in depreciation in the case of fixed assets.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in the income statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within ‘other (losses) gains- net’“other income and expenses, net”.
F-16
(All amounts are expressed in thousands of S/. unless otherwise stated)
Trade |
Trade accounts receivablereceivables are amounts due from customers for goods or services sold by the Company’s subsidiaries. If collection is expected in one year or less, they are classified as current assets. If not, they are presented asnon-current assets.
Trade accounts receivablereceivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for impairment.impairment, except for receivables of less than one year that are stated at nominal amount which is similar to their fair values since they are short term.
2.11 |
OutstandingUnbilled work in progress comprises the estimation made by the Management of the Engineering and Construction segment related to the unbilled rights receivable for services rendered and not yet approved by the client (valuation based on the percentage of completion).
It also includes the balance of work in progress costs incurred that relates to future activities of the construction contracts.contracts and the constructions phase in concessions (see Note 2.25 for detail on Revenue from construction and concession activities).
Changes in estimates of contract revenues and costs can increase or decrease the estimated margin. When a change in the estimate is known, the cumulative impact of the change is recorded in the period in which it is known based on the progress made.
(All amounts expressed in thousands of S/ unless otherwise stated)
Inventories |
Inventory mainly includes land, work in progress and finished propertyproperties which isare assigned to the real- estate activity carriedactivity. Land intended to carry out byreal estate projects is recognized at acquisition cost. Work in progress and finished properties comprise design costs, material, labor costs, financial costs (directly attributable to the Group. acquisition, construction and production of qualified assets), other indirect costs and general expenses related to the construction.
Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The Company reviews annually whether inventories have been impaired identifying three groups of inventories to measure their net realizable value: i) the first group consists of land bought for future real estate projects which are compared to their net appraisal value; if the acquisition value is higher, a provision of impairment is made; ii) the second group consists of land under construction, impairment is measured based on cost projections; if these costs are higher than selling prices of each real estate unit, a provision is made for impairment; and iii) the third group comprises completed real estate units; these inventory items are compared to the selling prices less selling expenses; if these selling expenses are higher, a provision for impairment is made. For the reductions in the carrying amount of these inventories to their net realizable value, a provision is made for impairment of inventories with a charge to profit or loss for the year in which those reductions occur.
It also includes material used in the construction activity. Goods and supplies correspond to goods that the Group trades as part of its IT segment. Materials and supplies used in construction activities and IT equipment are determined under the weighted average cost method.
Land intended to carry out real estate projects is recognized at acquisition cost. Work in progress and finished property comprise design costs, material, labor costs, other indirect costs and general expenses related to the construction and do not include exchange differences.
Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. For the reductions in the carrying amount of inventories to their net realizable value, a provision is made for inventory impairment with a charge to the results of the period in which such reductions are made.
IT equipment is stated at the lower of cost or net realizable value.
Materials and other supplies are not written down below cost if the finished products in which they will be incorporated are expected to generate margin. When a decline
(All amounts expressed in the pricethousands of materials indicates that the cost of the finished products exceeds net their realizable value, the materials are written down to their replacement cost which is the best available measure of their net realizable value.S/ unless otherwise stated)
Investment properties |
Investment properties are shown at cost less accumulated depreciation and impairment losses, if any. Subsequent costs attributable to investment properties are capitalized only if it is probable that future economic benefits will flow to the Company and the cost of these assets can be measured reliably; if not, they are recognized as expenses when incurred.
Repair and maintenance expenses are recognized in profit and loss when they are incurred. A property’s carrying amount is written down immediately to its recoverable amount ifIf the property’s carrying amount is greater than its estimated recoverable amount. Theamount, an adjustment to reduce the carrying amount to the recoverable amount is recognized.
Depreciation is determined at rates calculated to write off cost, and accumulated depreciationless estimated residual value, of each asset on disposals are eliminated from the respective accounts and the resulting gain or loss is recognized in profit or loss for the period. The depreciation of this asset is calculated under the straight-line method at a rate that is considered sufficient to absorb the property’s coststraight line basis over its estimated useful life. The estimated useful lifelives of this property is approximately 25those properties range from 5 to 33 years.
F-17
(All amounts are expressed in thousands of S/. unless otherwise stated)
The Group maintains only one investment property aheld by the Group consists of two Shopping MallCenters owned by the subsidiary Viva GyM S.A. Fair value is estimated to be US$29.5 million, equivalent to S/99 million, at December 31, 2016 (US$16.7 million, equivalent to S/58 million, at December 31, 2015). The sales stores in this mall areof these properties have been leased toas an operating lease with third parties under operating leases.parties.
Property, plant and equipment |
Property, plant and equipment are stated at historical cost less depreciation.accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of these items.
Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced asset is derecognized. All other repairsRepairs and maintenance expense are charged to the income statement during the financial period in which they are incurred.
Assets in theunder construction stage are capitalized as a separate component. At their completion, the cost of such assets is transferred to their definitive category.
Replacement units are major spare parts in which depreciation starts when the units are installed for use within the related asset.
Land is not depreciated. Depreciation of buildings, machinery and equipment and vehicles recognized as “Major equipment” are depreciated based on their hours of use. Under this method, the total number of work hours that machinery and equipment is capable to produce is estimated and a charge per hour is determined. The depreciation of other assets that do not qualify as “Major equipment” is calculated under the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:
Years | ||||
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Machinery and equipment | ||||
Vehicles | ||||
Furniture and fixtures | ||||
Other equipment | ||||
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The assets’ residual
(All amounts expressed in thousands of S/ unless otherwise stated)
Residual values and useful lives are reviewed and adjusted as appropriate at each date of the statement of financial position. An asset’s carrying amount is written-down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in “Other income and expenses”expenses, net” in the income statement. Regarding joint operations that carry out construction activities, the difference between the proceeds from disposals of fixed assets and their carrying amount is shown within “revenue from construction activities” and “cost of construction activities”, respectively.
Intangible assets |
Goodwill |
Goodwill arises on the acquisition of subsidiaries and represents the excess of the costpurchase consideration, the amount of acquisition as compared toanynon-controlling interest and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share in thenet identifiable assets liabilitiesacquired. If the total of consideration transferred,non-controlling interest recognized and contingent liabilities of the acquiree andpreviously held interest measured at fair value is less than the fair value of non-controlling interest at the acquisition date.net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognized directly in the income statement.
Goodwill acquired in a business combination is allocated to each of the cash-generating units (CGU), or group of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
F-18
(All amounts are expressed in thousands of S/. unless otherwise stated)
Goodwill impairment reviews are undertakenperformed at least annually or more frequently ifand when events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense in item “Other income and is not subsequently reversed.expenses, net” and cannot be reversed later.
Trademarks |
SeparatelyTrademarks acquired trademarksseparately are shown at historical cost. Trademarks acquired in a business combination are recognized at fair value at the acquisition date. TrademarksManagement has determined that these trademarks have indefinite useful lives. These trademarks have a finite useful lifelong trajectory (between 24 and 39 years) in each market and the Group is committed to continue investing in the long-term to extend the period over which they are carriedexpected to continue to provide economic benefits.
Trademark impairment reviews are performed at cost less accumulated amortization. Amortizationleast annually and when events or changes in circumstances indicate a potential impairment. Any impairment is calculated using the straight-line method to allocate the cost of trademarks to profit or loss over their estimated useful lives, which has been estimated torecognized immediately as an expense in item “Other income and expenses, net” and cannot be 30 years.reversed later.
The intangible asset related toconsisting of the right to charge users for the services related to service concessions agreements (Note 5.b2.5 and 2.5)Note 6.b) is initially recorded at the fair value of construction or improvement services. Before amortization is started, an impairment test is performed; it is amortized under the straight-line method, from the date when toll collection startedrevenue starts using the lower of its estimated expected useful life or effective period of the concession agreement.
Contractual relationships with customers |
Contractual relationships with customers are assets resulting from business combinations that were initially recognized at fair value as determined based on the futureexpected cash flows expected from those relationshipsrelations over an estimated period of time based on the time period those customers will remain as customers of the Group (the estimation of useful life is based on the contract terms which fluctuate between 25 and 59 years). The useful life and the impairment of these assets are individually assessed.
(All amounts expressed in thousands of S/ unless otherwise stated)
Costs incurred to prepare thein preparing wells to extract the hydrocarbons associated with Blockin Blocks I, III, IV and Block V, located in Talara, are capitalized as part of intangible asset. The Company capitalizes the development stage costs associated with preparing the wells for extraction.assets. These costs are amortized based onover the useful lifelives of the wells (Block I(10 years for Blocks III, IV and V and 9 years andfor Block V 10 years)I), whichwhen is less than the overall period of the service contractagreement signed with Perupetro.
Internally generated software and development costs |
Costs associated with maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:
Directly attributable costs, such as development employee costs and an appropriate portion of relevant overhead, are capitalized as part of the software.
F-19
(All amounts are expressed in thousands of S/. unless otherwise stated)
Other development expenditures that do not meet these recognition criteria are expensed as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their estimated useful lives, not exceeding threewhich fluctuate between 2 to 8 years.
Rights of use of land |
This item comprisesRefers rights maintained by the Promotora Larcomar subsidiary S.A. Rights of use of land use rightsare stated at historical cost less amortization and any accumulated impairment losses. The useful life of a physical space located in the district of Miraflores in Lima, the surface area comprises 8,800 m2 and has been designated for the construction of a five star hotel. The Group held these rights for a 60 years period underthis asset is based on the agreement signed (60 years) and theirthe effective period may be extended if agreed byto the parties. Amortization will begin when it becomes ready for its intended use by Management.
2.16 | Impairment ofnon-financial assets |
Assets that have an indefinite useful life are not subject to amortization and are testedsubject to review annually for impairment and whenever there is an impairment indicator.impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that were adjusted for impairment are reviewed for possible reversal of such impairment at each reporting date.
Trade payables |
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented asnon-current liabilities.
Trade payablesAccounts payable are initially recognized initially at their fair value and subsequently measuredare amortized at amortized cost using the effective interest method.method, except for accounts payable less than one year that are recorded at their nominal value that is similar to their fair value due to its expiration in the short term.
2.18 |
BorrowingsCorrespond to loans and bonds issued by the Group, which are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceedscash received (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.
(All amounts expressed in thousands of S/ unless otherwise stated)
Fees paid for entering into loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.
Borrowing costs |
Borrowing costs are recognized in the income statement in the period in which they are incurred except for intangible assets and inventories (Note 18 and 15) in which the Group proceeds to capitalize borrowing costs.
General and specific borrowing costs directly attributable to acquisitions, construction or development of qualifying assets, which are assets that necessarily take a substantial period of time (over 12 months) to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
F-20
(All amounts are expressed The Company suspends capitalization of a qualifying asset during periods in thousands of S/. unless otherwise stated)
Investmentwhich qualify asset development is interrupted .Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Current and deferred income tax |
TheIncome tax expense for the period comprises current and deferred tax. Tax expense is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directlyequity, in equity. In thiswhich case, the taxit is also recognized in the statement of comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Management, where appropriate, establishes provisions on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority.
The deferred income tax arising from the temporary differences
(All amounts expressed in subsidiaries, associates and interest in joint-controlled businesses is not recognized due the tax legislation in Chile and Peru does not consider the income from de dividends as a taxable item and the Group expects to recover the investment through the dividends rather than their sale.thousands of S/ unless otherwise stated)
Employee benefits |
a) | Profit sharing |
ThePeruvian entities of the Group recognizesrecognize a liability and an expense for statutory workers’ profit sharing based on the Peruvian legalunder laws and regulations currently in force for its Peruvian employees.force. Workers’ profit sharing is equivalent to 5% or 8% of the taxable income determined separately by each of the Group’s Peruvian entities, according to the income tax law currently in force. The branch based in the Dominican Republic has a similar profit sharing scheme, whichwith a rate isof 10% ofon the taxable income.
F-21
(All amounts For Chile, workers’ profit sharing is a component of remuneration (equivalent to 4.75 minimum salary per year) rather than a percentage based on profits. In Colombia and Guyana no such benefits are expressed in thousandspaid to workers. In Bolivia workers’ profit sharing is equivalent to aone-month salary and the total amount distributed cannot exceed 25% of S/. unless otherwise stated)
b) |
TheEntities of the Group recognizes anrecognize the expense and the related liability for statutory bonuses based on applicable laws and regulations effective in Peru, for its Peruvian employees. Statutory bonuses comprise two additional one-month salaries paid every year in JulyChile, Bolivia, Guyana and December, respectively. According to the Chilean legislation, employees receive a fixed amount of $65 thousand of Chilean pesos (equivalent to S/.3 hundred nuevos soles) in September and December. In Brazil, Colombia and Dominican Republic these benefits are not provided to employees.Colombia.
c) | Severance |
The employees’Employees’ severance payments for time of service of the Group’s Peruvian Group staff comprise their indemnification rights, calculated in accordance with the regulations in force, which have to be credited to thedeposited on bank accounts designated by workers in May and November each year. The compensation for time of service amounts to an additional one-month’s salary effective at the date of bank deposits. There is no such benefit in Chile and Guyana. The Group has no obligations to makedoes not have any additional paymentspayment obligation once the annual deposits are made of the amounts to which workers are entitled have been made.entitled.
d) | Vacation leave |
Annual vacation leave is recognized on an accrual and cumulative basis. Provision for the estimated obligations of annual vacations is recognized at the date of the statement of financial position and it corresponds to one month for Peruvian and Brazilian employees and fifteen days for Chilean, Dominican and Colombian employees per year. In Bolivia and Chile vacation leave depends on seniority of a worker and ranges from fifteen to thirty days.
e) | Pension plans |
The subsidiary CAM has in place a pension plan scheme with its workers. These commitments comprise both defined benefit and defined contribution plans. A defined benefit plan defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the balance sheet instatement of financial position with respect ofto the defined benefit pension plansplan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.
Actuarial gains and lossesRe-measurements arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
(All amounts expressed in thousands of S/ unless otherwise stated)
Group companies recognize the liability and the expense for employees’ severance indemnities when they are incurred. Under Peruvian laws, in the event of an arbitrary termination of a worker, the related indemnities equal an additionalone-month salary and a half per each year actually worked by the terminated worker.
Under Colombian laws, this type of indemnities is determined based on the salary. Under Chilean laws, termination indemnities equal an additional30-day salary per each year actually worked up to a maximum 330 days.
2.22 | Other provisions |
a) | General |
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are reviewed at year - end. If the time value of money is significant, provisions are discounted using apre-tax rate that reflects, when applicable, the specific risks related to the liability. Reversal of the discount due to the passage of time results in the obligation being recognized with a charge to the income statement as a financial expense. Provisions are not recognized for future operating losses.
F-22
(All amounts are expressed in thousands of S/. unless otherwise stated)
Contingent obligations are disclosed only when their existence willfor possible obligations that are not yet determined to be confirmed with future events or when their amount cannot be reliably estimated.probable. Contingent assets are not recognized and only disclosed if it is probable that future economic benefits will flow to the Company.
b) Provision for the closure of production wells -
Group entities recognizeThe subsidiary GMP recognizes a provision for the closure of operating units that correspond to the legal obligation to close oil production wells once the production phase has been completed. At the initial date of recognition, the liability that arises from said obligation is measured at the amount of expected cash flow discounted to present value, the same amount is simultaneously charged to the intangible account in the statement of financial position.
Subsequently, the liability will increase in each period to reflect the financial cost considered in the initial measurement of the discount, and the capitalized cost is depreciated based on the useful life of the related asset. When a liability is settled, the Group’s entities will recognize any gain or loss that may arise. The fair value changes estimated for the initial obligation and interest rates are recognized as an increase or decrease of the carrying amount of the obligation and related asset, according to IFRIC 1 ‘Changes in Existing Decommissioning, Restoration and Similar Liabilities’; any decrease in the provision, and any decrease of the asset that may exceed the carrying amount of said asset is immediately recognized in the income statement.
If the review of the estimated obligation results in the need to increase the provision and, accordingly, increase the carrying amount of the asset, the Group’s entities will also take into consideration if said increase corresponds to an indicator that the asset has been impaired and, if so, impairment tests are carried out according to the guidelines of IAS 36, “Impairment of assets” (Note 2.16).
2.23 |
The service concession arrangementGroup has written put options over the equity of Norvial have maintenance obligations that it must fulfill duringits subsidiary Morelco SAS (Note 33 b) which permit the operation phaseholder to maintainput their shares of the infrastructure to a specific level of service at all times and to restore the infrastructure to a specified level condition before it is handedsubsidiary back to the grantor.Group over a 10 -year period. The Group recognizes and measures such obligations, except for an upgrade element, in accordance with IAS 37, ‘Provisions, contingent assets and liabilities. The Company apply a criteria of maintenance provision based onamount that may become payable under the useoption upon exercise is initially recognized at the present value of the infrastructure, soredemption amount within other accounts payable with a corresponding charge directly to equity. The charge to equity is recognized separately as written put options overnon-controlling interests, adjacent tonon-controlling interest in the level of usenet assets of the roadconsolidated subsidiaries.
(All amounts expressed in thousands of S/ unless otherwise stated)
Subsequently, the financial liability is updated for changes in the fact orassumptions on which the estimated expected cash outflows were based and a financial component for the passage of time. The effects of this update are recognized in the income statement as Other income/expense. In the event that determines the amount ofoption expires unexercised, the obligation over the timeliability is derecognized with a corresponding adjustment to equity.
2.24 | Capital |
Common shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity, as a deduction, net of taxes, of the proceeds.
Where any Group company purchases the company’sCompany’s equity shares (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects is included in equity attributable to the Group’s equity holders.
2.25 | Revenue recognition |
Revenue is measured at the fair value of the consideration received or receivable. Revenue is stated net of sales rebates, discounts and after eliminating sales between Group companies.
F-23
(All amounts are expressed in thousands of S/. unless otherwise stated)
The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities.
The Group’s revenue recognition policy is described as follows:
i) | Revenue from construction activities |
Revenues from construction contracts are recognized using thepercentage-of-completion method which is based on the costs incurred method orcompletion of a physical proportion of the units ofoverall work method,contract considering total costs and revenues estimated at the end of the project, in accordance with IAS 11, Construction Contracts. Under this method revenues are determined based on the proportion of actual physical completion compared to the total contracted physical construction commitment.
When it is probable that the total costs of the contract will be above the related revenue, the expected loss will be immediately expensed.
When the outcome of a construction contract cannot be estimated reliably, the associated revenue is recognized to the extent costs incurred in comparison to total contract costs, representing the profits that can be attributed to the portion of work completed.
are recoverable. Revenue is billed once approval is received by the owners of the work in progress.
With respect to services that have been provided but not billed, due to a lackIn the statement of approval on behalf of owners,financial position, the Company recognizes revenue withshows the net position of each contract as an increase in accounts receivable—“Outstandingasset or a liability. A contract is considered an asset when the costs incurred plus recognized earnings less the sum of all the recognized losses and assessments exceed work in progress”.
Accounts receivable derived fromprogress billings; this asset is shown in the statement of financial position as “Unbilled work servicesin progress”; otherwise they are shown net of the advances received from customers to the extent the related contracts include liquidation provisions.presented as a liability within “Trade accounts payables”.
A variationchange order is an instruction by the customer for a change in the scope of the work to be performed under the contract. A variationcontract that may lead to an increase or a decrease in contract revenue. A variation is included in contract revenue when it is probable that the customer will approve the variation and the amount of revenue arising from the variation; and the amount of revenue can be reliably measured.
(All amounts expressed in thousands of S/ unless otherwise stated)
A claim is an amount that the Group seeks to collect from the customer or anotherthird party as reimbursement for costs not included in the contract price. Claims are included in contract revenue only when negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and the amount that it is probable will be accepted by the customer can be measured reliably.
ii) | Revenue from engineering, advisory, |
RevenueRevenues from services isservice contracts are recognized in the accounting period whenin which they are provided,performed using the percentage of completion method, calculated based on the services performed to date as a percentage of costs incurred. Additionally, there are contracts whereby income is recognized as it is earned, regardless of when the total services to be performed.related fees are received.
iii) |
Revenue from sales of real estate properties is recognized in the results of the period when sales occur, that is, when the properties are delivered and the risks and rewards inherent to ownership are transferred to the buyer and the collection of the corresponding receivables is reasonably assured.
iv) | Revenue from IT services |
The sale of computer equipment includes some services to be provided in a subsequent date to the asset sale as installation and maintenance. When sales agreements include multiple elements, the amount of the revenue is attributed to each element based on thetheir related fair values. The fair value of each element is determined based on the market price prevailing for each element when sold separately. Revenue derived from computer equipment is recognized when the related risks and rewards are transferred to the customer, which occurs upon delivery. Revenue relating to each service element is recognized as a percentage ofusing the total services to be performed during the period of service.
F-24
(All amounts are expressed in thousands of S/. unless otherwise stated)
v) | Interest income |
Revenue from interestInterest income is recognized on a time-proportion basis, using the effective interest method.
vi) |
Dividend income is recognized when the right to receive payment is established.
Revenue for concession services |
Revenue forfrom concession services is recognized according to its nature. Construction and restoration activities are accounted for applying thepercentage-of-completion method as described above and operation and maintenance services in the accounting period when they are provided (see Note 2.5).
2.26 | Construction contract costs |
Construction contract costs are recognized as an expense in the period in which they are incurred.
Contract costs include all direct costs such as materials, labor, subcontracting costs, manufacturing and supply costs of equipment,start-up costs and indirect costs. Periodically, the Company evaluates the reasonableness of the estimates used in the determination of thepercentage-of-completion. If, as a result of this evaluation, there are modifications to the revenue or cost previously estimated, or if the total estimated cost of the project exceeds expected revenues, an adjustment is made in order to reflect the effect in results of the period in which the adjustment or loss is incurred.
When the outcome of a construction work cannot be estimated reliably, the revenue of the contract is recognized only up to the amount of the contractual costs incurred and that are likely to be recovered.
Changes
(All amounts expressed in contract relating to the work to be performed, lawsuits and paymentthousands of incentives are included in the revenue from the contract to the extent that they have been agreed with the client and can be measured reliably.S/ unless otherwise stated)
2.27 | Leases |
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, including prepayments (net of any incentives received from the lessor) are charged to the profit or loss ofconsolidated income statement under the period on a straight-line basismethod over the periodlease term. The Group’s major kinds of the lease.operating leases are leases of machinery, computer equipment, printing equipment, among others.
The GroupFinance leases certain property, plant and equipment.
Leases of property, plant and equipment wherein which the Group hasassumes substantially assumed all the risks and rewards of ownership of an asset are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges in orderso as to obtainproduce a constant periodic rate of interest on the remaining balance pending payment.of the liability for each period. The corresponding rental obligations, net of finance charges, are included in other payables, short- and long-term payables. in the consolidated statement of financial position.
The interest element of the finance cost is charged to the consolidated statement of comprehensive income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases areis depreciated over the shorter of the useful life of the asset andor the lease term.
b) | Group as a lessor |
The Group only has operating leases and the leased assets are stated in the statement of financial position based on the nature of the asset. Revenue from operating leases are recognized under the straight-line method over the lease term and the incentives given to lessees reduce the revenue obtained from leases.
2.28 | Dividend distribution |
Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders.
F-25
(All amounts are expressed in thousands of S/. unless otherwise stated)
2.29 |
Contingent liabilities are not recognized in the financial statements; they are only disclosed in the Notes to the financial statements, unless it is probable that the use of resources is remote. Contingent assets are not recognized in the financial statements and are only disclosed when it is probable that an inflow of resources will flow to the Company.
Significantnon-operating items |
Significantnon-operating items are separately shown in the financial statements when they are necessary to provide a bettermore adequate understanding of the Group’s financial performance. These material items are income or expenses shown separately due to the significance or their nature or significant amount.
2.30 |
Company Management identified the need to make adjustments to the consolidated financial statements for the year 2015, so proceed to correct and restructure the financial statements as of December 31, 2015 in the items detailed below:
2015 | Adjustment | 2015 | ||||||||||||||
Restated See Note 2.30 | ||||||||||||||||
Asset Restated | ||||||||||||||||
Trade accounts receivables, net | (1 | ) | 1,050,791 | (8,336 | ) | 1,042,455 | ||||||||||
Unbilled work in progress, net | (1 | ) | 1,319,187 | (40,960 | ) | 1,278,227 | ||||||||||
Other accounts receivable | (1 | ) | 824,589 | (3,872 | ) | 820,717 | ||||||||||
Investments in associates and joint ventures | 646,884 | (9,879 | ) | 637,005 | ||||||||||||
Intangible assets, net | 881,020 | (2,734 | ) | 878,286 | ||||||||||||
Deferred income tax asset | (3 | ) | 173,851 | (26,006 | ) | 147,845 | ||||||||||
Liability Restated | ||||||||||||||||
Provisions | 35,618 | 11,842 | 47,460 | |||||||||||||
Deferred income tax liability | (3 | ) | 101,664 | (2,501 | ) | 99,163 | ||||||||||
Other liabilities | 5,671,484 | 4 | 5,671,488 | |||||||||||||
Equity Control Entity | ||||||||||||||||
Translation Adjustment | (2 | ) | (129,059 | ) | (14,725 | ) | (143,784 | ) | ||||||||
Profit (loss) for the period | 88,153 | (81,057 | ) | 7,096 | ||||||||||||
Minority Interest | 528,489 | (5,350 | ) | 523,138 | ||||||||||||
Gross profit | (1 | ) | 702,805 | (52,831 | ) | 649,974 | ||||||||||
Other expenses / other income, net | (364,382 | ) | (5 | ) | (364,387 | ) | ||||||||||
Financial expenses/income | (138,695 | ) | — | (138,695 | ) | |||||||||||
Share of the profit or loss in associates and joint ventures under the equity method accounting | 17,603 | (9,879 | ) | 7,724 | ||||||||||||
Income Tax | (3 | ) | (75,619 | ) | (23,408 | ) | (99,027 | ) | ||||||||
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Profit (Loss) for the period | 141,712 | (86,123 | ) | 55,589 | ||||||||||||
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Profit (Loss) attributable to: | ||||||||||||||||
Equity holders of the Company | 88,154 | (81,057 | ) | 7,097 | ||||||||||||
Non-controlling interest | 53,558 | (5,066 | ) | 48,492 | ||||||||||||
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141,712 | (86,123 | ) | 55,589 | |||||||||||||
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(1) | The Company performed a review of the estimates made of the work in progress, as well as impairments to the accounts receivable, determining the need to make adjustments to the account balances. |
(2) | The Goodwill of Morelco S.A. during 2015 was recorded using the group the functional currency (soles). In the review conducted in 2016, it was identified that the registration should be made in the currency of the subsidiary, generating a conversion adjustment. |
(3) | Likewise, a review of deferred tax assets was conducted, determining the need to record adjustments in accordance with the adjustments described above. |
As a result of the recording of these adjustments in the consolidated financial statements as of December 31, 2015, the Company’s equity decreased by approximately S / 86 million.
3 | ADOPTION OF NEW INTERNATIONAL FINANCIAL INFORMATION REGULATIONS (IFRS), AMENDMENTS AND INTERPRETATIONS |
3.1. | Standards, amendments and interpretations adopted by the Group |
The Company has adopted as of January 1, 2016 the following amendments to the IFRSs and amendments to IFRSs considered for the first time in the preparation of the financial statements:
(All amounts expressed in thousands of S/ unless otherwise stated)
The adoption of these changes did not have a material impact on the current year or prior years’ balances and they are not likely to affect future periods; however, the Group will give continuous consideration to the areas addressed in the amendments to help clear and concise information.
3.2. | New standards, amendments and interpretations |
The following standards effective for financial statements of annual periods beginning on or after January 1, 2017 which have not been adopted by the Group for the first time for the 2013 financial statements. Most of the impact of the adoption of these standards was restricted to presentation and disclosures in the financial statements:
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(All amounts are expressed in thousands of S/. unless otherwise stated)
The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group does not expect that the changes in IFRS 9 requiresmay have a material impact on its criteria of classification and measurement of financial assets and liabilities.
The new standard is based on the principle that income is recognized when the control of a good or service is transferred to be classified into two measurement categories: those measureda customer, in such a way that the notion of control replaces the existing notion of risks and benefits. The new standard establishes a new five-step process that guides the revenue recognition, these are: (i) identify contracts with customers, (ii) identify the performance obligation, (iii) determine the transaction price of the contract, (iv) allocate the transaction price to each of the performance obligations; and, (v) recognize the income as at fair value and those measured at amortized cost. each performance obligation is satisfied
(All amounts expressed in thousands of S/ unless otherwise stated)
The determination is made at initial recognition. The classification dependsapplication of IFRS 15 may haveflow-on effects on the entity’s business modelpractices regarding systems, processes and controls, compensation and bonus plans, contracts, tax planning and investor communication.
The standard is effective for managing its financial instrumentsannual periods beginning on or after January 1, 2018 and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main changeearly application is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess the impact of this new standard.permitted.
The Group estimates that the current procedure of revenue recognition defined according to its types of ordinary activities will not be materially different from the current definition of the standard that is based on compliance with performance obligations, whether for a period or a point in time.
The Group is in the process of evaluating the methodology to be used for the transition of IFRS 15. At this point, despite the qualitative evaluation, the Group cannot reasonably estimate the quantitative impacts that this standard would have on the financial statements.
IFRS 16 is effective for financial periods beginning on or after January 1, 2019; early application if permitted provided IFRS 15 is also early adopted. The Group is presently evaluating the impact of these standard on the preparation of its consolidated financial statements.
This interpretation will impact all entities that enter into foreign currency transactions for which consideration is paid or received in advance.
This interpretation is effective for financial periods beginning on or after January 1, 2018; early application is permitted. The Group is evaluating whether the changes introduced in IFRIC 22 may have a material impact on the qualifying criteria of “date of transaction” at their engineering and construction segment, which is the one with significant advances balances.
The Group is required to consider whether it is probable that a taxation authority will accept an uncertain tax treatment. If an entity concludes that it is not probable that the treatment will be accepted, it should reflect the effect of the uncertainty in its income tax accounting in the period in which that determination is made.
This IFRIC is effective for financial periods beginning on or after January 1, 2019 and early application is permitted. The Group is evaluating the impact of this new standard.
There are no
(All amounts expressed in thousands of S/ unless otherwise stated)
No other IFRS or IFRIC interpretations that are not yet effective that would beare expected to have a significantmaterial impact on the Group’s financial statements.
(All amounts expressed in thousands of S/ unless otherwise stated)
FINANCIAL RISK MANAGEMENT |
Financial risk management is carried out by the Group’s Management. Management oversees the general management of risks in specific areas, such as foreign exchange rate risk, price risk, cash flow and fair value interest rate risk, credit risk, the use of derivative andnon-derivative financial instruments and the investment of excess liquidity as well as financial risks, and carries out periodic supervision and monitoring.
Financial risk factors |
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group��sGroup’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures in one of its subsidiaries and considers the use of other derivatives in the event that it identifies risks that may generate an adverse effect for the Group in the short-short and medium-term.
a) | Market risks |
i) | Foreign exchange risk |
The Group is exposed to exchange rate risk as a result of the transactions carried out locally in foreign currency and due to its operations abroad. As of December 31, 20132016 and 2012,2015, this exposure is mainly concentrated in fluctuations of the U.S. dollar, the Chilean and Chilean pesos.Colombian Pesos. The foreign exchange risk of the investments in Brazil, ColombiaBolivia and Dominican RepublicPanama are not significant due their levelto the volume of operations.
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(All amounts are expressed in thousands of S/. unless otherwise stated)
Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure in coordination with the Group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, Group companies sometimes use forward contracts, previously approved by Group treasury. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency other than the entity’s functional currency.
As ofAt December 31, 2013,2016, the consolidated statement of financial position includes assets and liabilities in foreign currency (mainly in U.S. dollars) equivalent to S/.1,8862,770.9 million and S/.2,7462,708.3 million, respectively (S/.1,6731,659 million and S/.1,5682,404 million, respectively, as ofat December 31, 2012) equivalent2015) equivalents to US$0.47826.6 million and US$0.81806 million, respectively (US$0.52486.7 million and US$0.59 respectively as of December, 2012); US$90,904 million Ch$77,415704.5 million, respectively (Ch$48,833 million and Ch$23,939 million, respectively as ofat December 2012), Col$38,545 million and Col$27,595 million respectively (Col$31,195 million and Col$24,717 million, respectively as of December, 2012), R$0.028 million and R$0.022 million respectively (R$0.031 million and R$0.025 million, respectively as of December, 2012),31, 2015).
During 20132016, the NuevoPeruvian Sol, has weakenedthe Chilean and Colombian Pesos were exposed against the U.S. dollar. The Group’s exchange gains and losses for 20132016 amounted to S/.431761.8 million and S/.501774.3 million, respectively (S/.264427.2 million and S/.243510.1 million, respectively, in 2012)2015 and S/357.3 million and S/401.6 million, respectively in 2014).
If at December 31, 2013,2016 the new Peruvian solSol and the Chilean and Colombian Pesos had strengthened/weakened by 2% against the U.S. dollar, with all other variables held constant, thepre-tax profit for the year would have increased/decreased by S/.1.40.3 million (S/.0.41.7 million in 20122015 and S/.0.10.9 million in 2011)2014).
Investments classified as available for sale onAt December 31, 2016 the consolidated statement of changes in equity comprises a foreign currency translation adjustment originated by its subsidiaries. Their financial statements correspondposition includes assets and liabilities in functional currency equivalent to equity securities which exposureCLP$75,561.3 million and CLP$87,221.1 million, respectively (CLP$85,238 million and CLP$80,378 million, respectively at December 2015), COP$169,774.8 million and COP$166,091.8 million, respectively (COP$265,370 million and COP$309,446, respectively at December 2015).
The Group’s foreign exchange translation adjustment for 2016 amounted to price risk is immaterial due to the low amount invested. The Group does not have any other financial instruments exposed to price risk.S/0.6 million (expenses for S/44.6 million in 2015 and S/20.5 million in 2014).
(All amounts expressed in thousands of S/ unless otherwise stated)
ii) | Price risk |
Management considers that the exposure of the Group to the price risk of its investments in mutual funds, bonds and equity securities is low, since the invested amounts are not significant. Any fluctuation in their fair value will not have any significant impact on the balances reported in the consolidated financial statements.
iii) | Cash flow and fair value interest rate risk |
The Group’s interest rate risk mainly arises from its long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy is to maintain most of its borrowings inat fixed rate instruments; 86%52.8% of total debt in 2013 and 20122016 (72.7% in 2015) was contracted at fixed rates.rates and 47.2% at variable rates (27.3% in 2015) which consisted of a 18.0% fixed rate plus VAC (adjusted for inflation) and the remaining 29.2% at a variable rate (23.6% fixed rate + VAC and the remaining 3.7% at a variable rate in 2015).
Management has established mechanisms withThe debt subject to fixed rate plus VAC is related to a bond issued in Peruvian soles to finance the banks to negotiateGyM Ferrovías Project, Metro Line 1 (Note 20). Any increase in time intervals the interest rates of loans.rate resulting from higher inflation will have no significant impact on the Group’s profit because these revenues are also adjusted for inflation.
During 20132016 and 2012 the Group’s2015 borrowings at variable rates wereare denominated in Peruvian Soles and U.S. dollars and the Group’s policy is to manage thistheir cash flow risk by using interest-rateswaps,, which are recognized under hedge accounting.
The However, regarding the variable portion ofrate loans related to GSP (Note19-a), Management decided to assume the hedging derivative only comprises 14% ofrisk since it expects topre-pay them before due. If at December 31, 2016, the total debtlibor rate plus 3 months had increased/ decreased by 5%, with all other variables held constant, thepre-tax profit for 2013 and 2012 and any increase or decrease in interest ratethe year would have increased/ decreased by S/1.4 million (there was not have a material effect on the Group’s results.results in 2015). There was no material ineffectiveness on cash flow hedges occurred in fiscal years 20132016 and 2012.
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(All amounts are expressed in thousands of S/. unless otherwise stated)
b) | Credit risk |
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as customer credit counterparties, including the outstanding balance of accounts receivable and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. The Management of each of the Group’s companies evaluates the credit quality of the client taking into consideration its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilization of credit limits is regularly monitored.
With respect to loans to related parties, the Group has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board.
No credit limits were exceeded during the reporting period, and Management does not expect the Group to incur any losses from non-performanceperformance by these counterparties.counterparties, except for the ones already recorded at the financial statements.
c) | Liquidity risk |
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate number of sources of committed credit facilities and the capacity to close out positions in the market. In this sense,Historically, the Group has no significant liquidity risks given the fact that historically its operating cash flows have enabled it to maintain sufficient cash to meet its obligations. However, as of December 31, 2016, the Group started to experienced liquidity risk due to the early termination of the GSP concession agreement and the obligations assumed (Note 16a-i). As a consequence, the Group has started a disinvestment plan to be able to meet the obligations resulting from this scenario (Note 37).
(All amounts expressed in thousands of S/ unless otherwise stated)
Group Corporate Finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 18)19), so that the Group does not breach borrowing limits or covenants, where applicable, on any of its borrowing facilities. Less significant financing transactions are controlled by the Finance Management of each subsidiary.
Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable, external regulatory or legal requirements; for example, foreign currency restrictions.
Surplus cash held by the operating entities over and above the balance required for working capital management are invested in interest-bearing checking accounts or time deposits, selecting instruments with appropriate maturities and sufficient liquidity.
The following table below analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than 1 year | From 1 to 2 years | From 2 to 5 years | Over 5 years | Total | ||||||||||||||||
As of December 31, 2012 | ||||||||||||||||||||
Borrowing (except for finance leases) | 343,072 | 82,980 | 62,992 | 25,440 | 514,484 | |||||||||||||||
Finance leases liabilities | 124,709 | 103,373 | 130,246 | 22,119 | 380,447 | |||||||||||||||
Trade accounts payable | 937,287 | — | — | — | 937,287 | |||||||||||||||
Other accounts payable | 181,713 | 38,135 | — | — | 219,848 | |||||||||||||||
Trading and net settled derivative financial instruments (interest rate swaps) | 14,932 | 3,764 | — | — | 18,696 | |||||||||||||||
Accounts payable to related parties | 42,734 | — | — | — | 42,734 | |||||||||||||||
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1,644,447 | 228,252 | 193,238 | 47,559 | 2,113,496 | ||||||||||||||||
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F-29
(All amounts are expressed in thousands of S/. unless otherwise stated)
Less than 1 year | From 1 to 2 years | From 2 to 5 years | Over 5 years | Total | ||||||||||||||||
As of December 31, 2013 | ||||||||||||||||||||
Borrowing (except for finance leases) | 371,302 | 118,347 | 64,698 | — | 554,347 | |||||||||||||||
Finance leases liabilities | 115,698 | 82,492 | 87,829 | 22,912 | 308,931 | |||||||||||||||
Trade accounts payable | 991,397 | 2,157 | — | — | 993,554 | |||||||||||||||
Other accounts payable | 215,413 | 28,745 | 2,166 | 2,354 | 248,678 | |||||||||||||||
Trading and net settled derivative financial instruments (interest rate swaps) | 1,773 | 2,138 | — | — | 3,911 | |||||||||||||||
Accounts payable to related parties | 25,585 | — | — | — | 25,585 | |||||||||||||||
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1,721,168 | 233,879 | 154,693 | 25,266 | 2,135,006 | ||||||||||||||||
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Less than 1 year | From 1 to 2 years | From 2 to 5 years | Over 5 years | Total | ||||||||||||||||
At December 31, 2015 | ||||||||||||||||||||
Other financial liabilities (except for finance leases) | 1,102,855 | 181,729 | 223,713 | — | 1,508,297 | |||||||||||||||
Finance leases | 157,957 | 118,311 | 42,513 | 10,431 | 329,212 | |||||||||||||||
Bonds | 69,823 | 82,916 | 217,418 | 1,445,187 | 1,815,344 | |||||||||||||||
Trade accounts payables | 1,635,762 | — | — | — | 1,635,762 | |||||||||||||||
Accounts payables to related parties | 77,832 | 19,728 | — | 408 | 97,968 | |||||||||||||||
Other accounts payables | 181,113 | 36,456 | 121,678 | — | 339,247 | |||||||||||||||
Othernon-financial liabilities | — | 2,331 | — | — | 2,331 | |||||||||||||||
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3,225,342 | 441,471 | 605,322 | 1,456,026 | 5,728,161 | ||||||||||||||||
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At December 31, 2016 | ||||||||||||||||||||
Other financial liabilities (except for finance leases) | 1,936,825 | 128,508 | 173,145 | — | 2,238,478 | |||||||||||||||
Finance leases | 127,496 | 85,989 | 26,780 | 19,506 | 259,771 | |||||||||||||||
Bonds | 113,299 | 180,431 | 365,697 | 1,334,485 | 1,993,912 | |||||||||||||||
Trade accounts payables | 1,276,617 | — | — | — | 1,276,617 | |||||||||||||||
Accounts payables to related parties | 80,217 | 28,082 | 37,238 | — | 145,537 | |||||||||||||||
Other accounts payables | 303,827 | 49,064 | 143,655 | — | 496,546 | |||||||||||||||
Othernon-financial liabilities | — | 1,081 | — | — | 1,081 | |||||||||||||||
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3,838,281 | 473,155 | 746,515 | 1,353,991 | 6,411,942 | ||||||||||||||||
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Capital management |
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. As described at Note 1, in 2016 the current situation of the Company, has lead Management to monitor deviations that might cause thenon-compliance of covenants and may hinder renegotiation of liabilities(Note19-a and Note37-c).
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current andnon-current borrowings), less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.
As
(All amounts expressed in thousands of December 31, 2012, due to the fact that the Company has acquired significant borrowings, the Company’s strategy was to maintain a gearing ratio between 0.03 and 1.00. As of December 31, 2013, no gearing ratio was part of the analysis because cash surpluses were higher than financial obligations and equity had not been used to secure compliance with financial obligations as it is shown in the table below.S/ unless otherwise stated)
As of December 31, 20122016 and 20132015, the gearing ratio is presented below indicating the Company’s strategy to keep it in a range from 0.10 to 0.70.
As of December 31, the gearing ratio was as follows:
December 31, 2012 | December 31, 2013 | 2015 | 2016 | |||||||||||||
Total borrowing | 845,474 | 795,822 | ||||||||||||||
Total financial liabilities | 2,575,447 | 3,348,152 | ||||||||||||||
Less: Cash and cash equivalents | (780,114 | ) | (959,415 | ) | (554,002 | ) | (606,950 | ) | ||||||||
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Net debt | 65,360 | (163,593 | ) | 2,021,445 | 2,741,202 | |||||||||||
Total equity | 1,783,241 | 3,196,840 | 3,081,912 | 2,489,737 | ||||||||||||
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Total capital | 1,848,601 | 3,033,247 | 5,103,357 | 5,230,939 | ||||||||||||
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Gearing ratio | 0.04 | 0.00 | 0.40 | 0.52 | ||||||||||||
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Fair value estimation |
For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.
• | Level 1: | Measurement based on quoted prices in active markets for identical assets or liabilities. | ||
• | Level 2: | Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). | ||
• | Level 3: | Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group). |
The table below shows the Group’s assets or liabilities.
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(All amounts are expressed in thousands of S/. unless otherwise stated)
The main financial instrumentsliabilities measured at fair value byat December 31, 2015 and 2016:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
At December 31, 2015 | ||||||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 10,104 | — | — | 10,104 | ||||||||||||
Available-for-sale financial assets: TGP S.A. investment (i) | — | — | 120,134 | 120,134 | ||||||||||||
Financial liabilities | ||||||||||||||||
Derivatives used for hedging | — | 2,331 | — | 2,331 | ||||||||||||
At December 31, 2016 | ||||||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 6,379 | — | — | 6,379 | ||||||||||||
Financial liabilities | ||||||||||||||||
Derivatives used for hedging | — | 1,081 | — | 1,081 |
There were no transfers between levels 1 and 2 during the Group are the interest rate swaps signed with subsidiary GMP S.A., by which a variable-interest instrument is changed to a fixed interest rate and forward foreign exchange contracts signed by subsidiaries GyM Ferrovías S.A. and Viva GyM S.A. to hedge its exposure to changesyear.
Financial instruments in the exchange rate of the Euros and U.S. dollars. The information used for determining the fair value of these instruments are Level 2 and has been determined based on the present value of discounted future cash flows applied to the interest-rate change projections of Citibank New York.level 3
In 2013, theThe fair value of the investment maintainedheld in Transportadora de Gas del Perú S.A. (TGP) classified as available for saleavailable-for-sale financial asset was based on observable inputs in the price paid in one recent arm’s length transaction occurring in December 2013 among knowledgeable willing parties.market and unobservable inputs. The Group calculated its fair value based on its discounted cash flows as of the financial statement date. The information used for determiningto determine the fair value of this investment iscorresponds to Level 3 (Note 10).
(All amounts expressed in thousands of Level 2 (see Note 9).S/ unless otherwise stated)
The following table shows the changes in fair value by the investment held in TGP for the years ended on December 31:
2014 | 2015 | 2016 | ||||||||||
Opening balance | 88,333 | 93,144 | 120,134 | |||||||||
Unrealized gains (losses) recognized in the period | 4,811 | 26,990 | (2,996 | ) | ||||||||
Derecognition of investment sold: | ||||||||||||
- Historical cost of investment | — | — | (61,105 | ) | ||||||||
- Cumulative fair value | — | — | (56,033 | ) | ||||||||
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Final balance | 93,144 | 120,134 | — | |||||||||
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The carrying amountamounts of cash and cash equivalents correspondscorrespond to itstheir fair value.values. The Company considers that the carrying amount of current and long-termtrade accounts receivable and payable is similar to their fair values.values since they are short term. The fair value for long-term receivables and liabilities is disclosed in Note 11, Note 12, Note19-c, Note 20 and Note 22. The fair value of financial liabilities disclosed in Note 18-c), has been estimated by discounting the future contractual cash flows at the interest rate currently prevailing in the market and which is available to the Company for similar financial instruments.
There were no transfers between levels during the year.instruments (Level 2).
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS |
Estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions |
The GroupCompany makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
a) | Estimated impairment of goodwill and other intangible assets with indefinite useful life |
Impairment reviews are undertaken annually to determine if goodwill arising from business acquisitions has suffered any impairment,and other intangible assets with indefinite useful life are impaired, in accordance with the policy described in Note 2.16-a)2.15-i). For this purpose, goodwill is attributedallocated to the different CGUs to which it relates.relates while other intangible assets with indefinite useful life are assessed individually. The recoverable amountamounts of the CGUs hasand of other intangible assets with indefinite useful life have been determined based on its the higher of theirvalue-in-use calculations. and fair value less costs to sell. This evaluation requires the exercise of Management’s professional judgment to analyze any potential indicators of impairment as well as the use of estimates in determining the value in use, including the preparation ofpreparing future cash flows, macro-economic forecasts as well as defining the interest rate at which said cash flows will be discounted.
Value in use is usually determined on the basis of discounted estimated future net cash flows. Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters such as future commodity prices, the effects of inflation on operating expenses, discount rates, production profiles and the outlook for global or regional market supply-and-demand conditions for crude oil, natural gas and refined products.
F-31
(All amounts are expressed in thousands of S/. unless otherwise stated)
If the Group experiences a significant drop in revenues or a drastic increase in costs or changes in other factors, the fair value of their business units might decrease. If management determines the factors that reduce the fair value of the business are permanent, those economic factors will be taken into consideration to determine the recoverable amount of thethose business units and therefore, goodwill as well as other intangible assets with indefinite useful life may be deemed to be impaired, which may cause atheir write-down of goodwill to be necessary.required.
(All amounts expressed in thousands of S/ unless otherwise stated)
Based on the impairment tests performed by Group Management, no goodwill nor intangible (trademarks) impairment losses were required to be recognized because the recoverable amount of the CGUs subject to testing was substantially higher than their related carrying amounts.
The most significant assumptions used in impairment testing are gross margin, discount rate, terminal growth rate and discountrevenue growth rate which are included in Note 17. The18.
At December 31, 2015 and 2016 the Group has performed a sensitivity analysis onincreasing or decreasing the assumptions of gross margin, and discount rate which is included below.and revenue and terminal growth rate by a 10%, with all the other variables held constant, as follows:
Difference between recoverable amount and carrying amounts | ||||||||||||||||
2015 | 2016 | |||||||||||||||
Goodwill | ||||||||||||||||
Gross margin: | (10%) | +10% | (10%) | +10% | ||||||||||||
Mining construction services | 68.69% | 184.39% | 19.18% | 71.19% | ||||||||||||
Engineering and construction | (17.96%) | 30.43% | (42.68%) | 17.85% | ||||||||||||
Electromechanical | 159.40% | 240.58% | 32.16% | 74.41% | ||||||||||||
IT equipment and services | 92.38% | 98.22% | 200.93% | 289.04% | ||||||||||||
Telecommunication services | 205.49% | 619.81% | (110.85%) | 176.40% | ||||||||||||
Discount rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Mining construction services | 136.90% | 116.77% | 65.94% | 28.99% | ||||||||||||
Engineering and construction | 26.15% | (8.77%) | 8.22% | (27.56%) | ||||||||||||
Electromechanical | 234.27% | 172.83% | 74.42% | 36.77% | ||||||||||||
IT equipment and services | 132.94% | 98.22% | 285.63% | 212.65% | ||||||||||||
Telecommunication services | 468.23% | 367.15% | 70.31% | 4.59% | ||||||||||||
Terminal growth rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Mining construction services | 123.27% | 129.95% | 42.92% | 47.55% | ||||||||||||
Engineering and construction | 7.90% | 13.02% | (16.49%) | (7.84%) | ||||||||||||
Electromechanical | 196.39% | 203.75% | 51.14% | 55.62% | ||||||||||||
IT equipment and services | — | — | 243.21% | 247.06% | ||||||||||||
Telecommunication services | — | — | 26.14% | 39.94% | ||||||||||||
Trademarks | ||||||||||||||||
Revenue growth rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Morelco | 46.23% | 78.73% | 22.37% | 42.03% | ||||||||||||
Vial y Vives - DSD | 32.87% | 47.60% | 17.01% | 43.01% | ||||||||||||
Adexus | — | — | (8.18%) | 9.91% | ||||||||||||
Discount rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Morelco | 89.07% | 42.12% | 53.35% | 15.66% | ||||||||||||
Vial y Vives - DSD | 61.96% | 23.43% | 56.88% | 10.88% | ||||||||||||
Adexus | — | — | 15.42% | (10.59%) | ||||||||||||
Terminal growth rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Morelco | 59.07% | 66.12% | 29.19% | 34.94% | ||||||||||||
Vial y Vives - DSD | 36.06% | 44.28% | 23.19% | 37.83% | ||||||||||||
Adexus | — | — | (0.12%) | 1.89% |
The Group’s fair value is significantly above its book value andIn 2016 if the gross margin, was adjusted down bythe discount rate or terminal growth rate had been 10% the fair value would be 188% higher than the book value and if the gross margin was adjusted up bybelow or 10% the fair value would be 262.5% higher than book value. Therefore the Group’s businesses would still be greater than the book value even under a significant decline in the Group’s gross margin andabove Management’s estimates, respectively, the Group would not need to impair its goodwill.have recognized a provision for impairment of goodwill of the Engineering and Construction CGU and Telecommunication Services CGU (within the Engineering and Construction CGU in 2015).
(All amounts expressed in thousands of S/ unless otherwise stated)
The Group’s fair value is significantly above its book value andIn 2016 if the revenue growth rate or terminal growth rate had been 10% below Management’s estimates, or the discount rate was adjusted down byhad been 10% the fair value would be 193% higher than the book value and if the discount rate was adjusted up by 10% the fair value would be 264% higher than book value. Therefore the Group’s businesses would still be greater than the book value even under a significant upward adjustment to the discount rate in value andabove Management’s estimates, the Group would not need to impair its goodwill.have recognized a provision for impairment of their trademark Adexus.
At December 31, 2016, as a result of these evaluations, an impairment was identified and recorded in one of the CGU, Vial and Vives DSD (Note 18).
b) | Income taxes |
Determination of the tax obligations and expenses requires interpretations of the applicable tax laws and regulations. The Company seeks legal and tax counsel’s advicecounsel before making any decision on tax matters. Although Management considers its estimates to be prudent and appropriate, differences of interpretation may arise with theTax Authorities (mainly Peruvian, Tax AuthoritiesChilean and Colombian Authorities) which may require future tax adjustments.
Deferred tax assets and liabilities are calculated by takingon the temporary differences ofarising between the tax basis of assets and liabilities and the amounts stated in the financial statement basis using the tax rates in effect forin each of the years in which the difference is expected to reverse. Any change in tax rates will affect the deferred income tax assets and liabilities. This change will be recognized in the income statement in the period in which the change takes effect.
Management makes estimates for our deferredDeferred income tax asset valuation allowance. This allowance mayassets are recognized only to the extent that it is probable that future taxable profit will be increased or decreased ifavailable against which the temporary differences and tax loss carryforwards can be utilized. For this purpose, the Group determines it to be more likely than not that our valuation allowance needs to be adjusted. If a tax position is not more likely than not to ultimately be realized, no tax benefit is recorded.
The Group bases its estimates for the valuation allowance ontakes into consideration all available evidence, which includesincluding factors such as historical data, projected income, current operations and tax planning strategies. The deferredA tax assetbenefit related to a tax position is supported by the assumptiononly recognized if it is more likely than not that the Groupbenefit will continue to generate income in the future. If management determines in the future revenues will notultimately be sufficient to cover the deferred tax asset, it would adjust the valuation account for deferred income tax asset.realized.
The Group’s maximum exposure of the Company related to tax contingencies amounts to S/.35,948.
F-32
(All amounts are expressed in thousands of S/. unless otherwise stated)
c) | Percentage of completion revenue recognition |
RevenueRevenues from construction contracts isare recognized underusing thepercentage-of-completion method which requires the final margin from construction contracts to be estimated. Projections of these margins are performed by Managementis based on the completion of a physical proportion of the overall work execution budgetscontract considering total costs and adjusted periodically based on updated information reflecting the actual performance of work. Therevenues estimated contract revenue and total cost estimates are reviewed often as work advances and change orders are initiated and approved. In this regard, Management considers that the estimates made at the year-end closing are reasonable. When unapproved change orders are presented, revenue is recognized equal to costs incurred (no profit component recognized) untilend of the additional work has been approved.project (Note 2.25 i).
Contract revenue is recognized as revenue in the income statement in the accounting periods in which the work is performed. Contract costs are recognized as cost of sales in the income statement in the accounting period in which the work to which they relate is performed. However, any expected and probable excess of total contract costs over total contract revenue for the contract is recognized as an expense immediately. Furthermore, any changes in contract estimates are recognized as a change in accounting estimates and recognized in the period the change is made and in future periods as applicable. In certain construction contracts, the terms of these agreements allow for an amount to be withheld by the customers until construction has been completed. Under these contracts the full amount may not be recognized until the next operating cycle. As of December 31, 2013, 20122016, 2015 and 2011,2014, a sensitivity analysis was performed considering a 10% increase/decrease in the Group’s gross margins, as follows:
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Sales | 2,650,334 | 3,341,539 | 3,820,208 | 4,749,159 | 5,501,537 | 3,945,599 | ||||||||||||||||||
Gross profit | 289,813 | 371,852 | 466,512 | 412,771 | 159,158 | 194,378 | ||||||||||||||||||
% | 10.93 | 11.13 | 12.21 | 8.69 | 2.89 | 4.93 | ||||||||||||||||||
Over 10% | 12.02 | 12.24 | 13.43 | |||||||||||||||||||||
Plus 10% | 9.56 | 3.18 | 5.42 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Increase in profit before taxes | 28,981 | 37,185 | 46,651 | |||||||||||||||||||||
Increase inpre-tax profit | 41,249 | 15,787 | 19,473 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
318,794 | 409,037 | 513,163 | 454,020 | 174,949 | 213,851 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Less 10% | 9.84 | 10.02 | 10.99 | 7.82 | 2.60 | 4.44 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Decrease in profit before taxes | (28,981 | ) | (37,185 | ) | (46,651 | ) | ||||||||||||||||||
Decrease inpre-tax profit | (41,249 | ) | (15,787 | ) | (19,473 | ) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
260,832 | 334,667 | 419,861 | 371,522 | 143,371 | 174,905 | |||||||||||||||||||
|
|
|
|
|
|
(All amounts expressed in thousands of S/ unless otherwise stated)
d) | Provision for well closure costs |
At December 31, 2016 the present value of the estimated provision for closure of 144 wells located in Talara amounted to S/17.2 million (S/7.3 million as of December 31, 2015 for closure of 78 wells). The Companywell closure liability is adjusted to reflect the changes that resulted from the passage of time and from reviews of either the date of occurrence or the amount of the present value of the originally estimated obligations (Note 18).
The Group estimates the present value of its future obligation for well closure costs, or well closure liability, and increases the carrying amount of the asset that will be withdrawn in the future and that is shown under the heading of intangibles in the statement of financial position.
Thepre-tax discount pre-tax rate used for the present value calculation was 2.74%1.93% for Blocks I and V, and 2.93% for Blocks III and IV, respectively, based on a 5 to30-year rate used on U.S. bonds effective at December 31, 2016 (2.09% based on the 10 year7-year bond rate as ofat December 2013 (1.78% as of December, 2012). On December 31, 2013 the present value of the estimated provision2015 for closure activities for the 83 wells amounted to S/. 4.85 million (S/.4.9 million as of December, 2012 for closure activities for the 85 wells). Subsequently, this liability is attributed to profit or loss during the useful life of the assets that gave rise to it. The well closure liability is adjusted to reflect the changes that resulted from the passage of timeBlocks I and from revisions of either the date of occurrence or the amount of the present value of the obligations originally estimated.
F-33
(All amounts are expressed in thousands of S/V). unless otherwise stated)
If, at December 31, 2013,2016 and 2015, the estimated rate would havehad increased or decreased by 10%, with all variables held constant, the impact onpre-tax profit for the year would have not been as follows:
Impact in pretax profit 2013 | ||||
+10% | (59 | ) | ||
-10% | 59 |
During 2013, the Company recorded S/.0.5 million, charged to the intangible asset account, credited to the well closure liability. This is to reflect estimated obligations to close productive wells included in the service agreements for Blocks I and IV. This provision is increased monthly and charged to results, on an incremental value basis.significant.
Impairment of investment in Gasoducto Sur Peruano |
Based on the termination of the concession agreement, on which Gasoducto Sur Peruano S.A. (GSP) acts as concessionaire (Note16.a-i and Note 37), the Group identified potential impairment indicators affecting the recoverability of its investment. Consequently, the Group has applied the rules stated in IAS 36, ‘Impairment of assets” to determine the recoverable amount of this investment.
In that process, the Group has applied judgement to weight the various uncertainties surround the amount that can be recovered from this investment. Management has determined the recoverable amount assuming two key factors: (i) the amount that GSP will recover as a result of the public auction, and (ii) the validity of its right to subordinate the Odebrecht Group’s debts in GSP.
With relation to the amount to be recovered by GSP; the Group is assuming a recovery of the minimum amount established in the concession agreement, which is equivalent to 72.25% of the Net Carrying Amount (NCA) of the Concession assets. This amount, in substance, represents a minimum secured payment to be obtained by GSP based on a public auction (liquidation) to be set up for the adequate transfer of the Concession’s assets to a new Concessionaire within a year, under the relevant contractual terms and conditions.
With relation to the validity of its right to subordinate the Odebrecht Group’s liabilities in GSP, Management assessment, in consultation with its legal advisors, is that, although some uncertainties exist, these do not represent a material risk for exercising this right.
The concession agreement also established two additional tranches of 82.5% or 100% of the NCA to be recovered as a result of public auction, depending on several factors. In any of these scenarios, the Group would be able to recover their total investment and no additional impairment would be necessary to be recognized.
Depending on the date in which the NCA is actually cashed, the Group may need to take into account additional costs ranging from S/18.95 million (US$5.64 million) to S/42.2 million (US$12.56 million), due to higher financial expense.
(All amounts expressed in thousands of S/ unless otherwise stated)
f) | Impairment of the investment in Consorcio Constructor Ductos del Sur (CCDS) |
CCDS was mainly engaged in performing the engineering, procurement and construction work for GSP. Due to the early termination of GSP, the Group applied the rules stated in IAS 36 “Impairment of assets” and IAS 37 “Provisions” to determine the recoverable amounts of the assets and liabilities to be recorded, respectively. As a result, the following adjustments were included at the financial statements:
S/ | ||||
Income for debt forgiveness (i) | 431,484 | |||
Indemnification income | 33,600 | |||
Unbilled work in progress impairment (ii) | (410,199 | ) | ||
Other provisions | (24,915 | ) | ||
Inventories impairment (iii) | (33,824 | ) | ||
Financial expenses | (7,004 | ) | ||
Property, plant and equipment impairment | (4,143 | ) | ||
Other’s (liability) asset, net | (164 | ) | ||
( 15,165 | ) | |||
(i) | The extinguished trade accounts payable relates to the recognition of the construction project estimated margin recorded as a liability (Note 2.25.i) |
(ii) | The recoverable of unbilled work in progress relates to the minimum secured payment to be obtained from GSP. |
(iii) | Inventories were specialized assets that could not be sold in an active market. |
In 2016, the net impact of the early termination of CCDS construction contract is a loss of S/15.2 million.
5.2 | Critical judgments in applying the entity’s accounting policies |
Consolidation of entities in which the Group holdholds less than 50% -
The Company owns some direct and indirect subsidiaries onof which the Group has control even though it has less than 50% of the voting rights. These aresubsidiaries mainly related tocomprise indirect subsidiaries in the real-estate business owned through Viva GyM S.A., where even though the Group hasholds interest between 30% and 50%, has the power to affect the relevant activities that mostly impact the subsidiaries’ returns.
Additionally, the Group ownshas de facto control onover Promotora Larcomar S.A. onof which it owns 42.80%46.55% of equity interest consideringinterest.
Consolidation of entities in which the fact thereGroup does not have join control but have rights and obligations over the assets and liabilities
The Group assesses, on an ongoing basis, the nature of the contracts signed with one or more parties. If no control or joint control is no historydetermined to be held by the Group but it has rights to assets and obligations for liabilities under the arrangement, then the Group recognizes its assets, liabilities, revenue and expenses and its share of other shareholders formingany jointly controlled assets or liabilities and any revenue or expense arising under the arrangement as a group to exercise their votes collectively.joint operation in accordance with IFRS 11—Joint arrangements (Note2.2-d).
Percentage of interest | ||||||||
Joint operations | 2016 | 2015 | ||||||
- Consorcio de Gestión de Información | 56.00 | % | 56.00 | % | ||||
- Consorcio de la Disponibilidad PKI | — | 70.00 | % | |||||
CONCAR S.A. | ||||||||
- Consorcio Ancón-Pativilca | 67.00 | % | 67.00 | % | ||||
- Consorcio Peruano de Conservación | 50.00 | % | 50.00 | % | ||||
- Consorcio Manperan | 67.00 | % | 67.00 | % | ||||
- Consorcio Vial Sierra | — | 50.00 | % | |||||
Viva GyM S.A. | ||||||||
- Consorcio Panorama | — | 35.00 | % | |||||
Cam Holding S.p.A. | ||||||||
- Consorcio Mecam | 50.00 | % | 50.00 | % | ||||
- Consorcio Seringel | 50.00 | % | 50.00 | % |
All of the joint arrangements listed above operate in Peru, Chile and Colombia.
The table below provides a description of the major activities carried out by these joint operations:
Joint Operations in | Economic activity | |
Graña y Montero S.A.A. | Construction, operation and maintenance of La Chira waste water treatment plant south of Lima. The project is aimed to solve Lima’s environmental problems caused by sewage discharged directly into the sea. | |
GyM S.A. | Theses joint operations carried out activities through the four divisions of the engineering and construction segment (Note 6). | |
GMP S.A. | Consorcio Terminales and Terminales del Peru provide services for receiving, storing, shipping and transporting liquid hydrocarbons, such as gasoline, jet fuel, diesel fuel and residual among others. | |
CONCAR S.A. | Joint operations Concar provides rehabilitation service, routine and periodic maintenance of the road; it further provides conservation and supervision services. | |
GMD S.A. | Outsourcing service of online BPO processes (Business Process Outsourcing). | |
Viva GyM S.A. | Construction of a five-star hotel with a convention center, a business center and entertainment center. | |
CAM Holding S.p.A. | Execution of outsourcing services to the electric power sector. |
6 | INTERESTS IN OTHER ENTITIES |
The consolidated financial statements of the Group include the accounts of the Company and of its subsidiaries. Additionally, the consolidated financial statements of the Group include its interest in joint operations in which the Company or certain subsidiaries have joint control with their joint operations partners (See note 2.2d)(Note2.2-d).
a) | Principal subsidiaries |
The following charttable shows the principal direct and indirect subsidiaries allocatedclassified by operating segment (Note 6)7):
(All amounts expressed in thousands of S/ unless otherwise stated)
Name | Country | Economic activity | ||
Engineering and Construction: | ||||
GyM S.A. | Peru, | Civil construction, electro-mechanic assembly, buildings | ||
management and implementing housing development projects | ||||
and other related services. | ||||
Stracon GyM S.A. | Peru and Panama | |||
GyM Chile S.p.A. | Chile | Electromechanical assemblies and services to energy, oil, gas and mining sector. | ||
Chile | ||||
| Construction and electromechanical assemblies and services in the areas of energy, oil, | |||
GMI S.A. | Peru | Advisory and consultancy services in engineering, carrying out studies and projects, managing projects and supervision of works. |
F-34
(All amounts are expressed in thousands of S/. unless otherwise stated)
|
|
| ||||
Infrastructure: | ||||||
GMP S.A. | Peru | |||||
Oiltanking Andina Services S.A. | Peru | Operation of the gas processing plant of Pisco | ||||
Transportadora de Gas Natural Comprimido Andino S.A.C. | Peru | |||||
GyM Ferrovías S.A. | Peru | Concession for | ||||
Survial S.A. | Peru | Concession for constructing, operating and maintaining the Section 1 of the “Southern Inter-oceanic” road. | ||||
Norvial S.A. | Peru | Concession for restoring, operating and maintaining the “Ancón - Huacho - Pativilca” section of the Panamericana Norte road. | ||||
Concesión Canchaque S.A. | Peru | Concession for operating and maintaining the Buenos Aires - Canchaque road. | ||||
Concesionaria Vía Expresa Sur S.A. | Peru | Concession for designing, constructing, operating and maintaining the | ||||
Real estate: | ||||||
VIVA GyM S.A. | Peru | Developing and managing real estate projects directly or together with other partners. |
(All amounts expressed in thousands of S/ unless otherwise stated)
Name | Country | Economic activity | ||
Technical services: | ||||
GMD S.A. | Peru | Information technology services. | ||
Gestión de Servicios Digitales S.A. | Peru | Information technology services. | ||
CAM Holding | Chile
Colombia | Electric and technological | ||
Concar S.A. | Peru | Operating and maintaining | ||
Coasin Instalaciones Ltda. | Chile | Installing and maintaining network and equipment for telecommunications. | ||
Adexus S.A. | Chile, Peru, Colombia and Ecuador | IT solutions services. | ||
Parent company operation: | ||||
Generadora Arabesco S.A. | Peru | Implementing projects related to electric power-generating activities. | ||
Larcomar S.A. | Peru | |||
Promotora Larcomar S.A. | Peru | |||
Promotores Asociados de Inmobiliarias S.A. | Peru | Operating in the real-estate industry and engaged in the development and selling office facilities in Peru. | ||
Negocios del Gas S.A. | Peru | Construction, operation and maintenance of the pipeline system to transport natural gas and liquids of natural gas. |
The following are the Group’s subsidiaries and related interests onat December 31, 2013:2016:
Proportion of ordinary shares directly held by Parent (%) | Proportion of ordinary shares held by Subsidiaries (%) | Proportion of ordinary shares held by the Group (%) | Proportion of ordinary shares held by non- controlling interests (%) | Percentage of common shares directly held by Parent (%) | Percentage of common shares held by Subsidiaries (%) | Percentage of common shares held by the Group (%) | Percentage of common shares held by non- controlling interests (%) | |||||||||||||||||||||||||
Engineering and Construction: | ||||||||||||||||||||||||||||||||
GyM S.A. | 93.67 | % | — | 93.67 | % | 6.33 | % | 98.23 | % | — | 98.23 | % | 1.77 | % | ||||||||||||||||||
- GyM S.A. subsidiaries | — | — | — | 13.68 | % | — | 87.06 | % | 87.06 | % | 12.94 | % | ||||||||||||||||||||
Stracon GyM S.A. | — | 74.15 | % | 74.15 | % | 25.85 | % | — | 87.59 | % | 87.59 | % | 12.41 | % | ||||||||||||||||||
GyM Chile SpA | — | 99.99 | % | 99.99 | % | 0.01 | % | — | 99.99 | % | 99.99 | % | 0.01 | % | ||||||||||||||||||
DSD Construcciones y Montajes S.A. | — | 85.95 | % | 85.95 | % | 14.05 | % | |||||||||||||||||||||||||
Ingeniería y Construcción Vial y Vives S.A. | — | 80.40 | % | 80.40 | % | 19.60 | % | |||||||||||||||||||||||||
GyM Minería S.A. | — | 99.90 | % | 99.90 | % | 0.10 | % | |||||||||||||||||||||||||
Vial y Vives - DSD S.A. | — | 94.49 | % | 94.49 | % | 5.51 | % | |||||||||||||||||||||||||
GMI S.A. | 89.41 | % | — | 89.41 | % | 10.59 | % | 89.41 | % | — | 89.41 | % | 10.59 | % | ||||||||||||||||||
Morelco S.A.S. | — | 70.00 | % | 70.00 | % | 30.00 | % | |||||||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||||||||||||||
GMP S.A. | 95.00 | % | — | 95.00 | % | 5.00 | % | |||||||||||||||||||||||||
Oiltanking Andina Services S.A. | — | 50.00 | % | 50.00 | % | 50.00 | % | |||||||||||||||||||||||||
Transportadora de Gas Natural | ||||||||||||||||||||||||||||||||
Comprimido Andino S.A.C | — | 99.93 | % | 99.93 | % | 0.07 | % | |||||||||||||||||||||||||
GyM Ferrovias S.A. | 75.00 | % | — | 75.00 | % | 25.00 | % | |||||||||||||||||||||||||
Survial S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||||||||||||||||||
Norvial S.A. | 67.00 | % | — | 67.00 | % | 33.00 | % |
F-35
(All amounts are expressed in thousands of S/. unless otherwise stated)
Proportion of ordinary shares directly held by Parent (%) | Proportion of ordinary shares held by Subsidiaries (%) | Proportion of ordinary shares held by the Group (%) | Proportion of ordinary shares held by non- controlling interests (%) | |||||||||||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||||||||||||||
GMP S.A. | 95.00 | % | — | 95.00 | % | 5.00 | % | |||||||||||||||||||||||||
Oiltanking Andina Services S.A. | — | 50.00 | % | 50.00 | % | 50.00 | % | |||||||||||||||||||||||||
Transportadora de Gas Natural Comprimido Andino S.A.C. | — | 99.93 | % | 99.93 | % | 0.07 | % | |||||||||||||||||||||||||
GyM Ferrovias S.A. | 75.00 | % | — | 75.00 | % | 25.00 | % | |||||||||||||||||||||||||
Survial S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||||||||||||||||||
Norvial S.A. | 67.00 | % | — | 67.00 | % | 33.00 | % | |||||||||||||||||||||||||
Concesión Canchaque S.A. | 99.97 | % | — | 99.97 | % | 0.03 | % | 99.96 | % | — | 99.96 | % | 0.04 | % | ||||||||||||||||||
Concesionaria Vía Expresa Sur S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | 99.98 | % | 0.02 | % | 100.00 | % | — | ||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||||||
Viva GyM S.A. | 59.25 | % | 38.97 | % | 98.22 | % | 1.78 | % | 63.44 | % | 36.10 | % | 99.54 | % | 0.46 | % | ||||||||||||||||
- Viva GyM S.A. subsidiaries | — | — | — | 40.58 | % | — | 60.51 | % | 60.51 | % | 39.49 | % | ||||||||||||||||||||
Technical Services: | ||||||||||||||||||||||||||||||||
Services: | ||||||||||||||||||||||||||||||||
GMD S.A. | 89.15 | % | — | 89.15 | % | 10.85 | % | 89.23 | % | — | 89.23 | % | 10.77 | % | ||||||||||||||||||
Cam Holding S.p.A. | 100.00 | % | — | 100.00 | % | — | 100.00 | % | — | 100.00 | % | — | ||||||||||||||||||||
Concar S.A. | 99.74 | % | — | 99.74 | % | 0.26 | % | 99.75 | % | — | 99.75 | % | 0.25 | % | ||||||||||||||||||
Gestión de Servicios Digitales S.A. | — | 100.00 | % | 100.00 | % | — | — | 100.00 | % | 100.00 | % | — | ||||||||||||||||||||
Parent company operation: | ||||||||||||||||||||||||||||||||
Coasin Instalaciones Ltda. | — | 100.00 | % | 100.00 | % | — | ||||||||||||||||||||||||||
CAM Servicios del Perú S.A. | 73.16 | % | — | 73.16 | % | 26.84 | % | |||||||||||||||||||||||||
Adexus S.A. | 91.03 | % | — | 91.03 | % | 8.97 | % | |||||||||||||||||||||||||
Parent company operations: | ||||||||||||||||||||||||||||||||
Generadora Arabesco S.A. | 99.00 | % | — | 99.00 | % | 1.00 | % | 99.00 | % | — | 99.00 | % | 1.00 | % | ||||||||||||||||||
Larcomar S.A. | 79.66 | % | — | 79.66 | % | 20.34 | % | 79.66 | % | — | 79.66 | % | 20.34 | % | ||||||||||||||||||
Promotora Larcomar S.A. | 42.80 | % | — | 42.80 | % | 57.20 | % | 46.55 | % | — | 46.55 | % | 53.45 | % | ||||||||||||||||||
Promotores Asociados de Inmobiliarias S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | 99.99 | % | — | 99.99 | % | 0.01 | % | ||||||||||||||||||
Negocios del Gas S.A. | 99.99 | % | 0.01 | % | 100.00 | % | — | |||||||||||||||||||||||||
Agenera S.A. | 99.00 | % | 1.00 | % | 100.00 | % | — |
In August 2016, the Company acquired additional interest in the share capital of Adexus S.A. to obtained control (Note 33 a).
The following are the Group’s subsidiaries and related interests onat December 31, 2012:2015:
Proportion of ordinary shares directly held by Parent (%) | Proportion of ordinary shares held by Subsidiaries (%) | Proportion of ordinary shares held by the Group (%) | Proportion of ordinary shares held by non- controlling interests (%) | Percentage of common shares directly held by Parent (%) | Percentage of common shares held by Subsidiaries (%) | Percentage of common shares held by the Group (%) | Percentage of common shares held by non- controlling interests (%) | |||||||||||||||||||||||||
Engineering and Construction: | ||||||||||||||||||||||||||||||||
GyM S.A. | 93.67 | % | — | 93.67 | % | 6.33 | % | 98.23 | % | — | 98.23 | % | 1.77 | % | ||||||||||||||||||
- GyM S.A. subsidiaries | — | — | — | 12.80 | % | — | 82.49 | % | 82.49 | % | 17.51 | % | ||||||||||||||||||||
Stracon GyM S.A. | — | 74.15 | % | 74.15 | % | 25.85 | % | — | 87.59 | % | 87.59 | % | 12.41 | % | ||||||||||||||||||
GyM Chile SpA | — | 99.99 | % | 99.99 | % | 0.01 | % | — | 99.99 | % | 99.99 | % | 0.01 | % | ||||||||||||||||||
Ingeniería y Construcción Vial y Vives S.A. | — | 74.00 | % | 74.00 | % | 26.00 | % | |||||||||||||||||||||||||
GyM Minería S.A. | — | 99.90 | % | 99.90 | % | 0.10 | % | |||||||||||||||||||||||||
Vial y Vives – DSD S.A. | — | 80.79 | % | 80.79 | % | 19.21 | % | |||||||||||||||||||||||||
GMI S.A. | 89.41 | % | — | 89.41 | % | 10.59 | % | 89.41 | % | — | 89.41 | % | 10.59 | % | ||||||||||||||||||
Morelco S.A.S. | — | 70.00 | % | 70.00 | % | 30.00 | % | |||||||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||||||||||||||
GMP S.A. | 95.00 | % | — | 95.00 | % | 5.00 | % | 95.00 | % | — | 95.00 | % | 5.00 | % | ||||||||||||||||||
Oiltanking Andina Services S.A. | — | 50.00 | % | 50.00 | % | 50.00 | % | — | 50.00 | % | 50.00 | % | 50.00 | % | ||||||||||||||||||
Transportadora de Gas Natural | ||||||||||||||||||||||||||||||||
Comprimido Andino S.A.C. | — | 99.93 | % | 99.93 | % | 0.07 | % | |||||||||||||||||||||||||
Comprimido | ||||||||||||||||||||||||||||||||
Andino S.A.C | — | 99.93 | % | 99.93 | % | 0.07 | % | |||||||||||||||||||||||||
GyM Ferrovias S.A. | 75.00 | % | — | 75.00 | % | 25.00 | % | 75.00 | % | — | 75.00 | % | 25.00 | % | ||||||||||||||||||
Survial S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | 99.99 | % | — | 99.99 | % | 0.01 | % | ||||||||||||||||||
Norvial S.A. | 50.10 | % | — | 50.10 | % | 49.90 | % | 67.00 | % | — | 67.00 | % | 33.00 | % | ||||||||||||||||||
Concesión Canchaque S.A. | 99.97 | % | — | 99.97 | % | 0.03 | % | 99.96 | % | — | 99.96 | % | 0.04 | % | ||||||||||||||||||
Concesionaria la Chira | 50.00 | % | — | 50.00 | % | 50.00 | % | |||||||||||||||||||||||||
Concesionaria Vía Expresa Sur S.A. | 99.98 | % | 0.02 | % | 100.00 | % | — | |||||||||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||||||
Viva GyM S.A. | 59.25 | % | 38.97 | % | 98.22 | % | 1.78 | % | 60.62 | % | 38.97 | % | 99.59 | % | 0.41 | % | ||||||||||||||||
- Viva GyM S.A. subsidiaries | — | — | — | 34.75 | % | — | 53.81 | % | 53.81 | % | 46.19 | % | ||||||||||||||||||||
Services: | ||||||||||||||||||||||||||||||||
GMD S.A. | 89.37 | % | — | 89.37 | % | 10.63 | % | |||||||||||||||||||||||||
Cam Holding S.p.A. | 100.00 | % | — | 100.00 | % | — | ||||||||||||||||||||||||||
Concar S.A. | 99.81 | % | — | 99.81 | % | 0.19 | % |
F-36
(All amounts are expressed in thousands of S/. unless otherwise stated)
Proportion of ordinary shares directly held by Parent (%) | Proportion of ordinary shares held by Subsidiaries (%) | Proportion of ordinary shares held by the Group (%) | Proportion of ordinary shares held by non- controlling interests (%) | |||||||||||||
Technical Services: | ||||||||||||||||
GMD S.A. | 88.68 | % | — | 88.68 | % | 11.32 | % | |||||||||
Cam Holding S.p.A. | 100.00 | % | — | 100.00 | % | 00.00 | % | |||||||||
Concar S.A. | 99.57 | % | — | 99.57 | % | 0.43 | % | |||||||||
Gestión de Servicios Digitales S.A. | — | 100.00 | % | 100.00 | % | — | ||||||||||
Parent company operation: | ||||||||||||||||
Generadora Arabesco S.A. | 99.00 | % | — | 99.00 | % | 1.00 | % | |||||||||
Larcomar S.A. | 79.66 | % | — | 79.66 | % | 20.34 | % | |||||||||
Promotora Larcomar S.A. | 42.80 | % | — | 42.80 | % | 57.20 | % | |||||||||
Promotores Asociados de Inmobiliarias S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % |
Gestión de Servicios Digitales S.A. | — | 100.00 | % | 100.00 | % | — | ||||||||||
Coasin Instalaciones Ltda. | — | 100.00 | % | 100.00 | % | — | ||||||||||
CAM Servicios del Perú S.A. | 73.16 | % | — | 73.16 | % | 26.84 | % | |||||||||
Parent company operations: | ||||||||||||||||
Generadora Arabesco S.A. | 99.00 | % | — | 99.00 | % | 1.00 | % | |||||||||
Larcomar S.A. | 79.66 | % | — | 79.66 | % | 20.34 | % | |||||||||
Promotora Larcomar S.A. | 46.55 | % | — | 46.55 | % | 53.45 | % | |||||||||
Promotores Asociados de | ||||||||||||||||
Inmobiliarias S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||
Negocios del Gas S.A. | 99.99 | % | 0.01 | % | 100.00 | % | — | |||||||||
Agenera S.A. | 99.00 | % | 1.00 | % | 100.00 | % | — | |||||||||
GYM Colombia S.A. | 66.20 | % | 33.80 | % | 100.00 | % | — |
On November 17, 2015, Cam Holding S.p.A. sold 100% of its shares in Cam Brasil Multiservicos S.A., at a total US$300 thousand; as a result, a loss of S/8.3 million was recorded, which is shown in the statement of income, within “Profit (loss) on sale of investments” (a cash balance of S/0.98 million was presented net of the cash received for the sale of this investment in the statement of cash flow).
All investments in subsidiaries undertakings arehave been included in the consolidation. The proportionpercentage of the voting rights in the subsidiaries’ undertakings arethose subsidiaries is directly held directly by the parent companyParent Company and do not significantly differ from the proportionpercentage of ordinary shares held. There isare no restrictionrestrictions to the access or use of the Group’s assets or toand liabilities.
The following are the settlement of the liabilities of the Group.
AtGroup’s subsidiariesnon-controlling interests at December 31, the total non-controlling interest is attributable to the following subsidiaries:31:
2012 | 2013 | 2015 | 2016 | |||||||||||||
Viva GyM S.A. subsidiaries | 132,482 | 176,009 | ||||||||||||||
Viva GyM S.A. and subsidiaries | 214,260 | 241,140 | ||||||||||||||
Viva GyM S.A. | 4,101 | 5,411 | 1,481 | 1,700 | ||||||||||||
GyM S.A. subsidiaries | 76,414 | 101,601 | ||||||||||||||
GyM S.A. and subsidiaries | 145,699 | 100,840 | ||||||||||||||
GyM S.A. | 30,225 | 40,616 | 10,854 | 9,354 | ||||||||||||
Norvial S.A. | 57,774 | 39,811 | 52,993 | 61,349 | ||||||||||||
CAM Holding S.p.A. | 16,681 | 19,585 | 27,652 | 26,589 | ||||||||||||
GMP S.A. | 23,466 | 18,853 | 21,110 | 20,879 | ||||||||||||
GyM Ferrovias S.A. | 20,139 | 14,042 | 24,584 | 30,548 | ||||||||||||
Promotora Larcomar S.A. | 10,060 | 9,960 | 13,609 | 13,539 | ||||||||||||
Others | 19,692 | 5,173 | 10,896 | 3,375 | ||||||||||||
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391,034 | 431,061 | 523,138 | 509,313 | |||||||||||||
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Summarized financial information of subsidiaries with materialnon-controlling interests
Set out below areis the summarized financial information for each subsidiary that hasnon-controlling interests that are material to the Group.
Summarized statement of financial position
Viva GYM S.A. | GyM S.A. | Norvial S.A. | Viva GYM S.A. and subsidiaries | GyM S.A. and subsidiaries | Norvial S.A. | |||||||||||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | At December 31, | At December 31, | At December 31, | |||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||||||||||||||||||||
Current: | ||||||||||||||||||||||||||||||||||||||||||||||||
Assets | 642,799 | 672,627 | 1,504,198 | 1,791,129 | 13,741 | 19,977 | 1,109,270 | 1,117,065 | 3,140,222 | 1,849,077 | 43,513 | 107,838 | ||||||||||||||||||||||||||||||||||||
Liabilities | (263,600 | ) | (217,609 | ) | (1,547,653 | ) | (1,578,685 | ) | (13,804 | ) | (50,362 | ) | (555,148 | ) | (515,781 | ) | (2,809,890 | ) | (2,050,803 | ) | (79,634 | ) | (49,721 | ) | ||||||||||||||||||||||||
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Total current net assets (liabilities) | 379,199 | 455,018 | (43,455 | ) | 212,444 | (63 | ) | (30,385 | ) | |||||||||||||||||||||||||||||||||||||||
Current net assets (liabilities) | 554,122 | 601,284 | 330,332 | (201,726 | ) | (36,121 | ) | 58,117 | ||||||||||||||||||||||||||||||||||||||||
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Non-current: | ||||||||||||||||||||||||||||||||||||||||||||||||
Assets | 64,605 | 76,506 | 858,808 | 915,193 | 154,094 | 152,228 | 91,677 | 113,594 | 1,144,066 | 1,326,599 | 377,392 | 467,449 | ||||||||||||||||||||||||||||||||||||
Liabilities | (62,583 | ) | (97,762 | ) | (261,680 | ) | (382,067 | ) | (38,251 | ) | (1,207 | ) | (159,583 | ) | (104,179 | ) | (628,670 | ) | (471,424 | ) | (180,686 | ) | (339,661 | ) | ||||||||||||||||||||||||
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Total non-current net assets (liabilities) | 2,022 | (21,256 | ) | 597,128 | 533,126 | 115,843 | 151,021 | |||||||||||||||||||||||||||||||||||||||||
Non-current net assets (liabilities) | (67,906 | ) | 9,415 | 515,396 | 855,175 | 196,706 | 127,788 | |||||||||||||||||||||||||||||||||||||||||
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Net assets | 381,221 | 433,762 | 553,673 | 745,570 | 115,780 | 120,636 | 486,216 | 610,699 | 845,728 | 653,449 | 160,585 | 185,905 | ||||||||||||||||||||||||||||||||||||
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F-37
(All amounts are expressed in thousands of S/. unless otherwise stated)
Summarized income statement
Viva GYM S.A. | GyM S.A. | Norvial S.A. | Viva GYM S.A. and subsidiaries | GyM S.A. and subsidiaries | Norvial S.A. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | For the year ended | For the year ended | For the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2011 | 2012 | 2013 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 152,266 | 240,110 | 313,731 | 2,659,246 | 3,341,539 | 3,903,916 | 78,672 | 85,700 | 92,252 | 224,560 | 215,764 | 411,518 | 4,861,362 | 5,660,738 | 4,036,226 | 178,170 | 246,231 | 216,260 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Profit before income tax | 34,363 | 65,282 | 80,467 | 222,941 | 250,132 | 350,687 | 34,252 | 38,734 | 40,341 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit (loss) before income tax | 37,967 | 36,985 | 104,223 | 239,597 | (86,373) | (85,857) | 41,998 | 54,470 | 63,582 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax | (10,232 | ) | (19,967 | ) | (21,427 | ) | (66,679 | ) | (79,690 | ) | (105,782 | ) | (7,814 | ) | (11,578 | ) | (10,245 | ) | (11,452) | (7,649) | (27,054) | (54,657) | (49,304) | (11,228) | (10,908) | (13,611) | (16,262) | |||||||||||||||||||||||||||||||||||||||||||||
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Post-tax profit | 24,131 | 45,315 | 59,040 | 156,262 | 170,442 | 244,905 | 26,438 | 27,156 | 30,096 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit (loss) for the period | 26,515 | 29,336 | 77,169 | 184,940 | (135,677) | (97,085) | 31,090 | 40,859 | 47,320 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive Income | — | — | — | — | (962 | ) | (1,240 | ) | — | — | — | (25) | — | — | ( 26,199) | (60,380) | 19,486 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total comprehensive income | 24,131 | 45,315 | 59,040 | 156,262 | 169,480 | 243,665 | 26,438 | 27,156 | 30,096 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive Income for the period | 26,490 | 29,336 | 77,169 | 158,741 | (196,057) | (77,599) | 31,090 | 40.859 | 47,320 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dividends paid to non-controlling interest Note(36-d) | 23,785 | 3,066 | 5,050 | 26,640 | — | 8,288 | 8,250 | — | 7,260 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Summarized statement of cash flows
Viva GyM S.A. | GyM S.A. | Norvial S.A. | ||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2011 | 2012 | 2013 | 2011 | 2012 | 2013 | ||||||||||||||||||||||||||||
Net cash (used) generated from operating activities | (14,189 | ) | 5,104 | (46,450 | ) | 164,373 | ) | 467,606 | 69,768 | 44,585 | 48,052 | 37,746 | ||||||||||||||||||||||||
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Net cash a (used) generated in investing activities | (36,340 | ) | (4,158 | ) | (5,609 | ) | (51,441 | ) | (263,724 | ) | (139,563 | ) | (16,903 | ) | (16,729 | ) | (412 | ) | ||||||||||||||||||
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Net cash generated (used) in financing activities | 54,804 | 22,804 | 22,081 | (113,963 | ) | (179,416 | ) | (87,296 | ) | (23,667 | ) | (32,757 | ) | (24,791 | ) | |||||||||||||||||||||
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Net increase (decrease) in cash and cash equivalents | 4,275 | 23,750 | (29,978 | ) | (1,031 | ) | 24,466 | (157,091 | ) | 4,015 | (1,434 | ) | 12,543 | |||||||||||||||||||||||
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Cash decrese in deconsolidation | — | — | — | — | — | (1,458 | ) | — | — | — | ||||||||||||||||||||||||||
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Cash, cash equivalents and bank overdrafts at beginning of year | 44,979 | 49,254 | 73,004 | 399,466 | 398,435 | 422,901 | 10,368 | 14,383 | 12,949 | |||||||||||||||||||||||||||
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Cash and cash equivalents at end of year | 49,25 | 73,004 | 43,026 | 398,435 | 422,901 | 264,352 | 14,383 | 12,949 | 25,492 | |||||||||||||||||||||||||||
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Viva GYM S.A. and subsidiaries | GyM S.A. and subsidiaries | Norvial S.A. | ||||||||||||||||||||||||||||||||||
For the year ended | For the year ended | For the year ended | ||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
Cash flows from operating activities (used), net | 9,916 | (68,360 | ) | 44,910 | 147,249 | (303,970 | ) | 224,428 | (30,858 | ) | (111,423 | ) | (42,051 | ) | ||||||||||||||||||||||
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Cash flows from investing activities (used), net | (39,351 | ) | 23,865 | ( 546 | ) | (208,314 | ) | 11,884 | (29,853 | ) | ( 32 | ) | — | — | ||||||||||||||||||||||
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Cash flows from financing activities (used), net | 40,677 | 64,686 | (59,931 | ) | 79,432 | 176,987 | (283,296 | ) | 17,262 | 144,199 | 99,193 | |||||||||||||||||||||||||
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Increase (decrease) in cash and cash equivalents, net | 11,242 | 20,191 | (15,567 | ) | 18,367 | (115,101 | ) | (88,721 | ) | (13,628 | ) | 32,776 | 57,142 | |||||||||||||||||||||||
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Cash and cash equivalents at the beginning of the year | 43,026 | 54,268 | 74,459 | 264,353 | 282,721 | 167,620 | 19,128 | 5,500 | 38,276 | |||||||||||||||||||||||||||
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Cash and cash equivalents at the end of the year | 54,268 | 74,459 | 58,892 | 282,720 | 167,620 | 78,899 | 5,500 | 38,276 | 95,418 | |||||||||||||||||||||||||||
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The information above is the amount before inter-company eliminations.
b) | Public services concessions |
The Group acts as concessionairean operator in various public servicesservice concessions. When applicable, revenue attributable to the construction or restoration of infrastructure has been accounted for by applying the models set forth in Note 2.5 (financial asset, intangible asset and bifurcated model)models).
Subsidiary Transportadora de Gas Natural Comprimido Andino S.A.C. (hereinafter TGNCA) held a concession to design, finance, construct, maintain and operate the compressed natural gas supply system to be implemented in certain cities. The concessions of the Group are described as follows:
Financial model:
Under the Survial concession, the Company operates and maintains a 750 km road from the San Juan de Marcona port to Urcos, Peru, which is connected to an interoceanic road that runs up to the Peruvian-Brazilian border. The road has five toll stations and three weigh stations. The concessionConcession was awarded to Survial in 2007 for a 25-year term. The Company owns 99.9% of Survial.
The obligationsrecognized under the concession include the construction of the road, which was completed in 2010. The estimated investment is US$98.9 million. The concession maintains payback mechanisms through the annual payment for maintenance and operation of the road, hereinafter PAMO, which is paid to Survial by the Ministry of Transport and Communications of Peru, according to the terms established in the contract.
F-38
(All amounts are expressed in thousands of S/. unless otherwise stated)
PAMO revenues are generated by two types of periodic and routine maintenance. The 46.88% of the total invoiced is periodic maintenance, and the difference is for routine maintenance. The revenue in this concession does not depend on traffic volume.
This concession is recognized as a financial asset because Survial has the unconditional contractual right to receive cash or other financial asset and such operation is secured contractually by the Peruvian Government. Survial receives specific and determinable amounts of cash and measures the financial asset at amortized cost, taking into considerationmodel. In September 2016 the effective interest rate method as prescribed in IAS 39, ‘Financial Instruments: Recognition and Measurement’.
Under the Canchaque concession, the Company operates and periodically maintains a 78 km road from the towns of Buenos Aires to Canchaque, in Peru. The road has one toll station. The concessionConcession Agreement was awarded to Canchaque in 2006 for a 15-year term with the option to extend the term. The Company owns 99.97% of Canchaque. The obligations under the concession include the construction of the road 1B from Buenos Aires to Canchaque in Piura, which was completed in 2009; the total investment amounted to US$26.1 million. Revenue from this concession consists of an annual fee paid by the Peruvian Ministry of Transport and Communications in consideration for the operation and maintenance of the road, which can vary dependingterminated on the amountgrounds of road maintenancecounterparty’s failure to meet the required dueconditions (availability of assets and resources). As a result, TGNCA recognized an impairment loss of receivables amounting to road wear and tear. The revenue received by the Company in this concession does not depend on traffic volume. These revenues are guaranteed by a minimum amount of US$310,648.
The concession maintains payback mechanisms through the PAMO,S/6.3 million, which is paid to Canchaque by the Ministry of Transport and Communications of Peru, according to the terms establishedincluded in the contract.
PAMO revenues are generated by two typesincome statement within “cost of periodic and routine maintenance.services provided” (Note 27). The 20.30% of the total invoiced is periodic maintenance, and the difference isbalance remaining relates to trade accounts receivable for routine maintenance. The revenue in this concession does not depend on traffic volume.
This concession grantedS/38.7 million, to the Company comprises public services and investments qualifying as a financial asset as the Company has the unconditional right to receive cash or other financial assets from the collection of annual payments for maintenance and operation. Canchaque recognizes such financial asset at amortized cost, taking into consideration effective interest rate method, as prescribed in IAS 39 Financial instruments: recognition and measurement.
In 2011, the Company was awarded a 25-year concession for the construction, operation and maintenance of La Chira waste water treatment plant in the south of Lima. The project is aimed at addressing Lima’s environmental problems caused by sewage discharged directly into the sea. The Company holds a 50% share in this project and the Company’s partner Acciona Agua holds the remaining 50%. La Chira’s annual revenues under the concession are in the form of a fee paid by Sedapal S.A., the public utility company responsible for the supervision of the water service in Lima. The total investment amounted to S/.450.5 million.
The concession maintains payback mechanisms through certificates of progress of the works, hereinafter CAOS, because the concession is under construction.
At December 31, 2013, the concession has issued two CAOS by advancing work executed, corresponding to 38.54 % of the total of the project. It is estimated that a total of seven CAOS will be issued.
F-39
(All amounts are expressed in thousands of S/. unless otherwise stated)
This concession granted to the Company comprises public services and investments qualifying as a financial asset as the Company has the unconditional right to receive cash or other financial assets through collections of revenue charged for maintaining the plant.
The concession is recognized as a financial asset at its amortized cost, taking into consideration the effective interest rate method calculation set forth in IAS 39, ‘Financial Instruments: Recognition and Measurement’.
In 2011, the Company was awarded a 30-year concession for the operation of Line One of the Lima Metro, Peru’s only urban railway system. The concession was awarded to the subsidiary GyM Ferrovías, in which the Company holds a 75% ownership interest, with the other 25% being held by Ferrovías S.A.C. The obligations under the contract include (i) the operation and maintenance of the five existing trains provided by the government; (ii) the acquisition of 19 new trains on behalf of the Peruvian government, which will be the legal owner of such trains; (iii) the operation and maintenance of the 19 additional trains; and (iv) the design and construction of the railway maintenance and repair yard. The total investment amounted to US$549.8 million. Revenue from this concession consists of a quarterly fee that is received from the Ministry of TransportEnergy and Communications based on the kilometers travelled per train. The revenue does not depend on passenger traffic volume.
The concession given to the Company comprises public services and investments qualifyingMines. This balance was classified as current assets because Management expects a financial asset as the Company has the unconditional right to receive cash or other financial asset for the collectionfavorable outcome of the secured kilometers.award.
The concession is recognized as a financial asset at its amortized cost, taking into consideration the effective interest rate calculation set forth in IAS 39, ‘Financial Instruments: Recognition and Measurement’.
In July 2013all the Group through its subsidiary GMP S.A.concessions’, obtained from the Local Government the concession to design, finance, build, maintain and operate the system supply of compressed natural gas in Jauja, Huancayo, Huancavelica, Huamanga, Huanta, Andahuaulas, Abancay, Cusco, Juliaca and Puno. The concession term is 10 years with an option to extend for 20 more years. According to the contract the infrastructure will reverseis returned to the grantor at the end of the concession term.agreement. The estimated initial investment duringconcessions held by the first nine months will resultGroup are as follows at December 31, 2016:
(All amounts expressed in US$14.1 million. In the sixth year the amount will be about US$1.76 million.thousands of S/ unless otherwise stated)
This concession granted to the Company comprises public services and investments qualifying as financial assets, the Company has the unconditional right to receive cash or other financial assets due as the granted income which is higher than the investment costs.
Name of concession | Description | Estimated investment | Consideration | Ordinary shares held | Concession termination | Accounting model | ||||||||||||
Survial S.A. | This company operates and maintains a 750 km road from the San Juan de Marcona port to Urcos, Peru, which is connected to an interoceanic road. The road has five toll stations and three weigh stations. | US$98.9 million | Transaction secured by the Peruvian Government involving from annual payments for the maintenance and operation of the road, which is in charge of the Peruvian Ministry of Transport and Communications (MTC). | 99.9 | % | 2032 | Financial asset | |||||||||||
Canchaque S.A.C. | This company operates and periodically maintains a 78 km road from the towns of Buenos Aires to Canchaque, in Peru The road has one toll station. | US$29 million | Transaction secured by the Peruvian Government regardless the traffic volume. Revenue is secured by an annual minimum amount of US$0.3 million. | 99.96 | % | 2025 | Financial asset | |||||||||||
La Chira S.A. | Designing, financing, constructing, operating and maintaining project called “Planta de Tratamiento de Aguas Residuales y Emisario Submarino La Chira”. The Project will treat approximately 25% of waste waters in Lima. | S/450 million | Transaction secured by the Peruvian Government consisting of anual payment settled by Sedapal S.A. | 50.00 | % | 2036 | Financial asset | |||||||||||
GyM Ferrovías S.A. | Concession for the operation of Line 1 of the Lima Metro, Peru’s only urban railway system in Lima city, which includes (i) operation and maintenance of the five existing trains, (ii) operation and maintenance and the acquisition of 19 trains on behalf of the Peruvian government and (iii) design and construction of the repair yard and maintenance of railway. | S/548.8 million | Transaction secured by the Peruvian Government involving a quarterly payment received from MTC based on km travelled per train. | 75.00 | % | 2041 | Financial asset |
(All amounts expressed in thousands of S/ unless otherwise stated)
The concession is recognized as a financial asset at its amortized cost, taking into consideration the effective interest rate method set forth
Name of concession | Description | Estimated investment | Consideration | Ordinary shares held | Concession termination | Accounting model | ||||||||||||||
Norvial S.A. | The Company operates and maintains part of the only highway that connects Lima to the northwest of Peru. This 183 km road known as Red Vial 5 runs from the cities of Ancón to Pativilca and has three toll stations. | US$ | 152 million | From users (self-financed concession; revenue is derived from collection of tolls). | 67.00 | % | 2028 | Intangible | ||||||||||||
Vía Expresa Sur S.A. | The Company obtained the concession for designing, financing, building, operating and maintaining the infrastructure associated with the Vía Expresa Sur Project. This project involves the second stage expansion of the Via Expresa—Paseo de la República,between Av. República de Panamá and and Panamericana highway. | US$ | 196.8 million | Contract give the right of collection from users; however the Peruvian government shall pay the difference when the operating revenue obtained is below US$18 million during the first two years and below US$19.7 million from the third year to the fifteenth year of the effective period of the financing, with a ceiling of US$10 million. In June 2017, the contract was suspended temporarily for one year by agreement between Concessionaire and grantor. | 99.98 | % | 2053 | Bifurcated | ||||||||||||
Recaudo Trujillo S.A.C. | Design, implementation, operation, technological maintenance and renewal (estimate) of the single system of electronic collection. Design, implementation, operation and maintenance of the Clearing house Implementation of the Fleet Control Center, as well as training to personnel. | US$ | 40.2 million | Economic consideration resulting from applying the “price for validation” considering daily validations input on the system to be managed through a trust. | 95.00 | % | 2036 | Intangible |
(All amounts expressed in IAS 39, ‘Financial Instruments: Recognition and Measurement’.thousands of S/ unless otherwise stated)
Intangible model:
UnderAt December 31, 2016, the Norvial concession,Group is a partner to 69 Joint Operations with third parties (65 at December 31, 2015). The table below lists the Company operates and maintains part of the only highway that connects Lima to the northwest of Peru. This 183-km road known as Red Vial 5, runs from the cities of Ancón to Pativilca and has three toll stations. The concession was awarded to Norvial inGroup’s major Joint Operations.
Percentage of interest | ||||||||
Joint operations | 2015 | 2016 | ||||||
Graña y Montero S.A.A. | ||||||||
- Concesionaria la Chira S.A. | 50.00 | % | 50.00 | % | ||||
GyM S.A. | ||||||||
- Consorcio Constructor Alto Cayma | 50.00 | % | 50.00 | % | ||||
- Consorcio Rio Pallca – Huanza | 40.00 | % | 40.00 | % | ||||
- Consorcio Alto Cayma | 49.00 | % | 49.00 | % | ||||
- Consorcio Vial Ayacucho | 50.00 | % | — | |||||
- Consorcio Lima Actividades Comerciales | 50.00 | % | 50.00 | % | ||||
- Consorcio GyM – COSAPI | 50.00 | % | 50.00 | % | ||||
- Consorcio Atocongo | 40.00 | % | 40.00 | % | ||||
- Consorcio Norte Pachacutec | 49.00 | % | 49.00 | % | ||||
- Consorcio La Chira | 50.00 | % | 50.00 | % | ||||
- Consorcio Río Urubamba | 50.00 | % | 50.00 | % | ||||
- Consorcio Vial Quinua | 46.00 | % | 46.00 | % | ||||
- Consorcio Rio Mantaro | 50.00 | % | 50.00 | % | ||||
- Consorcio GyM – CONCIVILES | 66.70 | % | 66.70 | % | ||||
- Consorcio Toromocho | 55.00 | % | 55.00 | % | ||||
- Consorcio Construcciones y Montajes CCN | 25.00 | % | 25.00 | % | ||||
- Consorcio HV GyM | 50.00 | % | 50.00 | % | ||||
- Consorcio Stracon Motta Engil JV | 50.00 | % | 50.00 | % | ||||
- Consorcio Huacho Pativilca | 67.00 | % | 67.00 | % | ||||
- Consorcio Constructor Chavimochic | 26.50 | % | 26.50 | % | ||||
- Consorcio Constructor Ductos del Sur | 29.00 | % | 29.00 | % | ||||
- Consorcio Italo Peruano | 48.00 | % | 48.00 | % | ||||
- Consorcio Incolur | 50.00 | % | 50.00 | % | ||||
- Consorcio Menegua | 50.00 | % | 50.00 | % | ||||
- Consorcio Energía y Vapor | 50.00 | % | 50.00 | % | ||||
- Consorcio Ermitaño | — | 50.00 | % | |||||
- Consorcio para la Atención y Mantenimiento de Ductos | — | 50.00 | % | |||||
GMP S.A. | ||||||||
- Consorcio Terminales | 50.00 | % | 50.00 | % | ||||
- Terminales del Perú | 50.00 | % | 50.00 | % | ||||
GMD S.A. | ||||||||
- Consorcio Cosapi-Data – GMD S.A. | 70.00 | % | 70.00 | % | ||||
- Consorcio The Louis Berger Group Inc. - GMD | 66.45 | % | 66.45 | % | ||||
- Consorcio Procesos digitales | 43.65 | % | 43.65 | % | ||||
- Consorcio GMD S.A. – Indra S.A. | 50.00 | % | 50.00 | % | ||||
- Consorcio Fábrica de Software | 50.00 | % | 50.00 | % | ||||
- Consorcio Gestión de Procesos Electorales (ONPE) | 50.00 | % | 50.00 | % | ||||
- Consorcio Lima Actividades Sur | 50.00 | % | 50.00 | % | ||||
- Consorcio Latino de Actividades Comerciales de Clientes Especiales | 50.00 | % | 50.00 | % | ||||
- Consorcio Latino de Actividades Comerciales | 75.00 | % | 75.00 | % | ||||
- Consorcio Gestión de Procesos Junta de Gobernadores | 45.00 | % | 45.00 | % | ||||
- Consorcio Soluciones Digitales | 38.00 | % | 38.00 | % | ||||
- Consorcio de Gestión de la Información | 56.00 | % | 56.00 | % | ||||
- Consorcio de la Disponibilidad PKI | — | 70.00 | % |
F-40
(All amounts are expressed in thousands of S/. unless otherwise stated)
2003 for a 25-year term. The Company owns 67% of Norvial. Norvial’s revenue derives from the collection of tolls. The toll fee is determined by the Peruvian Ministry of Transport and Communications and adjusted on a yearly basis in accordance with a contractual formula that takes into account the nuevo sol/U.S. dollar exchange rate and Peruvian and U.S. inflation. The Company is required to transfer 5.5% of monthly toll revenue to the Peruvian Ministry of Transport and Communications and pay a 1% regulatory fee to the Peruvian Supervisory Agency for Investment in Public Transportation Infrastructure. The obligations under the concession include expanding the already existing road by, among other things, adding two additional lanes. The first stage of construction was completed in 2008 and the second stage is expected to begin between 2014 and 2015. The total investment of the concession amounted to US$50 million in the first stage while the second stage will amount to US$102 million. When the construction of the second stage begins, the Company will also be required to pay a one-time estimated fee of approximately US$1.8 million to the Peruvian Supervisory Agency for Investment in Public Transportation Infrastructure.
The concession contract given to the Company comprises public services and investments and qualifies as an intangible asset because the concession agreement grants the right to charge a predefined and adjustable rate to the users. The cost of the intangible asset comprises the investment committed, executed or to be executed to the extent their amount and borrowing costs can be estimated reliably.
Bifurcated model:
On August 8, 2013, the Company obtained the concession for a 40-year term for designing, financing, building, operating and maintaining the infrastructure associated with the Vía Expresa Sur Project. This project involves the second stage expansion of the Via Expresa—Paseo de la República, between the República de Panamá Avenue and Panamericana highway.
The estimated investment in this concession is expected to be US$196.8 million. The contract gives the Company the right to charge users of the public service according to a pre-defined price list; however, the grantor (Government) has agreed to pay the difference if the revenues generated during the operation stage are lower than US$18 million in the first two years and US$19.7 million from the third year until the fifteenth year. Revenue for the construction activities and other initial activities are accounted for as a financial asset for the portion that the government guarantees to the Company, and as an intangible, for the unguaranteed investment.
As of December 31, 2013, the Group participated in 64 Joint Operations in association with third parties (55 as of December 31, 2012). The following table contains the principal Joint Operations in which the Group participated:
Percentage of interest | ||||||||
Joint Operations | 2012 | 2013 | ||||||
Graña y Montero S.A.A. | ||||||||
- Concesionaria la Chira S.A. (*) | 50.00 | % | 50.00 | % | ||||
GyM S.A. | ||||||||
- Consorcio Pasco | 99.00 | % | 99.00 | % | ||||
- Consorcio Constructor Alto Cayma | 50.00 | % | 50.00 | % | ||||
- Consorcio Rio Pallca – Huanza | 40.00 | % | 40.00 | % | ||||
- Consorcio Tren electrico | 33.00 | % | 33.00 | % |
F-41
(All amounts are expressed in thousands of S/. unless otherwise stated)
Percentage of interest | ||||||||
Joint Operations | 2012 | 2013 | ||||||
- Consorcio Alto Cayma | 49.00 | % | 49.00 | % | ||||
- Consorcio Vial Ayacucho | 50.00 | % | 50.00 | % | ||||
- Consorcio Lima Actividades Comerciales | 50.00 | % | 50.00 | % | ||||
- Consorcio GyM – COSAPI | 50.00 | % | 50.00 | % | ||||
- Consorcio Atocongo | 40.00 | % | 40.00 | % | ||||
- Consorcio Norte Pachacutec | 49.00 | % | 49.00 | % | ||||
- Consorcio La Chira | 50.00 | % | 50.00 | % | ||||
- Consorcio Río Urubamba | 60.00 | % | 60.00 | % | ||||
- Consorcio Vial Quinua | 46.00 | % | 46.00 | % | ||||
- Consorcio Rio Mantaro | 50.00 | % | 50.00 | % | ||||
- Consorcio GyM – CONCIVILES | 66.70 | % | 66.70 | % | ||||
- Consorcio Toromocho | 55.00 | % | 55.00 | % | ||||
- Consorcio Construcciones y Montajes CCN | 40.00 | % | 50.00 | % | ||||
- Consorcio CGB | 50.00 | % | 50.00 | % | ||||
- Consorcio HV GyM | 50.00 | % | — | |||||
- Consorcio Stracon Motta Engil JV | 50.00 | % | — | |||||
GMP S.A. | ||||||||
- Consorcio Terminales | 50.00 | % | 50.00 | % | ||||
CONCAR S.A. | ||||||||
- Consorcio Ancón-Pativilca | 50.10 | % | 50.10 | % | ||||
- Consorcio Peruano de Conservación | 50.00 | % | 50.00 | % | ||||
GMD S.A. | ||||||||
- Consorcio Cosapi-Data – GMD S.A. | 50.00 | % | 50.00 | % | ||||
- Consorcio TLBG | 66.45 | % | 66.45 | % | ||||
- Consorcio Procesos digitales | 43.65 | % | 43.65 | % | ||||
- Consorcio Indra | 50.00 | % | 50.00 | % | ||||
- Consorcio Fábrica de Software | 50.00 | % | 50.00 | % | ||||
- Consorcio Gestión de Procesos Electorales (ONPE) | 50.00 | % | 50.00 | % | ||||
Viva GyM S.A. | ||||||||
- Consorcio Cuartel San Martín | 50.00 | % | 50.00 | % | ||||
GMI S.A. | ||||||||
- Consorcio Norte Pachacútec | 1.00 | % | 1.00 | % | ||||
Cam Holding S.p.A. | ||||||||
- Consorcio Norte | 99.00 | % | 99.00 | % |
Percentage of interest | ||||||||
Joint operations | 2015 | 2016 | ||||||
CONCAR S.A. | ||||||||
- ConsorcioAncón-Pativilca | 67.00 | % | 67.00 | % | ||||
- Consorcio Peruano de Conservación | 50.00 | % | 50.00 | % | ||||
- Consorcio Manperan | 67.00 | % | 67.00 | % | ||||
- Consorcio Vial Sierra | — | 50.00 | % | |||||
Viva GyM S.A. | ||||||||
- Consorcio Panorama | — | 35.00 | % | |||||
Cam Holding S.p.A. | ||||||||
- Consorcio Mecam | 50.00 | % | 50.00 | % | ||||
- Consorcio Seringel | 50.00 | % | 50.00 | % |
All of the joint arrangements listed above operate in Lima or in other Peruvian cities.
F-42
(All amounts are expressed in thousands of S/. unless otherwise stated)
Peru, Chile and Colombia.
The table below provides a description of the mainmajor activities of thecarried out by these joint arrangements is as follows:operations:
Joint | Economic activity | |
Graña y Montero S.A.A. | Construction, operation and maintenance of La Chira waste water treatment plant | |
GyM S.A. | ||
| ||
GMP S.A. | Consorcio Terminales | |
CONCAR S.A. | Joint operations Concar provides rehabilitation service, routine and periodic maintenance of the | |
GMD S.A. | ||
Viva GyM S.A. | Construction of a | |
CAM Holding |
The Group’s consolidated financial statements do not include any other type of entities in addition to those mentioned above, such as trust funds or special purpose entities.
In August 2013, the Group through some of its subsidiaries, GyM Minería S.A., Ingeniería y Construcción Vial y Vives S.A. and GyM Chile S.p A., acquired control of DSD Construcciones y Montajes S.A. for a consideration amounting to US$37.2 million (equivalent to S/.103.9 million).
In 2012, the Group, through some of its subsidiaries acquired control of certain entities as follows:
In 2011, the Group acquired control of CAM Holding S.p.A. for a consideration of US$10.9 million (equivalent to S/.29 million).
The details of these transactions and their resulting accounting impact are disclosed in Note 31.
F-43
(All amounts are expressed in thousands of S/. unless otherwise stated)
SEGMENT REPORTING |
Operating segments are reported consistently with the internal reports that are reviewed by the Group’ chief decision-maker; that is, the Executive Committee, leadswhich is led by the Corporate General Manager, whoManager. This Committee is the chief operating decision maker, responsible for allocating resources and evaluating the performance of each operating segment.
The Group’s operating segments are assessed by the activityactivities of the following business units: (i) engineering and construction, (ii) infrastructure, (iii) real estate and (iv) technical services.
(All amounts expressed in thousands of S/ unless otherwise stated)
As set forth under IFRS 8, reportable segments by significancebased on the level of incomerevenue are: ‘engineering and construction’ and ‘technical services’. However, the Group has voluntarily decided to report on all its operating segments as detailed in this Note.
The revenues derived from foreign operations (Chile, Brazil, Colombia)Panama, Dominican Republic, Colombia, Bolivia, Ecuador and Guyana) comprise 13.72%25.4% of the Group’s total revenue reported in 2013 (17.21%2016 (27.1% in 20122015 and 14.93%19.9% in 2011)2014).
Inter-segmental sales transactionsSales between segments are carried out at arm’s length. Revenueslength, are no material, and are eliminated on consolidation. The revenue from external customers reported to the Corporate General Management areparties is measured in a manner consistent with that in the preparation basisincome statement. Sale of goods relate to the financial statements.real state segment. Revenue from services relate to all other segments.
Group sales and receivables are not concentrated in a few customers. There is no external customer that represents 10% or more of the Group’s revenue.
The following segments set forth the principal activities of each of the Group:
a) | Engineering and construction: This segment |
b) | Infrastructure: The Group has long-term concessions or similar contractual arrangements in Peru for three toll roads, the Lima Metro, a waste water treatment plant in Lima, |
c) | Real Estate: The Group develops and sells homes targeted to |
d) | Technical Services: The Group provides: (i) operation and maintenance services for infrastructure assets; (ii) information technology (IT) services, including IT outsourcing, systems integration, application |
e) | Parent Company Operation corresponds to the services which the Holding company provides, management, logistics and accounting services, among others. |
The Executive Committee uses a measurement of adjusted earnings before interest, tax, depreciation and amortization (EBITDA) to assess the services which the Holding company provides, managing, logistics and accounting services, among others,performance of operating segments.
Profit before income tax reconciles to the different related entities of the Group.EBITDA as follows:
2014 | 2015 | 2016 | ||||||||||
Profit (loss) before income tax | 507,428 | 154,616 | (563,404 | ) | ||||||||
Financial expense/income, net | 91,354 | 138,696 | 210,778 | |||||||||
Depreciation | 185,310 | 217,070 | 205,522 | |||||||||
Amortization | 74,730 | 89,355 | 82,743 | |||||||||
|
|
|
|
|
| |||||||
EBITDA | 858,822 | 599,737 | (64,361 | ) | ||||||||
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|
|
|
|
F-44
(All amounts are expressed in thousands of S/. unless otherwise stated)
BelowEBITDA for each segment is as follows:
2014 | 2015 | 2016 | ||||||||||
Engineering and construction | 459,487 | 220,137 | 106,106 | |||||||||
Infrastructure | 272,489 | 232,954 | 210,791 | |||||||||
Real state | 56,502 | 52,794 | 121,421 | |||||||||
Technical services | 63,469 | 113,276 | 117,490 | |||||||||
Parent company operations | 252,312 | (35,591 | ) | (1,026,394 | ) | |||||||
Eliminations intercompany | (245,437 | ) | 16,167 | 406,225 | ||||||||
|
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|
|
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| |||||||
EBITDA | 858,822 | 599,737 | (64,361 | ) | ||||||||
|
|
|
|
|
|
The “Backlog” refers to the expected future revenue under signed contracts and legally binding letters of intent. The breakdown by operating segments as of December 31, 2016, and the dates in which they are estimated to, is shown in the following table:
ANUAL BACKLOG | ||||||||||||||||
2016 | 2017 | 2018 | 2019+ | |||||||||||||
Engineering and Construction | 6,645,729 | 2,883,254 | 1,964,435 | 1,798,041 | ||||||||||||
Infrastructure | 2,403,023 | 678,165 | 792,616 | 932,242 | ||||||||||||
Real Estate | 322,062 | 296,077 | 21,616 | 4,368 | ||||||||||||
Technical Services | 2,882,175 | 1,281,772 | 806,966 | 793,437 | ||||||||||||
Eliminations intercompany | (318,790 | ) | (108,710 | ) | (106,097 | ) | (103,984 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
11,934,199 | 5,030,559 | 3,479,536 | 3,424,104 | |||||||||||||
|
|
|
|
|
|
|
|
(All amounts expressed in thousands of S/ unless otherwise stated)
The table below shows the Group’s financial statements of the Group according to itsby operating segments:
Operating segments financial position
Segment Reportingreporting
Engineering | Infrastructure | Parent | Engineering | Infrastructure | Parent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | and | Water | Technical | Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | construction | Energy | Toll roads | Mass transit | treatment | Real estate | services | Operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 423,332 | 30,650 | 90,644 | 28,312 | 68 | 73,004 | 85,287 | 48,491 | 326 | 780,114 | 172,116 | 42,638 | 58,640 | 111,454 | 9,094 | 74,459 | 60,193 | 25,408 | — | 554,002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts receivable | 181,107 | 26,922 | 18,282 | 20 | 43,692 | 19,336 | 166,895 | 61 | — | 456,315 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding work in progress | 417,073 | — | — | 15,029 | — | — | 81,427 | — | — | 513,529 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial asset at fair value through profit or loss | 3,153 | — | — | — | — | — | — | — | — | 3,153 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts receivables, net | 614,917 | 43,260 | 22,045 | 55,180 | — | 59,108 | 247,945 | — | — | 1,042,455 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unbilled work in progress, net | 1,260,541 | — | — | — | 17,686 | — | — | — | — | 1,278,227 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable from related parties | 67,913 | — | 300 | 159 | 134 | 4,867 | 52,243 | 304,812 | (380,667 | ) | 49,761 | 316,188 | 12,145 | 18,820 | 301 | — | 34,724 | 48,520 | 132,735 | (283,280 | ) | 280,153 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other accounts receivable | 317,501 | 16,783 | 17,970 | 6,326 | — | 13,479 | 40,444 | 34,705 | — | 447,208 | 595,255 | 25,857 | 5,699 | 25,668 | 10,250 | 20,535 | 102,204 | 35,249 | — | 820,717 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | 145,301 | 8,287 | — | 6,419 | — | 523,722 | 64,048 | 1,392 | (1,753 | ) | 747,416 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories, net | 159,557 | 10,025 | — | 13,678 | — | 920,092 | 61,734 | 389 | (6,321 | ) | 1,159,154 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | 5,882 | 1,309 | 583 | 7,220 | — | 1,589 | 5,149 | 1,107 | — | 22,839 | 12,899 | 2,207 | 1,401 | 10,787 | 458 | 349 | 11,402 | 519 | — | 40,022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-current assets classified as held for sale | 22,511 | — | — | — | — | — | — | — | — | 22,511 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Current assets | 1,558,109 | 83,951 | 127,779 | 63,485 | 43,894 | 635,997 | 495,493 | 390,568 | (382,094 | ) | 3,017,182 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total current assets | 3,157,137 | 136,132 | 106,605 | 217,068 | 37,488 | 1,109,267 | 531,998 | 194,300 | (289,601 | ) | 5,200,394 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Long-term trade account receivable | — | — | — | 305,887 | �� | — | — | — | — | — | 305,887 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term trade accounts receivable, net | — | — | — | 621,831 | — | — | — | — | — | 621,831 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term unbilled work in progress, net | — | 40,727 | 19,027 | — | — | — | — | — | — | 59,754 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term accounts receivable from related parties | — | — | 408 | — | — | — | 500 | 256,022 | (256,930 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | — | 3,692 | 15,584 | 2,112 | 998 | — | — | — | — | 22,386 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term accounts receivable | 17,261 | 14,696 | 13,833 | 11,206 | 3,720 | 6,803 | 24,274 | 1,696 | — | 93,489 | 534 | 14,214 | 30,473 | 2,198 | 1,589 | 14,726 | — | 2,195 | — | 65,929 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale financial asset | — | — | — | — | — | — | — | 5,005 | — | 5,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale financial assets | — | — | — | — | — | — | — | 120,134 | — | 120,134 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in associates and joint ventures | 113,601 | — | — | — | — | 17,151 | 2 | 801,824 | (895,132 | ) | 37,446 | 122,717 | 8,265 | — | — | — | 28,732 | 9,228 | 2,476,689 | (2,008,626 | ) | 637,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment property | — | — | — | — | — | 35,972 | — | — | — | 35,972 | — | — | — | — | — | 34,702 | — | — | — | 34,702 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, machinery and equipment | 554,456 | 205,853 | 2,034 | 3,365 | — | 4,470 | 109,259 | 76,317 | (2,223 | ) | 953,531 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment | 606,158 | 198,774 | 1,624 | 217 | — | 11,303 | 170,660 | 130,113 | (7,092 | ) | 1,111,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets | 172,495 | 95,283 | 146,186 | 7,830 | 2,406 | 772 | 24,461 | 14,855 | 16,110 | 480,398 | 288,416 | 148,972 | 364,819 | 311 | — | 1,043 | 37,564 | 23,561 | 13,600 | 878,286 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | — | — | — | — | — | 128 | — | — | — | 128 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred income tax asset | 14,751 | — | 6,184 | 8,287 | — | 6,110 | 34,190 | — | 1,556 | 71,078 | 100,544 | 1,325 | 3,003 | — | — | 1,171 | 39,825 | 656 | 1,321 | 147,845 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Non-current assets | 872,564 | 315,832 | 168,237 | 336,575 | 6,126 | 71,406 | 192,186 | 899,697 | (879,689 | ) | 1,982,934 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Totalnon-current assets | 1,118,369 | 415,969 | 434,938 | 626,669 | 2,587 | 91,677 | 257,777 | 3,009,370 | (2,257,727 | ) | 3,699,629 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total assets | 2,430,673 | 399,783 | 296,016 | 400,060 | 50,020 | 707,403 | 687,679 | 1,290,265 | (1,261,783 | ) | 5,000,116 | 4,275,506 | 552,101 | 541,543 | 843,747 | 40,075 | 1,200,944 | 789,775 | 3,203,670 | (2,547,328 | ) | 8,900,023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Liabilities - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | 119,960 | 16,216 | 14,226 | — | 8,271 | 43,216 | 96,015 | 154,915 | — | 452,819 | 652,974 | 101,096 | 55,428 | — | — | 224,380 | 91,366 | 102,776 | — | 1,228,020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bonds | — | — | 5,537 | 31,546 | — | — | — | — | — | 37,083 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts payable | 663,454 | 21,996 | 744 | 15,111 | 27 | 70,571 | 163,495 | 1,889 | — | 937,287 | 1,409,984 | 35,428 | 3,768 | 24,498 | 154 | 14,334 | 134,973 | 12,623 | — | 1,635,762 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable to related parties | 42,973 | 1,610 | 13,970 | 290,601 | 15,763 | 9,231 | 46,376 | 14,189 | (391,979 | ) | 42,734 | 118,383 | 3,990 | 40,578 | 9,962 | 10,560 | 58,790 | 39,476 | 79,709 | (283,616 | ) | 77,832 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current taxes | 110,515 | 4,506 | 1,977 | 873 | 167 | 8,614 | 28,187 | 3,995 | — | 158,834 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current income tax | 19,337 | — | 753 | — | 166 | 26 | 13,750 | 84 | — | 34,116 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other accounts payable | 650,079 | 10,640 | 68,658 | 223 | — | 131,967 | 144,373 | 9,189 | — | 1,015,129 | 645,648 | 20,340 | 2,841 | 1,682 | — | 257,616 | 125,020 | 12,853 | — | 1,066,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other provisions | — | 401 | — | — | — | — | 10,911 | — | — | 11,312 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions | — | 6,341 | — | — | — | — | 7,127 | — | — | 13,468 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Current liabilities | 1,586,981 | 55,369 | 99,575 | 306,808 | 24,228 | 263,599 | 489,357 | 184,177 | (391,979 | ) | 2,618,115 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total current liabilities | 2,846,326 | 167,195 | 108,905 | 67,688 | 10,880 | 555,146 | 411,712 | 208,045 | (283,616 | ) | 4,092,281 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Borrowings | 180,857 | 97,777 | 48,513 | — | — | 49,657 | 12,427 | 3,424 | — | 392,655 | 375,952 | 83,307 | — | — | — | 27,562 | 66,515 | — | — | 553,336 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term bonds | — | — | 180,686 | 576,322 | — | — | — | — | — | 757,008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term accounts payable | — | 14,640 | — | — | — | 12,858 | 24,681 | 597 | — | 52,776 | 176,644 | — | 493 | — | — | — | 68,045 | 1,214 | — | 246,396 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other provisions | 11,009 | 7,558 | — | — | — | — | 27,624 | — | — | 46,191 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term accounts payable to related parties | — | — | — | 94,172 | 24,035 | 120,083 | 38,332 | — | (256,486 | ) | 20,136 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions | 24,624 | 18,876 | — | — | — | — | 3,960 | — | — | 47,460 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | — | 5,999 | — | 12,697 | — | — | — | — | — | 18,696 | — | 2,331 | — | — | — | — | — | — | — | 2,331 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred income tax liability | 70,121 | 2,563 | 24 | — | 722 | 68 | 9,634 | 5,310 | — | 88,442 | 52,016 | 4,250 | 107 | 7,222 | 270 | 11,937 | 3,164 | 20,197 | — | 99,163 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total non-current liabilities | 261,987 | 128,537 | 48,537 | 12,697 | 722 | 62,583 | 74,366 | 9,331 | — | 598,760 | 629,236 | 108,764 | 181,286 | 677,716 | 24,305 | 159,582 | 180,016 | 21,411 | (256,486 | ) | 1,725,830 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total liabilities | 1,848,968 | 183,906 | 148,112 | 319,505 | 24,950 | 326,182 | 563,723 | 193,508 | (391,979 | ) | 3,216,875 | 3,475,562 | 275,959 | 290,191 | 745,404 | 35,185 | 714,728 | 591,728 | 229,456 | (540,102 | ) | 5,818,111 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity | 472,097 | 192,411 | 90,124 | 60,416 | 12,535 | 147,054 | 103,015 | 1,086,774 | (772,219 | ) | 1,392,207 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity attributable to controlling interest in the Company | 639,194 | 255,032 | 198,345 | 73,751 | 4,890 | 158,605 | 162,550 | 2,961,763 | (1,895,356 | ) | 2,558,774 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interest | 109,608 | 23,466 | 57,780 | 20,139 | 12,535 | 234,167 | 20,941 | 9,983 | (97,585 | ) | 391,034 | 160,750 | 21,110 | 53,007 | 24,582 | — | 327,611 | 35,497 | 12,451 | (111,870 | ) | 523,138 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total liabilities and equity | 2,430,673 | 399,783 | 296,016 | 400,060 | 50,020 | 707,403 | 687,679 | 1,290,265 | (1,261,783 | ) | 5,000,116 | 4,275,506 | 552,101 | 541,543 | 843,737 | 40,075 | 1,200,944 | 789,775 | 3,203,670 | (2,547,328 | ) | 8,900,023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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F-45
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segments financial position
Segment reporting
Engineering | Infrastructure | Parent | Engineering | Infrastructure | Parent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | and | Water | Technical | Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | construction | Energy | Toll roads | Mass transit | treatment | Real estate | services | Operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 265,788 | 17,764 | 80,785 | 23,318 | 445 | 43,026 | 46,469 | 481,820 | — | 959,415 | 93,543 | 35,396 | 110,007 | 139,414 | 3,229 | 58,892 | 53,521 | 112,398 | 550 | 606,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Accounts receivables | 265,544 | 29,527 | 12,347 | 4,090 | — | 17,938 | 192,382 | 44 | — | 521,872 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding work in progress | 734,976 | 6,966 | 2,433 | 31,187 | 37,489 | — | 158,692 | — | — | 971,743 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial asset at fair value through profit or loss | 352 | — | — | — | — | — | — | — | — | 352 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts receivables, net | 334,426 | 84,996 | 23,579 | 56,665 | 256 | 83,704 | 449,848 | — | (2,204 | ) | 1,031,270 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unbilled work in progress, net | 648,851 | — | — | 32,078 | — | — | — | — | — | 680,929 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable from related parties | 107,732 | 4,083 | 18,660 | 163 | — | 561 | 53,845 | 733,645 | (834,839 | ) | 83,850 | 327,385 | 3,255 | 19,684 | 392 | 12,379 | 7,284 | 48,691 | 50,582 | (287,988 | ) | 181,664 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other accounts receivable | 360,939 | 26,840 | 11,180 | 34,263 | 4,557 | 17,939 | 65,794 | 33,469 | (1,763 | ) | 553,218 | 398,666 | 58,235 | 6,189 | 25,895 | 4,841 | 20,198 | 93,359 | 42,133 | — | 649,516 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | 90,671 | 7,741 | — | 11,927 | — | 590,567 | 63,912 | 487 | (2,508 | ) | 762,797 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories, net | 76,058 | 12,561 | — | 16,862 | — | 946,657 | 65,270 | 387 | (13,502 | ) | 1,104,293 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | 7,440 | 1,318 | 5,442 | 4,394 | 3 | 2,596 | 4,130 | 363 | — | 25,686 | 9,203 | 2,614 | 1,428 | 17,265 | 167 | 329 | 19,988 | 307 | — | 51,301 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-current assets classified as held for sale | 21,473 | — | — | — | — | — | — | — | — | 21,473 | 22,385 | — | — | — | — | — | — | — | — | 22,385 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Current assets | 1,854,563 | 94,239 | 130,847 | 109,342 | 42,494 | 672,627 | 585,224 | 1,249,828 | (839,110 | ) | 3,900,054 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total current assets | 1,910,869 | 197,057 | 160,887 | 288,571 | 20,872 | 1,117,064 | 730,677 | 205,807 | (303,144 | ) | 4,328,660 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Long-term trade account receivable | — | — | — | 591,917 | — | — | — | — | — | 591,917 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term trade accounts receivable, net | 149 | — | — | 629,310 | — | — | 38,060 | — | — | 667,519 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term unbilled work in progress, net | 171,752 | — | 24,165 | — | — | — | — | — | 1,669 | 197,586 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term accounts receivable from related parties | — | — | 408 | — | — | — | 492 | 700,614 | (170,130 | ) | 531,384 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | — | — | 20,554 | 2,029 | 943 | — | — | — | — | 23,526 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term accounts receivable | — | — | 10,081 | — | 1,858 | 11,811 | 12,301 | 2,100 | — | 38,151 | 42,511 | 29,533 | 22,924 | 225,565 | 7,347 | 17,887 | 1,077 | 11,108 | — | 357,952 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term accounts receivable from related parties | — | — | — | — | — | — | — | 57,501 | (57,501 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale financial asset | — | 1,058 | — | — | — | — | 2 | 88,333 | (1,060 | ) | 88,333 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in associates and joint ventures | 153,556 | 7,287 | — | — | — | 16,297 | 10,454 | 837,889 | (937,516 | ) | 87,967 | 116,512 | 8,516 | — | — | — | 31,768 | 9,589 | 2,358,917 | (2,135,543 | ) | 389,758 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment property | — | — | — | — | — | 36,945 | — | — | — | 36,945 | — | — | — | — | — | 49,357 | — | — | — | 49,357 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment | 533,757 | 190,844 | 3,919 | 6,724 | — | 5,636 | 114,081 | 103,840 | (6,205 | ) | 952,596 | 592,191 | 176,486 | 1,243 | 193 | 21 | 13,008 | 217,727 | 130,421 | (17,691 | ) | 1,113,599 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets | 175,275 | 101,978 | 145,711 | 6,450 | 1,151 | 957 | 18,883 | 15,282 | 15,705 | ) | 481,392 | 246,715 | 139,353 | 456,000 | 269 | — | 950 | 79,850 | 22,793 | 14,356 | 960,286 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred income tax asset | 68,699 | 644 | 4,258 | 8,765 | — | 4,860 | 42,119 | 1,264 | 4,912 | ) | 135,521 | 158,168 | 4,983 | 1,839 | — | — | 623 | 64,408 | 189,230 | 7,757 | 427,008 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Non-current assets | 931,287 | 301,811 | 163,969 | 613,856 | 3,009 | 76,506 | 197,840 | 1,106,209 | (981,665 | ) | 2,412,822 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Totalnon-current assets | 1,327,998 | 358,871 | 527,133 | 857,366 | 8,311 | 113,593 | 411,203 | 3,413,083 | (2,299,582 | ) | 4,717,976 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total assets | 2,785,850 | 396,050 | 294,816 | 723,198 | 45,503 | 749,133 | 783,064 | 2,356,037 | (1,820,775 | ) | 6,312,876 | 3,238,867 | 555,928 | 688,020 | 1,145,937 | 29,183 | 1,230,657 | 1,141,880 | 3,618,890 | (2,602,726 | ) | 9,046,636 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Liabilities - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | 195,083 | 33,847 | 46,007 | — | 5,869 | 77,854 | 126,872 | 587 | — | 486,119 | 582,260 | 82,063 | — | — | — | 206,456 | 158,151 | 932,113 | — | 1,961,043 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bonds | — | — | 25,540 | 20,551 | — | — | — | — | — | 46,091 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts payable | 751,097 | 19,950 | 3,353 | 9,912 | 280 | 42,484 | 160,104 | 4,217 | — | 991,397 | 876,849 | 59,830 | 2,310 | 23,882 | 599 | 30,617 | 276,766 | 6,704 | (940 | ) | 1,276,617 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable to related parties | 43,373 | 877 | 25,572 | 642,510 | 24,058 | 21,493 | 77,613 | 24,928 | (834,839 | ) | 25,585 | 119,989 | 3,902 | 27,757 | 33,009 | 237 | 66,190 | 44,211 | 67,685 | (282,763 | ) | 80,217 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current taxes | 117,088 | 3,477 | 2,515 | 81 | 366 | 3,161 | 30,498 | 2,049 | — | 159,235 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current income tax | 30,576 | 3,631 | 44 | — | 1,064 | 17,944 | 8,901 | — | — | 62,160 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other accounts payable | 526,994 | 10,882 | 42,891 | 879 | — | 72,617 | 79,050 | 11,781 | — | 745,094 | 485,247 | 11,711 | 10,512 | 14,622 | 27 | 194,441 | 190,303 | 189,444 | — | 1,096,307 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other provisions | — | 4,207 | 3,846 | — | — | — | 842 | — | — | 8,895 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions | 6,615 | 6,441 | — | — | — | 131 | 1,344 | — | — | 14,531 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Current liabilities | 1,633,635 | 73,240 | 124,184 | 653,382 | 30,573 | 217,609 | 474,979 | 43,562 | (834,839 | ) | 2,416,325 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total current liabilities | 2,101,536 | 167,578 | 66,163 | 92,064 | 1,927 | 515,779 | 679,676 | 1,195,946 | (283,703 | ) | 4,536,966 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Borrowings | 127,067 | 86,334 | 9,780 | — | — | 52,318 | 31,367 | 2,837 | — | 309,703 | 246,315 | 80,488 | — | — | — | 16,541 | 76,051 | — | — | 419,395 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term trade accounts payable | — | — | — | 2,157 | — | — | — | — | — | 2,157 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable to related parties | — | — | — | — | — | 28,500 | 29,001 | — | (57,501 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term bonds | — | — | 338,143 | 583,480 | — | — | — | — | — | 921,623 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term accounts payable | 124,344 | — | 462 | — | — | 9,723 | 69,957 | 910 | — | 205,396 | 147,839 | — | 493 | 246,522 | — | 32,000 | 83,516 | 2,433 | — | 512,803 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other provisions | 11,801 | 4,668 | — | — | — | — | 23,918 | — | — | 40,387 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term accounts payable to related parties | 41,672 | — | — | 87,200 | 23,445 | 40,074 | 42,667 | 395 | (170,133 | ) | 65,320 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions | 7,670 | 17,115 | — | — | — | — | 1,757 | — | — | 26,542 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | — | 3,563 | — | 201 | — | 147 | — | — | — | 3,911 | — | 1,081 | — | — | — | — | — | — | — | 1,081 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred income tax liability | 118,970 | 453 | 166 | — | 340 | 7,074 | 5,864 | 3,599 | 1,691 | 138,157 | 28,278 | 3,546 | 1,518 | 14,482 | 283 | 15,564 | 9,498 | — | — | 73,169 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total non-current liabilities | 382,182 | 95,018 | 10,408 | 2,358 | 340 | 97,762 | 160,107 | 7,346 | (55,810 | ) | 699,711 | 471,774 | 102,230 | 340,154 | 931,684 | 23,728 | 104,179 | 213,489 | 2,828 | (170,133 | ) | 2,019,933 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total liabilities | 2,015,817 | 168,258 | 134,592 | 655,740 | 30,913 | 315,371 | 635,086 | 50,908 | (890,649 | ) | 3,116,036 | 2,573,310 | 269,808 | 406,317 | 1,023,748 | 25,655 | 619,958 | 893,165 | 1,198,774 | (453,836 | ) | 6,556,899 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity | 623,246 | 211,431 | 120,407 | 50,594 | 14,590 | 152,713 | 125,736 | 2,295,245 | (828,183 | ) | 2,765,779 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity attributable to controlling interest in the Company | 551,652 | 265,241 | 220,337 | 91,643 | 3,528 | 234,449 | 210,542 | 2,406,573 | (2,003,541 | ) | 1,980,424 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interest | 146,787 | 16,361 | 39,817 | 16,864 | — | 281,049 | 22,242 | 9,884 | (101,943 | ) | 431,061 | 113,905 | 20,879 | 61,366 | 30,546 | — | 376,250 | 38,173 | 13,543 | (145,349 | ) | 509,313 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total liabilities and equity | 2,785,850 | 396,050 | 294,816 | 723,198 | 45,503 | 749,133 | 783,064 | 2,356,037 | (1,820,775 | ) | 6,312,876 | 3,238,867 | 555,928 | 688,020 | 1,145,937 | 29,183 | 1,230,657 | 1,141,880 | 3,618,890 | (2,602,726 | ) | 9,046,636 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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F-46
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segmentssegment performance
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2011 - | ||||||||||||||||||||||||||||||||||||||||
Revenues | 2,784,185 | 289,041 | 115,189 | — | — | 152,266 | 976,956 | 39,840 | (116,211 | ) | 4,241,266 | |||||||||||||||||||||||||||||
Gross profit | 329,276 | 115,950 | 40,134 | (9,888 | ) | — | 45,334 | 109,671 | 1,995 | (723 | ) | 631,749 | ||||||||||||||||||||||||||||
Administrative expenses | (104,358 | ) | (13,065 | ) | (7,086 | ) | (5,226 | ) | (269 | ) | (10,093 | ) | (72,061 | ) | (5,555 | ) | 18,131 | (199,582 | ) | |||||||||||||||||||||
Other income and expenses | 4,762 | (318 | ) | 88 | — | — | (357 | ) | 6,240 | (11,056 | ) | 4,971 | 4,330 | |||||||||||||||||||||||||||
Profit from the sale of investments | — | — | — | — | — | — | — | 4,769 | — | 4,769 | ||||||||||||||||||||||||||||||
Other (losses) gains, net | (2,165 | ) | (2,054 | ) | — | — | — | 22 | 406 | 946 | — | (2,845 | ) | |||||||||||||||||||||||||||
Gain from business combination | — | — | — | — | — | — | 45,152 | — | — | 45,152 | ||||||||||||||||||||||||||||||
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Profit before interests and taxes | 227,515 | 100,513 | 33,136 | (15,114 | ) | (269 | ) | 34,906 | 89,408 | (8,901 | ) | 22,379 | 483,573 | |||||||||||||||||||||||||||
Financial expenses | (105,906 | ) | (14,608 | ) | (21,043 | ) | (5,819 | ) | (15 | ) | (7,718 | ) | (25,523 | ) | (16,266 | ) | 8,442 | (188,456 | ) | |||||||||||||||||||||
Financial income | 111,180 | 12,714 | 15,108 | 7,704 | 5 | 7,175 | 17,014 | 19,847 | (8,442 | ) | 182,305 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method | 5,100 | 223 | — | — | — | — | — | 133,291 | (138,391 | ) | 223 | |||||||||||||||||||||||||||||
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Profit before income tax | 237,889 | 98,842 | 27,201 | (13,229 | ) | (279 | ) | 34,363 | 80,899 | 127,971 | (116,012 | ) | 477,645 | |||||||||||||||||||||||||||
Income tax | (71,514 | ) | (29,730 | ) | (5,822 | ) | 4,703 | 83 | (10,232 | ) | (19,812 | ) | (3,990 | ) | (5,133 | ) | (141,447 | ) | ||||||||||||||||||||||
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Profit for the year | 166,375 | 69,112 | 21,379 | (8,526 | ) | (196 | ) | 24,131 | 61,087 | 123,981 | (121,145 | ) | 336,198 | |||||||||||||||||||||||||||
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Profit attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 153,125 | 64,726 | 9,944 | (6,394 | ) | (98 | ) | 6,079 | 53,901 | 124,032 | (116,239 | ) | 289,076 | |||||||||||||||||||||||||||
Non-controlling interest | 13,250 | 4,386 | 11,435 | (2,132 | ) | (98 | ) | 18,052 | 7,186 | (51 | ) | (4,906 | ) | 47,122 | ||||||||||||||||||||||||||
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Profit for the year | 166,375 | 69,112 | 21,379 | (8,526 | ) | (196 | ) | 24,131 | 61,087 | 123,981 | (121,145 | ) | 336,198 | |||||||||||||||||||||||||||
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Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2014 - | ||||||||||||||||||||||||||||||||||||||||
Revenue | 5,035,674 | 350,339 | 338,153 | 166,951 | 29,323 | 224,560 | 1,208,168 | 53,241 | (397,729 | ) | 7,008,680 | |||||||||||||||||||||||||||||
Gross profit (loss) | 535,360 | 124,455 | 76,697 | 42,109 | 2,307 | 62,413 | 142,342 | (7,574 | ) | (26,541 | ) | 951,568 | ||||||||||||||||||||||||||||
Administrative expenses | (258,554 | ) | (17,256 | ) | (8,035 | ) | (14,714 | ) | (317 | ) | (21,058 | ) | (122,506 | ) | (35,444 | ) | 56,517 | (421,367 | ) | |||||||||||||||||||||
Other income and expenses,net | (9,796 | ) | (3,359 | ) | 33 | 18 | — | (852 | ) | 5,856 | 22,063 | 1,173 | 15,136 | |||||||||||||||||||||||||||
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Operating profit (loss) | ||||||||||||||||||||||||||||||||||||||||
Operating profit (loss) | 267,010 | 103,840 | 68,695 | 27,413 | 1,990 | 40,503 | 25,692 | (20,955 | ) | 31,149 | 545,337 | |||||||||||||||||||||||||||||
Financial expenses | (69,046 | ) | (11,564 | ) | (11,321 | ) | (5,245 | ) | (55 | ) | (14,807 | ) | (27,393 | ) | (1,725 | ) | 38,340 | (102,816 | ) | |||||||||||||||||||||
Financial income | 6,623 | 120 | 1,819 | 727 | 16 | 93 | 1,821 | 59,893 | (59,650 | ) | 11,462 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | 48,242 | 29 | — | — | — | 12,178 | 590 | 270,045 | (277,639 | ) | 53,445 | |||||||||||||||||||||||||||||
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Profit (loss) before income tax | 252,829 | 92,425 | 59,193 | 22,895 | 1,951 | 37,967 | 710 | 307,258 | (267,800 | ) | 507,428 | |||||||||||||||||||||||||||||
Income tax | (59,252 | ) | (29,768 | ) | (16,158 | ) | (10,842 | ) | (588 | ) | (11,452 | ) | (5,788 | ) | (12,582 | ) | 234 | (146,196 | ) | |||||||||||||||||||||
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Profit (loss) for the year | 193,577 | 62,657 | 43,035 | 12,053 | 1,363 | 26,515 | (5,078 | ) | 294,676 | (267,566 | ) | 361,232 | ||||||||||||||||||||||||||||
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Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 164,095 | 59,010 | 32,774 | 9,040 | 1,363 | 9,527 | (5,342 | ) | 294,948 | (265,672 | ) | 299,743 | ||||||||||||||||||||||||||||
Non-controlling interest | 29,482 | 3,647 | 10,261 | 3,013 | — | 16,988 | 264 | (272 | ) | (1,894 | ) | 61,489 | ||||||||||||||||||||||||||||
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193,577 | 62,657 | 43,035 | 12,053 | 1,363 | 26,515 | (5,078 | ) | 294,676 | (267,566 | ) | 361,232 | |||||||||||||||||||||||||||||
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F-47
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segmentssegment performance
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2012 - | ||||||||||||||||||||||||||||||||||||||||
Revenues | 3,524,585 | 287,040 | 123,345 | 73,067 | 41,007 | 240,110 | 1,083,323 | 44,654 | (185,246 | ) | 5,231,885 | |||||||||||||||||||||||||||||
Gross profit | 408,021 | 110,847 | 53,341 | (2,712 | ) | 11,155 | 86,706 | 103,935 | (26 | ) | (59,201 | ) | 712,066 | |||||||||||||||||||||||||||
Administrative expenses | (159,845 | ) | (14,739 | ) | (6,361 | ) | (7,926 | ) | (1,485 | ) | (17,409 | ) | (105,363 | ) | (3,971 | ) | 59,919 | (257,180 | ) | |||||||||||||||||||||
Other income and expenses | (1,928 | ) | (927 | ) | 61 | 21 | — | (1,711 | ) | 73,585 | (8,426 | ) | (1,583 | ) | 75,944 | |||||||||||||||||||||||||
Other (losses) gains, net | 1,326 | (1,603 | ) | — | (48 | ) | — | — | — | — | — | (325 | ) | |||||||||||||||||||||||||||
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Profit before interests and taxes | 247,574 | 93,578 | 47,041 | (10,665 | ) | 9,670 | 67,586 | 72,157 | 4,429 | (865 | ) | 530,505 | ||||||||||||||||||||||||||||
Financial expenses | (179,089 | ) | (25,041 | ) | (16,517 | ) | (27,975 | ) | (6,560 | ) | (14,469 | ) | (29,093 | ) | (17,009 | ) | 5,081 | (310,672 | ) | |||||||||||||||||||||
Financial income | 198,755 | 23,277 | 11,354 | 24,032 | 129 | 12,165 | 24,028 | 15,909 | (9,260 | ) | 300,389 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method | 9,178 | — | — | — | — | — | — | 252,288 | (260,862 | ) | 604 | |||||||||||||||||||||||||||||
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Profit before income tax | 276,418 | 91,814 | 41,878 | (14,608 | ) | 3,239 | 65,282 | 67,092 | 255,617 | (265,906 | ) | 520,826 | ||||||||||||||||||||||||||||
Income tax | (87,918 | ) | (28,457 | ) | (12,526 | ) | 3,584 | (972 | ) | (19,967 | ) | (5,638 | ) | (4,235 | ) | 1,554 | (154,575 | ) | ||||||||||||||||||||||
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Profit for the year | 188,500 | 63,357 | 29,352 | (11,024 | ) | 2,267 | 45,315 | 61,454 | 251,382 | (264,352 | ) | 366,251 | ||||||||||||||||||||||||||||
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Profit attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 165,116 | 58,029 | 15,800 | (8,268 | ) | 1,134 | 12,375 | 50,623 | 250,923 | (255,778 | ) | 289,954 | ||||||||||||||||||||||||||||
Non-controlling interest | 23,384 | 5,328 | 13,552 | (2,756 | ) | 1,133 | 32,940 | 10,831 | 459 | (8,574 | ) | 76,297 | ||||||||||||||||||||||||||||
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Profit for the year | 188,500 | 63,357 | 29,352 | (11,024 | ) | 2,267 | 45,315 | 61,454 | 251,382 | (264,352 | ) | 366,251 | ||||||||||||||||||||||||||||
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Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2015 - | ||||||||||||||||||||||||||||||||||||||||
Revenue | 5,829,441 | 389,377 | 394,462 | 206,459 | 27,994 | 215,764 | 1,152,544 | 70,531 | (471,077 | ) | 7,815,495 | |||||||||||||||||||||||||||||
Gross profit (loss) | 312,780 | 63,530 | 78,544 | 40,468 | 2,225 | 51,755 | 178,303 | (7,004 | ) | (70,627 | ) | 649,974 | ||||||||||||||||||||||||||||
Administrative expenses | (289,149 | ) | (18,214 | ) | (10,319 | ) | (10,529 | ) | (310 | ) | (20,521 | ) | (115,018 | ) | (29,882 | ) | 80,557 | (413,385 | ) | |||||||||||||||||||||
Other income and expenses,net | 30,616 | 1,365 | 55 | 2 | — | 1,759 | 15,348 | 11,114 | (2,972 | ) | 57,287 | |||||||||||||||||||||||||||||
Loss on sales of investments | — | — | — | — | (8,289 | ) | — | — | (8,289 | ) | ||||||||||||||||||||||||||||||
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Operating profit (loss) | 54,247 | 46,681 | 68,280 | 29,941 | 1,915 | 32,993 | 70,344 | (25,772 | ) | 6,958 | 285,587 | |||||||||||||||||||||||||||||
Financial expenses | (127,383 | ) | (19,953 | ) | (4,713 | ) | (5,303 | ) | (45 | ) | (11,642 | ) | (32,246 | ) | (2,818 | ) | 27,301 | (176,802 | ) | |||||||||||||||||||||
Financial income | 8,875 | 158 | 8,722 | 2,316 | 121 | 746 | 2,145 | 56,101 | (41,077 | ) | 38,107 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | (2,234 | ) | 944 | — | — | — | 14,888 | 589 | (14,709 | ) | 8,246 | 7,724 | ||||||||||||||||||||||||||||
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Profit (loss) before income tax | (66,495 | ) | 27,830 | 72,289 | 26,954 | 1,991 | 36,985 | 40,832 | 12,802 | 1,428 | 154,616 | |||||||||||||||||||||||||||||
Income tax | (55,350 | ) | (7,650 | ) | (18,794 | ) | (8,129 | ) | (520 | ) | (7,649 | ) | 6,102 | (9,208 | ) | 2,171 | (99,027 | ) | ||||||||||||||||||||||
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Profit (loss) for the year | (121,845 | ) | 20,180 | 53,495 | 18,825 | 1,471 | 29,336 | 46,934 | 3,594 | 3,599 | 55,589 | |||||||||||||||||||||||||||||
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Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | (131,181 | ) | 17,072 | 40,010 | 14,118 | 1,471 | 12,377 | 40,322 | 4,337 | 8,571 | 7,097 | |||||||||||||||||||||||||||||
Non-controlling interest | 9,336 | 3,108 | 13,485 | 4,707 | — | 16,959 | 6,612 | (743 | ) | (4,972 | ) | 48,492 | ||||||||||||||||||||||||||||
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(121,845 | ) | 20,180 | 53,495 | 18,825 | 1,471 | 29,336 | 46,934 | 3,594 | 3,599 | 55,589 | ||||||||||||||||||||||||||||||
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F-48
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segmentssegment performance
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2013 - | ||||||||||||||||||||||||||||||||||||||||
Revenues | 4,075,070 | 321,097 | 195,861 | 118,541 | 45,489 | 313,731 | 1,169,115 | 51,525 | (323,114 | ) | 5,967,315 | |||||||||||||||||||||||||||||
Gross profit | 560,083 | 97,495 | 66,455 | 19,670 | 3,179 | 113,732 | 179,175 | (4,031 | ) | (31,097 | ) | 1,004,661 | ||||||||||||||||||||||||||||
Administrative expenses | (217,927 | ) | (16,170 | ) | (6,600 | ) | (8,025 | ) | (212 | ) | (20,993 | ) | (132,486 | ) | (8,616 | ) | 49,237 | (361,792 | ) | |||||||||||||||||||||
Other income and expenses | 10,762 | (3,851 | ) | (35 | ) | 758 | (2 | ) | (727 | ) | 24,669 | (2,689 | ) | (2,851 | ) | 26,034 | ||||||||||||||||||||||||
Profit from the sale of investments | — | — | — | — | — | 3,197 | — | 2,525 | — | 5,722 | ||||||||||||||||||||||||||||||
Other (losses) gains, net | — | 290 | — | — | — | (1,023 | ) | — | — | — | (733 | ) | ||||||||||||||||||||||||||||
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Profit before interests and taxes | 352,918 | 77,764 | 59,820 | 12,403 | 2,965 | 94,186 | 71,358 | (12,811 | ) | 15,289 | 673,892 | |||||||||||||||||||||||||||||
Financial expenses | (318,447 | ) | (28,534 | ) | (22,392 | ) | (60,292 | ) | (47 | ) | (27,010 | ) | (35,235 | ) | (95,722 | ) | 4,227 | (583,452 | ) | |||||||||||||||||||||
Financial income | 291,812 | 14,303 | 17,982 | 34,315 | 17 | 13,227 | 19,382 | 108,617 | (28,652 | ) | 471,003 | |||||||||||||||||||||||||||||
Dividends received | — | — | — | — | — | — | — | 119,791 | (119,791 | ) | — | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method | 41,971 | 1,587 | — | — | — | 64 | 1,070 | — | (11,130 | ) | 33,562 | |||||||||||||||||||||||||||||
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Profit before income tax | 368,254 | 65,120 | 55,410 | (13,574 | ) | 2,935 | 80,467 | 56,575 | 119,875 | (140,057 | ) | 595,005 | ||||||||||||||||||||||||||||
Income tax | (111,348 | ) | (20,066 | ) | (14,971 | ) | 477 | (881 | ) | (21,427 | ) | (16,655 | ) | (781 | ) | 3,222 | (182,430 | ) | ||||||||||||||||||||||
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Profit for the year | 256,906 | 45,054 | 40,439 | (13,097 | ) | 2,054 | 59,040 | 39,920 | (119,094 | ) | (136,835 | ) | 412,575 | |||||||||||||||||||||||||||
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Profit attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 211,941 | 41,635 | 26,077 | (9,823 | ) | 2,054 | 19,153 | 34,296 | 119,192 | (124,162 | ) | 320,363 | ||||||||||||||||||||||||||||
Non-controlling interest | 44,965 | 3,419 | 14,362 | (3,274 | ) | — | 39,887 | 5,624 | (98 | ) | (12,673 | ) | 92,212 | |||||||||||||||||||||||||||
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Profit for the year | 256,906 | 45,054 | 40,439 | (13,097 | ) | 2,054 | 59,040 | 39,920 | 119,094 | (136,835 | ) | 412,575 | ||||||||||||||||||||||||||||
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Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2016 - | ||||||||||||||||||||||||||||||||||||||||
Revenue | 4,159,538 | 382,211 | 264,384 | 247,040 | 18,459 | 411,518 | 1,401,781 | 62,070 | (477,395 | ) | 6,469,606 | |||||||||||||||||||||||||||||
Gross profit (loss) | 224,621 | 42,129 | 75,780 | 42,473 | 5,698 | 136,540 | 171,842 | (171 | ) | (95,493 | ) | 603,419 | ||||||||||||||||||||||||||||
Administrative expenses | (258,568 | ) | (17,260 | ) | (10,185 | ) | (12,952 | ) | (786 | ) | (28,430 | ) | (119,003 | ) | (35,740 | ) | 83,522 | (399,402 | ) | |||||||||||||||||||||
Other income and expenses,net | (9,250 | ) | 542 | 128 | 10 | — | 838 | 4,228 | (5,843 | ) | (3,923 | ) | (13,270 | ) | ||||||||||||||||||||||||||
Gain on sales of investments | — | — | — | — | — | — | — | 46,336 | — | 46,336 | ||||||||||||||||||||||||||||||
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Operating profit (loss) | (43,197 | ) | 25,411 | 65,723 | 29,531 | 4,912 | 108,948 | 57,067 | 4,582 | (15,894 | ) | 237,083 | ||||||||||||||||||||||||||||
Financial expenses | (65,138 | ) | (10,801 | ) | (6,478 | ) | (2,810 | ) | (38 | ) | (14,388 | ) | (30,989 | ) | (115,225 | ) | 14,296 | (231,571 | ) | |||||||||||||||||||||
Financial income | 11,216 | 1,040 | 1,145 | 8,037 | 86 | 2,816 | 4,220 | 18,688 | (26,454 | ) | 20,794 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | 16,501 | 1,615 | — | — | — | 6,850 | 360 | (1,036,889 | ) | 421,853 | (589,710 | ) | ||||||||||||||||||||||||||||
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Profit (loss) before income tax | (80,618 | ) | 17,265 | 60,390 | 34,758 | 4,960 | 104,226 | 30,658 | (1,128,844 | ) | 393,801 | (563,404 | ) | |||||||||||||||||||||||||||
Income tax | (12,828 | ) | (5,308 | ) | (15,490 | ) | (10,904 | ) | (1,433 | ) | (27,054 | ) | (15,835 | ) | 193,425 | 7,233 | 111,806 | |||||||||||||||||||||||
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Profit (loss) for the year | (93,446 | ) | 11,957 | 44,900 | 23,854 | 3,527 | 77,172 | 14,823 | (935,419 | ) | 401,034 | (451,598 | ) | |||||||||||||||||||||||||||
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Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | (87,710 | ) | 9,370 | 29,284 | 17,891 | 3,527 | 22,106 | 15,918 | (934,508 | ) | 414,423 | (509,699 | ) | |||||||||||||||||||||||||||
Non-controlling interest | (5,736 | ) | 2,587 | 15,616 | 5,963 | — | 55,066 | (1,095 | ) | (911 | ) | (13,389 | ) | 58,101 | ||||||||||||||||||||||||||
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(93,446 | ) | 11,957 | 44,900 | 23,854 | 3,527 | 77,172 | 14,823 | (935,419 | ) | 401,034 | (451,598 | ) | ||||||||||||||||||||||||||||
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F-49
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segments cash flows
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2011 - | ||||||||||||||||||||||||||||||||||||||||
Profit before income tax | 237,889 | 98,842 | 27,201 | (13,229 | ) | (279 | ) | 34,363 | 80,899 | 127,971 | (116,012 | ) | 477,645 | |||||||||||||||||||||||||||
Adjustments to profit: | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 82,351 | 36,112 | 21,316 | 73 | 87 | 2,607 | 32,160 | 3,540 | — | 178,246 | ||||||||||||||||||||||||||||||
Accounts receivable | (170,212 | ) | 3,181 | 42,364 | (92,846 | ) | (1,501 | ) | (178 | ) | (674 | ) | — | 42,790 | (177,076 | ) | ||||||||||||||||||||||||
Inventories | (52,330 | ) | (630 | ) | — | — | — | (56,086 | ) | (10,359 | ) | — | (21,005 | ) | (140,410 | ) | ||||||||||||||||||||||||
Accounts payable | 328,670 | 8,650 | (761 | ) | 5,245 | (1,615 | ) | (598 | ) | (20,374 | ) | 302 | (53,893 | ) | 265,626 | |||||||||||||||||||||||||
Other variations | (255,857 | ) | (28,247 | ) | (60,221 | ) | 7,564 | (4,986 | ) | 5,703 | (110,623 | ) | (124,648 | ) | 100,623 | (470,692 | ) | |||||||||||||||||||||||
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Cash flows from operating activities | 170,511 | 117,908 | 29,899 | (93,193 | ) | (8,294 | ) | (14,189 | ) | (28,971 | ) | 7,165 | (47,497 | ) | 133,339 | |||||||||||||||||||||||||
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Sale of assets | 5,251 | 77 | (152 | ) | — | — | — | 2,214 | 28,047 | (2,436 | ) | 33,001 | ||||||||||||||||||||||||||||
Dividends received | 20,891 | — | — | — | — | 245 | 1,766 | 133,291 | (121,484 | ) | 34,709 | |||||||||||||||||||||||||||||
Purchase of assets | (80,544 | ) | (51,083 | ) | (363 | ) | (6,432 | ) | (2,598 | ) | (36,585 | ) | (22,916 | ) | (144,892 | ) | 192,124 | (153,289 | ) | |||||||||||||||||||||
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Cash flows from investing activities | (54,402 | ) | (51,006 | ) | (515 | ) | (6,432 | ) | (2,598 | ) | (36,340 | ) | (18,936 | ) | 16,446 | 68,204 | (85,579 | ) | ||||||||||||||||||||||
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Debt repayment | (41,245 | ) | 1,775 | (15,379 | ) | 4,048 | 11,500 | 71,396 | 59,527 | (583 | ) | (86,645 | ) | 4,394 | ||||||||||||||||||||||||||
Dividend distribution | (70,983 | ) | (67,329 | ) | (12,690 | ) | — | — | (3,102 | ) | (7,263 | ) | (69,866 | ) | 161,368 | (69,865 | ) | |||||||||||||||||||||||
Other payments | (4,456 | ) | (5,373 | ) | (8,906 | ) | 97,282 | — | (13,490 | ) | (6,797 | ) | 30,179 | (95,430 | ) | (6,991 | ) | |||||||||||||||||||||||
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Cash flows from financing activities | (116,684 | ) | (70,927 | ) | (36,975 | ) | 101,330 | 11,500 | 54,804 | 45,467 | (40,270 | ) | (20,707 | ) | (72,462 | ) | ||||||||||||||||||||||||
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Cash increase (decrease) | (575 | ) | (4,025 | ) | (7,591 | ) | 1,705 | 608 | 4,275 | (2,440 | ) | (16,659 | ) | — | (24,702 | ) | ||||||||||||||||||||||||
Cash at the beginning of the year | 401,054 | 43,110 | 31,069 | — | — | 44,979 | 75,841 | 86,836 | — | 682,889 | ||||||||||||||||||||||||||||||
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Cash at the end of the year | 400,479 | 39,085 | 23,478 | 1,705 | 608 | 49,254 | 73,401 | 70,177 | — | 658,187 | ||||||||||||||||||||||||||||||
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F-50
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segments cash flows
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2012 - | ||||||||||||||||||||||||||||||||||||||||
Profit before income tax | 276,418 | 91,814 | 41,878 | (14,608 | ) | 3,239 | 65,282 | 67,092 | 255,618 | (265,907 | ) | 520,826 | ||||||||||||||||||||||||||||
Adjustments to profit | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 131,133 | 42,821 | 24,494 | 454 | 104 | 2,922 | 39,447 | 2,075 | 1,053 | 244,503 | ||||||||||||||||||||||||||||||
Accounts receivable | (62,061 | ) | (6,356 | ) | 1,941 | (5,464 | ) | (37,419 | ) | (18,902 | ) | 5,868 | (22 | ) | 72,506 | (49,909 | ) | |||||||||||||||||||||||
Inventories | (61,468 | ) | (908 | ) | — | (6,251 | ) | — | (154,804 | ) | 14,197 | 851 | 11,740 | (196,643 | ) | |||||||||||||||||||||||||
Accounts payable | 159,597 | (26,566 | ) | (667 | ) | 9,866 | (14 | ) | 58,190 | (5,976 | ) | 782 | 29,723 | 224,935 | ||||||||||||||||||||||||||
Other variations | 126,885 | 5,047 | 51,143 | 47,270 | 31,836 | 52,416 | (33,573 | ) | (433,651 | ) | (48,356 | ) | (200,983 | ) | ||||||||||||||||||||||||||
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Cash flows from operating activities | 570,504 | 105,852 | 118,789 | 31,267 | (2,254 | ) | 5,104 | 87,055 | (174,347 | ) | (199,241 | ) | 542,729 | |||||||||||||||||||||||||||
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Sale of assets | (60,205 | ) | 392 | (17 | ) | (458 | ) | — | (1,032 | ) | (961 | ) | 9,637 | 76,115 | 23,471 | |||||||||||||||||||||||||
Dividends received | 4,119 | — | — | — | — | — | — | 252,288 | (254,350 | ) | 2,057 | |||||||||||||||||||||||||||||
Purchase of assets | (393,856 | ) | (63,113 | ) | 101 | (3,940 | ) | — | (3,126 | ) | (30,582 | ) | (166,389 | ) | 235,390 | (425,515 | ) | |||||||||||||||||||||||
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Cash flows from investing activities | (449,942 | ) | (62,721 | ) | 84 | (4,398 | ) | — | (4,158 | ) | (31,543 | ) | 95,536 | 57,155 | (399,987 | ) | ||||||||||||||||||||||||
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Debt repayment | 17,465 | 38,991 | (23,108 | ) | — | 8,271 | 34,728 | (2,934 | ) | 153,845 | (107,257 | ) | 120,001 | |||||||||||||||||||||||||||
Dividend distribution | (100,820 | ) | (87,429 | ) | (20,750 | ) | — | — | (10,571 | ) | (29,956 | ) | (124,235 | ) | 249,526 | (124,235 | ) | |||||||||||||||||||||||
Contribution of non-controlling shareholders | — | — | — | — | — | — | — | 26,096 | 5,750 | 31,846 | ||||||||||||||||||||||||||||||
Acquisition of interest in non-controlling | — | — | — | — | — | — | — | (4,393 | ) | — | (4,393 | ) | ||||||||||||||||||||||||||||
Sale of interest in non-controlling subsidiary | — | — | — | — | — | — | — | 1,193 | — | 1,193 | ||||||||||||||||||||||||||||||
Other payments | (14,354 | ) | (3,128 | ) | (7,849 | ) | (262 | ) | (6,557 | ) | (1,353 | ) | (10,736 | ) | 4,619 | (5,607 | ) | (45,227 | ) | |||||||||||||||||||||
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Cash flows from financing activities | (97,709 | ) | (51,566 | ) | (51,707 | ) | (262 | ) | 1,714 | 22,804 | (43,626 | ) | 57,125 | 142,412 | (20,815 | ) | ||||||||||||||||||||||||
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Cash increase (decrease) | 22,853 | (8,435 | ) | 67,166 | 26,607 | (540 | ) | 23,750 | 11,886 | (21,686 | ) | 326 | 121,927 | |||||||||||||||||||||||||||
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Cash at the beginning of the year | 400,479 | 39,085 | 23,478 | 1,705 | 608 | 49,254 | 73,401 | 70,177 | — | 658,187 | ||||||||||||||||||||||||||||||
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Cash at the end of the year | 423,332 | 30,650 | 90,644 | 28,312 | 68 | 73,004 | 85,287 | 48,491 | 326 | 780,114 | ||||||||||||||||||||||||||||||
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F-51
(All amounts are expressed in thousands of S/. unless otherwise stated)
Operating segments cash flows
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2013 - | ||||||||||||||||||||||||||||||||||||||||
Profit before income tax | 368,254 | 65,120 | 55,410 | (13,574 | ) | 2,935 | 80,468 | 56,575 | 121,322 | (141,505 | ) | 595,005 | ||||||||||||||||||||||||||||
Adjustments to profit | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 151,158 | 53,432 | 10,047 | 632 | 52 | 3,610 | 37,219 | 1,986 | 1,003 | 259,139 | ||||||||||||||||||||||||||||||
Accounts receivable | (388,587 | ) | (10,343 | ) | (4,316 | ) | (322,993 | ) | (20,131 | ) | 1,949 | (137,016 | ) | (487,403 | ) | 517,365 | (851,475 | ) | ||||||||||||||||||||||
Inventories | 64,957 | 546 | — | (5,508 | ) | — | (58,500 | ) | (4,667 | ) | — | (17,899 | ) | (21,071 | ) | |||||||||||||||||||||||||
Accounts payable | 34,401 | 753 | (7,250 | ) | 337,027 | 16,444 | (50,784 | ) | 32,424 | 24,290 | (490,522 | ) | (103,217 | ) | ||||||||||||||||||||||||||
Other variations | (149,752 | ) | (24,371 | ) | (26,279 | ) | 4,735 | (623 | ) | (23,193 | ) | (29,370 | ) | (126,907 | ) | 129,700 | (246,060 | ) | ||||||||||||||||||||||
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Cash flows from operating activities | 80,431 | 85,137 | 27,612 | 319 | (1,323 | ) | (46,450 | ) | (44,835 | ) | (466,712 | ) | (1,858 | ) | (367,679 | ) | ||||||||||||||||||||||||
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Sale of assets | 15,134 | 86 | — | — | — | 317 | 316 | 6,799 | 9 | 22,661 | ||||||||||||||||||||||||||||||
Dividends received | 12,064 | 1,708 | — | — | — | — | — | 119,791 | (128,876 | ) | 4,687 | |||||||||||||||||||||||||||||
Purchase of assets | (171,126 | ) | (70,835 | ) | (555 | ) | (5,313 | ) | — | (5,926 | ) | (30,880 | ) | (134,946 | ) | 52,238 | (367,343 | ) | ||||||||||||||||||||||
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Cash flows from investing activities | (143,928 | ) | (69,041 | ) | (555 | ) | (5,313 | ) | — | (5,609 | ) | (30,564 | ) | (8,356 | ) | (76,629 | ) | (339,995 | ) | |||||||||||||||||||||
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Debt repayment | (371,997 | ) | (29,430 | ) | (10,662 | ) | (34,400 | ) | (43,567 | ) | (135,472 | ) | (285,472 | ) | (537,484 | ) | 9,111 | (1,439,373 | ) | |||||||||||||||||||||
Dividend distribution | (73,936 | ) | (29,163 | ) | (25,240 | ) | — | — | (32,581 | ) | (4,728 | ) | (86,986 | ) | 113,853 | (138,781 | ) | |||||||||||||||||||||||
Contribution of non-controlling shareholders | — | — | — | — | — | 34,774 | — | — | 34,774 | |||||||||||||||||||||||||||||||
Acquisiton of interest in non-controlling subsidiary | (9,104 | ) | — | — | — | — | — | — | (54,764 | ) | — | (63,868 | ) | |||||||||||||||||||||||||||
Issue of common shares, proceeds from shares issuance, net of related expenses | — | — | — | — | — | — | — | 1,147,418 | — | 1,147,418 | ||||||||||||||||||||||||||||||
Other payments | 362,449 | 32,881 | (1,014 | ) | 34,400 | 45,300 | 155,360 | 327,182 | 437,331 | (41,923 | ) | 1,351,967 | ||||||||||||||||||||||||||||
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Cash flows from financing activities | (92,588 | ) | (25,712 | ) | (36,916 | ) | — | 1,733 | 22,081 | 36,982 | 905,516 | 81,041 | 892,137 | |||||||||||||||||||||||||||
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Cash increase (decrease) | (156,085 | ) | (9,616 | ) | (9,859 | ) | (4,994 | ) | 410 | (29,978 | ) | (38,417 | ) | 430,448 | 2,554 | 184,463 | ||||||||||||||||||||||||
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Cash decrease in deconsolidation | (1,458 | ) | (3,270 | ) | — | — | (34 | ) | — | (400 | ) | — | — | (5,162 | ) | |||||||||||||||||||||||||
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Cash at the beginning of the year | 423,332 | 30,650 | 90,644 | 28,312 | 68 | 73,004 | 85,287 | 48,491 | 326 | 780,114 | ||||||||||||||||||||||||||||||
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Cash at the end of the year | 265,789 | 17,764 | 80,785 | 23,318 | 444 | 43,026 | 46,470 | 478,939 | 2,880 | 959,415 | ||||||||||||||||||||||||||||||
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F-52
(All amounts are expressed in thousands of S/. unless otherwise stated)
Segments by Geographical areasgeographical area
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
- Peru | 3,546,403 | 4,326,471 | 5,072,251 | 5,611,844 | 5,690,160 | 4,826,738 | ||||||||||||||||||
- Chile | 374,184 | 660,152 | 631,698 | 1,011,822 | 944,198 | 707,364 | ||||||||||||||||||
- Colombia | 119,464 | 114,757 | 112,573 | 125,929 | 778,333 | 570,203 | ||||||||||||||||||
- Panama | 139,666 | 206,137 | 346,065 | |||||||||||||||||||||
- Guyana | 49,525 | 111,924 | 717 | |||||||||||||||||||||
- Brazil | 66,587 | 92,899 | 74,399 | 68,045 | 39,253 | — | ||||||||||||||||||
- Dominican Republic | 133,304 | 37,606 | — | |||||||||||||||||||||
- Panama | — | — | 76,394 | |||||||||||||||||||||
- Others | 1,324 | — | — | |||||||||||||||||||||
- Ecuador | — | — | 3,682 | |||||||||||||||||||||
- Bolivia | 1,849 | 45,490 | 14,837 | |||||||||||||||||||||
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4,241,266 | 5,231,885 | 5,967,315 | 7,008,680 | 7,815,495 | 6,469,606 | |||||||||||||||||||
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Non-current assets | ||||||||||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||
- Peru | 1,623,934 | 1,895,217 | 2,461,288 | 3,230,288 | 3,995,453 | |||||||||||||||||||
- Chile | 331,736 | 499,777 | 359,686 | 320,094 | 446,998 | |||||||||||||||||||
- Colombia| | 11,887 | 8,987 | ||||||||||||||||||||||
- Colombia | 272,543 | 124,820 | 260,732 | |||||||||||||||||||||
- Bolivia | 1,890 | 15,043 | 13,043 | |||||||||||||||||||||
- Ecuador | — | — | 888 | |||||||||||||||||||||
- Guyana | 2,974 | 8,800 | 862 | |||||||||||||||||||||
- Brazil | 10,372 | 8,717 | 8,398 | — | — | |||||||||||||||||||
- Panama | — | 124 | — | 584 | — | |||||||||||||||||||
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1,977,929 | 2,412,822 | 3,106,779 | 3,699,629 | 4,717,976 | ||||||||||||||||||||
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Until March 2017, the subsidiary Concar belonged to the ‘technical services’ segment, on April 2017, the Company transferred its subsidiary to the ‘infrastructure’ segment.
FINANCIAL INSTRUMENTS |
Financial instruments by category |
TheAt December 31 the classification of financial assets and liabilities perby category is as follows:
December 31, | ||||||||
2012 | 2013 | |||||||
Assets according to the statement of financial position | ||||||||
Loans and accounts receivable: | ||||||||
- Cash and cash equivalents | 780,114 | 959,415 | ||||||
- Trade and other accounts receivable not including advances to suppliers | 590,845 | 672,707 | ||||||
- Outstanding work in progress | 513,529 | 971,743 | ||||||
- Financial assets related to concession agreements (1) | 359,572 | 623,376 | ||||||
- Accounts receivable from related parties | 49,761 | 83,850 | ||||||
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2,293,821 | 3,311,091 | |||||||
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Available-for-sale financial assets (Note 9) | 5,005 | 88,333 | ||||||
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| |||||
Hedging derivatives: | ||||||||
- Derivative financial instruments | 128 | — | ||||||
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2015 | 2016 | |||||||
Assets according to the statement of financial position | ||||||||
Loans and accounts receivable: | ||||||||
- Cash and cash equivalents | 543,898 | 600,923 | ||||||
- Trade accounts receivable and other accounts receivable not including advances to suppliers, net | 1,292,081 | 1,329,262 | ||||||
- Unbilled work in progress | 1,337,981 | 878,515 | ||||||
- Financial assets related to concession agreements | 699,056 | 685,975 | ||||||
- Accounts receivable from related parties | 280,153 | 713,048 | ||||||
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4,153,169 | 4,207,723 | |||||||
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Available-for-sale financial asset (Note 10) | 120,134 | — | ||||||
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| |||||
Financial asset at fair value through profit or loss | ||||||||
- Cash and cash equivalents (Mutual funds) | 10,104 | 6,027 | ||||||
- Other financial asset | 3,153 | 352 | ||||||
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13,257 | 6,379 | |||||||
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Liabilities according to the statement of financial position | ||||||||
Other financial liabilities at amortized cost | ||||||||
- Borrowings | 501,692 | 514,228 | ||||||
- Finance leases | 343,782 | 281,594 | ||||||
- Trade and other accounts payable (excluding non-financial liabilities) | 1,157,135 | 1,242,235 | ||||||
- Accounts payable to related parties | 42,734 | 25,585 | ||||||
- Derivative financial instruments (a) | 12,697 | 348 | ||||||
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| |||||
2,058,040 | 2,063,990 | |||||||
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Hedging derivatives: | ||||||||
- Derivative financial instruments (b) | 5,999 | 3,563 | ||||||
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F-53
(All amounts are expressed in thousands of S/. unless otherwise stated)
2015 | 2016 | |||||||
Financial liabilities according to the statement of financial position | ||||||||
Other financial liabilities at amortized cost | ||||||||
- Other financial liabilities | 1,480,071 | 2,140,297 | ||||||
- Finance leases | 301,285 | 240,141 | ||||||
- Bonds | 794,091 | 967,714 | ||||||
- Trade and other accounts payable | 1,967,270 | 1,769,444 | ||||||
- Accounts payable to related parties | 97,968 | 145,537 | ||||||
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4,640,685 | 5,263,133 | |||||||
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Hedging derivatives: | ||||||||
- Derivative financial instruments | 2,331 | 1,081 | ||||||
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Credit quality of financial assets |
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external risk ratings (if available) or to historical information about counterparty default rates.
TheAt December 31 the credit quality of financial assets is presentedshown as follows:
December 31, | ||||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Cash and cash equivalents (*) | ||||||||||||||||
Banco de Crédito del Perú (A+) | 426,762 | 558,540 | 237,870 | 147,759 | ||||||||||||
Banco Continental (A+) | 156,419 | 254,439 | 43,074 | 136,805 | ||||||||||||
Banco Santander (Chile) (A) | 40,745 | 7,544 | ||||||||||||||
Banco Scotiabank (A+) | 38,345 | 121,480 | ||||||||||||||
Citibank (A) | 82,471 | 105,812 | ||||||||||||||
Banco de la Nación (A) | 64,456 | 30,007 | ||||||||||||||
Banco Santander—Perú (A) | 21,660 | 17,480 | ||||||||||||||
Banco Interbank (A) | 33,864 | 9,360 | 17,145 | 6,344 | ||||||||||||
Banco Scotiabank (A+) | 26,648 | 2,401 | ||||||||||||||
Banco de la Nación (A) | 24,784 | 45,782 | ||||||||||||||
Banco de Chile (A+) | 16,828 | — | ||||||||||||||
Banco Santander (A) | 9,024 | 42,102 | ||||||||||||||
Citibank (A) | 4,610 | 850 | ||||||||||||||
Banco BCI (Chile) (A) | 3,451 | 25,568 | ||||||||||||||
Banco de Chile (AAA) | 1,523 | 4,822 | ||||||||||||||
Banco Interamericano de Finanzas (A) | 30 | 652 | — | 4,035 | ||||||||||||
Other lesser amounts | 33,859 | 10,771 | ||||||||||||||
Banco Bogotá (A) | 4,124 | 3,756 | ||||||||||||||
Larrain Vial de Chile (A) | 3,368 | 3,514 | ||||||||||||||
GNB | — | 2,080 | ||||||||||||||
Banco Santander - Chile (AAA) | 7,181 | 1,941 | ||||||||||||||
Scotiabank Chile (AAA) | 6,758 | 1,117 | ||||||||||||||
Banco de Crédito e Inversiones - Chile (AA+) | 6,331 | 937 | ||||||||||||||
Banco Scotiabank de Guyana (A) | 5,462 | 125 | ||||||||||||||
Others | 5,064 | 5,061 | ||||||||||||||
|
|
|
| |||||||||||||
777,024 | 958,009 | 544,832 | 593,075 | |||||||||||||
|
|
|
|
The ratings in the above table “A and A+”AAA” represent high quality credit ratings. For banks located in Peru, the ratings were derived from risk rating agencies authorized by the BankingPeruvian banking and Insurance Superintendency of Peru (Superintendenciainsurance regulator “Superintendencia de Banca, Seguros y AFP)AFP” (SBS). For banks located in Chile, the ratings were derived from risk rating agencies authorized by the StockChilean stock and Insurance Superintendency of Chile (Superintendenciainsurance regulator “Superintendencia de Valores y Seguros)Seguros” (SVS).
(*) | The difference between the balances shown above with the balances shown in the statement of financial position corresponds to cash on hand andin-transit remittances (Note |
F-54
(All amounts are expressed in thousands of S/. unless otherwise stated)
The credit quality of customers is assessed in three categories (internal classification):
A: |
B: | existing customers/related parties (with more than 6 months of trade relationship) with no previous default history; and |
C: | existing customers/related parties (with more than 6 months of trade relationship) with previous default history. |
As
2015 | 2016 | |||||||
Trade accounts receivable (Note 11 and Note 12) | ||||||||
Counterparties with no external risk rating | ||||||||
A | 540,573 | 117,797 | ||||||
B | 2,119,217 | 2,052,356 | ||||||
C | 342,477 | 407,151 | ||||||
|
|
|
| |||||
3,002,267 | 2,577,304 | |||||||
|
|
|
| |||||
Receivable from related parties (Note 13) | ||||||||
B | 280,153 | 713,048 |
The total balance of December 31, 2013trade accounts receivable and 2012 the majority of the Group’s portfolio had been risk-rated as category B. Also, of the total number of accountsreceivable from related parties is in compliance with contract terms and conditions,conditions; none of them have beenre-negotiated.
With respect toavailable-for-sale financial assets, the counterparty held an external credit rating of AAA at December 31, 2013 and 2012.2015.
CASH AND CASH EQUIVALENTS |
ThisAt December 31 this account comprises:
December 31, | ||||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Cash on hand | 3,090 | 1,406 | 6,116 | 5,944 | ||||||||||||
Checking accounts | 501,912 | 817,692 | ||||||||||||||
In-transit remittances | 3,054 | 7,931 | ||||||||||||||
Bank accounts | 411,695 | 475,025 | ||||||||||||||
Time deposits | 273,404 | 138,701 | 123,033 | 112,023 | ||||||||||||
In-transit remittances | 1,641 | 1,616 | ||||||||||||||
Mutual funds | 67 | — | 10,104 | 6,027 | ||||||||||||
|
|
|
| |||||||||||||
780,114 | 959,415 | 554,002 | 606,950 | |||||||||||||
|
|
|
|
At December 31, 2016, short-term deposits were mainly derived from subsidiaries GyM S.A., GyM Ferrovías, Viva GyM S.A., and GMP S.A. for S/43.7 million, S/24.7 million, S/19.6 million and S/16.4 million respectively and interest rates ranged from 0.10% to 4.95% (GyM S.A., Viva GyM S.A., GyM Ferrovías and Concar S.A. for S/36.7 million, S/33 million, S/23 million and S/11.1 million respectively, at interest rates ranging from 0.10% and 4.70%, at December 31, 2015).
(i) Reconciliation to cash flow statement
The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the financial year as follows:
2015 | 2016 | |||||||
Cash and Cash Equivalent on Balance Sheet | 554,002 | 606,950 | ||||||
Bank overdrafts (Note 19) | — | (8,396 | ) | |||||
|
|
|
| |||||
Balances per statement of cash flows | 554,002 | 598,554 | ||||||
|
|
|
|
(All amounts expressed in thousands of S/ unless otherwise stated)
This account comprises the investment maintained byOn April 2016, the Company directly and indirectlysold their 1.64% of interest held in Transportadora de Gas del Perú S.A. (TGP) for S/107.3 million, resulting in a net profit of S/46.3 million, as shown in the income statement, within “Profit (loss) on sale of investments”. The balance of its investment at the date of sale was S/117.1 million.
The cumulative amount of fair values at the date of sale amounting to S/41.5 million (S/56 million of gain on fair value and S/14.6 million of income tax), a local entity that operates gas transportation systems. as recognized in the statement of other comprehensive income was transferred to profits for the period.
At December 31, 2012 the investment corresponded to shares representing the 0.6% of interest in the TGP’s capital.
In December 2013, the Group acquired from one of the TGP’s shareholders, Pluspetrol Resources Corporation (hereinafter Pluspetrol), an additional 1.04% interest in TGP paying a consideration of US$20 million (equivalent to S/.56.1 million). At December 31, 2013,2015 the fair value of the Group’s interest in TGP equals S/.88.3 million.120.1 million based on the discounted cash flow method. The changeinformation used in the calculation was as follows:
The fluctuation in the fair value from 2012of this investment in 2015 amounted to 2013 of S/.19.119.9 million (S/4.6 million in 2014) net of theits income tax ofeffect amounting to S/.8.27 million is recorded within(S/1.3 million in 2014), which was recognized in the statement of other comprehensive income.
Together withIn 2015 dividends from this investment were received for a total S/7.2 million (S/9.3 million in 2014) included within Other income (Note 29).
The most significant assumptions are the acquisitiondiscount rate and cash flows affected by the U.S. Wholesale Price Index; the Group performed a sensitivity analysis of this assumptions: if the 1.04% interest,discount rate were adjusted down by 5% the Company acquired from Pluspetrol on behalf offair value would be 7.4% lower; and if the Canada Pension Plan Investment Board (CPPIB) an additional indirect interest of 11.34% in TGP. The investment for US$217 million was funded entirelydiscount rate were adjusted up by CPPIB. The risk5% the fair value would be 7.1% higher; if the cash flows were adjusted down by 5% the fair value would be 9.1% lower and rewards ofif the entire investment are assumedcash flows were adjusted up by CPPIB.
Given5% the features of the transaction, it has been treated as an off-balance transaction because, in substance, the Company is acting as an agent for CPPIB. Therefore, the Company has not recognized neither the investment in TGP nor any obligation to CPPIB.
This acquisition is part of an investment agreement entered into with CPPIB, whereby both parties commit themselves to initiate and develop projects in the oil and gas industry.
F-55
(All amounts are expressed in thousands of S/. unless otherwise stated)
On December 27, 2013 the Company announced its intention to transfer the previously acquired interest of 11.34% in TGP to CPPIB (10.43%) and to Corporación Financiera de Inversiones – CFI (0.91%), if none of the existing TGP shareholders exercise their first option of share acquisition rights. The transfer of interest to these entities took place in February 2014.fair value would be 8.8% higher.
TRADE ACCOUNTS |
ThisAt December 31 this account comprises:
December 31, | ||||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Invoices receivable | 447,300 | 1,058,078 | 1,548,669 | 1,556,817 | ||||||||||||
Collection rights | 317,609 | 58,528 | 135,267 | 164,645 | ||||||||||||
|
|
|
| |||||||||||||
764,909 | 1,116,606 | 1,683,936 | 1,721,462 | |||||||||||||
Impairment of trade accounts | (2,707 | ) | (2,817 | ) | ||||||||||||
Impairment of receivables | (19,650 | ) | (22,673 | ) | ||||||||||||
|
|
|
| |||||||||||||
762,202 | 1,113,789 | 1,664,286 | 1,698,789 | |||||||||||||
Less: non-current portion | ||||||||||||||||
Invoice receivable | — | (545,736 | ) | |||||||||||||
Invoices receivable | (610,695 | ) | (652,939 | ) | ||||||||||||
Collection rights | (305,887 | ) | (46,181 | ) | (11,136 | ) | (14,580 | ) | ||||||||
|
|
|
| |||||||||||||
Total non-current | (305,887 | ) | (591,917 | ) | (621,831 | ) | (667,519 | ) | ||||||||
|
|
|
| |||||||||||||
Total current | 456,315 | 521,872 | 1,042,455 | 1,031,270 | ||||||||||||
|
|
|
|
Invoices receivable are related to estimated percentages of completion approved by customers.
The fair value of current receivables is similar to their carrying amount since their average collection turnover is less than 60 days. These current receivables do not bear interest and have no specific guarantees.
Invoices receivable are related to percentage
(All amounts expressed in thousands of completion estimates approved by the clients. As of December 31, 2013 and 2012, trade receivable balances are shown netS/ unless otherwise stated)
Thenon-current portion of the advances received from customers of S/.273 million and S/.849 million, respectively. These advances are substantiallytrade accounts receivable is related to the financial asset model (Note 2.5) of subsidiary GyM Ferrovías S.A. and their terms vary based on each contract.
At December 31, 2013, a significant portion2016 the fair value of these advances of S/.248.53 million corresponded to the funds given by certain customers with which a monthly revolving advances system has been agreed which is settled with the billing of the month before. Other advances that are netted fromnon-current accounts receivable correspondamounted to funds netted gradually as services are provided; which in the event of an anticipated termination of the contractual relationship will be offset with the balances due for work progress.
Accounts receivable as ofS/606 million (S/514 million at December 31, 2013 comprise2015), which was calculated under the discounted cash flows method, using rates of 7.14% (8.98% at December 31, 2015).
At December 31, 2016, collection rights ofprimarily relate to GyM Ferrovías S.A., SurvialGMD S.A., GMI S.A., Concar S.A., CAM Servicios del Perú S.A. and Canchaque ConcessionsSurvial amounting to S/68 million, S/49 million, S/19 million, S/13 million, S/12 million and S/11 million, respectively (GyM Ferrovías S.A., GMD S.A., GMI S.A. and Survial S.A. for S/.46,181,65 million, S/.7,61737 million, S/22 million and S/.4,73016 million, respectively (S/.305,887, S/.7,502 and S/.4,220 in 2012)2015). The main balance is generated by GyM Ferrovías S.A which is the concession signed with the Peruvian Government comprising Line 1 of the Lima Metro/ (train line), require this entity to acquire, on the Government’s behalf, certain infrastructure needed for the implementation of the transport system to be operated once completed (Note 5-b-iv). This account will be amortized with the cash flows resulting from the consideration to be received by the subsidiary at the inception of the concession under the “price per kilometer traveled” (PKT). For this purpose, the subsidiary has applied certain criteria to determine the amount of the interest to be accrued on these balances and the beginning of this amortization. These balances bear interest at a 7.7% rate and their amortization is expected to begin in 2014 at the time the infrastructure begins operation.
The aging detailAging of trade accounts receivable is as follows:
December 31, | At December 31, | |||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Current | 447,937 | 937,932 | 1,245,266 | 1,396,040 | ||||||||||||
Past due up to 30 days | 153,440 | 117,985 | 256,743 | 103,617 | ||||||||||||
Past due over 30 days | 163,532 | 60,689 | ||||||||||||||
Past due from 31 days up to 180 days | 122,948 | 113,825 | ||||||||||||||
Past due from 181 days up to 360 days | 16,988 | 29,506 | ||||||||||||||
Past due over 360 days | 41,991 | 78,474 | ||||||||||||||
|
|
|
| |||||||||||||
764,909 | 1,116,606 | 1,683,936 | 1,721,462 | |||||||||||||
|
|
|
|
F-56
(All amounts are expressed in thousands of S/. unless otherwise stated)
As ofAt December 31, 2013,2016 trade accounts receivables totalingwith maturity greater than 31 days for S/.178.7221.8 million (S/.317182 million asin 2015) are not fully impaired. For 2016 the Group recognized impairment of December 31, 2012) are past due but not impaired, andS/3.1 million (S/5.8 million in 2015) in the customers do not have a historical record of default.consolidated income statement (Note 27).
The maximum exposure to credit risk at the reporting date is the carrying amount of the accounts receivable and of outstandingunbilled work in progress (note 11)(Note 12).
Management performed a specific review and assessment of the balances outstanding of certain customers of subsidiary CAM Holding S.P.A. that were undergoing financial difficulties and shown payment delinquency during 2012 and 2013 and recorded in profit or loss for the year 2012 and 2013 an impairment of trade accounts receivable resulting from the assessment
The movement of the account receivables reserve is as follows:
2012 | 2013 | |||||||
Initial balance | — | 2,707 | ||||||
Additions | 2,707 | 110 | ||||||
|
|
|
| |||||
Final balance | 2,707 | 2,817 | ||||||
|
|
|
|
This account comprises:
December 31, | ||||||||
2012 | 2013 | |||||||
Rights receivable | 454,019 | 748,376 | ||||||
Work in progress | 59,510 | 223,367 | ||||||
|
|
|
| |||||
513,529 | 971,743 | |||||||
|
|
|
|
Rights receivable correspond to the unbilled rights for services rendered. Each month, under the percentage of completion method, the Company estimates the advancement of work to date. Based on its monthly estimates, the Company recognizes revenue. Until such revenue is billed, it is recorded in the account, rights receivable.
The balance of work in progress includes costs that the Group incurred related to future activity on the construction contracts. The increase is mainly related to the Machu Picchu and Cerro Aguila Kallpa projects amounting to S/.27.9 million and S/.66.6 million respectively and to others minor projects as Pachacutec, Electrico Lima Tramo 2, Tunel Santa Rosa, Concentradora las Bambas, among others, totaling S/.74.2 million.
12 | UNBILLED WORK IN PROGRESS, NET |
At December 31 this account comprises:
2015 | 2016 | |||||||
Unbilled rights receivable | 1,092,877 | 1,143,634 | ||||||
Rights for concessions in progress | 77,440 | 57,912 | ||||||
Cost of work in progress | 167,664 | 87,168 | ||||||
|
|
|
| |||||
1,337,981 | 1,288,714 | |||||||
Impairment of work in progress (Note5.1-f) | — | (410,199 | ) | |||||
|
|
|
| |||||
1,337,981 | 878,515 | |||||||
Less:non-current portion | ||||||||
Unbilled rights receivable | — | (171,752 | ) | |||||
Rights for concessions in progress | (59,754 | ) | (25,834 | ) | ||||
|
|
|
| |||||
Totalnon-current | (59,754 | ) | (197,586 | ) | ||||
|
|
|
| |||||
Total current | 1,278,227 | 680,929 | ||||||
|
|
|
|
Unbilled rights receivable are the rights that were not billed by the Engineering and Construction segment. Until that revenue is billed, they are stated as unbilled rights receivable. At December 31, 2016, the book value ofnon-current unbilled rights receivable is similar to its fair value since it was recorded using the discounted cash flow method, using a 1.71% rate.
Rights for concessions in progress include rights of future collections from public services concessions that are inpre-operational stage.
(All amounts expressed in thousands of S/ unless otherwise stated)
Deferred costs of work in progress include all those expenses incurred by the Group comprising future activities to be carried out under construction contracts currently effective. The Group estimates that all incurred cost will be billed and collected.
At December 31, 2016 and 2015 work in progress that remained to be billed are shown net of any advances received from customers for S/10.58 million and S/42.5 million, respectively under the terms and conditions set forth in each specific agreement. These advances are mostly related to subsidiary GyM S.A.
13 | TRANSACTIONS WITH RELATED PARTIES AND JOINT OPERATORS |
a) | Transactions with related parties |
Major transactions between the Company and its related parties are summarized as follows:
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Revenue from sale of goods and services: | ||||||||||||||||||||||||
Revenue from sales of goods and services: | ||||||||||||||||||||||||
- Associates | 52,158 | 49,252 | 4,915 | 6,040 | 1,400 | — | ||||||||||||||||||
- Joint operations | 177,254 | 51,385 | 67,601 | 43,897 | 52,384 | 36,901 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
229,412 | 100,637 | 72,516 | 49,937 | 53,784 | 36,901 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Purchase of goods and services: | ||||||||||||||||||||||||
- Associates | 42 | 18 | — | |||||||||||||||||||||
- Joint operations | 715 | 489 | 3,228 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
757 | 507 | 3,228 | ||||||||||||||||||||||
|
|
|
Inter-company servicestransactions are agreed at arm’s length as ifbased on the services had beenprice lists in force and terms and conditions that would be agreed with third parties.
F-57
(All amounts are expressed in thousands of S/. unless otherwise stated)
b) | Key management compensation |
Key management includes directors (executives andnon-executives), members of the Executive Committee and Internal Audit Management. The compensation paid or payable to key management in 20132016 amounted to S/.93.5106.9 million (S/.60.04111.7 million as of December 31, 2012).in 2015) and only relates to short-term benefits.
c) | Balances at the end of the year |
December 31, | ||||||||||||||||
2012 | 2013 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Related: | ||||||||||||||||
Proyectos Inmobiliarios Consultores (PICSA) | 223 | — | — | — | ||||||||||||
Sierra Morena | — | 243 | — | — | ||||||||||||
|
|
|
|
|
|
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| |||||||||
223 | 243 | — | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Joint operations: | ||||||||||||||||
Consorcio Peruano de Conservación | — | — | 15,080 | — | ||||||||||||
Consorcio Rio Mantaro | 8,974 | — | 3,822 | — | ||||||||||||
Consorcio Grupo 12 | 8,699 | — | — | — | ||||||||||||
Consorcio Brocal Pasco | 4,711 | — | 1,913 | 41 | ||||||||||||
Consorcio La Gloria | 3,430 | 3,443 | 3,696 | 3,398 | ||||||||||||
Consorcio GyM Conciviles | 2,197 | 2,426 | 33,405 | — | ||||||||||||
Consorcio Toromocho | 1,819 | 3,432 | 62 | 34 | ||||||||||||
Consorcio Rio Urubamba | 1,790 | — | 2,798 | — | ||||||||||||
Consorcio Tren Electrico | 1,622 | — | 2,499 | — | ||||||||||||
Consorcio Atocongo | 1,650 | — | 712 | — | ||||||||||||
Consorcio Marcona | 1,600 | 2,168 | — | — | ||||||||||||
Consorcio Constructor Alto Cayma | 1,533 | — | 566 | 4,881 | ||||||||||||
Consorcio Lima | 1,232 | — | 312 | — | ||||||||||||
Consorcio—Sermesa Zhejian | 1,013 | — | — | — | ||||||||||||
Consorcio Rios Pallca | 975 | — | 3,903 | — | ||||||||||||
Consorcio Norte Pachacutec | 971 | 800 | 556 | 952 | ||||||||||||
Consorcio Tiwu | 963 | 1,716 | — | — | ||||||||||||
Consorcio Vial Ipacal | 694 | 700 | 283 | — | ||||||||||||
Consorcio Terminales | 628 | — | 4,294 | — | ||||||||||||
Consorcio Vial Quinua | 561 | 4,422 | 37 | 1,315 | ||||||||||||
Consorcio CAM Lima | 458 | 231 | — | — | ||||||||||||
Consorcio Sermesa | 405 | — | — | — | ||||||||||||
Consorcio Pacifico | 280 | — | — | — | ||||||||||||
Consorcio Vial Sullana | 348 | 341 | 470 | — | ||||||||||||
Consorcio La Zanja | 309 | 349 | — | — | ||||||||||||
Consorcio Ancon Pativilca | 303 | 1,054 | — | — | ||||||||||||
Consorcio La Chira | — | 7,868 | 51 | |||||||||||||
Consorcio Alto Cayma | — | 942 | 5,557 | 666 | ||||||||||||
Consorcio GyM Cosapi | — | 321 | — | — | ||||||||||||
Comerciales Sur | — | — | 206 | — | ||||||||||||
Consorcio Proyecto Chiquintirca | — | — | 134 | — | ||||||||||||
Consorcio Ingenieria y Construcción Bechtel | — | — | — | 3,924 | ||||||||||||
Consorcio Vial Sur | — | — | 737 | — | ||||||||||||
Consorcio JV PAnamá | — | — | 1,323 | — | ||||||||||||
Other | 2,065 | 1,639 | 1,485 | 965 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
49,230 | 31,852 | 83,850 | 16,227 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other related parties: | ||||||||||||||||
Ferrovias Argentina | — | 7,118 | 8,771 | |||||||||||||
Besco | — | 2,155 | — | 587 | ||||||||||||
El Condor Combustibles | — | 1,366 | — | — | ||||||||||||
Other minor | 308 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
308 | 10,639 | — | 9,358 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
49,761 | 42,734 | 83,850 | 25,585 | |||||||||||||
|
|
|
|
|
|
|
|
At December 31, 2015 | At December 31, 2016 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Joint operations: | ||||||||||||||||
Consorcio Constructor Ductos del Sur | 154,383 | — | 62,834 | 37,238 | ||||||||||||
Consorcio GyM Conciviles | 57,679 | — | 61,006 | — | ||||||||||||
Consorcio Rio Urubamba | 10,856 | 2,819 | 9,072 | — | ||||||||||||
Consorcio Peruano de Conservación | 6,270 | — | 8,784 | |||||||||||||
-Consorcio Vial Quinua | 1,036 | 89 | 4,198 | 738 | ||||||||||||
Consorcio Italo Peruano | 465 | 21,907 | 4,174 | 17,325 | ||||||||||||
Consorcio La Gloria | 3,116 | 3,077 | 3,521 | 3,080 | ||||||||||||
Terminales del Perú | 9,459 | — | 3,215 | 259 | ||||||||||||
Consorcio Rio Mantaro | 6,021 | 15,941 | 3,191 | 6,886 | ||||||||||||
Consorcio Vial Sierra | — | — | 940 | 5,400 | ||||||||||||
Consorcio Constructor Chavimochic | 2,558 | 6,422 | 915 | 2,471 | ||||||||||||
Consorcio Energía y Vapor | 3,328 | — | 491 | 3,203 | ||||||||||||
Consorcio Ermitaño | — | 83 | 6,372 | |||||||||||||
Consorcio Menegua | 1,910 | — | 30 | 3,803 | ||||||||||||
Consorcio para la Atención y Mantenimiento de Ductos - | — | — | 21,790 | |||||||||||||
Consorcio Huacho Pativilca | 80 | 5,041 | — | 3,434 | ||||||||||||
Ingeniería y Construcción Sigdo Koppers-Vial | 2,659 | 3,900 | — | — | ||||||||||||
Complementarios Ltda. | 84 | 6,956 | — | — | ||||||||||||
Other minors | 11,728 | 7,390 | 10,134 | 2,472 | ||||||||||||
|
|
|
|
|
|
|
|
F-58
(All amounts are expressed in thousands of S/. unless otherwise stated)
At December 31, 2015 | At December 31, 2016 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Carried forward: | 271,632 | 73,542 | 172,588 | 114,471 | ||||||||||||
Brought forward: | 271,632 | 73,542 | 172,588 | 114,471 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other related parties: | ||||||||||||||||
Adexus S.A. | 8,521 | — | — | — | ||||||||||||
Gaseoducto Sur Peruano S.A | — | — | 531,383 | — | ||||||||||||
Perú Piping Spools S.A.C. | — | — | 9,077 | — | ||||||||||||
Ferrovias Participaciones | — | 20,136 | — | 20,813 | ||||||||||||
Ferrovias Argentina | — | — | — | 2,835 | ||||||||||||
Arturo Serna | — | 4,290 | — | 7,418 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
8,521 | 24,426 | 540,460 | 31,066 | |||||||||||||
|
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|
|
|
|
|
| |||||||||
280,153 | 97,968 | 713,048 | 145,537 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Lessnon-current portion: | ||||||||||||||||
Gaseoducto Sur Peruano S.A | — | — | (531,384 | ) | — | |||||||||||
Consorcio Constructor Ductos del Sur | — | — | — | (37,238 | ) | |||||||||||
Ferrovias Participaciones | — | (20,136 | ) | — | (20,813 | ) | ||||||||||
Ferrovias Argentina | — | — | — | (2,835 | ) | |||||||||||
Arturo Serna | — | — | — | (4,434 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-current portion | — | (20,136 | ) | (531,384 | ) | (65,320 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Portion current | 280,153 | 77,832 | 181,664 | 80,217 | ||||||||||||
|
|
|
|
|
|
|
|
Receivables and payables are mainly of current maturity and do not have specific guarantees, except for the receivable account from GSP. Accounts receivable from related parties mainly arise from sales transactions for goods and services withhave maturity periods of 60 days. Such accountsdays and arise from sales of goods and services. These balances arenon-interest-bearing because they have due to their short-term maturities and doare not requireimpaired.
This balance relates to the commitments that resulted from the early termination of GSP project (Note16.a-i). At December 31, 2016 thenon-current account receivables from related parties is similar to its fair value since it was accounted for using the discounted cash flow method with a provision for impairment.1.71% rate which originated a discount value of US$25.8 million. View events after the date of the statement of financial position in Note 37.
Accounts payable to related parties mainly arise from transactions to provide services of engineering, construction, maintenance and others and have maturity periods of 60 days. Such accountsdays and arise from engineering, construction, maintenance and other services received. These balances are not interest bearing because they are short-term.interest-bearing due to their short-term maturities.
Transactions withnon-controlling interest are disclosed in Note 34.36.
OTHER ACCOUNTS RECEIVABLE |
ThisAt December 31 this account comprises:
December 31, | ||||||||
2012 | 2013 | |||||||
Advances to suppliers (a) | 181,790 | 183,464 | ||||||
Fiscal credit (b) | 76,991 | 109,050 | ||||||
Guarantees deposits (c) | 68,473 | 56,851 | ||||||
Income tax on-account payment | 68,502 | 95,488 | ||||||
Accounts receivable from sale of investments | 26,739 | 33,601 | ||||||
Petróleos del Perú S.A.- Petroperú S.A. (d) | 23,236 | 18,087 | ||||||
Claims to the tax administration (tax paid in advance) | 17,388 | 7,913 | ||||||
Account receivable from personnel | 12,946 | 14,633 | ||||||
Account receivable from Ferrocarriles del Estado—Chile | 9,209 | — | ||||||
Claims to third-parties | 7,221 | 15,799 | ||||||
Indemnification asset (note 31-b) | 6,006 | 6,006 | ||||||
Temporary taxes on net assets | 4,643 | 10,901 | ||||||
Restricted fund | 3,822 | — | ||||||
Overseas Bechtel Incorp. Suc.del Peru | — | 5,107 | ||||||
Right to recover taxes (Brazil and Colombia) | 3,168 | 2,259 | ||||||
Legal credits CAM Brasil | 2,955 | 3,430 | ||||||
Accounts receivable from suppliers (Transportadora de Gas del Perú) | 2,290 | — | ||||||
Project reimbursements | 1,926 | 1,794 | ||||||
Loans receivable to employees | 1,760 | 584 | ||||||
Compensation fund (e) | 1,637 | 812 | ||||||
Others (f) | 19,995 | 25,590 | ||||||
|
|
|
| |||||
540,697 | 591,369 | |||||||
|
|
|
| |||||
Less non-current portion: | ||||||||
Fiscal credit | (48,493 | ) | (34,071 | ) | ||||
Petróleos del Perú S.A. | (14,696 | ) | — | |||||
Ferrocarriles del Estado SEC | (9,209 | ) | — | |||||
Indemnification asset (note 31-b) | (6,006 | ) | ||||||
Legal credits CAM Brazil | (2,955 | ) | (3,430 | ) | ||||
Accounts receivable from Transportadora de Gas del Perú | (2,290 | ) | — | |||||
Right to recover taxes | (2,010 | ) | — | |||||
Debtors for sale, according to legal agreement (Chile) | (662 | ) | — | |||||
Loans receivable from employees | (659 | ) | — | |||||
Others | (6,509 | ) | (650 | ) | ||||
|
|
|
| |||||
(93,489 | ) | (38,151 | ) | |||||
|
|
|
| |||||
Current portion | 447,208 | 553,218 | ||||||
|
|
|
|
2015 | 2016 | |||||||
Advances to suppliers (a) | 170,126 | 305,022 | ||||||
Income taxon-account payments (b) | 165,705 | 202,045 | ||||||
Fiscal credit (c) | 146,785 | 132,316 | ||||||
Guarantee deposits (d) | 125,269 | 95,916 | ||||||
Claims to third parties | 17,846 | 59,198 | ||||||
Petróleos del Perú S.A.- Petroperú S.A. | 8,891 | 46,413 | ||||||
Temporary tax on net assets | 20,051 | 21,204 | ||||||
Taxes receivable | 42,404 | 13,954 | ||||||
Claims to SUNAT(pre-paid taxes) | 19,544 | 16,479 | ||||||
Restricted funds | — | 14,067 | ||||||
Rental and sale of equipment | 9,919 | 13,640 | ||||||
Receivables from personnel | 8,168 | 10,726 | ||||||
Advances pending liquidation | 3,478 | 2,447 | ||||||
Loans to third parties | 83,657 | 1,065 | ||||||
Other | 64,803 | 72,976 | ||||||
|
|
|
| |||||
Carried forward: | 886,646 | 1,007,468 | ||||||
|
|
|
|
F-59
(All amounts are expressed in thousands of S/. unless otherwise stated)
2015 | 2016 | |||||||
Brought forward: | 886,646 | 1,007,468 | ||||||
Lessnon-current portion: | ||||||||
Advances to suppliers | (2,200 | ) | (225,567 | ) | ||||
Fiscal credit | (55,663 | ) | (52,225 | ) | ||||
Claims to third parties | — | (32,669 | ) | |||||
Petróleos del Perú S.A.- Petroperú S.A. | (7,948 | ) | (29,534 | ) | ||||
Other | (118 | ) | (17,957 | ) | ||||
|
|
|
| |||||
Non-current portion | (65,929 | ) | (357,952 | ) | ||||
|
|
|
| |||||
Current portion | 820,717 | 649,516 | ||||||
|
|
|
|
Other receivables are neither past due nor impaired. Othernon-current accounts receivable have maturities frombetween 2 toand 5 years. In
The fair value of the caseshort-term receivables approximates their carrying amount due to their short-term maturities. Thenon-current portion mainly comprisesnon-financial assets such as advances to suppliers and fiscal credit; the remaining balance is not significant for any period shown in the financial statements.
The maximum exposure to credit risk at the reporting date is the carrying amount of fiscal credit, Company’s Management estimates that this balance will be applied against the fiscal debit from future operations over the medium term.each class of above-mentioned other receivables. The Group does not demand guarantees.
The following paragraph contains a description of major accounts receivable:
(a) | Advances to suppliers |
Mainly corresponds toIn 2016, the balance mainly comprises advances that subsidiary GyM Ferrovias S.A. gave to Alsthom Transporte for S/230 million. In 2015 the balance mainly comprises advances that subsidiary GyM S.A. providedgave for approximately S/.163.1 million (S/.171.5 million in 2012) to importimporting equipment to be used in different projects, which are detailed as follows, based on the related project:Consorcio Río Mantaro Project amounting to S/76 million.
December 31, | ||||||||
2012 | 2013 | |||||||
Consorcio Tren Eléctrico | 58,203 | 64,567 | ||||||
Consorcio Rio Mantaro | 27,067 | 54,311 | ||||||
Central Hidroeléctrica Machu Picchu | 15,132 | 20,998 | ||||||
EPC Planta Minera Inmaculada | — | 7,207 | ||||||
Edificio Real 8 | 3,442 | 3,025 | ||||||
Consorcios – Cam | — | 2,800 | ||||||
Consorcio GyM Conciviles | 26,730 | 2,144 | ||||||
Servicios para proyectos inmobiliarios | 4,663 | 2,379 | ||||||
GyM Chile SPA | 1,709 | 1,888 | ||||||
Stracon GyM | 1,557 | 1,655 | ||||||
Mantenimiento Periodico/Red Vial 1 | 1,474 | 2,439 | ||||||
Consorcio Peruano de Conservación | 1,421 | 4,708 | ||||||
Panorama Plaza Negocios 2 | — | 1,312 | ||||||
Consorcio Rio Urubamba | 1,194 | 704 | ||||||
Ciudad Nueva Fuerabambas | 10,525 | — | ||||||
Inversiones y Construcciones GyM Ltda | 9,110 | — | ||||||
Ampliación Red Principal—Cálida | 8,759 | — | ||||||
Other smaller projects | 10,804 | 13,327 | ||||||
|
|
|
| |||||
181,790 | 183,464 | |||||||
|
|
|
|
(b) |
Mainly correspondsThis balance mainly consists of income taxon-account payments made by GyM S.A., GMP S.A., Graña y Montero S.A.A., CAM Holding S.p.A., Viva GyM S.A., GMI S.A. and GMD S.A. for S/133 million, S/17 million, S/16 million, S/16 million, S/5 million, S/4 million and S/4 million, respectively (GyM S.A., Graña y Montero S.A.A., GMP S.A., CAM Holding S.p.A., Concar S.A. and Viva GyM S.A. for S/95 million, S/16 million, S/12 million, S/8 million, S/5 million and S/4 million, respectively in 2015).
(c) | Fiscal credit |
This item is related to the subsidiaries GyM S.A., Viva GyM S.A., Norvial S.A., Negocias del Gas S.A., La Chira S.A. and Concesionaria Vía Expresa Sur S.A. amounting to S/55 million, S/25 million, S/15 million, S/8 million, S/5 million and S/5 million, respectively (GyM S.A., Viva GyM S.A., Norvial S.A., Survial S.A., GyM Ferrovías S.A., GyM Ferrovias S.A., Viva GyM S.ALa Chira and ConcarGMP S.A. for S/.1741 million, S/.2522 million, , S/.2715 million, S/.1214 million, S/13 million, S/12 million and S/.9 million respectively, (Survial S.A., GyM S.A. and GyM Ferrovías S.A. for S/.25 million, S/.14.9 million and S/.143 million, respectively in 2012)2015). Based on its estimates, Management considers that this VAT fiscal credit will be recovered duringin the ordinarynormal course of the future operations of these subsidiaries.
F-60
(All amounts are expressed in thousands of S/. unless otherwise stated)
Guarantee deposits - |
Guarantee deposits are the funds retained by customers for work contracts mainly forassumed basically by subsidiary GyM S.A. which ensuresThese deposits are retained by the customers to secure the Subsidiary’s compliance with its obligations under the contracts and the funds arecontracts. The amounts retained will be recovered once the contracted work has beenis completed. Such deposits mainly correspond to the following projects:
December 31, | ||||||||
2012 | 2013 | |||||||
Project: | ||||||||
Stracon GyM | 16,516 | 18,834 | ||||||
Collahuasi (Vial y Vives) | 10,757 | — | ||||||
Campamentos Congas | 8,783 | 415 | ||||||
Conga Reticulation Camp 3000/4500 K | 7,738 | 287 | ||||||
Consorcio GyM Cosapi | 7,501 | — | ||||||
Pueblo Viejo (Dominican Republic) | 7,212 | — | ||||||
Proyecto Machupicchu | 4,513 | 8,624 | ||||||
Ampla Brasil | 1,402 | — | ||||||
OPR | 909 | 971 | ||||||
Conga- Campamento 400 personas K12 | 387 | — | ||||||
Edificio Real 8 | 351 | 1,417 | ||||||
Distrito S | 319 | 118 | ||||||
Local Euromotors | 289 | — | ||||||
Pozas almacenamiento de agua | — | 7,143 | ||||||
Proyecto Chancadora Caserones | — | 5,473 | ||||||
Minera Antucoya | — | 3,814 | ||||||
Pampa Verde | — | 3,601 | ||||||
La Zanja | — | 1,348 | ||||||
Planta Minera Inmaculada | — | 881 | ||||||
Garantías—arriendos CAM Perú | — | 605 | ||||||
Garantías—arriendos CAM Chile | — | 573 | ||||||
Centro Empresarial Leuro | — | 554 | ||||||
Others | 1,796 | 2,193 | ||||||
|
|
|
| |||||
68,473 | 56,851 | |||||||
|
|
|
|
These balances are comprised of additional investments established in the operating agreement and completed by Consorcio Terminales (a joint venture of the subsidiary GMP S.A.) for the modernization and extension of 9 terminals subject to the agreement. These investments which are presently works in progress will be transferred to Petróleos del Perú S.A.—Petroperú S.A., once a technical audit has been completed and after obtaining the written approval and accreditation of said institution; the value thus determined will be considered for billing. During the fiscal years 2013 and 2012, the consortium incurred additional investments of US$ 6.1 million and US$11.5 million, respectively; which will be collected over the effective period of the agreement, once Petróleos del Perú—Petroperú S.A., confirms the investment made through the results of technical audits.
This agreement consists in the operation of the oil terminals of Petroleos del Peru to store and distribute the oil to the different customers of this State entity.
The balance receivable from the compensation fund corresponds to subsidiary GMP S.A. and relates to the Fund created by the Government to prevent the high volatility of the price of crude oil and its by-products from affecting the end users. In 2013 GMP S.A. received payments of S/.1.7 million (S/.9.3 million in 2012) and applications of contributions amounting to S/.1.6 million (S/.3.7 million in 2012).
F-61
(All amounts are expressed in thousands of S/. unless otherwise stated)
15 |
Other receivables do not present past due amounts or impairment and the non-current balances are supported by contractual agreements with third-parties and in the particular case of the fiscal credit, its maturity has been determined based on the period, estimated by Management for using said fiscal credit.At December 31 this account comprises:
The fair value of other short—term accounts receivable is similar to their carrying amount due to the fact of short term maturity.
2015 | 2016 | |||||||
Land | 361,082 | 398,120 | ||||||
Work in progress - Real estate | 415,538 | 289,775 | ||||||
Finished properties | 136,621 | 244,240 | ||||||
Construction material | 162,538 | 114,919 | ||||||
Merchandise and supplies | 87,643 | 97,860 | ||||||
|
|
|
| |||||
1,163,422 | 1,144,914 | |||||||
Impairment of inventories (Note5.1-f) | (4,268 | ) | (40,621 | ) | ||||
|
|
|
| |||||
1,159,154 | 1,104,293 | |||||||
|
|
|
|
Land -
At December 31, 2013,land comprises properties for the fair value of other accounts receivable from Petróleos del Perú S.A., originates from the subsidiary GMP S.A., does not bear interest and, therefore, was discounted at the prevailing market rate prevailing at the dateimplementation of the disbursements, which on average is 7.40% per annum (6% in 2012). This rate corresponds to the weighted average borrowing ratefollowing projects of the subsidiary.subsidiary Viva GyM:
The maximum exposure to credit risk as of the date of the report is the carrying amount of each class of other accounts receivable mentioned. The Group does not request collaterals as guarantee.
2015 | 2016 | |||||||
Lurín (a) | 92,071 | 95,634 | ||||||
Miraflores (b) | 79,971 | 80,552 | ||||||
San Miguel (c) | 69,859 | 70,556 | ||||||
San Isidro (d) | — | 46,606 | ||||||
Ancón (e) | 33,068 | 35,934 | ||||||
Nuevo Chimbote | 15,834 | 17,054 | ||||||
Huancayo | 11,324 | 11,618 | ||||||
Villa el Salvador | 19,143 | — | ||||||
San Martín de Porres | 12,978 | — | ||||||
Others | 26,834 | 40,166 | ||||||
|
|
|
| |||||
361,082 | 398,120 | |||||||
|
|
|
|
Plot of land of 750 hectares located in the district of Lurín, province of Lima, for industrial development and public housing. |
(b) | Plot of land located in Av. El Ejército, Urbanización. Santa Cruz, Miraflores, province of Lima, a development complex consisting of a5-star hotel, convention center, business, cultural, commercial and residential building center. |
(c) | Plot of land located in the district San Miguel of 1.4 hectares to develop a traditional multi-family building of 1,004 apartments in 4 stages. |
(d) | A plot of land in the district of San Isidro in which a15-storey building will be built with 28 apartments and 121 parking spaces. |
(e) | A108-hectare land property in which a mega housing-project will be implemented, including apartments ranging from 55 m2 to 75 m2, as well as houses of 75 m2. |
This account comprises:
December 31, | ||||||||
2012 | 2013 | |||||||
Land | 326,451 | 411,822 | ||||||
Work in progress—real estate | 181,956 | 104,908 | ||||||
Construction materials | 148,565 | 92,299 | ||||||
Materials and supplies | 89,736 | 92,909 | ||||||
Finished properties | 11,689 | 71,304 | ||||||
|
|
|
| |||||
758,397 | 773,242 | |||||||
Impairment of inventories | (10,981 | ) | (10,445 | ) | ||||
|
|
|
| |||||
747,416 | 762,797 | |||||||
|
|
|
|
Land -
As of December 31, 2013 and 2012 this item mainly includes land of 740 hectares located in the district of Lurin, a province of Lima, intended for industrial and public housing development purposes (S/.90 million); a plot of land located in the district of Comas , where it is intended to implement a large green area project called “Los Parques de Comas”, and build 8,000 houses (the land cost is approximately S/.57 million); and “Cuartel San Martín” (S/.78. million), located on Av. El Ejército, Urb. Santa Cruz Miraflores which will be a development complex consisting of a 5-star hotel, convention, business, cultural, commercial and residential building center. During the year 2013 the Group acquired a land located on Av. Pezet 583, San Isidro (S/.47.9 million), where it intends to build 31 apartments of 300m2 each; and land in Av. Argentina, Callao (S/.52.4 million), where it intends to implement a project of approximately 1000 multi-family buildings called “Los Parques del Callao”.
Work in progress—real estate -
As of December 31, 2013, this item mainly consists of project “Parque Central Club Residencial” (S/.17.6 million), comprising 22 multi-family buildings of 12 floors each, located in Cercado de Lima, and the housing project “Los Parques de Carabayllo” (S/.16.6 million) comprising 24 buildings of 4 floors each, located in Carabayllo. The housing project “Los Parques de San Martin” (S/.53.2 million) comprising 20 multi-family buildings of 5, 10 and 12 floors, located in San Martin de Porres, the housing project “Barranco” (S/.9.9 million) comprising 1 building of 16 floors with 40 apartments and the “Real 8-9” project (S/.21.4 million) where it will be built 1 building of 16 floors with 32 offices of 500m2 will be built.
F-62
(All amounts are expressed in thousands of S/. unless otherwise stated)
AsLand properties maintained from 2015 consist of assets of projects, the construction of which have not begun. Changes in these balances over 2016 primarily reflects higher costs of project engineering, license paperwork and other smaller costs. Construction in these land properties is expected to begin in late 2017 and the first quarter of 2019. The land property located in San Martín de Porres was reclassified to “Finished properties” since the construction started and finished at December 31, 2012, this item mainly includes2016. The plot of land in Villa El Salvador was sold in 2016.
Real estate - work in progress
At December 31, real state work in progress comprises the following project: “Parque Central Club Residencial” (S/.23.6 million), “Los Parques de Carabayllo” (S/.19.3 million), “Los Parques de Villa el Salvador” (S/.15.4 million), “Los Cipreses” (S/.44.2 million) and “Los Parques de San Martin” (S/.39.6 million).projects:
2015 | 2016 | |||||||
Klimt | 67,910 | 100,751 | ||||||
Los Parques de Comas | 77,346 | 89,074 | ||||||
Los Parques del Callao | 57,672 | 51,613 | ||||||
Real 2 | 7,497 | 17,181 | ||||||
Villa El Salvador 2 | 9,918 | 12,674 | ||||||
El Rancho | 166,256 | — | ||||||
Los Parques de San Martín (2nd phase) | 19,063 | — | ||||||
Others | 9,876 | 18,482 | ||||||
|
|
|
| |||||
415,538 | 289,775 | |||||||
|
|
|
|
During the year,2016 the Company has capitalized financing costs forof these construction projects amounting to S/.612.2 million at interest rates between 6.75% and 8.90% (S/.4.34 million in 2012)2015 at interest rates between 5.3% and 9.5%; and S/9 million in 2014 at interest rates between 3.12% and 8.5%).
Finished properties -
At December 31, the balance of finished properties consists of the following investment properties:
2015 | 2016 | |||||||
El Rancho | — | 121,302 | ||||||
Panorama | 70,951 | 33,443 | ||||||
Los Parques de San Martín de Porres | 21,557 | 30,724 | ||||||
Los Parques del Callao | — | 19,736 | ||||||
Rivera Navarrete | 14,085 | 11,966 | ||||||
Los Parques de Carabayllo 2nd phase | 9,848 | 7,497 | ||||||
Los Parques de Comas | 4,115 | 7,336 | ||||||
Los Parques de Villa El Salvador II | 12,604 | 5,951 | ||||||
Others | 3,461 | 6,285 | ||||||
|
|
|
| |||||
136,621 | 244,240 | |||||||
|
|
|
|
Construction materials -
The balance onAt December 31, 2013 showed a decrease compared to 2012, which corresponds2016 and 2015, construction materials relates mainly to the materials of the projects that are in the final stage, the most significantGSP project for S/54.8 million and S/68.3 million, respectively, of which is the Machu Picchu Project which has a variationS/33.8 million corresponding to Consorcio Constructor Ductos del Sur (CCDS) were impaired in 2016 (Note5.1-f).
At December 31, 2016 borrowings are secured with respect to 2012 of S/.59.25 million. Also, this balance includes material that did not have much movement such as Consorcio Conciviles which had a decrease of S/.10.24 million, the Estación de Gas y Acometida Fenix – Calidda with a decrease of S/.9.46 million and Consorcio Tren Electrico with a decrease of S/.7.49 million compared to 2012.
In 2013, the Group recognized a provision for the impairment of inventories amounting to S/.2.2 million (S/.11 million in 2012). The movement is as follows:
2012 | 2013 | |||||||
Initial balance | — | 10,981 | ||||||
Additions | 10,981 | 2,239 | ||||||
Write off | — | (2,775 | ) | |||||
|
|
|
| |||||
Final balance | 10,981 | 10,445 | ||||||
|
|
|
|
Borrowings are guaranteed with inventory (landland properties and work in progress—real state) related to “Parque Central”, “Barranco”, “Parqueprogress comprising the following projects: Los Parques de San Martín”, “Pezet”Callao, Ancón and “Parque del Agustino II” for theEl Rancho. The total amount of the guarantee amounting tois S/.509.57101.2 million (S/.354.8175 million asin 2015).
(All amounts expressed in thousands of December 31, 2012).S/ unless otherwise stated)
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES |
ThisAt December 31 this account comprises:
2012 | 2013 | 2015 | 2016 | |||||||||||||
Associates | 24,719 | 28,209 | 490,702 | 286,403 | ||||||||||||
Joint ventures | 12,727 | 59,758 | 146,303 | 103,356 | ||||||||||||
|
|
|
| |||||||||||||
37,446 | 87,967 | 637,005 | 389,759 | |||||||||||||
|
|
|
|
The amounts recognized in the income statement are as follows:
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Associates | 223 | 114 | 11,104 | 29,132 | 22,800 | (584,801 | ) | |||||||||||||||||
Joint ventures | — | 490 | 22,458 | 24,313 | 2,193 | (4,909 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
223 | 604 | 33,562 | 53,445 | 24,993 | (589,710 | ) | ||||||||||||||||||
|
|
|
|
|
|
F-63
(All amounts are expressed in thousands of S/. unless otherwise stated)
a) Investment in associates
a) | Investment in associates |
Set out below are the associates of the Group as at December 31, 20122015 and 2013.2016. The associates listed below have share capital solely consisting solely of ordinarycommon shares, which are held directly by the Group. None of the associates are listed companies; therefore, there is no quoted market price available for their shares.
Carrying amount | ||||||||||||||||||||
Class | Interest in capital | At December 31, | ||||||||||||||||||
Entity | of share | 2012 | 2013 | 2012 | 2013 | |||||||||||||||
% | % | |||||||||||||||||||
Promoción Inmobiliaria del Sur S.A. | Common | 23.86 | 23.86 | 14,807 | 16,298 | |||||||||||||||
Ingenieria y Construccion | ||||||||||||||||||||
Vial y Vives OGP-1 Ltda. | Common | 40.00 | 40.00 | 288 | 8,450 | |||||||||||||||
JV Panama | Common | — | 15.00 | — | 2,755 | |||||||||||||||
Ingenieria Vial y Vives—Consorcio | ||||||||||||||||||||
Bechtel VyV Ltda | Common | 40.00 | 40.00 | 2,660 | 3 | |||||||||||||||
Sierra Morena S.A. | Common | 33.33 | 33.33 | 310 | 305 | |||||||||||||||
Inversiones Real Once S.A. | Common | 29.07 | — | 4,276 | — | |||||||||||||||
Inmobiliaria San Silvestre S.A. | Common | 21.73 | — | 2,324 | — | |||||||||||||||
Other | 54 | 398 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
24,719 | 28,209 | |||||||||||||||||||
|
|
|
|
Carrying amount | ||||||||||||||||||||
Class | Interest in capital | At December 31, | ||||||||||||||||||
Entity | of share | 2015 | 2016 | 2015 | 2016 | |||||||||||||||
% | % | |||||||||||||||||||
Gasoducto Sur Peruano S.A. | Common | 20.00 | 20.00 | 437,494 | 218,276 | |||||||||||||||
Promoción Inmobiliaria del Sur S.A. | Common | 22.50 | 22.50 | 28,733 | 31,768 | |||||||||||||||
Concesionaria Chavimochic S.A.C. | Common | 26.50 | 26.50 | 17,202 | 32,394 | |||||||||||||||
Betchel Vial y Vives Servicios | ||||||||||||||||||||
Complementarios Ltda. | Common | 40.00 | 40.00 | 6,187 | 69 | |||||||||||||||
Others | 1,086 | 3,896 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
490,702 | 286,403 | |||||||||||||||||||
|
|
|
|
The most significant investmentsassociates are described as follows:
i) | Gasoducto Sur Peruano S.A. - |
In November 2015, the group acquired a 20% interest in Gasoducto Sur Peruano (hereinafter GSP) and obtained a 29% interest in the Ductos del Sur Consortium (CCDS) through its subsidiary GyM. GSP signed on July 22, 2014 a concession contract with the Peruvian government (Grantor) to build, operate and maintain the transportation system by natural gas pipelines to meet the demand of the cities of the Peruvian southern region. Additionally, GSP signed an engineering, procurement and construction (EPC) contract with the Ductos del Sur Consortium (CCDS). The Group made an investment of US $ 242.5 million (S / 811 million), and was required to assume 20% of the performance guarantee established in the Concession contract for US $ 262.5 million (equivalent to S / 882 million) and 20% of the guarantee for the bridge loan obtained by GSP for US $ 600 million (equivalent to S / 2,016 million) See subsequent events after the date of the statement of financial position in Note 37.
ii) | Promoción Inmobiliaria del Sur |
An entity whose major asset isengaged in purchasing land properties to obtain gains from their subsequent appreciation and disposal in the long term. Major assets consist of plots of land of 24,957,300 m2 located891.08 hectares in Lurin, which will be used for real estate developments.Lurín and 2.07 hectares in Punta Hermosa, both in Lima. Based on recent appraisals of the property, properties,
(All amounts expressed in thousands of S/ unless otherwise stated)
Management believes that the commercial value of this propertythese properties is higher that itsthan their carrying amount.
Concesionaria Chavimochic S.A.C. |
ThisAn entity is mainly engagedthat was awarded with the implementation of the Chavimochic irrigation Project, including: a) design and construction of the work required for the third-phase of the Chavimochic irrigation project in the executionprovince of civil construction work, industrial assemblyLa Libertad; b) operation and engineering works at Escondida Minemaintenance of works; and c) water supply to the Project users. Construction activities started in Chile;2015; the objective ofconcession effective period is 25 years and the business is to expand the processing capacity of its client.total investment amounts US$647 million.
A limited company constituted under the laws of Barbados which provides engineering services to mining companies in Panama.
The entity is mainly engaged in providing construction and acquisition services as well as other related services to Bechtel Chile Limitada, its partner to carry out construction work.
F-64
(All amounts are expressed in thousands of S/. unless otherwise stated)
The following table shows financial information of the principal associates:
Summarized financial information for associates -
Promoción Inmobiliaria del Sur S.A | Ingeniería y Construcción Vial y Vives OGP-1 Ltda. | JV Panama | ||||||||||||||||||||||
At December 31, | At December 31, | At December 31, | ||||||||||||||||||||||
2012 | 2013 | 2012 | 2013 | 2012 | 2013 | |||||||||||||||||||
Current | ||||||||||||||||||||||||
Cash and cash equivalents | 3,500 | 937 | 1,544 | 572 | — | 16,284 | ||||||||||||||||||
Other current assets (excluding cash) | 152 | 146 | 6,319 | 156,328 | — | 85,261 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total current assets | 3,652 | 1,083 | 7,863 | 156,900 | 101,545 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financial liabilities (excluding trade payables) | 65 | 187 | — | — | — | — | ||||||||||||||||||
Other current liabilities | ||||||||||||||||||||||||
(including trade payables) | 608 | 102 | 7,142 | 135,761 | — | 83,574 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total current liabilities | 673 | 289 | 7,142 | 135,761 | — | 83,574 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Non-current | ||||||||||||||||||||||||
Assets | 134,949 | 156,749 | — | — | — | 395 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financial liabilities | — | — | — | — | — | — | ||||||||||||||||||
Other liabilities | 75,871 | 89,237 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net assets | 62,057 | 68,306 | 721 | 21,139 | — | 18,366 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Gaseoducto Sur Peruano S.A. | Promoción Inmobiliaria del Sur S.A. | Chavimochic S.A.C. | ||||||||||||||||||||||
At December, 31 | At December, 31 | At December, 31 | ||||||||||||||||||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
Current | ||||||||||||||||||||||||
Assets | 303,219 | 375,547 | 124,887 | 149,300 | 171,400 | 120,342 | ||||||||||||||||||
Liabilities | (3,357,508 | ) | (6,747,492 | ) | (32,072 | ) | (187,380 | ) | (110,799 | ) | (3,160 | ) | ||||||||||||
Non-current | ||||||||||||||||||||||||
Assets | 4,943,392 | 8,522,099 | 47,699 | 193,127 | 8,608 | 8,282 | ||||||||||||||||||
Liabilities | (7,442 | ) | — | (13,090 | ) | (13,855 | ) | (2,547 | ) | (1,918 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net assets | 1,881,661 | 2,150,154 | 127,424 | 141,192 | 66,662 | 123,546 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Promoción Inmobiliaria del Sur S.A | Ingeniería y Construcción Vial y Vives OGP-1 Ltda | JV Panama | ||||||||||||||||||||||||||||||||||
At December 31, | At December 31, | At December 31, | ||||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2011 | 2012 | 2013 | 2011 | 2012 | 2013 | ||||||||||||||||||||||||||||
Revenue | 15,740 | 20,560 | 44,552 | — | 6,437 | 127,528 | — | — | 175,306 | |||||||||||||||||||||||||||
Depreciation and amortization | (101 | ) | (79 | ) | (69 | ) | — | (5,562 | ) | (101,320 | ) | — | — | (176 | ) | |||||||||||||||||||||
Interest income | 30 | 63 | 52 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Interest expenses | (12 | ) | (2 | ) | (2 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Profit or loss from continuing operations | 14,403 | 11,183 | 43,234 | — | 875 | 26,208 | — | — | 3,045 | |||||||||||||||||||||||||||
Income tax expense | (4,695 | ) | (2,601 | ) | (13,365 | ) | — | (175 | ) | (5,398 | ) | — | — | (807 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Post-tax profit from continuing operations | 9,708 | 7,009 | 29,971 | — | 700 | 20,810 | — | — | 2,239 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total comprehensive income | 9,708 | 7,009 | 29,971 | — | 700 | 20,810 | — | — | 2,239 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoducto Sur Peruano S.A. | Promoción Inmobiliaria del Sur S.A. | Chavimochic S.A.C. | ||||||||||||||||||||||||||||||
2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | |||||||||||||||||||||||||
Revenues | 3,007,799 | 3,323,410 | 88,870 | 90,970 | 65,071 | 67,473 | 376,124 | 264,386 | ||||||||||||||||||||||||
Profit (loss) from continuing operations | 69,191 | (1,372,594 | ) | 82,080 | 80,372 | 42,281 | 175 | 22,995 | (2,994 | ) | ||||||||||||||||||||||
Incometax | (19,828 | ) | — | (24,521 | ) | (25,373 | ) | (11,839 | ) | (57 | ) | (6,656 | ) | 921 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Profit (loss) from continuing operations after income tax | 49,363 | (1,372,594 | ) | 61,402 | 65,245 | 30,442 | 118 | 16,339 | (2,073 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Othercomprehensiveincome | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total comprehensive income | 49,363 | (1,372,594 | ) | 61,402 | 65,245 | 30,442 | 118 | 16,339 | (2,073 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-65
(All amounts are expressed in thousands of S/. unless otherwise stated)
The movement of the investments in associates is as follows:
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Opening balance | 67,577 | 25,953 | 24,719 | 28,209 | 82,494 | 490,702 | ||||||||||||||||||
Acquisition through business combinations (Note 31) or contributions received | — | 2,891 | 346 | |||||||||||||||||||||
Contributions | — | — | 390,506 | |||||||||||||||||||||
Acquisition of Gasoducto Sur Peruano (Note 16a-i) | — | 437,494 | — | |||||||||||||||||||||
Acquisitions | 51,244 | — | — | |||||||||||||||||||||
Change in corporate structure of | ||||||||||||||||||||||||
Panorama Project (Note 16a-ii) | — | (39,180 | ) | — | ||||||||||||||||||||
Dividends received | (25,191 | ) | (9,838 | ) | (10,149 | ) | ||||||||||||||||||
Equity interest in results | 223 | 114 | 11,104 | 29,132 | 22,800 | 8,304 | ||||||||||||||||||
Dividends received | (34,709 | ) | — | (2,980 | ) | |||||||||||||||||||
Return of capital | — | (2,057 | ) | — | ||||||||||||||||||||
Sale of investments | (21,948 | ) | — | (6,684 | ) | |||||||||||||||||||
Others | 153 | (2,182 | ) | 1,704 | ||||||||||||||||||||
Impairment of GSP | — | — | (593,105 | ) | ||||||||||||||||||||
Decrease in capital | — | — | (166 | ) | ||||||||||||||||||||
Derecognition of investments | — | (2,755 | ) | — | ||||||||||||||||||||
Conversion adjustment | (900 | ) | (313 | ) | 311 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Final balance | 11,296 | 24,719 | 28,209 | 82,494 | 490,702 | 286,403 | ||||||||||||||||||
|
|
|
|
|
|
In 2013, 2012addition to the GSP acquisition described in Note 16a-i); in 2014, 2015 and 20112016 the following significant movements were carried out:noted:
(All amounts expressed in thousands of S/.4.8 million, which is presented in the item “Profit on sale of investments” in the statement of comprehensive income. unless otherwise stated)
b) | Investment in Joint Ventures - |
Set out below are the joint ventures of the Group as of December 31, 2012 and 2013.31:
Carrying amount | ||||||||||||||||||||
Interest in capital | At December 31, | |||||||||||||||||||
Entity | Class | 2012 | 2013 | 2012 | 2013 | |||||||||||||||
% | % | |||||||||||||||||||
Constructora SK-VyV Ltda. | Common | 50.00 | 50.00 | 12,584 | 37,542 | |||||||||||||||
Sistemas SEC – Cam Chile | Common | — | 49.00 | — | 10,452 | |||||||||||||||
Logistica Químicos del Sur S.A.C. | Common | — | 50.00 | — | 7,287 | |||||||||||||||
Consorcio DSD Echeverria Izquierdo | Common | — | 50.00 | — | 4,284 | |||||||||||||||
Consorcio Vial y Vives Mena y Ovalle Ltda. | Common | 50.00 | 50.00 | 143 | 193 | |||||||||||||||
|
|
|
| |||||||||||||||||
12,727 | 59,758 | |||||||||||||||||||
|
|
|
|
F-66
(All amounts are expressed in thousands of S/. unless otherwise stated)
Entity | share | 2015 | 2016 | 2015 | 2016 | |||||||||||||||
% | % | |||||||||||||||||||
Tecgas N.V. | Common | 51.00 | 51.00 | 79,450 | 84,100 | |||||||||||||||
Sistemas SEC | Common | 49.00 | 49.00 | 9,228 | 9,591 | |||||||||||||||
Logistica Químicos del Sur S.A.C. | Common | 50.00 | 50.00 | 8,265 | 8,515 | |||||||||||||||
G.S.J.V. SCC | Common | 50.00 | 50.00 | 8,800 | 861 | |||||||||||||||
ConstructoraSK-VyV Ltda. | Common | 50.00 | 50.00 | 3,287 | 59 | |||||||||||||||
Adexus S.A. (Note 33 a) | Common | 44.00 | — | 37,034 | — | |||||||||||||||
Others | Common | 239 | 230 | |||||||||||||||||
|
|
|
| |||||||||||||||||
146,303 | 103,356 | |||||||||||||||||||
|
|
|
|
i) |
TheThis entity is mainly engagedprovides services of operations and maintenance of oil pipelines and related activities, its activities are focused in the executionservice agreement of civil construction workoperations and industrial assembly, construction, buildings and carrying out engineering projects, in general, and any other business agreed upon by the partners for the project “Caserones”maintenance of oil pipelines of the client Minera Lumina Cooper.concession of Transportadora de Gas del Perú S.A.A. - TGP (its largest customer).
ii) |
The company’s activities include the renovation and automation of the electrical system and signaling of railways and communications within Santiago—the Santiago - Chillán—Bulnes—n - Bulnes - Caravans and Conception areas. The contract was awarded to the SEC in 2005 for a period of 16 years.
iii) |
It is mainly engaged in providing specialized technological IT services and communications solutions, including system integration to companies in a wide range of industries, such as financial services, telecommunications, manufacturing, mining, retail, among others. The purpose of Logistica de Quimicos del Sur S.A.C. (LQS) is to provide services of receiving, storing, shipping, and transport of sodium hydrosulfide to Sociedad Minera Cerro Verde S.A.A.
The purposeGroup acquired control of this company exclusively, is the execution of civil works and electromechanical assemblies for the mining project Ministro Hales, which is owned by Codelco. It was incorporated into the Group through the acquisition of DSD Construcciones y Montajes S.A. (see Note 31-a)
F-67
(All amounts are expressed in thousands of S/since August 2016, going from a joint venture to a subsidiary (Note33-a). unless otherwise stated)
The following table shows the financial information of the principal joint ventures:
Summarized financial information for joint ventures -
Constructora SK-VyV Ltda. | Consorcio SEC – Cam Chile | Logistica Químicos del Sur S.A.C. | Tecgas N.V. | Adexus S.A. | ||||||||||||||||||||||||||||||||
At December 31, | At December 31, | At December 31, | At December 31, | At December 31, | ||||||||||||||||||||||||||||||||
2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 352 | 871 | 2,221 | 181 | 3,103 | 1,802 | 71,903 | 67 | 13,626 | |||||||||||||||||||||||||||
Other current assets (excluding cash) | 113,731 | 153,019 | 19,862 | 22,248 | 1,559 | 2,785 | ||||||||||||||||||||||||||||||
Other current assets | 41,219 | 92,843 | 128,616 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total current assets | 114,083 | 153,890 | 22,083 | 22,429 | 4,662 | 4,587 | 113,122 | 92,910 | 142,242 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Financial liabilities (excluding trade payables) | — | — | 6,197 | 1,935 | 22 | 75 | — | — | (100,618 | ) | ||||||||||||||||||||||||||
Other current liabilities | (103,941 | ) | (87,780 | ) | (68,116 | ) | ||||||||||||||||||||||||||||||
(including trade payables) | 88,993 | 78,782 | 13,432 | 17,487 | 15,433 | 16,577 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total current liabilities | 88,993 | 78,782 | 19,629 | 19,422 | 15,455 | 16,652 | (103,941 | ) | (87,780 | ) | (168,734 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Non-current | ||||||||||||||||||||||||||||||||||||
Assets | — | — | 25,233 | 24,618 | 27,429 | 26,869 | ||||||||||||||||||||||||||||||
Financial liabilities | — | — | — | — | 56 | 5 | ||||||||||||||||||||||||||||||
Other liabilities | — | — | 8,274 | 6,296 | 640 | 259 | ||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Totalnon-current assets | 192,360 | 33,336 | 174,159 | |||||||||||||||||||||||||||||||||
Total non-current liabilities | — | — | 8,274 | 6,296 | 695 | 264 | (47,686 | ) | (7,367 | ) | (63,397 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Net assets | 25,090 | 75,108 | 19,413 | 21,329 | 15,941 | 14,540 | 153,855 | 31,099 | 84,270 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Constructora SK-VyV Ltda. | Consorcio SEC – Cam Chile | Logistica Químicos del Sur S.A.C. | ||||||||||||||||||||||||||||||||||
At December 31, | At December 31, | At December 31, | ||||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2011 | 2012 | 2013 | 2011 | 2012 | 2013 | ||||||||||||||||||||||||||||
Revenue | — | 259,146 | 593,258 | 32,437 | 29,635 | 37,912 | 8,347 | 6,929 | 6,180 | |||||||||||||||||||||||||||
Depreciation and amortization | — | (98 | ) | (68 | ) | (437 | ) | (360 | ) | (236 | ) | (1,510 | ) | (1,044 | ) | (1,064 | ) | |||||||||||||||||||
Interest income | — | — | — | 730 | 312 | — | 9 | 15 | — | |||||||||||||||||||||||||||
Interest expenses | — | — | — | (823 | ) | (752 | ) | (582 | ) | (1,045 | ) | (46 | ) | (18 | ) | |||||||||||||||||||||
Profit or loss from continuing operations | — | 17,848 | 63,266 | 1,735 | 1,407 | 2,835 | 3490 | 2,729 | 1,993 | |||||||||||||||||||||||||||
Income tax expense | — | (3,756) | (12,164) | (816 | ) | (1,505 | ) | (684 | ) | (1161 | ) | (81 | ) | (594 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Post-tax profit from continuing operations | — | 14,092 | 51,102 | 919 | (98 | ) | 2,151 | 2,329 | 1,912 | 1,399 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total comprehensive income | — | 14,092 | 51,102 | 919 | (98 | ) | 2,151 | 2,329 | 1,912 | 1,399 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-68
(All amounts are expressed in thousands of S/. unless otherwise stated)
Tecgas N.V. | Adexus S.A. | |||||||||||
At December 31, | At December 31, | |||||||||||
2015 | 2016 | 2015 | ||||||||||
Revenue | 426,487 | 457,554 | 334,376 | |||||||||
Depreciation and amortization | (11,749 | ) | (2,266 | ) | (18,387 | ) | ||||||
Interest income | 138 | 215 | 47 | |||||||||
Interest expense | (122 | ) | — | (23,026 | ) | |||||||
Profit (loss) from continuing operations | 1,876 | (3,209 | ) | (35,573 | ) | |||||||
Income tax expense | (892 | ) | (4,078 | ) | 2,391 | |||||||
|
|
|
|
|
| |||||||
Post-tax profit (loss) from continuing operations | 984 | (7,287 | ) | (33,182 | ) | |||||||
|
|
|
|
|
| |||||||
Other comprehensive income | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total comprehensive income | 984 | (7,287 | ) | (33,182 | ) | |||||||
|
|
|
|
|
|
The movement of the investments in joint ventures iswas as follows:
2012 | 2013 | |||||||
Opening balance | — | 12,727 | ||||||
Acquisition through business combination (ii) (Note 31) | 12,237 | 2,262 | ||||||
Debt capitalization | — | 7,989 | ||||||
Equity interest in results | 490 | 22,458 | ||||||
Dividends received | — | (1,708 | ) | |||||
Adjustment SEC (i) | — | 9,379 | ||||||
Adjustment LQS (i) | — | 7,408 | ||||||
Conversion adjustment | — | (757 | ) | |||||
|
|
|
| |||||
Final balance | 12,727 | 59,758 | ||||||
|
|
|
|
2014 | 2015 | 2016 | ||||||||||
Opening balance | 59,758 | 147,069 | 146,303 | |||||||||
Debt capitalization | — | — | 8,308 | |||||||||
Contributions | — | — | 6,889 | |||||||||
Equity interests in profits | 24,313 | 2,193 | (4,909 | ) | ||||||||
Acquisitions | 78,615 | 44,145 | — | |||||||||
Transfer of Adexus from acquisition of control | — | — | (35,870 | ) | ||||||||
Dividends received | (11,527 | ) | (42,122 | ) | (17,843 | ) | ||||||
Decrease in capital | — | (3,364 | ) | (1,798 | ) | |||||||
Translation adjustment | (4,090 | ) | (1,618 | ) | 2,276 | |||||||
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Final balance | 147,069 | 146,303 | 103,356 | |||||||||
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In 20132016, 2015 and 20122014 the following significant movements were carried out (there were no movements in 2011):out:
F-69
(All amounts are expressed in thousands of S/. unless otherwise stated)
PROPERTY, PLANT AND EQUIPMENT, NET |
The movement in property, plant and equipment accounts and its correspondingrelated accumulated depreciation for the year ended December 31, 2013, 20122014, 2015 and 20112016 is as follows:
Land | Own occupied buildings | Machinery | Vehicles | Furniture and fixtures | Other equipment | Replacement units | In-transit units | Work in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2011 | ||||||||||||||||||||||||||||||||||||||||
Cost | 20,260 | 83,939 | 497,710 | 144,596 | 16,646 | 74,615 | 5,384 | 9,515 | 30,488 | 883,153 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (11,170 | ) | (249,578 | ) | (67,966 | ) | (9,771 | ) | (46,644 | ) | — | — | — | (385,129 | ) | ||||||||||||||||||||||||
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Net cost | 20,260 | 72,769 | 248,132 | 76,630 | 6,875 | 27,971 | 5,384 | 9,515 | 30,488 | 498,024 | ||||||||||||||||||||||||||||||
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Net initial cost | 20,260 | 72,769 | 248,132 | 76,630 | 6,875 | 27,971 | 5,384 | 9,515 | 30,488 | 498,024 | ||||||||||||||||||||||||||||||
Additions | — | 6,393 | 117,924 | 80,160 | 6,621 | 17,929 | 630 | 11,158 | 59,866 | 300,681 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary—CAM | — | 1,031 | 45,656 | 4,930 | 3,969 | 1,123 | — | — | 16,447 | 73,156 | ||||||||||||||||||||||||||||||
Reclassifications | — | ��� | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Transfers to intangibles (Note 17) | (13,298 | ) | (13,298 | ) | ||||||||||||||||||||||||||||||||||||
Deductions for sale of assets | — | (2,160 | ) | (31,625 | ) | (10,299 | ) | (1,134 | ) | (2,829 | ) | — | (51 | ) | — | (48,098 | ) | |||||||||||||||||||||||
Adjustments and/or reclassifications for cost—asset disposal | (2,586 | ) | (2,938 | ) | (502 | ) | 2,840 | 2,399 | 704 | 3,057 | (13,700 | ) | (30,270 | ) | (40,996 | ) | ||||||||||||||||||||||||
Depreciation charge | — | (5,701 | ) | (71,960 | ) | (29,899 | ) | (4,283 | ) | (15,180 | ) | — | — | — | (127,023 | ) | ||||||||||||||||||||||||
Depreciation for sales deductions | — | 834 | 25,327 | 6,782 | 948 | 1,843 | — | — | — | 35,734 | ||||||||||||||||||||||||||||||
Adjustments and/or reclassifications of asset depreciation | — | 193 | 3,793 | 1,483 | (3,222 | ) | 65 | — | — | — | 2,312 | |||||||||||||||||||||||||||||
Depreciation for disposals and transfers | — | 220 | 3,759 | — | (202 | ) | 165 | — | — | — | 3,942 | |||||||||||||||||||||||||||||
Foreign currency translation effect | — | — | — | — | — | — | — | — | 2,479 | 2,479 | ||||||||||||||||||||||||||||||
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Net final cost | 17,674 | 70,641 | 340,504 | 132,627 | 11,971 | 31,791 | 9,071 | 6,922 | 65,712 | 686,913 | ||||||||||||||||||||||||||||||
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At December 31, 2011 | ||||||||||||||||||||||||||||||||||||||||
Cost | 17,674 | 86,265 | 629,163 | 222,227 | 28,501 | 91,542 | 9,071 | 6,922 | 65,712 | 1,157,077 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (15,624 | ) | (288,659 | ) | (89,600 | ) | (16,530 | ) | (59,751 | ) | — | — | — | (470,164 | ) | ||||||||||||||||||||||||
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Net cost | 17,674 | 70,641 | 340,504 | 132,627 | 11,971 | 31,791 | 9,071 | 6,922 | 65,712 | 686,913 | ||||||||||||||||||||||||||||||
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Furniture and | Other | Replacement | In-transit | Work | ||||||||||||||||||||||||||||||||||||
Land | Buildings | Machinery | Vehicles | fixtures | equipment | units | units | in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 29,342 | 110,456 | 855,084 | 361,876 | 37,675 | 149,438 | 10,646 | 21,829 | 98,043 | 1,674,389 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (26,130 | ) | (380,281 | ) | (180,793 | ) | (23,906 | ) | (110,305 | ) | (68 | ) | — | — | (721,483 | ) | |||||||||||||||||||||||
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Net carrying amount | 29,342 | 84,326 | 474,803 | 181,083 | 13,769 | 39,133 | 10,578 | 21,829 | 98,043 | 952,906 | ||||||||||||||||||||||||||||||
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Net opening carrying amount | 29,342 | 84,326 | 474,803 | 181,083 | 13,769 | 39,133 | 10,578 | 21,829 | 98,043 | 952,906 | ||||||||||||||||||||||||||||||
Additions | 17 | 19,349 | 133,230 | 87,958 | 8,434 | 40,125 | 98 | 19,982 | 119,773 | 428,966 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Morelco (Note 33 b) | 1,993 | 8,869 | 53,942 | 1,844 | 254 | 1,653 | — | — | 526 | 69,081 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Coasin (Note 33 c) | — | — | — | — | — | 711 | — | — | — | 711 | ||||||||||||||||||||||||||||||
Reclassifications | — | 67,454 | 24,523 | (3,048 | ) | 468 | (3,316 | ) | (2,043 | ) | (31,415 | ) | (52,623 | ) | — | |||||||||||||||||||||||||
Transfers to intangibles (Note 18) | — | — | — | — | — | — | (66,604 | ) | (66,604 | ) | ||||||||||||||||||||||||||||||
Deduction for sale of assets | — | (3,066 | ) | (61,508 | ) | (52,364 | ) | (2,514 | ) | (3,087 | ) | (851 | ) | (830 | ) | — | (124,220 | ) | ||||||||||||||||||||||
Disposals - cost | — | (2,327 | ) | (10,404 | ) | (1,402 | ) | (585 | ) | (8,319 | ) | (605 | ) | — | 801 | (22,841 | ) | |||||||||||||||||||||||
Depreciation charge | — | (11,996 | ) | (89,463 | ) | (52,697 | ) | (6,896 | ) | (22,100 | ) | (7 | ) | — | — | (183,159 | ) | |||||||||||||||||||||||
Depreciation for transfers | — | (2,222 | ) | 375 | (3,036 | ) | 958 | 3,925 | — | — | — | — | ||||||||||||||||||||||||||||
Depreciation for sale deductions | — | 2,959 | 45,001 | 33,458 | 2,214 | 2,394 | 71 | — | — | 86,097 | ||||||||||||||||||||||||||||||
Disposals - accumulated depreciation | — | 1,910 | 8,339 | 1,253 | 351 | 5,753 | — | — | — | 17,606 | ||||||||||||||||||||||||||||||
Translations adjustments | (677 | ) | (285 | ) | ( 8,380 | ) | (787 | ) | (586 | ) | (336 | ) | — | (389 | ) | (85 | ) | (11,525 | ) | |||||||||||||||||||||
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Net final carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
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At December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 30,675 | 200,450 | 986,487 | 394,077 | 43,146 | 176,869 | 7,245 | 9,177 | 99,831 | 1,947,957 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (35,479 | ) | (416,029 | ) | (201.815 | ) | (27,279 | ) | (120,333 | ) | (4 | ) | — | — | (800,939 | ) | |||||||||||||||||||||||
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Net carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
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F-70
(All amounts are expressed in thousands of S/. unless otherwise stated)
Land | Own occupied buildings | Machinery | Vehicles | Furniture and fixtures | Other equipment | Replacement units | In-transit units | Work in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2012 | ||||||||||||||||||||||||||||||||||||||||
Cost | 17,674 | 86,265 | 629,163 | 222,227 | 28,501 | 91,542 | 9,071 | 6,922 | 65,712 | 1,157,077 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (15,624 | ) | (288,659 | ) | (89,600 | ) | (16,530 | ) | (59,751 | ) | — | — | — | (470,164 | ) | ||||||||||||||||||||||||
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Net cost | 17,674 | 70,641 | 340,504 | 132,627 | 11,971 | 31,791 | 9,071 | 6,922 | 65,712 | 686,913 | ||||||||||||||||||||||||||||||
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Net initial cost | 17,674 | 70,641 | 340,504 | 132,627 | 11,971 | 31,791 | 9,071 | 6,922 | 65,712 | 686,913 | ||||||||||||||||||||||||||||||
Additions | 3,713 | 17,955 | 136,853 | 82,363 | 7,161 | 29,962 | 784 | 28,033 | 97,393 | 404,217 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary—Vial y Vives | 5,128 | — | 32,055 | 75 | 1,547 | 379 | — | — | — | 39,184 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary—Stracon GyM | — | — | 24,504 | 47,233 | 31 | — | — | — | — | 71,768 | ||||||||||||||||||||||||||||||
Reclassifications | — | (608 | ) | (21,555 | ) | 20,459 | (216 | ) | 22,045 | 1,218 | (15,609 | ) | (5,734 | ) | — | |||||||||||||||||||||||||
Transfers to intangibles | — | — | — | — | — | — | — | — | (59,755 | ) | (59,755 | ) | ||||||||||||||||||||||||||||
Deduction for sale of assets | — | (5,790 | ) | (45,868 | ) | (16,284 | ) | (633 | ) | (6,281 | ) | (63 | ) | — | — | (74,919 | ) | |||||||||||||||||||||||
Adjustments and/or reclassifications for | — | 1,791 | (3,216 | ) | 1,994 | 1,675 | (1,729 | ) | (806 | ) | (23 | ) | 683 | 369 | ||||||||||||||||||||||||||
Depreciation charge | — | (6,664 | ) | (81,798 | ) | (53,306 | ) | (8,738 | ) | (21,642 | ) | (47 | ) | — | — | (172,195 | ) | |||||||||||||||||||||||
Depreciation for sales deductions | — | 1,198 | 34,234 | 10,987 | 537 | 5,704 | — | — | — | 52,660 | ||||||||||||||||||||||||||||||
Adjustments and/or reclassifications for asset depreciation | — | — | 1,821 | (1,185 | ) | 5,248 | 644 | 5 | — | — | 6,533 | |||||||||||||||||||||||||||||
Depreciation for transfers | — | 362 | 22,427 | (2,565 | ) | 236 | (20,449 | ) | (11 | ) | — | — | — | |||||||||||||||||||||||||||
Foreign currency translation effect | — | — | — | — | — | — | — | — | (1,244 | ) | (1,244 | ) | ||||||||||||||||||||||||||||
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Net final cost | 26,515 | 78,885 | 439,961 | 222,398 | 18,819 | 40,424 | 10,151 | 19,323 | 97,055 | 953,531 | ||||||||||||||||||||||||||||||
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At December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||
Cost | 26,515 | 99,613 | 751,936 | 358,067 | 38,066 | 135,918 | 10,204 | 19,323 | 97,055 | 1,536,697 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (20,728 | ) | (311,975 | ) | (135,669 | ) | (19,247 | ) | (95,494 | ) | (53 | ) | — | — | (583,166 | ) | |||||||||||||||||||||||
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Net cost | 26,515 | 78,885 | 439,961 | 222,398 | 18,819 | 40,424 | 10,151 | 19,323 | 97,055 | 953,531 | ||||||||||||||||||||||||||||||
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Furniture and | Other | Replacement | In-transit | Work | ||||||||||||||||||||||||||||||||||||
Land | Buildings | Machinery | Vehicles | fixtures | equipment | units | units | in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 30,675 | 200,450 | 986,487 | 394,077 | 43,146 | 176,869 | 7,245 | 9,177 | 99,831 | 1,947,957 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (35,479 | ) | (416,029 | ) | (201,815 | ) | (27,279 | ) | (120,333 | ) | (4 | ) | — | — | (800,939 | ) | |||||||||||||||||||||||
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Net carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
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Net initial carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
Additions | — | 9,021 | 105,575 | 86,923 | 12,684 | 22,802 | — | 16,018 | 44,933 | 297,956 | ||||||||||||||||||||||||||||||
CAM Brazil deconsolidation | — | (839 | ) | ( 1,462 | ) | ( 633 | ) | (70 | ) | — | — | — | — | (3,004 | ) | |||||||||||||||||||||||||
Reclassifications | — | 36,180 | 32,389 | 9,300 | 1,245 | 7,272 | 10,529 | (23,092 | ) | (73,823 | ) | — | ||||||||||||||||||||||||||||
Transfers to intangibles (Note 18) | — | — | 68 | — | — | — | — | — | (36,785 | ) | (36,717 | ) | ||||||||||||||||||||||||||||
Transfers to accounts receivable | — | (3,635 | ) | — | — | (777 | ) | (4,442 | ) | — | — | (5,168 | ) | (14,022 | ) | |||||||||||||||||||||||||
Deduction for sale of assets | (2,001 | ) | (1,235 | ) | ( 35,118 | ) | (42,464 | ) | (1,491 | ) | (7,979 | ) | — | — | (14,185 | ) | (104,473 | ) | ||||||||||||||||||||||
Disposals - cost | — | (5,057 | ) | ( 10,224 | ) | ( 362 | ) | (2,299 | ) | (1,810 | ) | (2,326 | ) | (89 | ) | (1,206 | ) | (23,373 | ) | |||||||||||||||||||||
Depreciation charge | — | (13,598 | ) | (116,993 | ) | (54,808 | ) | (5,156 | ) | (24,225 | ) | — | — | — | (214,780 | ) | ||||||||||||||||||||||||
Depreciation for sale deductions | — | 1,003 | 23,907 | 32,566 | 799 | 7,751 | — | — | — | 66,026 | ||||||||||||||||||||||||||||||
Disposals - accumulated depreciation | — | 3,060 | 4,373 | 323 | 503 | 1,331 | — | — | — | 9,590 | ||||||||||||||||||||||||||||||
Translations adjustments | (265 | ) | (306 | ) | ( 8,288 | ) | ( 2,221 | ) | (128 | ) | (506 | ) | — | (197 | ) | (553 | ) | (12,464 | ) | |||||||||||||||||||||
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Net final carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
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At December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 28,409 | 231,029 | 1,074,195 | 443,239 | 52,225 | 191,238 | 15,448 | 1,817 | 13,044 | 2,050,644 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (41,464 | ) | (509,510 | ) | (222,353 | ) | (31,048 | ) | (134,508 | ) | (4 | ) | — | — | (938,887 | ) | |||||||||||||||||||||||
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Net carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
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F-71
(All amounts are expressed in thousands of S/. unless otherwise stated)
Land | Own occupied buildings | Machinery | Vehicles | Furniture and fixtures | Other equipment | Replacement units | In-transit units | Work in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2013 | ||||||||||||||||||||||||||||||||||||||||
Cost | 26,515 | 99,613 | 751,936 | 358,067 | 38,066 | 135,918 | 10,204 | 19,323 | 97,055 | 1,536,697 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (20,728 | ) | (311,975 | ) | (135,669 | ) | (19,247 | ) | (95,494 | ) | (53 | ) | — | — | (583,166 | ) | |||||||||||||||||||||||
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Net cost | 26,515 | 78,885 | 439,961 | 222,398 | 18,819 | 40,424 | 10,151 | 19,323 | 97,055 | 953,531 | ||||||||||||||||||||||||||||||
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Net initial cost | 26,515 | 78,885 | 439,961 | 222,398 | 18,819 | 40,424 | 10,151 | 19,323 | 97,055 | 953,531 | ||||||||||||||||||||||||||||||
Additions | 6,713 | 63,155 | 31,445 | 3,419 | 22,061 | 3,537 | 19,585 | 91,450 | 241,365 | |||||||||||||||||||||||||||||||
Acquisition of subsidiary—DSD | 915 | 624 | 46,125 | 2,973 | 94 | 1,773 | — | — | — | 52,504 | ||||||||||||||||||||||||||||||
Deconsolidation SEC and LQS | — | (1,555 | ) | (5,187 | ) | (119 | ) | (382 | ) | (158 | ) | — | (19,108 | ) | (26,509 | ) | ||||||||||||||||||||||||
Reclassifications | 147 | 10,184 | 35,627 | 6,193 | 1,108 | (4,417 | ) | (2,494 | ) | (15,823 | ) | (30,525 | ) | — | ||||||||||||||||||||||||||
Transfers to intangibles | — | — | (948 | ) | — | — | — | — | — | (38,656 | ) | (39,604 | ) | |||||||||||||||||||||||||||
Deduction for sale of assets | — | (2,467 | ) | (20,432 | ) | (19,213 | ) | (2,579 | ) | (2,676 | ) | — | — | (47,367 | ) | |||||||||||||||||||||||||
Transfer to held for sale assets | — | (5,706 | ) | (15,767 | ) | — | — | — | (21,473 | ) | ||||||||||||||||||||||||||||||
Adjustments and/or reclassifications for | — | (2,641 | ) | (5,752 | ) | (1,592 | ) | (2,074 | ) | (3,004 | ) | (601 | ) | (1,256 | ) | (2,174 | ) | (19,094 | ) | |||||||||||||||||||||
Depreciation charge | — | (7,387 | ) | (84,345 | ) | (59,126 | ) | (9,247 | ) | (19,235 | ) | (38 | ) | — | — | (179,378 | ) | |||||||||||||||||||||||
Depreciation for transfers | — | (144 | ) | (2,623 | ) | 1,746 | (12 | ) | 1,010 | 23 | — | — | — | |||||||||||||||||||||||||||
Depreciation for sales deductions | — | 1,587 | 14,984 | 11,961 | 2,432 | 1,276 | — | — | — | 32,240 | ||||||||||||||||||||||||||||||
Adjustments and/or reclassifications for | — | 542 | 3,787 | 295 | 2,168 | 2,138 | — | — | — | 8,930 | ||||||||||||||||||||||||||||||
Foreign currency translation effect | (285 | ) | (15 | ) | (2,102 | ) | (111 | ) | 23 | (59 | ) | — | — | — | (2,549 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||||
Net final cost | 27,292 | 84,326 | 476,544 | 181,083 | 13,769 | 39,133 | 10,578 | 21,829 | 98,042 | 955,406 | ||||||||||||||||||||||||||||||
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At December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||
Cost | 27,292 | 110,457 | 856,716 | 361,876 | 37,674 | 149,437 | 10,646 | 21,829 | 98,042 | 1,676,779 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (26,131 | ) | (380,172 | ) | (180,793 | ) | (23,905 | ) | (110,304 | ) | (68 | ) | — | — | (721,373 | ) | |||||||||||||||||||||||
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Net cost | 27,292 | 84,326 | 476,544 | 181,083 | 13,769 | 39,133 | 10,578 | 21,829 | 98,042 | 952,596 | ||||||||||||||||||||||||||||||
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Land | Buildings | Machinery | Vehicles | Furniture and fixtures | Other equipment | Replacement units | In-transit units | Work in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 28,409 | 231,029 | 1,074,195 | 443,239 | 52,225 | 191,238 | 15,448 | 1,817 | 13,044 | 2,050,644 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (41,464 | ) | (509,510 | ) | (222,353 | ) | (31,048 | ) | (134,508 | ) | (4 | ) | — | — | (938,887 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net initial carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
Additions | 6,238 | 12,126 | 81,378 | 50,574 | 4,423 | 24,870 | 553 | 19,312 | 13,594 | 213,068 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary – Adexus (Note 33 a) | — | 13,913 | — | 420 | 1,525 | 26,130 | — | — | — | 41,988 | ||||||||||||||||||||||||||||||
Reclassifications | — | 588 | 1,927 | ( 1,172 | ) | 4,456 | 13,156 | 2,583 | (17,349 | ) | (4,189 | ) | — | |||||||||||||||||||||||||||
Transfers from inventories | 2,941 | — | — | — | — | — | — | — | — | 2,941 | ||||||||||||||||||||||||||||||
Transfers to intangibles (Note 18) | — | — | — | — | — | — | — | — | (1,257 | ) | (1,257 | ) | ||||||||||||||||||||||||||||
Deduction for sale of assets | (5,256 | ) | (14,333 | ) | ( 60,374 | ) | (48,521 | ) | (1,724 | ) | (5,766 | ) | — | — | — | (135,974 | ) | |||||||||||||||||||||||
Disposals - cost | — | ( 1,232 | ) | ( 15,149 | ) | ( 1,354 | ) | (1,579 | ) | (4,364 | ) | (661 | ) | (2 | ) | — | (24,341 | ) | ||||||||||||||||||||||
Depreciation charge | — | (14,842 | ) | (104,638 | ) | (48,041 | ) | (7,548 | ) | (28,127 | ) | (5 | ) | — | — | (203,201 | ) | |||||||||||||||||||||||
Impairment loss | — | ( 73 | ) | ( 5,190 | ) | ( 317 | ) | (3,301 | ) | (382 | ) | — | — | — | (9,263 | ) | ||||||||||||||||||||||||
Depreciation for sale deductions | — | 8,113 | 48,266 | 29,536 | 1,026 | 1,907 | — | — | — | 88,848 | ||||||||||||||||||||||||||||||
Disposals - accumulated depreciation | — | 939 | 14,430 | 886 | 1,540 | 3,991 | — | — | — | 21,786 | ||||||||||||||||||||||||||||||
Translations adjustments | 282 | 130 | 5,987 | 922 | 176 | (344 | ) | — | — | 94 | 7,247 | |||||||||||||||||||||||||||||
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Net final carrying amount | 32,614 | 194,894 | 531,322 | 203,819 | 20,171 | 87,801 | 17,914 | 3,778 | 21,286 | 1,113,599 | ||||||||||||||||||||||||||||||
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At December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 32,614 | 241,150 | 1,088,229 | 443,641 | 59,593 | 246,102 | 17,923 | 3,778 | 21,286 | 2,154,316 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (46,256 | ) | (556,907 | ) | (239,822 | ) | (39,422 | ) | (158,301 | ) | (9 | ) | — | — | (1,040,717 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 32,614 | 194,894 | 531,322 | 203,819 | 20,171 | 87,801 | 17,914 | 3,778 | 21,286 | 1,113,599 | ||||||||||||||||||||||||||||||
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F-72
(All amounts are expressed in thousands of S/. unless otherwise stated)
In 20132016 and 2012,2015 additions to costthe carrying amount correspond to the acquisition of fixed assets under finance leases andor by direct acquisition.
The balance of work in progress at December 31, 2016 relates mainly to investments made by the subsidiary GMP S.A. for S/19 million (S/3 million at December 31, 2015) for the activities of oil drilling in order to increase the volume of exploitation of oil and gas. Additionally, the balance includes the construction work of Proyecto Hotel Larcomar for S/14.4 million (S/11 million in 2015).
In 20132016 fixed asset sales amounted to S/70.5 million (S/55.8 million and S/42.4 million in 2015 and 2014, respectively) resulting in profits of S/18.4 million (profits of S/17.4 and S/4.3 million in 2015 and 2014, respectively) that are shown in the salestatement of income within “other income and expenses, net” (Note 29), the difference between the income proceeds from disposals of fixed assets amounted to S/.20.4 million (S/.22.2 million in 2012)and their profit are shown within “revenue from construction activities” and “gross profit”, resulting in a profit of S/.0.7 million (profit of S/.1.2 million in 2012), which is shown in the income statement under “other income and expenses”.
The item transferred to held for sale assets amounting of S/.21.5 million corresponds to certain machinery and furniture owned by the subsidiary GyM S.A., for the execution of a project in Chile. The sale of these assets has been approved by management. The sale is expected to occur in 2014.respectively.
Depreciation onof fixed assets and investment properties for the year is broken down in the statement of income statement as follows:
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Cost of services and goods | 113,063 | 159,526 | 167,981 | 168,634 | 196,725 | 191,113 | ||||||||||||||||||
Administrative expenses | 13,960 | 11,980 | 11,397 | 14,525 | 18,055 | 12,088 | ||||||||||||||||||
Capitalization to inventories | — | 689 | — | |||||||||||||||||||||
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Total depreciation related to property, plant and equipment | 127,023 | 172,195 | 179,378 | 183,159 | 214,780 | 203,201 | ||||||||||||||||||
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(+) Depreciation related to investment property | — | 1,512 | 1,991 | 2,151 | 2,290 | 2,321 | ||||||||||||||||||
(-) Capitalization to inventories | — | (689 | ) | — | ||||||||||||||||||||
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Total depreciation charged to expenses | 127,023 | 173,018 | 181,369 | 185,310 | 217,070 | 205,522 | ||||||||||||||||||
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The Group determined indicators of impairment of items of property, plant and equipment relating to: i) early termination of the GSP concession in respect of Consorcio Constructor Ductos del Sur (CCDS) and ii) assets understand-by status. Management calculated the recoverable amount of those assets as the fair value; fair value was determined taking into account appraisals performed by independent experts. The recognized impairment loss is mainly related to Consorcio Constructor Ductos del Sur (CCDS) for a total of S/4.1 million (Note5.1-f), GyM for S/2.39 million and Stracon GyM S.A. for S/2.34 million, which are shown within “Expenses by nature” (Note 27).
The net carrying amount of machinery and equipment, vehicles and furniture and fixtures acquired under finance leases or leasebacklease agreements is broken down as follows:
December 31, | ||||||||
2012 | 2013 | |||||||
Cost | 621,974 | 480,099 | ||||||
Accumulated depreciation | (268,372 | ) | (201,999 | ) | ||||
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| |||||
Net cost | 353,602 | 278,100 | ||||||
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At December 31, | ||||||||
2015 | 2016 | |||||||
Cost of acquisition | 735,591 | 800,927 | ||||||
Accumulated depreciation | (327,465 | ) | (386,411 | ) | ||||
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Net carrying amount | 408,126 | 414,516 | ||||||
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Property,Other financial liabilities are secured with items of property, plant and equipment amounting tofor S/.240.5617.9 million (S/.444.6440.8 million as ofin 2015).
At December 31, 2012)2016 the Group have been granted as guarantee of certain borrowings.fully depreciated property, plant and equipment items that are still in use for S/151.6 million (S/155.8 million, at December 31, 2015).
F-73
(All amounts are expressed in thousands of S/. unless otherwise stated)
INTANGIBLE ASSETS, NET |
The movement of intangible assets and that of their correspondingrelated accumulated amortization, as of December 31, 2013, 20122014, 2015 and 2011,2016, is as follows:
Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Costs of generated internally software and development costs | Block I and Block V | Development expenses | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2011 | ||||||||||||||||||||||||||||||||||||||||
Cost | 46,904 | — | 365,046 | 6,391 | 8,907 | 96,298 | 3,623 | 13,288 | — | 540,457 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (21,995 | ) | — | (180,845) | (2,467) | (4,404 | ) | (48,154 | ) | (3,623 | ) | — | — | (261,488 | ) | |||||||||||||||||||||||||
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| |||||||||||||||||||||
Net cost | 24,909 | — | 184,201 | 3,924 | 4,503 | 48,144 | — | 13,288 | — | 278,969 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net initial cost | 24,909 | — | 184,201 | 3,924 | 4,503 | 48,144 | — | 13,288 | — | 278,969 | ||||||||||||||||||||||||||||||
Additions | — | — | 25,378 | 175 | 17,864 | 4,731 | — | — | 21,376 | 69,524 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary – CAM (Note 31) | — | — | — | 10,952 | — | — | — | — | — | 10,952 | ||||||||||||||||||||||||||||||
Transfers from work in progress | — | — | — | — | — | 13,298 | — | — | — | 13,298 | ||||||||||||||||||||||||||||||
Impairment charge | — | — | — | — | (3,436 | ) | — | — | — | — | (3,436 | ) | ||||||||||||||||||||||||||||
Disposals—cost | — | — | (385) | — | — | — | — | — | — | (385 | ) | |||||||||||||||||||||||||||||
Amortization charge | — | — | (26,902) | (2,440) | (4,400 | ) | (17,394 | ) | — | — | (87 | ) | (51,223 | ) | ||||||||||||||||||||||||||
Disposals—amortization | — | — | 98 | — | — | — | — | — | — | 98 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net final cost | 24,909 | — | 182,390 | 12,611 | 14,531 | 48,779 | — | 13,288 | 21,289 | 317,797 | ||||||||||||||||||||||||||||||
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At December 31, 2011 | ||||||||||||||||||||||||||||||||||||||||
Cost | 46,904 | — | 390,039 | 17,518 | 26,771 | 114,327 | 3,623 | 13,288 | 21,376 | 633,846 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (21,995 | ) | — | (207,649) | (4,907) | (12,240 | ) | (65,548 | ) | (3,623 | ) | — | (87 | ) | (316,049 | ) | ||||||||||||||||||||||||
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Net cost | 24,909 | — | 182,390 | 12,611 | 14,531 | 48,779 | — | 13,288 | 21,289 | 317,797 | ||||||||||||||||||||||||||||||
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Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Internally generated software and development costs | Costs of development of wells | Development costs | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 95,342 | 75,812 | 438,167 | 57,791 | 27,547 | 217,214 | 3,623 | 13,288 | 11,636 | 940,420 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (2,868 | ) | (258,172 | ) | (28,256 | ) | (23,450 | ) | (118,612 | ) | (3,623 | ) | — | (2,559 | ) | (459,535 | ) | |||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 73,347 | 72,944 | 179,995 | 29,535 | 4,097 | 98,602 | — | 13,288 | 9,077 | 480,885 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net initial carrying amount | 73,347 | 72,944 | 179,995 | 29,535 | 4,097 | 98,602 | — | 13,288 | 9,077 | 480,885 | ||||||||||||||||||||||||||||||
Additions | — | — | 135,502 | — | 2,804 | — | — | — | 5,238 | 143,544 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Morelco (Note 33 b) | 103,055 | 33,326 | 847 | 30,318 | — | — | — | — | — | 167,546 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Coasin (Note 33 c) | 6,413 | — | 6 | — | 1,371 | — | — | — | — | 7,790 | ||||||||||||||||||||||||||||||
Transfers from assets under construction (Note 17) | — | — | 1,845 | — | 1,677 | 64,759 | — | — | (1,677 | ) | 66,604 | |||||||||||||||||||||||||||||
Reclassifications | — | — | 920 | — | 180 | (251 | ) | — | — | (849 | ) | — | ||||||||||||||||||||||||||||
Derecognition - cost | — | — | (16,016 | ) | — | (29 | ) | — | — | — | (91 | ) | (16,136 | ) | ||||||||||||||||||||||||||
Amortization charge | — | — | (26,823 | ) | (14,987 | ) | (3,013 | ) | (31,780 | ) | — | — | (778 | ) | (77,381 | ) | ||||||||||||||||||||||||
Derecognition - accumulated amortization | — | — | 15,491 | — | 1 | — | — | — | — | 15,492 | ||||||||||||||||||||||||||||||
Amortization reversal (Vial y Vives) | — | 2,651 | — | — | — | — | — | — | — | 2,651 | ||||||||||||||||||||||||||||||
Translations adjustments | (2,666 | ) | (6,303 | ) | (88 | ) | (1,876 | ) | (1,319 | ) | — | — | — | — | (12,252 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||||
Net final carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
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At December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 202,144 | 102,835 | 561,183 | 86,233 | 32,231 | 281,722 | 3,623 | 13,288 | 14,257 | 1,297,516 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (269,504 | ) | (43,243 | ) | (26,462 | ) | (150,392 | ) | (3,623 | ) | — | (3,337 | ) | (518,773 | ) | |||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
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F-74
(All amounts are expressed in thousands of S/. unless otherwise stated)
Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Costs of generated internally software and development costs | Block I and Block V | Development expenses | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2012 | ||||||||||||||||||||||||||||||||||||||||
Cost | 46,904 | — | 390,039 | 17,518 | 26,771 | 114,327 | 3,623 | 13,288 | 21,376 | 633,846 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (21,995 | ) | — | (207,649 | ) | (4,907 | ) | (12,240 | ) | (65,548 | ) | (3,623 | ) | — | (87 | ) | (316,049 | ) | ||||||||||||||||||||||
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| |||||||||||||||||||||
Net cost | 24,909 | — | 182,390 | 12,611 | 14,531 | 48,779 | — | 13,288 | 21,289 | 317,797 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net initial cost | 24,909 | — | 182,390 | 12,611 | 14,531 | 48,779 | — | 13,288 | 21,289 | 317,797 | ||||||||||||||||||||||||||||||
Additions | — | — | 28,406 | — | 3,998 | 4,897 | — | — | 1,956 | 39,257 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary—Vial y Vives (Note 31) | 28,944 | 75,845 | — | 23,024 | — | — | — | — | — | 127,813 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary—Stracon GyM (Note 31) | 13,366 | — | — | 9,976 | — | — | — | — | — | 23,342 | ||||||||||||||||||||||||||||||
Deductions | — | — | (263 | ) | — | (20 | ) | — | — | — | (13,962 | ) | (14,245 | ) | ||||||||||||||||||||||||||
Transfers from work in progress (Note 16) | — | — | — | — | — | 59,686 | — | — | 69 | 59,755 | ||||||||||||||||||||||||||||||
Disposals—cost | — | — | (537 | ) | — | (7,654 | ) | — | — | — | (38 | ) | (8,229 | ) | ||||||||||||||||||||||||||
Amortization charge | — | (410 | ) | (31,413 | ) | (7,147 | ) | (10,427 | ) | (21,828 | ) | — | — | (260 | ) | (71,485 | ) | |||||||||||||||||||||||
Disposals—amortization | — | — | 29 | — | 6,307 | — | — | — | 57 | 6,393 | ||||||||||||||||||||||||||||||
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Net final cost | 67,219 | 75,435 | 178,612 | 38,464 | 6,735 | 91,534 | — | 13,288 | 9,111 | 480,398 | ||||||||||||||||||||||||||||||
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At December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||
Cost | 89,214 | 75,845 | 417,645 | 50,518 | 23,095 | 178,910 | 3,623 | 13,288 | 9,401 | 861,539 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (21,995 | ) | (410 | ) | (239,033 | ) | (12,054 | ) | (16,360 | ) | (87,376 | ) | (3,623 | ) | — | (290 | ) | (381,141 | ) | |||||||||||||||||||||
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Net cost | 67,219 | 75,435 | 178,612 | 38,464 | 6,735 | 91,534 | — | 13,288 | 9,111 | 480,398 | ||||||||||||||||||||||||||||||
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Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Internally generated software and development costs | Costs of development of wells | Development costs | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 202,144 | 102,835 | 561,183 | 86,233 | 32,231 | 281,722 | 3,623 | 13,288 | 14,257 | 1,297,516 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (269,504 | ) | (43,243 | ) | (26,462 | ) | (150,392 | ) | (3,623 | ) | — | (3,337 | ) | (518,773 | ) | |||||||||||||||||||||
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Net carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
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Net initial carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
Additions | 5,418 | — | 165,149 | — | 9,141 | 11,842 | — | — | 3,429 | 194,979 | ||||||||||||||||||||||||||||||
CAM Brazil Deconsolidation | — | — | — | — | (129 | ) | — | — | — | — | (129 | ) | ||||||||||||||||||||||||||||
Transfers from assets under construction (Note 17) | — | — | — | (68 | ) | 1,562 | 33,396 | — | — | 1,827 | 36,717 | |||||||||||||||||||||||||||||
Transfers to accounts receivable | — | — | (2,278 | ) | — | — | — | — | — | — | (2,278 | ) | ||||||||||||||||||||||||||||
Transfers topre-paid expenses | — | — | (10,923 | ) | — | — | — | — | — | (3,684 | ) | (14,607 | ) | |||||||||||||||||||||||||||
Reclassifications | — | — | — | — | 188 | (188 | ) | — | — | (3 | ) | (3 | ) | |||||||||||||||||||||||||||
Amortization charge | — | — | (25,683 | ) | (14,697 | ) | (6,033 | ) | (42,117 | ) | — | — | (825 | ) | (89,355 | ) | ||||||||||||||||||||||||
Translations adjustments | (15,335 | ) | (6,084 | ) | (51 | ) | (4,031 | ) | (280 | ) | — | — | — | — | (25,781 | ) | ||||||||||||||||||||||||
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Net final carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 | ||||||||||||||||||||||||||||||
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At December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 192,227 | 96,751 | 716,125 | 82,134 | 42,761 | 326,723 | 3,623 | 13,288 | 15,425 | 1,489,057 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (298,232 | ) | (57,940 | ) | (32,543 | ) | (192,460 | ) | (3,623 | ) | — | (3,761 | ) | (610,771 | ) | |||||||||||||||||||||
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Net carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 |
F-75
(All amounts are expressed in thousands of S/. unless otherwise stated)
Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Costs of generated internally software and development costs | Block I and Block V | Development expenses | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1,2013 | ||||||||||||||||||||||||||||||||||||||||
Cost | 89,214 | 75,845 | 417,645 | 50,518 | 23,095 | 178,910 | 3,623 | 13,288 | 9,401 | 861,539 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (21,995 | ) | (410 | ) | (239,033 | ) | (12,054 | ) | (16,360 | ) | (87,376 | ) | (3,623 | ) | — | (290 | ) | (381,141 | ) | |||||||||||||||||||||
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Net cost | 67,219 | 75,435 | 178,612 | 38,464 | 6,735 | 91,534 | — | 13,288 | 9,111 | 480,398 | ||||||||||||||||||||||||||||||
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Net initial cost | 67,219 | 75,435 | 178,612 | 38,464 | 6,735 | 91,534 | — | 13,288 | 9,111 | 480,398 | ||||||||||||||||||||||||||||||
Additions | — | — | 14,622 | — | 5,106 | — | — | — | 4,976 | 24,704 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary DSD | 7,868 | — | 557 | 5,184 | — | — | — | — | — | 13,609 | ||||||||||||||||||||||||||||||
Deconsolidation of subsidiaries | — | — | (1,203 | ) | — | (902 | ) | — | — | — | (5 | ) | (2,110 | ) | ||||||||||||||||||||||||||
Transfers from work in progress (Note 16) | — | — | 2,122 | — | 290 | 38,622 | — | — | (1,429 | ) | 39,605 | |||||||||||||||||||||||||||||
Disposals—cost | — | (33 | ) | (1,966 | ) | (100 | ) | (42 | ) | (317 | ) | — | — | (1,307 | ) | (3,765 | ) | |||||||||||||||||||||||
Amortization charge | — | (2,458 | ) | (18,929 | ) | (15,472 | ) | (7,084 | ) | (31,236 | ) | — | — | (2,591 | ) | (77,770 | ) | |||||||||||||||||||||||
Disposals—amortization | — | — | (323 | ) | — | (6 | ) | — | — | — | 322 | (7 | ) | |||||||||||||||||||||||||||
Other adjustments | — | — | 6,728 | — | — | — | — | — | — | 6,728 | ||||||||||||||||||||||||||||||
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Net final cost | 75,087 | 72,944 | 180,220 | 28,076 | 4,097 | 98,603 | — | 13,288 | 9,077 | 481,392 | ||||||||||||||||||||||||||||||
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At December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||
Cost | 97,082 | 75,812 | 438,505 | 55,602 | 27,547 | 217,215 | 3,623 | 13,288 | 11,636 | 940,310 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (21,995 | ) | (2,868 | ) | (258,285 | ) | (27,526 | ) | (23,450 | ) | (118,612 | ) | (3,623 | ) | — | (2,559 | ) | (458,918 | ) | |||||||||||||||||||||
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Net cost | 75,087 | 72,944 | 180,220 | 28,076 | 4,097 | 98,603 | — | 13,288 | 9,077 | 481,392 | ||||||||||||||||||||||||||||||
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Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Internally generated software and development costs | Costs of development of wells | Development costs | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 192,227 | 96,751 | 716,125 | 82,134 | 42,761 | 326,723 | 3,623 | 13,288 | 15,425 | 1,489,057 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (298,232 | ) | (57,940 | ) | (32,543 | ) | (192,460 | ) | (3,623 | ) | — | (3,761 | ) | (610,771 | ) | |||||||||||||||||||||
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Net carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 | ||||||||||||||||||||||||||||||
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Net initial carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 | ||||||||||||||||||||||||||||||
Additions | — | — | 118,222 | — | 16,477 | 17,772 | — | — | 19,255 | 183,568 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary – Adexus (Note 33 a) | 930 | 9,088 | 6,090 | 12,822 | — | — | — | — | 4,203 | 33,133 | ||||||||||||||||||||||||||||||
Transfers from assets under construction (Note 17) | — | — | — | — | — | — | — | — | 1,257 | 1,257 | ||||||||||||||||||||||||||||||
Reclasifications | — | — | 5,258 | — | 345 | — | — | — | (5,603 | ) | — | |||||||||||||||||||||||||||||
Disposals – net cost | — | — | (1,395 | ) | — | — | (2,395 | ) | — | — | — | (3,790 | ) | |||||||||||||||||||||||||||
Amortization charge | — | — | (28,206 | ) | (4,376 | ) | (8,043 | ) | (40,918 | ) | — | — | (1,200 | ) | (82,743 | ) | ||||||||||||||||||||||||
Impairment loss | (38,680 | ) | (15,628 | ) | — | — | — | — | — | — | — | (54,308 | ) | |||||||||||||||||||||||||||
Translations adjustments | 12,038 | 3,672 | (102 | ) | 171 | 1,024 | — | — | — | (78 | ) | 2,149 | ||||||||||||||||||||||||||||
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Net final carrying amount | 144,520 | 93,666 | 517,760 | 32,811 | 20,021 | 108,722 | — | 13,288 | 29,498 | 960,286 | ||||||||||||||||||||||||||||||
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At December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 205,195 | 109,511 | 844,213 | 95,127 | 60,607 | 342,100 | 3,623 | 13,288 | 34,294 | 1,707,958 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (60,675 | ) | (15,845 | ) | (326,453 | ) | (62,316 | ) | (40,586 | ) | (233,378 | ) | (3,623 | ) | — | (4,796 | ) | (747,672 | ) | |||||||||||||||||||||
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Net carrying amount | 144,520 | 93,666 | 517,760 | 32,811 | 20,021 | 108,722 | — | 13,288 | 29,498 | 960,286 | ||||||||||||||||||||||||||||||
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F-76
(All amounts are expressed in thousands of S/. unless otherwise stated)
a) | Goodwill - |
Management reviews the results of its businesses based on the type of economic activity carried out. Economic activities which have given rise
At December 31 goodwill allocated to goodwill in the Group are construction, electro-mechanical, engineering services and the sale of IT equipment and services.
The cash-generating units belong to the following segments:(CGU) are:
December 31, | ||||||||
2012 | 2013 | |||||||
Construction—Engineering (Note 31 a-b) | 28,944 | 36,812 | ||||||
Construction—Mining services (Note 31-c) | 13,366 | 13,366 | ||||||
Construction—Electromechanical | 20,737 | 20,737 | ||||||
Information technology services | 4,172 | 4,172 | ||||||
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67,219 | 75,087 | |||||||
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Goodwill from the electromechanical engineering business corresponds to the previous acquisition in prior years of the subsidiary GMA S.A., which was later merged with subsidiary GyM S.A.
2015 | 2016 | |||||||
Engineering and construction | 125,514 | 98,587 | ||||||
Electromechanical | 20,737 | 20,737 | ||||||
Mining and construction services | 13,366 | 13,366 | ||||||
IT equipment and services | 4,172 | 5,102 | ||||||
Telecommunications services | 6,443 | 6,728 | ||||||
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170,232 | 144,520 | |||||||
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As a result of the impairment testing on goodwill performed by Management on an annual basis, the recoverable amount of the related cash-generating unit (CGU) is determined based on the higher of its value in use.use and fair value less cost of disposal. Value in use is determined based on the future cash flows expected to be generated by the assessed CGU.
As a result of these assessments no provisions foran impairment were required.was identified in one of the CGU’s, Vial y Vives—DSD, and was accounted as of December 31st, 2016. The loss to impairment was generated due to the decrease in the expected flows, as a result of the reduction of the contracts linked to the Backlog. The amount of the impairment it impacted the total amount of goodwill was S/38.7 million.
The main criteriaMajor assumptions used by the Group to determinein determining the fair value less cost of disposal and the value in use arewere as follows:
Mining construction services | Engineering construction | Electro- mechanical | IT equipment and services | Engineering and construction | Electro- mechanical | Mining and construction | IT equipment and services | Telecommunication services | ||||||||||||||||||||||||||||
2012 - | ||||||||||||||||||||||||||||||||||||
% | % | % | % | % | ||||||||||||||||||||||||||||||||
2015 - | ||||||||||||||||||||||||||||||||||||
Gross margin | 10.20 | % | 29.50 | % | 11.15 | % | 34.92 | % | 10.80 to 11.50 | 10.33 | 11.81 | 24.31 | 14.39 | |||||||||||||||||||||||
Growth rate | 5.00 | % | 5.00 | % | 1.00 | % | 1.60 | % | ||||||||||||||||||||||||||||
Terminal growth rate | 3.00 | 2.00 | 2.00 | — | — | |||||||||||||||||||||||||||||||
Discount rate | 14.00 | % | 12.00 | % | 14.00 | % | 11.00 | % | 9.66 to 12.72 | 11.01 | 11.71 | 21.74 | 10.02 | |||||||||||||||||||||||
2013 - | ||||||||||||||||||||||||||||||||||||
2016 - | ||||||||||||||||||||||||||||||||||||
Gross margin | 17.00 | % | 12.99 | % | 10.80 | % | 31.89 | % | �� | 9.50 to 12.99 | 11.10 | 12.04 | 15.00 to 23.19 | 11.75 | ||||||||||||||||||||||
Growth rate | 3.00 | % | 3.00 | % | 3.00 | % | 3.00 | % | ||||||||||||||||||||||||||||
Terminal growth rate | 3.00 to 4.00 | 2.00 | 2.00 | 2.00 to 3.00 | 3.00 | |||||||||||||||||||||||||||||||
Discount rate | 12.00 | % | 9.80 | % | 9.80 | % | 22.40 | % | 9.87 to 11.85 | 11.48 | 11.31 | 14.64 to 24.10 | 10.80 |
These assumptions have been used for the analysis of each cash-generating unit (CGU)CGU included in the operating segmentseconomic activities for a period of 5 years and considering a recoverable residual value with no growth.years.
Management determines the budgeted gross margins based on past results and market development expectations. Average growth rates are consistent with those prevailing in the industry. Discount rates used arepre-tax orpost-tax as appropriate and reflect the specific risk related to the assessed CGUs.
b) | Trademarks - |
The GroupThis item mainly comprises the trademarks acquired trademarks in athe business combination process which were recognized at fair value on the acquisition date ofprocesses with Vial y Vives S.A.CS.A.C. (S/75.4 million) in October 2012.2012; Morelco S.A.S. (S/33.33 million) in December 2014; and Adexus S.A. (S/9.1 million) in August 2016. Management estimated a finite useful life of 30 years. The carrying amount at December 31, 2013 amounted to S/.72.9 million (S/.75.4 million at December 31, 2012).determined that the brands obtained from Vial y Vives, Morelco and Adexus have indefinite lives; consequently, annual impairment tests are performed on these intangibles, as described in paragraph a) above.
F-77
(All amounts are expressed in thousands of S/. unless otherwise stated)
As a result of these tests, at December 31, 2016, the Vial y Vives - DSD trademark was partially impaired, the amount of the impairment was S/15.6 million. No provision for impairment was considered necessary to be recorded for 2015.
Major assumptions used by the Group in determining the fair value less cost of disposal are as follows:
Engineering and construction and | IT equipment services | |||||||||||
Morelco % | Vial y Vives - DSD | Adexus % | ||||||||||
2015 - | ||||||||||||
Average revenue growth rate | 13.65 | 44.49 | — | |||||||||
Terminal growth rate | 3.00 | 3.00 | — | |||||||||
Discount rate | 12.72 | 9.66 | — | |||||||||
2016 - | ||||||||||||
Average revenue growth rate | 14.39 | 24.53 | 12.60 | |||||||||
Terminal growth rate | 3.00 | 4.00 | 3.00 | |||||||||
Discount rate | 11.85 | 9.87 | 16.05 |
c) | Concessions - |
The intangible asset mainly includes the value attributable to the concession for the Ancón-Huacho-Pativilca road section of the Panamericana Norte highway. TheConcession’s intangibles arising from this concession as ofat December 31, 20132016 mainly comprise theconsist of: i) EPC contract for S/.109.2405 million highway improvement for S/.20.2 million and initial capitalized expenses of S/. 12.2 million (S/.117 million, S/.21.3 million and S/.13.1317.5 million at December 31,2012 respectively)31, 2015) comprising the construction of the second section of“Ancón-Huacho-Pativilca” highway; ii) improvement of highway for S/18.1 million (S/19.6 million at December 31, 2015), and iii) Borrowing costs that were capitalized for a total of S/22.5 at an interest rate ranging from 7.14% y 8.72% (S/7.7 million in 2015 at an interest rates ranging from 6.75% to 8.375%). UnderBy those contracts, the Concessionaire hasshould perform activities to construct, improve and rehabilitate theremediate road infrastructure overduring the Concession effective period of the concession.period.
d) |
Through one of its subsidiaries, the Group operates and extracts oil from two oil fields (Block I and Block V) located in the province of Talara in northern Peru. Both oil fields are operated under long-term service contracts underagreements by which the Group provides hydrocarbon extraction services to Perupetro,Perupetro.
On December 10, 2014 the statePeruvian Government granted subsidiary GMP S.A. a right of exploiting for 30 years the oil company. Hydrocarbons extracted from each field belongblocks III and IV (owned by the Peruviangovernment-run entity- Perupetro) located in Talara, Piura, 230 wells and 330 wells respectively. The total investment expected to Perupetro, whichbe made in turn pays the Group a variable fee per barrel of lifted hydrocarbons, whichboth wells is based on a basket of international crude prices and the level of production. The fee is paid on a monthly basis. The Group’s activities are focused on proved reserves development and production and are conductedestimated to be US$560 million; operations began in mature oil fields, which have been producing oil for over 100 years (in the case of Block I) and over 50 years (in the case of Block V). Such service contracts do not qualify as public service concessions, as defined by IFRIC 12. The extraction services that the Group provides and the infrastructure that it maintains are not a service that is provided to the public. Such infrastructure is not designed for public use and the services provided are exclusively for Perupetro.April 2015 in both blocks.
As part of the Group’s obligations under the relevant service contracts, it is required to invest inagreements, certain costs to preparewill be incurred in preparing the wells located in BlockBlocks I, III, IV and Block V for providing oil and hydrocarbon exploration services, whichV. These costs are capitalized as part of the intangible asset withassets at a carrying amount on December 31, 2013 of S/.91.8 million and S/.6.9 million, respectively (S/.82.5 million and S/.980 million at December 31, 2012, respectively)2016 (S/118.4 million at December 31, 2015). These
All blocks are amortized alongon the concession terms, which set maturity in 2021basis of the useful lives of the wells (estimated to be 5 years for BlockBlocks I and in 2023V and 10 years for Block V.Blocks III and IV), which is less than the total effective period of the service agreement with Perupetro.
e) | Amortization of intangible assets - |
Amortization of intangible assets -
The amortization of intangibles is distributedbroken down in the income statement as follows:
2011 | 2012 | 2013 | ||||||||||
Cost of sales (Note 25) | 44,553 | 60,517 | 66,637 | |||||||||
Administrative expenses (Note 25) | 6,670 | 10,968 | 11,133 | |||||||||
|
|
|
|
|
| |||||||
51,223 | 71,485 | 77,770 | ||||||||||
|
|
|
|
|
|
2014 | 2015 | 2016 | ||||||||||
Cost of sales and services (Note 27) | 68,089 | 81,841 | 74,849 | |||||||||
Administrative expenses (Note 27) | 6,641 | 7,514 | 7,894 | |||||||||
|
|
|
|
|
| |||||||
74,730 | 89,355 | 82,743 | ||||||||||
|
|
|
|
|
|
(All amounts expressed in thousands of S/ unless otherwise stated)
This itemAt December 31 this account comprises:
Total | Current | Non- current | Total | Current | Non-current | |||||||||||||||||||||||||||||||||||||||||||
As of December 31, | As of December 31, | As of December 31, | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | ||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2012 | 2013 | 2012 | 2013 | |||||||||||||||||||||||||||||||||||||||||||
Bank overdrafts | — | 8,396 | — | 8,396 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Bank loans | 501,692 | 514,228 | 337,196 | 381,005 | 164,496 | 133,223 | 1,480,071 | 2,131,901 | 1,082,860 | 1,835,340 | 397,211 | 296,561 | ||||||||||||||||||||||||||||||||||||
Finance leases | 343,782 | 281,594 | 115,623 | 105,114 | 228,159 | 176,480 | 301,285 | 240,141 | 145,160 | 117,307 | 156,125 | 122,834 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total debt | 845,474 | 795,822 | 452,819 | 486,119 | 392,655 | 309,703 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| 1,781,356 | 2,380,438 | 1,228,020 | 1,961,043 | 553,336 | 419,395 | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
a) | Bank loans - |
At December 31, 2016 and 2015, this item comprises bank borrowings contracted in local and foreign currency intended for working capital. These obligations are subject to fixed interest rates ranging between 1.0% and 14.4% in 2016 and between 1.0% and 13.1% in 2015.
Current | Non-current | |||||||||||||||||||||||
Interest | Date of | At December 31 | At December 31 | |||||||||||||||||||||
rate | maturity | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
Graña y Montero S.A.A. | | Libor USD 3M + from 4.9% to 5.5% | | 2016 / 2020 | 102,776 | 932,114 | — | — | ||||||||||||||||
GyM S.A. | 1.00% / 7.80% | 2016 / 2020 | 535,776 | 492,910 | 286,671 | 187,029 | ||||||||||||||||||
Viva GyM S.A. | 6.75% / 8.90% | 2016 / 2017 | 220,423 | 201,609 | 8,372 | — | ||||||||||||||||||
GMP S.A. | 3.65% / 6.04% | 2016 / 2020 | 95,824 | 77,857 | 70,220 | 71,453 | ||||||||||||||||||
CAM Holding S.A. | 1.30% / 14.43% | 2016 / 2018 | 42,534 | 69,702 | 31,948 | 24,889 | ||||||||||||||||||
Adexus S.A. | 5.9% | 2019 | — | 42,782 | — | 13,190 | ||||||||||||||||||
GMD S.A. | 6.20% / 7.47% | 2016 / 2017 | 30,107 | 14,746 | — | — | ||||||||||||||||||
Norvial S.A. | 8.37% | 2016 | 54,706 | — | — | — | ||||||||||||||||||
Others | 5.56% / 7.18% | 2016 | 714 | 3,620 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
1,082,860 | 1,835,340 | 397,211 | 296,561 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
i) | Credit Suisse Syndicated Loan - |
In December 2015, the Group entered into a medium term loan credit agreement for up to US$200 million (equivalent to S/672 million), with Credit Suisse AG, Cayman Islands Branch, Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC. The initial term of the loan was set at five years, with quarterly installments starting to be paid on the 18th month. The loan accrued interest at a rate of three months Libor plus 3.9% per year. The proceeds were used to finance the equity interest in GSP. As of December 31, 20132016, the outstanding balance amounted to US$148.5 million (equivalent to S/498.8 million), and 2012it is included within the current portion.
On June 27, 2017, the Group renegotiated the terms of this item comprises bank loansloan to clear breaches related to the termination of the GSP concession. The new terms require repayment by December, 2020, with required prepayments to be made with the proceeds of asset sales of 40% in localthe first year and foreign currencies for working capital purposes. These obligations bearan additional 30% in the second year of the amendment. The syndicated loan accrues interest at fixed rates which fluctuated between 2%LIBOR plus 4.90% per year. Under the amendment, the Group is prohibited from paying dividends until the loan is fully repaid. The loan is secured by (i) a lien on Concar’s shares; (ii) a lien on Almonte’s shares; (iii) a mortgage over certain real estate properties in Miraflores and 9% in 2013Surquillo; (iv) liens on certain accounts; (v) a lien on GyM’s share; (vi) a second lien on CAM Holding SPA’s shares; (vii) a second lien on CAM Servicios del Perú S.A.’s shares; and 2012.(viii) a first lien on cash flows from the sale of certain assets.
The agreement contains certain covenants, including the obligation by the Company to maintain the following financial ratios during the term of the agreement: (1) the Consolidated EBITDA to Consolidated Interest Expense Ratio shall not be less than 3.5:1.0 commencing on April 1, 2018 and thereafter; (2) the Consolidated Leverage Ratio (as defined therein) shall not be greater than 3.5:1.0 at any time during the period commencing on December 31, 2016 and ending on March 31, 2017; 3.5:1.0 at any time during the period commencing on July 1, 2017 and ending on September 30, 2017; and no greater than 2.5:1.0 at any time thereafter; and (3) the Debt Service Coverage Ratio as of the last day of any fiscal quarter of the borrower, falling on or after the first anniversary of the closing date, shall not be less than 1.5:1.0, commencing on April 1, 2018 and thereafter.
F-78
(All amounts are expressed in thousands of S/. unless otherwise stated)
In April 2005,As of the subsidiary Norvial S.A. signed with IFCdate of this annual report, we are under continuing default in this financing due to the non-delivery of the audited consolidated financial statements of Graña y Montero and IDB, respectively, two agreements called “Loan Agreements” by which these multilateral financial institutions agree to provide financingGyM for the engineering, construction, completion2016 and acceptance2017 fiscal years. The syndicated loan required that we provide the financial statements for the 2016 and 2017 fiscal years no later than April 30, 2018. We are in the process of obtaining waivers from the lenders.
As of to date, the outstanding balance of the works of the first stage of the Concession Agreement amounting toloan capital is US$36 million (S/. 123.5 million). As of December 31, 2013, the balance of these loans amounts to S/.42.6 million (S/.47.8 million as of December 31, 2012).
Between November and December 2013, the subsidiary Concar S.A. acquired bank loans in local currency which total S/.51.2 million at December 31, 2013, to be used as working capital. These notes bear interest at fixed rates ranging from 5.6% to 6%. The maturity date of these loans is in June 2014 and has no guarantees.
In December 2013, the subsidiary GMI S.A. signed bank loans with local financial institutions, totaling S/.3.2 million and US$4.781.1 million (equivalent to S/.13.2264.9 million), bearing fixed interest rates ranging between 5.45% and 7.5%. Acquired loans were used for working capital and they do not have collateral, these loans are due in March 2014.
In September 2013,
ii) | GSP Bridge Loan - |
At December 31, 2016, the subsidiary GMP S.A. obtained a loan from Banco Continental of $8current balance includes US$129 million (equivalent to S/.21433.3 million); of the corporate guarantee issued by the Company to secure the bridge loan given to GSP, which was enforceable at that date. On June, 2017, the Company has reached a new term loan with Natixis, BBVA, SMBC and MUFJ for US$78.7 million (equivalent to S/264.8 million), the proceeds of which were used for working capital. Thisto repay the GSP bridge loan.
The maturity is June, 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year. The new term contains the following covenant: the consolidated leverage ratio shall not be more than 3.5:1.0 at any time, and accrues interest at LIBOR plus 4.50% per year, which increases to 5.00% during the second year and 5.50% during the third year. Under the new term, the Group is prohibited from paying dividends until the loan bears an annual interest of 4.34% andis fully repaid. Also, the new term is secured by future(i) a first lien on rights to receive the termination payment derived from the GSP termination (the “VCN”), (ii) a second lien on our shares of GyM and Concar; (iii) a second lien on our shares of Almonte; (iv) a second lien on certain real estate properties in Miraflores and Surquillo; (v) a second lien on our shares of CAM Holding SPA; (vi) a second lien on our shares of CAM Servicios del Perú S.A.; and (vii) a first lien on cash flows from the sale of Lote I Project (Note 17-d).
Additionally, the subsidiary GMP maintains a loan with Citibank N.A. as per the loan agreement signed on September 19, 2008 (amended on August 29, 2012), which was applied to the financing of the construction, equipment and operating the new Gas Pariñas Plant of the subsidiary. The major amendments to the original agreement include: an increase in the financed amount to US$28 million (S/.72 million), an extension of the repayment period and a reduction of accrued interest. The guarantees given to secure this obligation are: a mortgage on the land on which the Gas Pariñas Plant has been constructed; a pledge on the equipment and assignment of the cash flows to be obtained from sales to customers (Repsol, Llama Gas, Zeta Gas and Herco). Said loan reaches maturity in August 2020, as per the new conditions agreed upon.This debt bears interest at Libor (3m) + 1.75%, if the exchange rate, at the installment payment date, remains within the range from S/.2.60 to S/.2.75 per US$1 or (ii) 1.95%, if the stated range is not maintained. In order to reduce the exposure to Libor variation, the Company signed an interest rate swap with Citibank N.A., which establishes a fixed rate of 4.80% or 5.05%, based on each of the above cases. At December 31, 2013, the balance of this loan is S/.66.4 million (S/.69.2 million as of December 31, 2012).
GyM S.A. maintains three promissory notes with local banks of US$23 million in total (equivalent to S/.64.3 million) with current maturity to use as working capital. These instruments bear interest rates between 0.91% and 2.30%.
During 2013, Viva GyM S.A. maintains bank loans and promissory notes equivalents to S/.109.3 million (S/.72.4 million at December 2012) million with local banks with interest rates between 3% and 8%, the funds were used to buy lands (Note 14) and work capital.certain assets.
As of December 31, 2013, the Company maintained unused credit limitsdate of this annual report, we are under certain continuing defaults under the term loan with respect to certain financial ratios and the non-delivery of the audited consolidated financial statements of Graña y Montero for S/.2,626 million, which expire within one year (S/.1,728 millionthe 2016 and 2017 fiscal years. The term loan required that we provide the financial statements for the 2016 and 2017 fiscal years no later than April 30, 2018. As of March 2018, (a) our Consolidated Leverage Ratio (as defined therein) was 2.62, rather than no more than 2.50 as required under the syndicated loan and (b) [●]. We are in the process of December 31, 2012).obtaining waivers from the lenders.
b) | Finance lease obligations - |
Current | Non-current | |||||||||||||||||||||||
Interest | Date of | At December 31 | At December 31 | |||||||||||||||||||||
rate | maturity | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
GyM S.A. | 1.90% / 8.96% | 2016 / 2023 | 116,205 | 80,570 | 88,715 | 58,937 | ||||||||||||||||||
GMD S.A. | 4.99% / 7.00% | 2016 / 2020 | 10,474 | 10,404 | 20,024 | 12,099 | ||||||||||||||||||
Adexus S.A. | 3.36% / 18.00% | 2016 / 2020 | — | 9,884 | — | 12,287 | ||||||||||||||||||
Viva GyM S.A. | 7.30% / 8.95% | 2018 / 2022 | 3,957 | 4,847 | 19,190 | 16,541 | ||||||||||||||||||
GMP S.A. | 2.65% / 7.20% | 2016 / 2018 | 5,272 | 4,206 | 13,087 | 9,035 | ||||||||||||||||||
CAM Holding S.A. | 7.19% / 9.27% | 2016 / 2020 | 4,633 | 3,729 | 12,382 | 10,590 | ||||||||||||||||||
Others | 3.23% / 7.75% | 2016 / 2019 | 4,619 | 3,667 | 2,727 | 3,345 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
145,160 | 117,307 | 156,125 | 122,834 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
The minimum payments to be made by maturity and present value of the finance lease obligations are as follows:
December 31, | At December 31, | |||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Up to 1 year | 124,709 | 115,698 | 157,957 | 127,496 | ||||||||||||
From 1 to 5 years | 255,738 | 193,233 | 160,824 | 112,769 | ||||||||||||
Over 5 years | 10,431 | 19,506 | ||||||||||||||
|
|
|
| |||||||||||||
380,447 | 308,931 | 329,212 | 259,771 | |||||||||||||
Future financial charges on finance leases | (36,665 | ) | (27,337 | ) | (27,927 | ) | (19,630 | ) | ||||||||
|
|
|
| |||||||||||||
Present value of the obligations for finance lease contracts | 343,782 | 281,594 | 301,285 | 240,141 | ||||||||||||
|
|
|
|
F-79
(All amounts are expressed in thousands of S/. unless otherwise stated)
The present value of finance lease obligations is broken down as follows:
December 31, | At December 31, | |||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Up to 1 year | 115,623 | 115,114 | 145,160 | 117,307 | ||||||||||||
From 1 to 5 years | 228,159 | 166,480 | ||||||||||||||
From 1 year to 5 years | 146,316 | 105,978 | ||||||||||||||
Over 5 years | 9,809 | 16,856 | ||||||||||||||
|
|
|
| |||||||||||||
343,782 | 281,594 | 301,285 | 240,141 | |||||||||||||
|
|
|
|
c) | Fair value of borrowings - |
The carrying amount and fair value of borrowings are broken down as follows:
Carrying amount current and non-current portion | Fair value | |||||||||||||||
As of December 31, | As of December 31, | |||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Loans from multilateral organizations | 47,815 | 42,599 | 50,567 | 44,384 | ||||||||||||
Other loans | 797,659 | 753,223 | 828,208 | 642,842 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
845,474 | 795,822 | 878,775 | 687,226 | |||||||||||||
|
|
|
|
|
|
|
|
Carrying amount | Fair value | |||||||||||||||
At December 31, | At December 31, | |||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Bank overdrafts | — | 8,396 | — | 8,396 | ||||||||||||
Loans | 1,480,071 | 2,131,901 | 1,493,981 | 2,142,890 | ||||||||||||
Leases | 301,285 | 240,141 | 308,202 | 240,089 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,781,356 | 2,380,438 | 1,802,183 | 2,391,375 | |||||||||||||
|
|
|
|
|
|
|
|
TheFair values are determined based on discounted expected cash flows using borrowing rates between 1.3% and 14.3% (between 4.8% and 13.1% in 2015) that corresponds to level 2 of the fair value hierarchy.
20 | BONDS |
At December 31 this account comprises:
Total | Current | Non-current | ||||||||||||||||||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
GyM Ferrovías | 607,868 | 604,031 | 31,546 | 20,551 | 576,322 | 583,480 | ||||||||||||||||||
Norvial | 186,223 | 363,683 | 5,537 | 25,540 | 180,686 | 338,143 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
794,091 | 967,714 | 37,083 | 46,091 | 757,008 | 921,623 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
GyM Ferrovías S.A. -
In February 2015, subsidiary GyM Ferrovías carried out an international issue of corporate bonds under the U.S. Regulation S. The issue was carried out in Soles VAC (the Spanish acronym for constant value update) for a total amount of S/629 million. The costs of issue in this transaction were S/22 million. Maturity of these bonds is basedNovember 2039 and interest is accrued at a rate of 4.75% (plus VAC adjustment); they have a risk rating of AA+ (local level) granted by Apoyo & Asociados Internacionales Clasificadora de Riesgo and a guarantee scheme that includes a mortgage on the concession to which GyM Ferrovías is the concessionaire, security interest over the shares of GyM Ferrovías, Cession of the Collection Rights of the Administration Trust, a Flow and Reserve Account Trust for the Debt, Operation and Maintenance Service and Capex currently in progress. At December 31, 2016 the Group amortized a total of S/38.4 million (S/16 million in 2015).
At December 31, 2016 the balance included accrued interest and VAC adjustments payable for S/34.5 million (S/17.3 million at December 31, 2015).
As part of the process of bond structuring, GyM Ferrovías engaged to report on and verify the following covenants measured on the basis of the individual financial statements:
(All amounts expressed in thousands of S/ unless otherwise stated)
Norvial S.A. -
In July 2015, Norvial S.A. issued the First Corporate Bond Program on the Lima Stock Exchange for a total S/365 million. The first issue was for S/80 million at 5 years, bearing an interest rate of 6.75% and funds drawdown performed on July 23, 2015. The second issue was for S/285 million at 11.5 years, bearing an interest rate of 8.375%, structured in 3 disbursements: the first disbursement of S/105 million was on July 23, 2015; the second disbursement of S/100 million was on January 25, 2016; and the third disbursement of S/80 million will be made effective in July 25, 2016. The issues costs corresponding to the first issue and the first disbursement of the second issue were for S/3.9 million. Risk rating agencies Equilibrium y Apoyo & Asociados Internacionales graded this debt instrument AA.
This financing transaction has been secured by (i) a cash flow trust, related to the consideration and the regulatory rate; (ii) a mortgage on the concession in which Norvial S.A. is a concessionaire; (iii) a security on shares; (iv) collection rights and (v) in general, all those additional collaterals given to the secured creditors.
The capital raised is intended to finance the construction of the Second Phase of Red Vial No.5 and the financing of VAT arising from project-related expenses.
At December 31, 2016 the balance included interest payables for S/4.9 million (S/2.7 million at December 31, 2015).
As part of the process of bond structuring, Norvial engaged to report on and verify periodically the compliance of the following covenants:
As of December 31, 2015 and 2016 both Companies have complied with their covenants.
Fair value of the bonds of both Companies at December 31, 2016 amounted to S/1,055 million (S/769.5 million at December 31, 2015), which was calculated under discounted cash flows discountedmethod, using a rate based on the borrowing rate of 4.1%rates between 4.20% and 8.05% (5.61%7.99% (between 4.88% and 6.45% in 2012) and8.89% at December 31, 2015), which are within level 2 of the fair value hierarchy.
TRADE ACCOUNTS PAYABLE |
This itemAt December 31 this account comprises:
December 31, | ||||||||
2012 | 2013 | |||||||
Invoices payable | 936,718 | 993,050 | ||||||
Notes payable | 569 | 504 | ||||||
|
|
|
| |||||
Total | 937,287 | 993,554 | ||||||
Non-Current | ||||||||
Invoices payable | — | (2,157 | ) | |||||
|
|
|
| |||||
Total current | 937,287 | 991,397 | ||||||
|
|
|
|
2015 | 2016 | |||||||
Unbilled services received | 703,801 | 924,025 | ||||||
Invoices payable | 911,793 | 350,559 | ||||||
Bills of exchange payable | 20,168 | 2,033 | ||||||
|
|
|
| |||||
1,635,762 | 1,276,617 | |||||||
|
|
|
|
AsUnbilled services received include the estimate made by Management of the valuation of the percentage of completion, amounting to S/127.2 million at December 31, 2013 and 2012, invoices payable are originated primarily from the acquisition2016 (S/164.1 million at December 31, 2015).
(All amounts expressed in thousands of material, supplies and services for the development of works.S/ unless otherwise stated)
OTHER ACCOUNTS PAYABLE |
This itemAt December 31, this account comprises:
December 31, | ||||||||
2012 | 2013 | |||||||
Advances received from customers | 848,057 | 701,813 | ||||||
Salaries and profit sharing payable | 135,137 | 156,455 | ||||||
Loans from third-parties | 21,559 | 29,771 | ||||||
Deposits in guarantee | 7,539 | 17,342 | ||||||
Account payable for the purchase of fixed assets | 6,370 | 5,159 | ||||||
Post-retirement benefits | 5,593 | 8,995 | ||||||
Unbilled services | 3,841 | 3,807 | ||||||
Deferred Income | 458 | 4,356 | ||||||
Other accounts payables | 39,351 | 22,792 | ||||||
|
|
|
| |||||
Carried forward: | 1,067,905 | 950,490 |
2015 | 2016 | |||||||
Advances received from customers | 607,097 | 810,755 | ||||||
Salaries and profit sharing payable | 232,102 | 176,022 | ||||||
GSP performance guarantee (Note37-a-i) | — | 176,401 | ||||||
Put option liability on Morelco acquisition (Note 29 and33-b) | 111,349 | 110,604 | ||||||
Third-party loans | 94,553 | 69,991 | ||||||
VAT payable | 77,461 | 51,607 | ||||||
Other taxes payable | 51,893 | 50,548 | ||||||
Supplier funding | 59,992 | 40,612 | ||||||
Acquisition ofnon-controlling interest (Note36-a,i) | — | 32,102 | ||||||
Guarantee deposits | 26,806 | 16,799 | ||||||
VAT payable - Fractional | — | 14,170 | ||||||
Post-retirement benefits | 9,043 | 9,088 | ||||||
Interest payable to Oiltanking Perú S.A.C. | 9,015 | — | ||||||
Other accounts payables | 33,085 | 50,411 | ||||||
|
|
|
| |||||
1,312,396 | 1,609,110 | |||||||
Lessnon-current portion: | ||||||||
Advances received from customers | (80,936 | ) | (300,388 | ) | ||||
Put option liability - Morelco acquisition | (111,349 | ) | (110,604 | ) | ||||
Third-party loans | — | (32,000 | ) | |||||
Supplier funding | (33,031 | ) | (14,086 | ) | ||||
VAT payable - Fractional | — | (12,099 | ) | |||||
Post-retirement benefits | (9,043 | ) | (9,088 | ) | ||||
Others | (12,037 | ) | (34,538 | ) | ||||
|
|
|
| |||||
(246,396 | ) | (512,803 | ) | |||||
|
|
|
| |||||
Current portion | 1,066,000 | 1,096,307 | ||||||
|
|
|
|
Advances received from customers relate mainly to construction projects and are discounted from billing under the terms of the relevant agreements.
The fair value of the short-term payables approximates their carrying amount due to their short-term maturities. Thenon-current portion, mainly comprisesnon-financial liabilities such as advances received from customers; the remaining balance is not significant for any period shown in the financial statements.
23 | PROVISIONS |
F-80At December 31 this account comprises:
2015 | 2016 | |||||||
Legal claims | 15,000 | 15,732 | ||||||
Contingent liabilities from the acquisition of Morelco | 15,374 | 5,182 | ||||||
Contingent liabilities from the acquisition of Coasin and Vial yVives - DSD | 7,586 | 1,815 | ||||||
Contingent liabilities from the acquisition of Adexus | — | 1,128 | ||||||
Contingent liabilities from CAM acquisition | 3,819 | — | ||||||
Provision for well closure (Note 5.1 d) | 19,149 | 17,216 | ||||||
|
|
|
| |||||
60,928 | 41,073 | |||||||
Less: | ||||||||
Non-current portion | (47,460 | ) | (26,542 | ) | ||||
|
|
|
| |||||
Current portion | 13,468 | 14,531 | ||||||
|
|
|
|
(All amounts are expressed in thousands of S/. unless otherwise stated)
December 31, | ||||||||
2012 | 2013 | |||||||
Brought forward: | 1,067,905 | 950,490 | ||||||
Less: | ||||||||
Non-current portion | (52,776 | ) | (205,396 | ) | ||||
|
|
|
| |||||
Current portion | 1,015,129 | 745,094 | ||||||
|
|
|
|
Advances received from customers are discounted from billing, in accordance with the terms of the agreements. These advances mainly comprise:
December 31, | ||||||||
2012 | 2013 | |||||||
Projects: | ||||||||
Consorcio Tren Eléctrico Lima | 243,961 | 28,441 | ||||||
Consorcio Rio Mantaro | 117,315 | 162,926 | ||||||
Ministerio de Transportes y Comunicaciones | 67,366 | — | ||||||
GyM Chile SPA | 63,036 | 51,387 | ||||||
Los Cipreses | 53,064 | — | ||||||
Cora Cora | 48,658 | 32,168 | ||||||
EPC Planta Minera Inmaculada | 44,170 | 60,331 | ||||||
Consorcio Vial La Quinua | 22,463 | 21,078 | ||||||
Los Parques del Agustino 2 | 22,389 | — | ||||||
Consorcio Rio Urubamba | 15,801 | 8,166 | ||||||
Central Hidroeléctrica Machu Picchu | 15,536 | 46,678 | ||||||
Chilectra S.A. | 15,389 | 3,819 | ||||||
Southern Perú Cooper Corporation | 14,640 | — | ||||||
Inversiones y Construcción GyM | 13,041 | — | ||||||
Pezet 961 | 11,911 | 16,323 | ||||||
Parque Central Club Residencial | 9,999 | 8,468 | ||||||
Edificio Real 8 | 8,372 | — | ||||||
Consorcio GyM Conciviles | 8,307 | 6,882 | ||||||
Los Parques San Martín y Piura | 7,012 | 9,671 | ||||||
Neo 10 y Real 8-9 | 6,539 | 6,535 | ||||||
Consorcio Vial Ipacal | 6,321 | 4,012 | ||||||
Consorcio Vial Sullana | 5,161 | — | ||||||
Los Parques de Villa El Salvador | 4,809 | — | ||||||
Contrato Red Vial 1 | 4,476 | 14,368 | ||||||
Los Parques de Carabayllo | 1,138 | — | ||||||
Los Parques de Comas | 204 | — | ||||||
Los Parques del Agustino | 384 | — | ||||||
Stracon GyM | — | 45,670 | ||||||
Proyecto Especial de Transporte Nacional | — | 39,125 | ||||||
Panorama Plaza Negocios 2 | — | 19,552 | ||||||
Centro Empresarial Leuro 2do Etapa | — | 13,531 | ||||||
Túnel Santa Rosa II | — | 12,016 | ||||||
Anticipos—Proyecto Barranco | — | 10,108 | ||||||
Planta Concentradora Cerro Verde 2 Fase 1 | — | 9,800 | ||||||
Consorcio Construcciones y Montajes—CCM | — | 8,005 | ||||||
Shougan Hierro Perú SAA | — | 7,545 | ||||||
Construcción Planta de Cal. | — | 7,228 | ||||||
Advances—Proyecto Navarrete | — | 4,678 | ||||||
Advances—Consorcio Peruano de Conservación | — | 4,494 | ||||||
Consorcio HV | — | 4,452 | ||||||
Edelnor | — | 3,389 | ||||||
Other projects | 16,595 | 30,967 | ||||||
|
|
|
| |||||
848,057 | 701,813 | |||||||
|
|
|
|
F-81
(All amounts are expressed in thousands of S/. unless otherwise stated)
The amortized cost of the other short—term accounts payable is similar to their carrying amounts due the fact to the short maturity.
This item comprises:
December 31, | ||||||||
2012 | 2013 | |||||||
Legal claims | 11,380 | 12,217 | ||||||
Contingent liabilities DSD (Note 31) | — | 815 | ||||||
Contingent liabilities Vial y Vives (Note 31) | 6,006 | 6,006 | ||||||
Contingent liabilities from CAM acquisition | 35,220 | 21,546 | ||||||
Provision for well closure | 4,897 | 4,852 | ||||||
Provision for maintenance obligations in concession contracts | — | 3,846 | ||||||
|
|
|
| |||||
57,503 | 49,282 | |||||||
Less: | ||||||||
Non-current portion | (46,191 | ) | (40,387 | ) | ||||
|
|
|
| |||||
Current portion | 11,312 | 8,895 | ||||||
|
|
|
|
Legal claims
Legal claims as ofAt December 31, 2013 and 20122016, legal claims mainly comprise provisions for labor-related obligationslabor liabilities and tax claims recognized by subsidiaries GyM S.A., GMP S.A. and CAM Chile amounting tofor S/.514.7 million S/.4(S/8 million and S/.3 million.
Provisions related to GyM S.A. comprise claims fromat December 31, 2015). Claims with the tax authority which have been accounted for based on management estimates of the amounts the CompanyGroup would most likely be required to pay forin regard of these cases. Regarding the tax claims, duecurrent court actions. Due to the fact those amounts will depend on the tax authority, the Group does not have an estimated timing of when these cash outflows will take place.would be required.
Contingent liabilities DSD
Correspond toThis legal claims balance also includes court actions brought against the fair valueGroup by the Peruvian energy regulator (OSINERGMIN) resulting from the storage of contingent fiscal obligations ofhydrocarbons and the applicable environmental laws and regulations for S/.782 and employees’ contingent obligation of S/.33 of the DSD (Note 31-a).
Contingent liabilities Vial y Vives
As a result of the due diligence process, certain labor contingent liabilities were recorded for the acquisition of 74% of the outstanding shares of Vial y Vives. Each of these contingencies was assigned a probability of occurrence based on management and attorney assessments. The outflows expected outflows expected to take place in 2014 are in the amount of S/.6 million.
Contingent liabilities CAM
In 2013 the Company completed a reversal of approximately S/.13.66.3 million (S/.686.1 million in 2012) in provisions that accrued in conjunction with labor and tax contingencies identified in conjunction with the purchase price allocation related to the 2011 acquisition of CAM Chile and affiliates. Such provisions have been reversed since they expired during the year.
F-82
(All amounts are expressed in thousands of S/. unless otherwise stated)
Provision for maintenance obligations in concession contracts
These provisions correspond to Norvial S.A., a subsidiary which has agreed to perform the conservation and maintenance the infrastructure during the extent of the Contract. This contractual obligation to maintain the infrastructure up to a specified service capacity have been recognized and measured in accordance with IAS 37, ‘Provisions, contingent assets and liabilities.
These periodic maintenance obligations depend on the use of the infrastructure, so the level of use of the road is the factor that determines the amount of the obligation and this provision is accounted for over the contract length (a 25 year term). The balance at December 31, 2013 amounts to S/.3.8 million.
Provision for well closure
In 1994 and 1995 GMP S.A. (“GMP”) contracted with Perupetro to provide hydrocarbon extraction services in Block I and Block V located in northwestern Peru. The contract states that GMP is responsible for the abandonment of the following wells:
A preliminary estimate of the wells that should be permanently closed showed that 70 wells from Block I and 15 wells from Block V should be closed. The closure processes for both blocks started in 2013 and are scheduled to be completed in 2021 and 2023, respectively. In 2013, one well in each block was permanently closed.
As of December 31, 2013, the discounted value of the estimated provision for closure activities for the remaining 83 wells amounted to S/.4.85 million at a discount rate of 2.74% (1.78% in December, 2012)2015).
It should be noted that there will be greater information and certainty regarding the amount of Blocks I and V wells that should be permanently closed at the end of the effective periods of the agreements.
The gross movement of other provisionprovisions is broken down as follows:
Other provisions | Legal claims | Contingent liabilities from acquisitions | Provisions for the for the acquisition of CAM | Provision for well closure | Provision for periodic maintenance | Total | ||||||||||||||||||
At January 1, 2012 | 6,700 | 24,466 | 102,776 | — | — | 133,942 | ||||||||||||||||||
Additions | 4,680 | — | — | 4,897 | — | 9,577 | ||||||||||||||||||
Additions from business combinations | — | 6,006 | — | — | — | 6,006 | ||||||||||||||||||
Reclassifications | — | (24,466 | ) | — | — | — | (24,466 | ) | ||||||||||||||||
Reversals | — | — | (67,556 | ) | — | — | (67,556 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At December 31, 2012 | 11,380 | 6,006 | 35,220 | 4,897 | — | 57,503 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Additions | 2,039 | — | — | 154 | 12,868 | 15,061 | ||||||||||||||||||
Transfer from intangibles | 6,728 | 6,728 | ||||||||||||||||||||||
Additions from business combinations | — | 815 | — | — | — | 815 | ||||||||||||||||||
Reversals | (882 | ) | — | (13,674 | ) | — | — | (14,556 | ) | |||||||||||||||
Payments | (320 | ) | — | — | (199 | ) | (15,750 | ) | (16,269 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At December 31, 2013 | 12,217 | 6,821 | 21,546 | 4,852 | 3,846 | 49,282 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| �� |
Other provisions | Legal claims | Contingent liabilities resulting from acquisitions | Provision for well closure | Total | ||||||||||||
At January 1, 2015 | 13,056 | 45,349 | 7,210 | 65,615 | ||||||||||||
Additions | 6,297 | — | 11,943 | 18,240 | ||||||||||||
Reversals | — | (7,796 | ) | — | (7,796 | ) | ||||||||||
Offsetting | — | (1,216 | ) | — | (1,216 | ) | ||||||||||
Deconsolidation of CAM Brazil | (2,353 | ) | — | — | (2,353 | ) | ||||||||||
Payments | (1,580 | ) | (5,186 | ) | (4 | ) | (6,770 | ) | ||||||||
Translation adjustments | (420 | ) | (4,372 | ) | — | (4,792 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
At December 31, 2015 | 15,000 | 26,779 | 19,149 | 60,928 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At January 1, 2016 | 15,000 | 26,779 | 19,149 | 60,928 | ||||||||||||
Additions | 9,486 | — | 462 | 9,948 | ||||||||||||
Acquisition of subsidiaries | 1,926 | 1,149 | — | 3,075 | ||||||||||||
Reversals | (10,569 | ) | (17,883 | ) | (2,395 | ) | (30,847 | ) | ||||||||
Payments | (298 | ) | (2,458 | ) | — | (2,756 | ) | |||||||||
Translation adjustments | 187 | 538 | — | 725 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At December 31, 2016 | 15,732 | 8,125 | 17,216 | 41,073 | ||||||||||||
|
|
|
|
|
|
|
|
The reverses relate mainly to contingent liabilities in 2016 from subsidiaries Morelco, Vial y Vives - DSD and CAM Chile for S/10.1 million, S/4.0 million and S/3.8 million, respectively (from subsidiaries CAM Chile for S/7.8 million in 2015).
EQUITY |
a) | Capital - |
As of December 30, 2013 andAt December 31, 2012,2016 and 2015, the authorized, subscribed andpaid-in capital, according to the Company’s bylaws as amended, is represented by laws, and its amendments, comprises 660,053,790 common shares (558,284,190 common shares at December 31,2012) at S/.1.001.00 par value each.
At December 31, 2014 a total of 253,635,480 shares were represented by ADS, equivalent to 50,727,096 ADS at a ratio of 5 shares per ADS; a total of 250,860,370 shares were represented by ADS, equivalent to 50,172,074 ADSs at December 31, 2015 and a total of 264,809,545 shares were represented by ADS, equivalent to 52,961,909 ADSs at December 31, 2016
F-83
(All amounts are expressed in thousands of S/. unless otherwise stated)
AtAs of December 31, 2016 the General Shareholders’ Meeting held on March 30, 2012, the decisionCompany’s shareholding structure was made to capitalize retained earnings, which increased capital from S/.390,799 to S/.558,284. As a consequence of this transaction the nominal value of shares increased from S/.0.7 to S/.1.00 per share.
Subsequently, a resolution of the General Meeting on March 26, 2013, as well as agreements adopted at meetings of the Board on May 30, July 23 and August 22 of 2013, mandated the issuance of common stock through a public offering of “American Depositary Shares” (ADS’s) registered in the Securities and Exchange Commission (SEC) and NYSE, increasing the capital sum from S/.558,284 to S/.660,054.
This capital increase was carried out in two tranches as follows:
Percentage of individual interest in capital | Number of shareholders | Total percentage of interest | ||||||
Up to 1.00 | 1,988 | 15.77 | ||||||
From 1.01 to 5.00 | 9 | 21.13 | ||||||
From 5.01 to 10.00 | 1 | 5.12 | ||||||
Over 10 | 2 | 57.98 | ||||||
|
|
|
| |||||
2,000 | 100.00 | |||||||
|
|
|
|
As of December 31, 20132016 the Company’s capital structure is as follows:
Percentage of individual interest in capital | Number of shareholders | Total percentage of interest | ||||||
Up to 1.00 | 1,361 | 15.37 | ||||||
From 1.01 to 5.00 | 4 | 9.76 | ||||||
From 5.01 to 10.00 | 3 | 16.68 | ||||||
Over 10 | 2 | 58.19 | ||||||
|
|
|
| |||||
1,370 | 100.00 | |||||||
|
|
|
|
As of December 31, 2013 the year-end quoted price of the Company’s shares was S/.11.904.7 per share, with a trading frequency of 95.24%97.60% (quoted price of S/.9.701.97 per share and a trading frequency of 95%91.94% at December 31, 2012)2015).
b) |
This item comprises legal reserve exclusively. In accordance with Peruvian Company Law, the Company’s legal reserve is formed by the transfer of 10% of the annual net profit,profits, up to a maximum of 20% of thepaid-in capital. In the absence of profits or freely available reserves, this legal reserve mustcan be applied to offset losses but it musthas to be replenished with the profits ofto be obtained in subsequent years’ profit.years. This reserve can also be capitalized but its subsequent replenishment is equally mandatory. At December 31, 2016 and 2015 the legal reserve balance reached the above-mentioned limit.
c) |
At December 31, 2016 and 2015 the General Shareholders’ Meeting held on March 26, 2013, and the subsequent Boardbalance of Directors’ meetings held on May 30, July 23 and August 22, 2013, the Board agreedthis reserve of S/29.97 million correspond to the issuanceexcess legal reserve, which is above the limit established of common shares through a public offering20% of American Depositary Shares (ADS) registered withpaid-in capital.
d) | Share premium - |
This item comprises the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE).
In July and August 2013, the Company issued 101,769,600 new common shares, equivalent to 20,353,920 ADS in two tranches (note 21-a).
The excess of the total proceeds obtained by this transactionfor the issuance of common shares in 2013 in comparison with the nominal value of these shares amounted to S/.1,055,488 (net of commissions and other related coststhose for S/.48,3751,055,488.
Also, this balance shows the difference between the par value and nettransaction value of tax effects for S/.9,840). This amount was recordedthenon-controlling interest acquired. A detail of this transactions is disclosed in the premium for issuance of shares in the consolidated statement of changes in equity.Note 36.
e) | Retained earnings - |
F-84Dividends to be distributed to shareholders other than legally resident entities are subject to a 4.1% rate (based on 2014’s profits), 6.8% (based on 2015’s and 2016’s profits) and 5.00% (on profits for 2017 and onwards) of income tax payable by these shareholders; this tax rate should be withheld and settled by the Company. Dividends were distributed over 2016 and 2015 (Note 34).
(All amounts are expressed in thousands of S/. unless otherwise stated)
On December 31, 2013 a total of 265,877,310 shares were represented in ADS (equivalent to 53,175,462 ADS).
DEFERRED INCOME TAX |
Deferred income tax is broken down by its estimated reversal period as follows:
December 31, | At December 31, | |||||||||||||||
2012 | 2013 | 2015 | 2016 | |||||||||||||
Deferred income tax asset: | ||||||||||||||||
Reversal expected in the following 12 months | 35,574 | 87,635 | 76,469 | 86,990 | ||||||||||||
Reversal expected after 12 months | 35,504 | 47,886 | 71,376 | 340,018 | ||||||||||||
|
|
|
| |||||||||||||
Total deferred tax asset | 71,078 | 135,521 | 147,845 | 427,008 | ||||||||||||
|
|
|
| |||||||||||||
Deferred income tax liability: | ||||||||||||||||
Reversal expected in the following 12 months | (38,464 | ) | (98,401 | ) | (10,551 | ) | (166 | ) | ||||||||
Reversal expected after 12 months | (49,978 | ) | (39,756 | ) | (88,612 | ) | (73,003 | ) | ||||||||
|
|
|
| |||||||||||||
Total deferred tax liability | (88,442 | ) | (138,157 | ) | (99,163 | ) | (73,169 | ) | ||||||||
|
|
|
| |||||||||||||
Deferred income tax asset (liability), net | (17,364 | ) | (2,636 | ) | ||||||||||||
Deferred income tax (liability) asset, net | 48,682 | 353,839 | ||||||||||||||
|
|
|
|
The gross movement of the deferred income tax item is as follows:
2011 | 2012 | 2013 | ||||||||||
Deferred income tax asset (liability), net as of January 1 | (32,828 | ) | 19,908 | (17,364 | ) | |||||||
Credit (charge) to income statement (Note 27) | 41,795 | (8,666 | ) | 5,597 | ||||||||
Tax charged to other comprehensive income | (298 | ) | (1,158 | ) | (8,159 | ) | ||||||
Tax charged to equity | — | 9,840 | ||||||||||
Acquisition of subsidiary (CAM) | 3,869 | — | — | |||||||||
Acquisition of subsidiary (DSD) | — | — | (1,995 | ) | ||||||||
Acquisition of subsidiary (Stracon GyM) | — | (6,653 | ) | — | ||||||||
Acquisition of subsidiary (Vial y Vives) | — | (20,458 | ) | — | ||||||||
Deconsolidation of SEC and LQS | — | — | 835 | |||||||||
Other increases | 7,370 | (337 | ) | 8,610 | ||||||||
|
|
|
|
|
| |||||||
Total as of December 31 | 19,908 | (17,364 | ) | (2,636 | ) | |||||||
|
|
|
|
|
|
2014 | 2015 | 2016 | ||||||||||
Deferred income tax asset (liability), net as of January 1 | (3,033 | ) | 58,723 | 48,682 | ||||||||
Credit to income statement (Note 29) | 57,689 | (175 | ) | 263,806 | ||||||||
Adjustment for changes in rates of income tax | 2,746 | (2,008 | ) | 17,105 | ||||||||
Credit (charge) to other comprehensive income | (1,328 | ) | (7,298 | ) | 15,004 | |||||||
Tax charged to equity | — | — | 159 | |||||||||
Acquisition of a subsidiary | 6,172 | — | 10,363 | |||||||||
Acquisition of joint operation | — | 1,476 | — | |||||||||
Other movements | (3,523 | ) | (2,036 | ) | (1,280 | ) | ||||||
|
|
|
|
|
| |||||||
Total as of December 31 | 58,723 | 48,682 | 353,839 | |||||||||
|
|
|
|
|
|
F-85
(All amounts are expressed in thousands of S/. unless otherwise stated)
The movement of deferred tax assets and liabilities in the year, without taking into account the offsetting of balances, is as follows:
Deferred income tax liability | Non-taxable Income | Difference in depreciation rates | Fair value gains | Outstanding work in progress | Difference in depreciation rates of assets leased | Others | Total | |||||||||||||||||||||
At January 1, 2011 | — | 16,910 | (413 | ) | 16,768 | 10,266 | 5,634 | 49,165 | ||||||||||||||||||||
Charge (credit) to results | — | (10,452 | ) | 56 | (20,686 | ) | — | (6,040 | ) | (37,122 | ) | |||||||||||||||||
Charge (credit) to OCI | — | 53 | — | — | — | (873 | ) | (820 | ) | |||||||||||||||||||
Acquisition of CAM (Note 30-d) | — | 6,545 | — | 6,692 | — | 4,569 | 17,806 | |||||||||||||||||||||
Other increases | — | — | — | — | — | 107 | 107 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
At December 31, 2011 | — | 13,056 | (357 | ) | 2,774 | 10,266 | 3,397 | 29,136 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Charge (credit) to results | 4,236 | (2,054 | ) | — | 22,346 | (1,221 | ) | 7,120 | 30,427 | |||||||||||||||||||
Charge (credit) to OCI | — | — | — | — | — | (612 | ) | (612 | ) | |||||||||||||||||||
Acquisition of Stracon GyM (Note 30-c) | — | 2,181 | — | 4,472 | — | — | 6,653 | |||||||||||||||||||||
Acquisition of Vial y Vives (Note 30-b) | — | 236 | 17,152 | — | — | 3,605 | 20,993 | |||||||||||||||||||||
Other increases | — | — | — | — | — | 1,568 | 1,568 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
At December 31, 2012 | 4,236 | 13,419 | 16,795 | 29,592 | 9,045 | 15,078 | 88,165 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Charge (credit) to results | 9,954 | (270 | ) | 34 | 38,448 | (50 | ) | 4,461 | 52,577 | |||||||||||||||||||
Charge (credit) to OCI | — | — | 8,169 | — | — | 1,520 | 9,689 | |||||||||||||||||||||
Acquisition of DSD (Note 30-a) | — | 1,148 | 3,873 | — | — | (834 | ) | 4,187 | ||||||||||||||||||||
Other increases | — | (1,176 | ) | (1,410 | ) | 18,734 | 1,505 | (16,596 | ) | 1,057 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
At December 31, 2013 | 14,190 | 13,121 | 27,461 | 86,774 | 10,500 | 3,629 | 155,675 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liability | Non-taxable income | Difference in depreciation rates | Fair value gains | Outstanding work in progress | Difference in depreciation rates of assets leased | Receivables from local Government | Borrowing costs recognized as assets | Purchase price allocation | Others | Total | ||||||||||||||||||||||||||||||
At January 1, 2014 | 14,190 | 13,121 | 27,857 | 86,774 | 10,500 | — | — | — | 3,628 | 156,070 | ||||||||||||||||||||||||||||||
Charge (credit) to P&L | — | 9,936 | (8,585 | ) | (72,488 | ) | 219 | — | — | — | 5,754 | (65,164 | ) | |||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | — | — | — | — | — | — | 1,328 | 1,328 | ||||||||||||||||||||||||||||||
Reclassification of prior years | — | 13,458 | (5,540 | ) | 82 | (274 | ) | — | — | — | 7,777 | 15,503 | ||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | — | 3,047 | 3,047 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
At December 31, 2014 | 14,190 | 36,515 | 13,732 | 14,368 | 10,445 | — | — | — | 21,534 | 110,784 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Charge (credit) to P&L | — | 2,791 | 15,338 | 16,393 | — | 9,986 | 15,178 | — | 1,347 | 61,032 | ||||||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | 7,016 | — | — | — | — | — | 281 | 7,297 | ||||||||||||||||||||||||||||||
Reclassification of prior years | (14,190 | ) | 5,849 | (5,402 | ) | (6,038 | ) | (10,445 | ) | 15,557 | — | — | (11,354 | ) | (26,020 | ) | ||||||||||||||||||||||||
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At December 31, 2015 | — | 45,155 | 30,684 | 24,723 | — | 25,543 | 15,178 | — | 11,808 | 153,093 | ||||||||||||||||||||||||||||||
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Charge (credit) to P&L | — | 16,595 | 13,587 | (16,481 | ) | — | 3,324 | 6,240 | — | 2,619 | 25,883 | |||||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | (15,348 | ) | — | — | — | — | — | — | (15,348 | ) | ||||||||||||||||||||||||||||
Reclassification of prior years | — | — | (28,923 | ) | — | — | — | — | 30,187 | (1,264 | ) | — | ||||||||||||||||||||||||||||
Acquisition of Adexus | — | — | — | — | — | — | — | (3,069 | ) | — | (3,069 | ) | ||||||||||||||||||||||||||||
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At December 31, 2016 | — | 61,750 | — | 2,452 | — | 28,867 | 21,418 | 27,118 | 13,163 | 160,559 | ||||||||||||||||||||||||||||||
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F-86
(All amounts are expressed in thousands of S/. unless otherwise stated)
Deferred income tax asset | Provisions | Accelerated tax depreciation | Tax losses | Outstanding work in progress | Provision for vacations unpaid | Others | Total | |||||||||||||||||||||
At January 1, 2011 | 1,732 | 4,919 | 6,809 | — | 1,322 | 1,555 | 16,337 | |||||||||||||||||||||
Credit (charge) to results | 4,695 | 1,918 | (4,883 | ) | 737 | 53 | 2,153 | 4,673 | ||||||||||||||||||||
Credit (charge) to OCI | 1,742 | (659 | ) | — | — | — | 28 | 1,111 | ||||||||||||||||||||
Acquisition of CAM (Note 30-d) | 14,545 | — | 2,074 | — | — | 5,056 | 21,675 | |||||||||||||||||||||
Other increases | — | — | — | — | — | 5,248 | 5,248 | |||||||||||||||||||||
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At December 31, 2011 | 22,714 | 6,178 | 4,000 | 737 | 1,375 | 14,040 | 49,044 | |||||||||||||||||||||
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Credit (charge) to results | (6,656 | ) | 6,529 | 13,936 | 13,456 | 1,506 | (7,010 | ) | 21,761 | |||||||||||||||||||
Credit (charge) to OCI | — | — | — | — | — | (1,768 | ) | (1,768 | ) | |||||||||||||||||||
Acquisition of Vial y Vives (Note 30-b) | 535 | — | — | — | — | — | 535 | |||||||||||||||||||||
Other increases | 134 | 299 | — | — | 55 | 741 | 1,229 | |||||||||||||||||||||
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At December 31, 2012 | 16,727 | 13,006 | 17,936 | 14,193 | 2,936 | 6,003 | 70,801 | |||||||||||||||||||||
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Credit (charge) to results | 3,788 | (6,499 | ) | 23,544 | 33,242 | 1,984 | 2,115 | 58,174 | ||||||||||||||||||||
Charge (credit) to OCI | 1,530 | — | — | — | — | 1,530 | ||||||||||||||||||||||
Credit (charge) to equity (Note 21-c) | — | — | 9,840 | — | — | — | 9,840 | |||||||||||||||||||||
Acquisition of DSD (Note 30-a) | — | — | — | 966 | 684 | 542 | 2,192 | |||||||||||||||||||||
Other increases | 1,842 | 1,836 | 1,560 | 3,244 | 1,690 | 330 | 10,502 | |||||||||||||||||||||
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At December 31, 2013 | 23,887 | 8,343 | 52,880 | 51,645 | 7,294 | 8,990 | 153,039 | |||||||||||||||||||||
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Deferred income tax asset | Provisions | Accelerated tax depreciation | Tax losses | Outstanding work in progress | Provision for unpaid vacations | Investments in subsidiaries | Impairment | Tax goodwill | Others | Total | ||||||||||||||||||||||||||||||
At January 1, 2014 | 23,887 | 8,343 | 52,880 | 51,645 | 7,294 | — | — | — | 8,990 | 153,039 | ||||||||||||||||||||||||||||||
Credit (charge) to P&L | 1,579 | 9,054 | 2,492 | (24,886 | ) | 4,083 | 5,613 | — | — | (2,664 | ) | (4,729 | ) | |||||||||||||||||||||||||||
Acquisition of Coasin (Note32-c) | 16 | — | — | — | — | — | — | — | — | 16 | ||||||||||||||||||||||||||||||
Acquisition of Morelco (Note32-b) | — | — | — | — | — | 6,156 | — | — | — | 6,156 | ||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | (473 | ) | (473 | ) | ||||||||||||||||||||||||||||
Reclassification of prior years | 324 | 5,953 | 3,664 | (2,818 | ) | 5,596 | — | — | — | 2,783 | 15,502 | |||||||||||||||||||||||||||||
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At December 31, 2014 | 25,806 | 23,350 | 59,036 | 23,941 | 16,973 | 11,769 | — | — | 8,636 | 169,511 | ||||||||||||||||||||||||||||||
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Credit (charge) to P&L | 342 | 4,076 | 26,661 | 18,623 | 772 | (13,832 | ) | — | 17,522 | 4,646 | 58,810 | |||||||||||||||||||||||||||||
Acquisition of joint operation | — | — | — | — | — | 1,476 | — | — | — | 1,476 | ||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | (1,895 | ) | (2,002 | ) | ||||||||||||||||||||||||||||
Reclassification of prior years | (5,199 | ) | (12,534 | ) | 5,615 | (19,544 | ) | (2,768 | ) | 2,063 | ) | — | — | 5,263 | (26,020 | ) | ||||||||||||||||||||||||
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At December 31, 2015 | 20,973 | 14,892 | 91,313 | 24,103 | 14,977 | 1,476 | — | 17,522 | 16,463 | 201,775 | ||||||||||||||||||||||||||||||
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Charge (credit) to P&L | 84,571 | 1,489 | 51,163 | (6,486 | ) | (2,005 | ) | (312 | ) | 172,052 | 3,003 | 3,322 | 306,794 | |||||||||||||||||||||||||||
Charge (credit) to equity | 159 | — | — | — | — | — | — | — | — | 159 | ||||||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | — | — | — | — | — | — | (343 | ) | (343 | ) | ||||||||||||||||||||||||||||
Acquisition of Adexus (Note32-a) | — | — | 10,607 | — | — | — | — | — | (3,313 | ) | 7,294 | |||||||||||||||||||||||||||||
Others | — | — | — | — | — | (556 | ) | — | — | (724 | ) | (1,280 | ) | |||||||||||||||||||||||||||
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At December 31, 2016 | 105,679 | 16,381 | 153,083 | 17,614 | 12,972 | 608 | 172,052 | 20,525 | 15,487 | 514,398 | ||||||||||||||||||||||||||||||
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F-87
(All amounts are expressed in thousands of S/. unless otherwise stated)
As ofAt December 31, 2013,2016, total tax losses amounted to S/.213507.3 million (whichof which S/.57.422.28 million are expected to be applied in 2014,2017, S/.65.457.55 million in 20152018 and the remaining balance in the following periodsfiscal years (S/.93334.5 million in 2012,2015, of which S/.12.5 million are53.6 were expected to be applied in 2013,2016, S/.18.756.9 million in 20142017 and the remaining balance in the following periods.fiscal years).
Tax goodwill arose from a tax credit balance resulting from the reorganization of Chilean subsidiaries in 2014 under Chilean tax laws and regulations. In 2016, the arbitration process relating to Project Collahuasi was completed and an additional payment was determined to be paid to the Chilean subsidiary selling party; which resulted in a higher balance in this item.
(All amounts expressed in thousands of S/ unless otherwise stated)
WORKERS’ PROFIT SHARING |
As established under current legislation,Worker’s profit sharing plans of Graña y Montero S.A.A., consortiums and local subsidiaries is 5% of the net income. This share is deductible for the purposes of income tax calculation.
In the case of the Dominican Republic, the profit sharing plan rate is 10%. In the specific case of Chile, profit sharing plans are a component of remuneration and not a determined percentage of profit. In Brazil and Colombia profit sharing plans are not required by law.
In 2013, profit sharing plans amounted to S/.16 million (S/.22.7 million and S/.23.6 million in 2012 and 2011 respectively).
The distribution of profit sharing plansbroken down in the income statement as of December 31 is as follows:
2011 | 2012 | 2013 | ||||||||||
Cost of sales | 19,134 | 18,633 | 12,990 | |||||||||
Administrative expenses | 4,431 | 4,088 | 3,060 | |||||||||
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Total at December 31 | 23,565 | 22,721 | 16,050 | |||||||||
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2014 | 2015 | 2016 | ||||||||||
Cost of sales of goods and services | 27,396 | 27,618 | 15,234 | |||||||||
Administrative expenses | 9,541 | 7,263 | 1,297 | |||||||||
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| |||||||
36,937 | 34,881 | 16,531 | ||||||||||
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EXPENSES BY NATURE |
For the years endingended December 31 this item is made up ofcomprises the following:
Cost of services and goods | Adminis- trative expenses | Total | Goods and | Administrative | ||||||||||||||||
2011: | ||||||||||||||||||||
Purchase of goods | 28,468 | — | 28,468 | |||||||||||||||||
Personnel charges | 1,056,356 | 114,267 | 1,170,623 | |||||||||||||||||
services | expenses | |||||||||||||||||||
2014: | ||||||||||||||||||||
Inventories, materials and consumables used | 1,148,533 | 52 | ||||||||||||||||||
Wages, salaries and fringe benefits | 1,864,053 | 210,028 | ||||||||||||||||||
Services provided by third-parties | 1,379,555 | 40,730 | 1,420,285 | 2,105,226 | 120,714 | |||||||||||||||
Taxes | 4,190 | 191 | 4,381 | 11,356 | 6,212 | |||||||||||||||
Other management charges | 233,549 | 23,764 | 257,313 | 686,593 | 63,124 | |||||||||||||||
Depreciation | 113,063 | 13,960 | 127,023 | 170,785 | 14,525 | |||||||||||||||
Amortization | 44,553 | 6,670 | 51,223 | 68,089 | 6,641 | |||||||||||||||
Variation of inventories | 749,783 | — | 749,783 | |||||||||||||||||
Impairment of inventories | 62 | — | ||||||||||||||||||
Impairment of accounts receivable | — | 71 | ||||||||||||||||||
Impairment of property, plant and equipment | 2,415 | — | ||||||||||||||||||
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3,609,517 | 199,582 | 3,809,099 | 6,057,112 | 421,367 | ||||||||||||||||
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2012: | ||||||||||||||||||||
Purchase of goods | 252,186 | — | 252,186 | |||||||||||||||||
Personnel charges | 1,458,715 | 125,558 | 1,584,273 | |||||||||||||||||
2015: | ||||||||||||||||||||
Inventories, materials and consumables used | 1,094,836 | — | ||||||||||||||||||
Wages, salaries and fringe benefits | 2,128,130 | 215,101 | ||||||||||||||||||
Services provided by third-parties | 1,389,371 | 51,378 | 1,440,749 | 2,953,247 | 137,980 | |||||||||||||||
Taxes | 7,238 | 863 | 8,101 | 37,129 | 1,919 | |||||||||||||||
Other management charges | 292,740 | 52,425 | 345,165 | 651,057 | 30,225 | |||||||||||||||
Depreciation | 159,526 | 13,492 | 173,018 | 199,015 | 18,055 | |||||||||||||||
Amortization | 60,517 | 10,968 | 71,485 | 81,841 | 7,514 | |||||||||||||||
Impairment (inventories and accounts receivable) | 11,192 | 2,496 | 13,688 | |||||||||||||||||
Variation of inventories | 888,334 | — | 888,334 | |||||||||||||||||
Impairment of inventories | 62 | — | ||||||||||||||||||
Impairment of accounts receivable | 13,118 | — | ||||||||||||||||||
Impairment of property, plant and equipment | 7,086 | 2,591 | ||||||||||||||||||
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4,519,819 | 257,180 | 4,776,999 | 7,165,521 | 413,385 | ||||||||||||||||
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2016: | ||||||||||||||||||||
Inventories, materials and consumables used | 942,354 | — | ||||||||||||||||||
Wages, salaries and fringe benefits | 1,544,128 | 234,474 | ||||||||||||||||||
Services provided by third-parties | 2,358,699 | 118,293 | ||||||||||||||||||
Taxes | 13,922 | 1,771 | ||||||||||||||||||
Other management charges | 273,601 | 24,882 | ||||||||||||||||||
Depreciation | 193,434 | 12,088 | ||||||||||||||||||
Amortization | 74,849 | 7,894 | ||||||||||||||||||
Impairment of inventories | 36,353 | — | ||||||||||||||||||
Impairment of accounts receivable (Note5.1-f) | 419,584 | — | ||||||||||||||||||
Impairment of property, plant and equipment | 9,263 | — | ||||||||||||||||||
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5,866,187 | 399,402 | |||||||||||||||||||
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F-88
(All amounts are expressed in thousands of S/. unless otherwise stated)
Costs of services and goods | Adminis- trative expenses | Total | ||||||||||
2013: | ||||||||||||
Purchase of goods | 212,819 | — | 212,819 | |||||||||
Personnel charges | 1,527,148 | 169,469 | 1,696,617 | |||||||||
Services provided by third-parties | 1,520,254 | 93,667 | 1,613,921 | |||||||||
Taxes | 8,930 | 614 | 9,544 | |||||||||
Other management charges | 533,544 | 72,413 | 605,957 | |||||||||
Depreciation | 167,981 | 13,388 | 181,369 | |||||||||
Amortization | 66,637 | 11,133 | 77,770 | |||||||||
Impairment of inventories and accounts receivables | 2,349 | 764 | 3,113 | |||||||||
Variation of inventories | 922,992 | 344 | 923,336 | |||||||||
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4,962,654 | 361,792 | 5,324,446 | ||||||||||
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For the years ended December 31 wages, salaries and fringe benefits comprise the following items:
2014 | 2015 | 2016 | ||||||||||
Salaries | 1,579,515 | 1,792,723 | 1,312,968 | |||||||||
Social contributions | 133,760 | 177,307 | 107,340 | |||||||||
Statutory bonuses | 134,892 | 135,980 | 147,311 | |||||||||
Employee’s severance indemnities | 91,100 | 98,604 | 72,608 | |||||||||
Vacations | 69,417 | 79,354 | 66,305 | |||||||||
Worker’s profit sharing (Note 26) | 36,937 | 34,881 | 16,531 | |||||||||
Others | 28,460 | 24,382 | 55,539 | |||||||||
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2,074,081 | 2,343,231 | 1,778,602 | ||||||||||
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FINANCIAL INCOME AND EXPENSES |
For the years endingended December 31 these items includedcomprise the following:
2011 | 2012 | 2013 | ||||||||||
Financial income: | ||||||||||||
Interest on loans granted to related parties | 875 | 3,005 | 113 | |||||||||
Interest on short-term bank deposits | 8,749 | 2,007 | 5,230 | |||||||||
Interest on loans | 1,470 | 14,644 | 15,497 | |||||||||
Income from reimbursement of performance bond | 1,108 | 968 | 783 | |||||||||
Commissions and guarantees | 626 | 290 | 2,053 | |||||||||
Interest on third-party loans | — | 350 | 874 | |||||||||
Exchange difference gains | 165,534 | 263,669 | 430,650 | |||||||||
Derivative financial instruments | — | 12,745 | 13,972 | |||||||||
Other | 3,943 | 2,711 | 1,831 | |||||||||
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182,305 | 300,389 | 471,003 | ||||||||||
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Financial expenses: | ||||||||||||
Interest expense: | ||||||||||||
- Interests to related parties | — | — | 500 | |||||||||
- Bank loans | 8,636 | 25,897 | 40,000 | |||||||||
- Finance lease | 8,476 | 19,119 | 14,164 | |||||||||
- Multilateral loans | 7,086 | 6,422 | 4,975 | |||||||||
- Commissions and guarantees | — | — | 5,155 | |||||||||
- Third party loans | — | 1,333 | 895 | |||||||||
Derivative financial instruments | 2,131 | 14,763 | 15,903 | |||||||||
Expense from exchange losses | 163,657 | 242,543 | 501,068 | |||||||||
Other financial expenses | 6,912 | 5,375 | 6,840 | |||||||||
Less capitalized interest | (8,442 | ) | (4,780 | ) | (6,048 | ) | ||||||
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188,456 | 310,672 | 583,452 | ||||||||||
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2014 | 2015 | 2016 | ||||||||||
Financial income: | ||||||||||||
Interest on short-term bank deposits | 8,010 | 12,413 | 9,229 | |||||||||
Interest on loans to third parties | 899 | 19,749 | 6,142 | |||||||||
Commissions and collaterals | 969 | 3,026 | 4 | |||||||||
Others | 1,584 | 2,919 | 5,419 | |||||||||
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11,462 | 38,107 | 20,794 | ||||||||||
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| |||||||
Financial expenses: | ||||||||||||
Interest expense: | ||||||||||||
- Bank loans | 21,307 | 55,027 | 99,730 | |||||||||
- Bonds | — | 6,370 | 25,352 | |||||||||
- Financial lease | 12,872 | 15,243 | 13,847 | |||||||||
- Commissions and collaterals | 4,927 | 9,368 | 10,168 | |||||||||
- Loans from third parties | 2,432 | 6,335 | 4,681 | |||||||||
- Interest on loans from related parties | 3,026 | 814 | 3,452 | |||||||||
- Multilateral loans | 5,022 | — | — | |||||||||
Exchange difference loss, net | 44,282 | 82,851 | 12,527 | |||||||||
Derivative financial instruments | 1,819 | 1,691 | 1,248 | |||||||||
Lost by Measurement of Financial Asset VR | — | — | 76,864 | |||||||||
Other financial expenses | 9,992 | 12,256 | 18,402 | |||||||||
Less capitalized interest | (2,863 | ) | (13,153 | ) | (34,700 | ) | ||||||
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102,816 | 176,802 | 231,571 | ||||||||||
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Most of the other income is related to the reversal of provisions that were recognized in 2011 for the business combination with CAM. At the acquisition date of CAM (Note 31-d), as part of the purchase price allocation process and based on external lawyers reports, we accounted for S/.102.7 million for contingent liabilities mainly related to labor and tax issues considered as possible and probable as stated by IAS 37, which have expiration dates according to legal requirements between 2012 and 2016.
F-89
(All amounts are expressed in thousands of S/. unless otherwise stated)
29 | OTHER INCOME AND EXPENSES, NET |
The amount recognized as other income and expenses mainly corresponds to the reversal amounted to S/.13.6 million (S/.68 million and S/.3,616 in 2012 and 2011, respectively); this primarily reflects the liabilities that expired according to the each countries laws during the year, 2012 and 2013.
In 2013 it amounted to S/.13.6 million related to labor-related and tax contingencies of Brazil, Chile and Peru for S/.9 million, S/.4 million and S/.0.6 million respectively.
In 2012 it amounted to S/.68 million, related to labor-related and tax contingencies for S/.40 million (from Brazil and Colombia for S/.32 million and S/.8 million, respectively) and trade liabilities amounting to S/.28 million. The probability of payment became remote throughout the course ofFor the years 2012 and 2013, asended December 31 these items comprise the statute of limitations for such issues expired.following:
2014 | 2015 | 2016 | ||||||||||
Other income: | ||||||||||||
Sales of fixed assets | 33,711 | 25,690 | 40,146 | |||||||||
Reversal of legal and tax provisions (Note 23) | 9,394 | 7,796 | 18,778 | |||||||||
Legal indemnities | — | — | 8,957 | |||||||||
Sales of investments | 7,481 | 60 | 46 | |||||||||
Dividends received from TGP (Note 10) | 9,350 | 7,215 | — | |||||||||
Disposal ofnon-current assets classified as held for sale | — | 8,775 | — | |||||||||
Present value of the liability from put option | — | 18,627 | — | |||||||||
Others | 7,509 | 14,467 | 18,792 | |||||||||
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| |||||||
67,445 | 82,630 | 86,719 | ||||||||||
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| |||||||
Other expenses: | ||||||||||||
Impairment of goodwill and trademarks | — | — | 54,308 | |||||||||
Net cost of fixed assets disposal | 29,367 | 15,669 | 31,339 | |||||||||
Loss on remeasurement of previously held interest (Note33-a) | — | — | 6,832 | |||||||||
Present value of the liability from put option | — | — | 984 | |||||||||
Cost of sales ofnon-current assets classified as held for sale | — | 8,945 | — | |||||||||
Others | 22,942 | 729 | 6,526 | |||||||||
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52,309 | 25,343 | 99,989 | ||||||||||
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15,136 | 57,287 | ( 13,270 | ) | |||||||||
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a) | In accordance with current legislation in Peru, Chile, Brazil, Colombia, Ecuador, Bolivia, Guyana and Panama, each |
b) | Changes in the Peruvian Income Tax Law - |
By means of Law No.30296 enacted on December 31, 2014 amendments to Income Tax Law have been made, which are effective starting in fiscal year 2015 onwards. Among these amendments, it should be noted the progressive reduction in the corporate income tax rate (on the Peruvian third-category income earners) from 30% to 28% for fiscal years 2015 and 2016; then a reduction to 27% for fiscal years 2017 and 2018; and a final reduction to 26% from fiscal year 2019 onwards. Tax on dividends and other forms of profit distribution, agreed on by any legal entities to individuals andnon-domiciled legal persons is to be progressively increased from 4.1% to 6.8% for distributions that are agreed on or paid during fiscal years 2015 and 2016; then an increase to 8.8% for fiscal years 2017 and 2018 will be effective; and a final increase to 9.3% will be effective from fiscal year 2019 onwards. The distribution of retained earnings until December 31, 2015 will continue to be subject to a 4.1% tax even when the distribution is to be made in the subsequent years.
By means of Legislative Decree No. 1261, enacted on December 10, 2016 the Peruvian income tax law was amended to be effective from fiscal 2017 onwards. This amendment sets forth a corporate income tax rate of 29.5%. It also sets forth an income tax rate on dividends of 5% applicable tonon-domiciled legal entities and individuals effective from fiscal 2017 onwards. Undistributed profits up to December 31, 2016 will continue to be affected to a 6.8% income tax rate regardless of whether the distribution is agreed or occurs in subsequent periods.
c) | Amendments to Income Tax Law in Chile - |
On September 29, 2014, Law No 20780 was enacted by which certain changes are made to the Chilean tax system, such as: changes in the Income Tax Law, VAT Law and Tax Code. Also, on February 1, 2016 Law No 20899 was enacted to simplify and define the application of the above-mentioned tax reform. With respect to income tax, two systems have been established:
(All amounts expressed in thousands of S/ unless otherwise stated)
i) | Attributable income system: the tax rate of first-category applicable on entities will be progressively increased, 21% in 2014, 22.5% in 2015, 24% in 2016, up to 25% in 2017. Its choice is being restricted to companies whose partners are individuals domiciled or resident in Chile or individuals or legal personsnon-domiciled and non-resident in Chile. This system levies the shareholders of Chilean entities with taxes on an annual basis regardless of any effective distribution of profits from the local entity; and entitles them to use the total taxes paid as income tax fiscal credit. |
ii) | Partially integrated system: of first-category taxes applicable on entities will be progressively increased, 21% in 2014, 22.5% in 2015, 24% in 2016, 25.5% in 2017, up to 27% in 2018. Subject to this system are corporations and entities in which at least one of its owners is not an individual (whether domiciled or not) ornon-domiciled legal entity. This system levies the shareholders of Chilean entities that distribute dividends and entitle them to use such distribution as a fiscal credit at a 65% of the total taxes paid. This limit does not apply to investors with whom Chile had signed double taxation agreements, such as Peru. |
d) | Changes in the Income Tax Law in Colombia - |
In December 2014 Law No 1739 was enacted amending the Tax Code and introducing diverse temporary changes in Income Tax, CREE (Tax on income for equity) and includes the tax on wealth (Impuesto a la Riqueza). Major changes are as follows:
In December 2016 Law No.1819 was published with another amendment to the tax laws, effective from fiscal 2017. Major changes are as follows:
e) | The income tax expense shown in the consolidated income statement comprises: |
2011 | 2012 | 2013 | ||||||||||
Current tax: | ||||||||||||
- Current tax on profit of the year | 183,242 | 145,909 | 188,027 | |||||||||
Deferred tax: | ||||||||||||
- Generation and reversal of temporary differences (Note 23) | (41,795 | ) | 8,666 | (5,597 | ) | |||||||
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Income tax expense | 141,447 | 154,575 | 182,430 | |||||||||
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2014 | 2015 | 2016 | ||||||||||
Current income tax | 212,569 | 138,164 | 176,894 | |||||||||
Deferred income tax (Note 25) | (60,435 | ) | 2,222 | (280,911 | ) | |||||||
PPUA | (5,938 | ) | (41,359 | ) | (7,789 | ) | ||||||
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Income tax expense | 146,196 | 99,027 | (111,806 | ) | ||||||||
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(All amounts expressed in thousands of S/ unless otherwise stated)
Under Chilean Legislation, when a Company reports tax losses, it can apply for a refund of first-category taxes paid in prior years up to an amount that equals the taxes that would be levied on the tax losses, provided that no dividends have been distributed on the income obtained from the refund. The amount to be refunded by the Chilean Tax Authorities is called “provisional payment on absorbed profits - PPUA”. The Company recognizes income from income tax and an account receivable when applying for this tax refund.
In 2016 the PPUA-derived income is related to the tax losses reported by of subsidiaryVyV-DSD. In 2015 this item was related to the tax losses reported by CAM Chile Spa andVyV-DSD, amounting to S/19.4 million and S/21.9 million, respectively.
The Group’s income tax |
2011 | 2012 | 2013 | ||||||||||
Profit before income tax | 477,645 | 520,826 | 595,005 | |||||||||
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Income tax by applying local applicable tax rates on profit generated in the respective countries | 143,294 | 156,248 | 211,341 | |||||||||
Tax effect on: | ||||||||||||
- Non-taxable income | (67,353 | ) | (11,550 | ) | (39,494 | ) | ||||||
- Associates net profit | — | — | (9,348 | ) | ||||||||
- Non-deductible expenses | 65,506 | 19,756 | 24,160 | |||||||||
- Prior year adjustment | — | (7,432 | ) | 104 | ||||||||
- Others | — | (2,447 | ) | (4,333 | ) | |||||||
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Income tax charge | 141,447 | 154,575 | 182,430 | |||||||||
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2014 | 2015 | 2016 | ||||||||||
Pre-tax profit | 507,428 | 154,616 | (563,404 | ) | ||||||||
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Income tax by applying local applicable tax rates on profit generated in the respective countries | 146,113 | 54,631 | (157,276 | ) | ||||||||
Tax effect on: | ||||||||||||
-Non-taxable income | (14,420 | ) | (31,266 | ) | (1,068 | ) | ||||||
- Equity method (profit) loss | 1,790 | 2,171 | 3,673 | |||||||||
-Non-deductible expenses | 25,967 | 9,831 | 57,044 | |||||||||
- Unrecognized deferred tax asset income (expense) | 13,922 | 31,432 | (4,535 | ) | ||||||||
- Adjustment for changes in rates of income tax | (2,746 | ) | 2,008 | (17,105 | ) | |||||||
- Tax goodwill | (20,542 | ) | — | — | ||||||||
- PPUA adjustment for changes in tax rates | (5,938 | ) | 15,296 | 4,871 | ||||||||
- Change in prior years estimations | 3,891 | 12,762 | (181 | ) | ||||||||
- Others, net | (1,841 | ) | 2,162 | 2,771 | ||||||||
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Income tax charge | 146,196 | 99,027 | (111,806 | ) | ||||||||
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The theoretical tax disclosed resulted from applying the income tax rate stipulated in the tax laws of the country in which a Group company is legally resident. Accordingly, for fiscal 2016, companies that are legally resident in Peru, Chile and Colombia applied income tax rates of 28%, 24% and 40% respectively (28%, 22.5% and 39% for 2015; 28%, 21% and 34% for 2014). Norvial, GyM Ferrovías, Vesur and GMP (Blocks III and IV) have legal stability agreements with Peruvian Government, in force for all years preserved. In this sense, the consolidated theoretical amount is obtained as a weighted averagepre-tax profit or loss and the applicable income tax rate. |
(All amounts expressed in thousands of S/ unless otherwise stated)
Country | Statutory tax rate | Pre - tax profit | Tax at statutory tax rate | |||||||||
(A) | (B) | (A)*(B) | ||||||||||
2016 | ||||||||||||
Perú | 28.00 | % | (1,071,663 | ) | (300,066 | ) | ||||||
Perú - Norvial | 27.00 | % | 63,583 | 17,167 | ||||||||
Perú - GyM Ferrovías | 30.00 | % | 34,760 | 10,428 | ||||||||
Perú – Vesur | 30.00 | % | 888 | 267 | ||||||||
Perú – GMP | 30.00 | % | 8,602 | 2,581 | ||||||||
Chile | 24.00 | % | (86,151 | ) | (20,676 | ) | ||||||
Colombia | 40.00 | % | (25,555 | ) | (10,222 | ) | ||||||
Bolivia | 25.00 | % | (703 | ) | (176 | ) | ||||||
Unrealized gains | 512,836 | 143,421 | ||||||||||
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Total | (563,404 | ) | (157,276 | ) | ||||||||
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2015 | ||||||||||||
Perú | 28.00 | % | 174,432 | 48,841 | ||||||||
Perú - Norvial | 27.00 | % | 54,471 | 14,707 | ||||||||
Perú - GyM Ferrovías | 30.00 | % | 26,954 | 8,086 | ||||||||
Perú – Vesur | 30.00 | % | 2,336 | 701 | ||||||||
Perú – GMP | 30.00 | % | 15,007 | 4,502 | ||||||||
Chile | 22.50 | % | (95,284 | ) | (21,439 | ) | ||||||
Colombia | 39.00 | % | 40,900 | 15,951 | ||||||||
Bolivia | 25.00 | % | (57,382 | ) | (14,345 | ) | ||||||
Unrealized gains | (6,817 | ) | (2,045 | ) | ||||||||
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Total | 154,616 | 54,631 | ||||||||||
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2014 | ||||||||||||
Perú | 30.00 | % | 288,917 | 86,675 | ||||||||
Perú - Norvial | 27.00 | % | 41,999 | 11,340 | ||||||||
Perú - GyM Ferrovías | 30.00 | % | 22,894 | 6,868 | ||||||||
Perú – Vesur | 30.00 | % | 96 | 29 | ||||||||
Perú – GMP | 30.00 | % | 92,425 | 27,728 | ||||||||
Chile | 21.00 | % | 49,484 | 10,392 | ||||||||
Colombia | 34.00 | % | 1,290 | 439 | ||||||||
Bolivia | 25.00 | % | 484 | 121 | ||||||||
Others - elimination | 9,839 | 2,521 | ||||||||||
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Total | 507,428 | 146,113 | ||||||||||
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h) | Peruvian tax authorities have the right to examine, and, if necessary, amend the income tax determined by the Company in the last four |
F-90
(All amounts are expressed in thousands of S/. unless otherwise stated)
for fiscal years |
As established under regulations in force in Peru, for purposes of determining income tax and the general sales tax, transfer pricing must be taken into account for |
(All amounts expressed in thousands of S/ unless otherwise stated)
Temporary tax on net assets - |
The temporary tax on net assets is applied by the companies which operate in Peru, to third category income generators subject to the Peruvian Income Tax General Regime. Effective in the year 2012, the tax rate is 0.4%, applicable to the amount of the net assets exceeding S/.11 million.
The amount effectively paid may be used as a credit against payments on account of income tax under the General Regime or against the provisional tax payment of the income tax of the related period.
The |
l) | At December 31, 2015 deferred income tax |
m) | The current income tax payable, after applying the corresponding tax credits and whose due date arrives until the first week of April of the following year, includes mainly: |
31 | ACCUMULATED OTHER |
Accumulated other comprehensive income is composed of the fair value of the variable-fixed interest rate hedge signed by GMP S.A., foreign currency translation adjustment related to foreign subsidiaries and the fair value of available for sale assets. These movements are shown net of income tax, except for the translation adjustment.
The analysis of the movement is as follows:
The | analysis of the movement is as follows: |
Cash flow hedge | Translation adjustment | Increase in fair value of available-for sale assets | Total | |||||||||||||
At January 1, 2011 | (4,108 | ) | (382 | ) | 7,460 | 2,970 | ||||||||||
Additions * | 943 | (3,940 | ) | — | (2,997 | ) | ||||||||||
Tax effects * | (283 | ) | — | — | (283 | ) | ||||||||||
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At December 31, 2011 | (3,448 | ) | (4,322 | ) | 7,460 | (310 | ) | |||||||||
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Additions * | (3,216 | ) | (1,155 | ) | — | (4,371 | ) | |||||||||
Tax effects * | 965 | — | — | 965 | ||||||||||||
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At December 31, 2012 | (5,699 | ) | (5,477 | ) | 7,460 | (3,716 | ) | |||||||||
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Additions * | 5,066 | (467 | ) | 27,229 | 31,828 | |||||||||||
Tax effects * | (1,520 | ) | — | (8,169 | ) | (9,689 | ) | |||||||||
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At December 31, 2013 | (2,153 | ) | (5,944 | ) | 26,520 | 18,423 | ||||||||||
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Exchange | ||||||||||||||||||||
Foreign | Increase in | difference from | ||||||||||||||||||
currency | fair value of | net investment | ||||||||||||||||||
Cash flow | translations | available-for | in a foreign | |||||||||||||||||
hedge | adjustment | sale assets | operation | Total | ||||||||||||||||
At January 31, 2014 | (2,153 | ) | (5,944 | ) | 26,520 | — | 18,423 | |||||||||||||
(Charge) credit for the year | 750 | (13,086 | ) | 4,811 | (17,030 | ) | (24,555 | ) | ||||||||||||
Tax effects | (210 | ) | — | (1,251 | ) | 4,428 | 2,967 | |||||||||||||
Adjustment for changes in rates of income tax | — | — | 1,089 | — | 1,089 | |||||||||||||||
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Other comprehensive income of the year | 540 | (13,086 | ) | 4,649 | (12,602 | ) | (20,499 | ) | ||||||||||||
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At December 31, 2014 | (1,613 | ) | (19,030 | ) | 31,169 | (12,602 | ) | (2,076 | ) | |||||||||||
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(Charge) credit for the year | 954 | (45,411 | ) | 26,991 | (6,942 | ) | (24,408 | ) | ||||||||||||
Tax effects | (267 | ) | — | (7,018 | ) | 1,804 | (5,481 | ) | ||||||||||||
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Other comprehensive income of the year | 687 | (45,411 | ) | 19,973 | ( 5,138 | ) | (29,889 | ) | ||||||||||||
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At December 31, 2015 | (926 | ) | (64,441 | ) | 51,142 | (17,739 | ) | (31,965 | ) | |||||||||||
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(Charge) credit for the year | 1,190 | 9,885 | (3,149 | ) | 10,965 | 18,891 | ||||||||||||||
Tax effects | (351 | ) | — | 929 | (3,243 | ) | (2,665 | ) | ||||||||||||
Transfer to profit or loss (Note 10) | — | — | (41,461 | ) | 1,562 | (39,899 | ) | |||||||||||||
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Other comprehensive income of the year | 839 | 9,885 | (43,681 | ) | 9,284 | (23,673 | ) | |||||||||||||
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At December 31, 2016 | (87 | ) | (54,556 | ) | 7,461 | (8,455 | ) | (55,638 | ) | |||||||||||
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F-91
(All amounts are expressed in thousands of S/. unless otherwise stated)
Amounts in the table above represent only amounts attributable to the Company’s controlling interest net of taxes. Below is the movement in Other Comprehensive Income for each year:
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||
Controlling interest | (3,280 | ) | (3,406 | ) | 22,139 | (20,499 | ) | (29,889 | ) | (23,673 | ) | |||||||||||||
Non-controlling interest | 35 | (982 | ) | (2,232 | ) | (7,986 | ) | (15,235 | ) | 4,191 | ||||||||||||||
Adjustment for actuarial gains and losses, net of tax | — | (3,678 | ) | (4,591 | ) | (1,332 | ) | (2,921 | ) | (1,119 | ) | |||||||||||||
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Total value in OCI | (3,245 | ) | (8,066 | ) | 15,316 | ( 29,817 | ) | (48,045 | ) | (20,601 | ) | |||||||||||||
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CONTINGENCIES, |
As of December 31, 2013 the Group presents the following contingencies:
a) | Tax contingencies - |
During
During the course of 2012, Graña y Montero S.A.A. was subject to tax audit for fiscal 2007, 2008 and 2009. Asyears 1999 to 2002. The maximum exposure amount is S/5.2 million.
In fiscal year 2017, the Companytax litigation process related to 2001 was resolved, where the Tax Court orders SUNAT to recalculate the observations, determining an amount lower than initially claimed. Our subsidiary has fileddecided to accept the respective appeals, which are pendingconclusions of this resolution and the outcome of which Management and legal counsel consider will be favorable.
As a result of this tax examinationsubmit fractionation requests for the years 1999 and 2001payment of the debt in reference amounting to S/14.1 million
Likewise, at the end of fiscal year 2017, the contentious-administrative process related to the 1999 fiscal year was resolved, where the Judicial Branch rejected our arguments and confirmed what was stated by SUNAT. Regarding this process, there was already a contingency provision of S/5 million.
An administrative tax process related to the 2010 fiscal year is still underway, however, its resolution will not imply economic damage since it corresponds to a greater refund of the balance in favor in 2011, already audited by the Tax Administration
The Company has made a provision for S/.5 million which is the best estimateresults of the expected future expenses to be incurred any potential tax contingencyinspection, which is recognizedhad a maximum exposure at December 31, 2016 of S/2.8 million (S/0.8 million at December 31, 2015).
(All amounts expressed in thousands of S/ unless otherwise stated)
Management believes thatexpects the outcome of the remainingother court actions will be favorable based onto the analysisCompany considering their nature and characteristics as well as the opinion of their characteristics, which was performed by its legal counsel.advisor.
b) | Other contingencies - |
As of December 31, 2013, civil court actions have been brought against the Company mainly relating to claims of Municipalities in respect of work execution with no municipal authorization and failure to pay municipal rights for S/.2.7 million (S/.4.7 million in 2012).
Also, similar actions have been brought against jointly-controlled businesses in which the Company has an interest, mainly relating to work executed without the respective municipal authorization; these actions total approximately S/.0.7 million (S/.0.8 million in 2012).
Management believes that the court actions mentioned above will be declared will be declared without merit, and therefore, no liabilities will arise in addition to those already paid as of December 31, 2013.
In February 2003 the Company was served notice of General Management Resolution No.004-2003-GG-OSITRAN issued by the Peruvian regulator of infrastructure and public transport investment—(OSITRAN) by which payment of S/.250 plus interest was ordered on the grounds of alleged withholdings of the Transport Fund (Fondo Vial) by the Company. To date, the Company has challenged the decision and the hearing date remains to be set by the Administrative Court. Management considers that the outcome of this claim will be favorable to the Company and will not affect future financial results.Year 2016 -
i) | Civil-court lawsuits mainly related to indemnities for damages, contract termination and workplace accidents amounting to S/0.61 million (S/0.15 million attributable to GyM; S/0.19 million attributable to Concar; S/0.17 million attributable to Viva GyM while the remaining S/0.1 million attributable to GMP and CAM Peru). |
F-92
ii) | Contentious administrative lawsuits for S/4 million, of which, S/3.4 million is related to 14 processes of GMP S.A. and Consorcio Terminales, S/0.5 million resulting from an action brought against GyM Ferrovías for alleged noncompliance with OSITRAN’s General Rules of Oversight. In addition, it includes S/0.1 million GyM S.A. related to a contentious administrative process. |
iii) | Administrative lawsuits for S/3.29 million, S/0.85 million is related to 24 processes of GMP S.A., Consorcio Terminales and Terminales del Perú; S/2 million involving GyM Ferrovías resulting from an action brought by OSITRAN, the Municipalities of Villa María del Triunfo and San Juan de Miraflores comprising the property tax; S/0.24 million against Viva GyM for a claim made by the Asociación Peruana de Consumidores y Usuarios before Indecopi in relation to the Parques del Agustino project; and S/0.2 million involving an action brought against Concesionaria Canchaque for alleged contractual noncompliance with OSITRAN). |
iv) | Labor lawsuits for a total S/6.12 million (S/5 million comprising actions brought against GyM, S/0.35 million against STRACON GyM; S/0.65 million against GMP, S/0.2 million against GMD S.A., and the remaining balance of S/0.1 million comprising actions brought against Concar, CAM Colombia and CAM Perú S.A.). |
v) | Two securities class action have been filed against the Company, an executive and a former executive officers in the Eastern District of New York during the first quarter of 2017. Both complaints allege false and misleading statements during the class period. In particular, they allege that the Company failed to disclose, among other things, that a) the company knew that its partner Odebrecht was engaged in illegal activities, and b) the Company profited from such activities in violation of its own corporate governance standards. All parties have agreed to unify the two lawsuits and appoint a single lead plaintiff, with one single council to control the class action. On March 6, 2018, the court appointed Treasure Finance Holding Corp. as the plaintiffs’ representative. In addition, the court has established the following schedule: i) on May 4, 2018, consolidation of files; ii) on July 3, 2018, presentation of the request for dismissal; iii) September 4, 2018, presentation of the opposition to the request for dismissal; and iv) October 3, 2018, submission of allegations by GyM. After this, the court could dismiss the claim or admit it. Management believe that both of those actions would likely be dismissed by the court for failure to adequately file a claim. Therefore, at the reporting date, we consider the risk of a material loss to the company is not probable. |
vi) | On March 30, 2017, the minority interest holders of Adexus (Sistemas y Redes S.A. and Asesorías e Inversiones Busso Ltda.) filed three lawsuits against Graña y Montero S.A.A., GMD, Adexus and their major executives, related to: a) the unenforceability of the Investment Agreement and Shareholders’ Agreement under the provisions of Law 18.046 (“Ley de Sociedades Anónimas” in Chile), for a total amount claimed of US$11.4 million (equivalent to S/38.3 million); b) the declaration of nullity because of fraud of the Investment Agreement and other acts and damages and the order of forced execution of the Investment Agreement, plus damages for a total amount claimed of US$50 million (equivalent to S/168 million); c) the declaration of nullity of the Shareholders’ Agreement and its amendments. The parties have responded and counterclaimed and up to date we are waiting for the date of the Conciliation Hearing. The probability of loss of the present litigations is classified as remote. |
(All amounts are expressed in thousands of S/. unless otherwise stated)
Year 2015 -
vii) | Civil court actions mainly involving costs and damages and contract terminations as well as work accidents amounting to S/1.1 million (S/0.5 million for GyM S.A., S/0.3 million for Viva GyM and S/0.3 million for Concar SA.). |
viii) | Arbitration processes amounting to S/122.3 million related to an action brought by Contugas S.A.C. and IMECON S.A. against the court action brought by GyM S.A. involving recognition of expenses and indemnification for costs and damages for S/112.3 million and S/10 million, respectively. |
ix) | Administrative challenge actions amounting to S/4.1 million, of which, S/4 million comprising an action brought by the Peruvian mining and energy regulator—OSINERMIN for an alleged noncompliance by GMP S.A. and Consorcio Terminales. Also included is S/.0.1 million to be assumed by GyM S.A.as a result of an actions brought by the Peruvian Ministry of Labor. |
x) | Administrative actions amounting to S/3.1 million (S/2 million comprising an action brought by the Peruvian Mining and Energy regulator (OSINERMIN) for the alleged noncompliance of GMP S.A., Consorcio Terminales and Terminales del Peru; S/0.9 million of GyM Ferrovías S.A. comprising an action brought by Municipality of La Victoria, Lima, Villa María del Triunfo and San Juan de Luriganch o for property tax; and S/.0.2 million compromising action brought against Morelco S.A.S.) |
xi) | Labor-related court actions amounting to S/3.7 million (S/1.4 million were actions against Vial yVives-DSD S.A., S/0.9 million against GMP S.A., S/0.6 million against GyM S.A, S/0.2 million against GMD S.A, S/0.2 million against Concar S.A, S/0.1 million against Stracon GyM S.A. and S/0.1 million against CAM Perú S.A.). |
c) |
AsAt December 31, 2016, the Group holds current performance bonds and guarantees with a number of financial institutions to secure transactions for US$1,258.5 million and US $330.5 million, respectively (US$820.2 million and US$27.4 million, respectively, as of December 31, 2013, the Group had guarantee commitments with different financial institutions securing transactions in the amount of US$83 million and S/.3.8 million.2015).
BUSINESS COMBINATIONS |
a) |
In August 2013, throughJune 2015 the subsidiaries GyM MineríaCompany acquired 44% interest in the capital stock of Chilean entity Adexus S.A., Ingenieríwhich is mainly engaged in providing IT solutions services. At December 31, 2015 the Company arrived at the conclusion that joint control existed and that the joint arrangement qualified as a y Construcción Vial y Vives S.A. and GyM Chile S.p.A.,joint venture; therefore, the investment was recorded under the equity method of accounting in the consolidated financial statements of the Group (Note16-b).
In January 2016 the Group acquired an additional interest of 8%, totaling 52% of total interest; the consideration agreed totaled S/8.3 million which was settled through debt capitalization. This larger interest did not affected the investment classification as a joint venture.
Subsequently, in August 2016, the Group acquired an additional interest of 39.03% to obtain total interest in its capital stock of 91.03%; thus gaining control over this entity. The consideration agreed totaled S/14 million which was initially stated as debt and then capitalized in the same period.
(All amounts expressed in thousands of S/ unless otherwise stated)
Upon obtaining control, the Company accounted for the transaction using the acquisition method of accounting set forth in IFRS 3 “Business Combination” and determined goodwill resulting from the acquisition. The balance at December 31, 2016 was stated at provisional values.
The table below itemizes the provisional determination of the fair value of the identifiable assets acquired, liabilities assumed,non-controlling interest held and goodwill at the acquisition date:
Provisional fair values | ||||||||
S/ | US$000 | |||||||
Purchase consideration | 14,040 | 4,179 | ||||||
Fair value of previously held interest | 29,039 | 8,643 | ||||||
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Total consideration (a) | 43,079 | 12,822 | ||||||
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Carried forward: | 43,079 | 12,822 | ||||||
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Provisional fair values | ||||||||
S/ | US$000 | |||||||
Brought forward: | 43,079 | 12,822 | ||||||
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Fair value of assets and liabilities of Adexus S.A.: | ||||||||
Cash and cash equivalents | 7,737 | 2,303 | ||||||
Trade receivables | 107,426 | 31,972 | ||||||
Receivables from related parties | 2,610 | 777 | ||||||
Other receivables | 1,160 | 345 | ||||||
Inventories | 1,647 | 490 | ||||||
Prepaid expenses | 11,587 | 3,449 | ||||||
Long-term trade receivables | 26,886 | 8,195 | ||||||
Other long-term receivables | 2,063 | 614 | ||||||
Property, plant and equipment | 41,988 | 12,496 | ||||||
Intangibles | 32,204 | 9,585 | ||||||
Deferred income tax assets | 18,115 | 5,198 | ||||||
Borrowings | (108,808 | ) | (32,383 | ) | ||||
Trade payables | (59,399 | ) | (17,678 | ) | ||||
Payables to related parties | (15,683 | ) | (4,667 | ) | ||||
Current income tax | (2,763 | ) | (822 | ) | ||||
Other payables | (10,291 | ) | (3,063 | ) | ||||
Other provisions | (1,926 | ) | (573 | ) | ||||
Contingent liabilities | (1,149 | ) | (342 | ) | ||||
Deferred income tax liabilities | (7,102 | ) | (2,114 | ) | ||||
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Fair value of net identifiable assets | 46,302 | 13,782 | ||||||
Non-controlling interest (8.97%) | (4,153 | ) | (1,236 | ) | ||||
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Fair value of net assets attributable to the Group (b) | 42,149 | 12,546 | ||||||
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Goodwill (Note 18) (a) - (b) | 930 | 276 | ||||||
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Losses arising from there-measurement at fair value of the previously held interest amounted to S/6.8 million, which was recognized in the statement of income within “Other income and expenses, net”, at the date of acquisition of that additional interest (Note 29).
Acquisition transaction costs amounting to S/1.4 million were charged to profit or loss within administrative expenses.
Revenue and net losses obtained for the period from the acquisition date to December 31, 2016 were S/113.2 million and S/3.7 million, respectively. If Adexus had been consolidated from January 1, 2016, the balances of revenue and net losses would have been S/272.7 million and S/20.2 million, respectively.
(All amounts expressed in thousands of S/ unless otherwise stated)
Provided that the distribution of the consideration is divided between the fair values on a provisional basis for the 2016 financial statements, the Group will complete the distribution process over a period that should not exceed one year as of the acquisition date of Adexus.
During such review period, additional assets and liabilities will be recognized as they may arise from updated data that may be obtained in relation with the information that existed at the acquisition date and that does not comprise new incidents occurred after the acquisition date; that is, if the Group were to adjust initial amounts recognized at the business combination dates.
b) | Acquisition of Morelco S.A.S. - |
In December 23, 2014, through subsidiary GyM S.A. the Company obtained control of DSD with the purchase of 85.95%Morelco S.A.S. (Morelco) by acquiring 70.00% of its equitycapital shares. DSDMorelco is an entity domiciled in Chile whose main economic activityColombia that is the execution of electromechanical worksmainly engaged in providing construction and assemblies in construction projects of oil refineries, pulp and paper, power plants and mining plants.
assembly services. This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Chile,Colombia, and in attractive industries, such as mining and energy.
At December 31, 2014 the Company determined goodwill resulting from this acquisition on the basis of an estimated purchase price of US$93.7 million (equivalent to S/277.1 million), which included cash payments made for US$78.5 million and cash payable estimated to be US$15.1 million (equivalent to S/45.7 million), which, under the agreement of the parties, would be defined after a review of the acquiree’s balance sheet, mainly working capital, cash and financial debt as well as the final carrying amount of the acquiree’s work backlog. The following tables summarizeestimated purchase price was allocated to the consideration paid for DSDprovisional carrying amounts of the assets acquired and the preliminary determinationliabilities assumed.
As a result of fair valuethis allocation, the balance of assets acquired, liabilities assumed andgoodwill was determined to be US$36.1 million (equivalent to S/105.8 million).
In 2015 as part of the non-controlling interest atreview of the acquisition date:provisional allocation of the purchase price, the following situations arose:
S/.000 | US$000 | |||||||
Cash and cash equivalents | 15,530 | 5,562 | ||||||
Trade accounts receivable | 74,502 | 26,684 | ||||||
Accounts receivable from related entities | 6,605 | 2,366 | ||||||
Prepaid expenses | 1,032 | 369 | ||||||
Investments | 2,608 | 935 | ||||||
Property, plant and equipment | 52,504 | 18,805 | ||||||
Intangibles | 5,741 | 2,056 | ||||||
Deferred income tax | 2,192 | 785 | ||||||
Trade accounts payable | (5,328 | ) | (1,908 | ) | ||||
Other accounts payable | (38,679 | ) | (13,854 | ) | ||||
Contingent liability | (815 | ) | (292 | ) | ||||
Deferred income tax | (4,187 | ) | (1,500 | ) | ||||
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Fair value of net assets | 111,705 | 40,008 | ||||||
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Non-controlling interest (14.05%) | (15,701 | ) | (5,624 | ) | ||||
Goodwill | 7,868 | 2,802 | ||||||
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Total paid for acquisition | 103,872 | 37,186 | ||||||
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Cash payment for the acquisition | 103,872 | 37,186 | ||||||
Cash and cash equivalent of the acquired subsidiary | (15,530 | ) | (5,562 | ) | ||||
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Direct cash outflow from acquisition | 88,342 | 31,624 | ||||||
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Acquisition related costs of S/.0.65 million have been charged to administrative expenses in the consolidated income statement for the year ended 31 December 2013.
Revenue and profit generated for the period between the date of acquisition to December 31, 2013 were S/.82.97 million and S.8.3 million, respectively.
If DSD Construcciones y Montajes S.A. would have been consolidated since January 1, 2013, the revenue and profit generated would have been S/.182.68 million and S/.10.15 million, respectively.
F-93
(All amounts are expressed in thousands of S/. unless otherwise stated)
a) | The balance at December 31, 2014 of the consideration payable of US$15 million (equivalent to S/46 million) was adjusted in 2015 to US$9.1 million (S/32 million) as a result of the final determination of the working capital, cash and financial debt balances, under the purchase agreement. This amount was fully paid in 2015. |
b) | The provisional fair values of certain assets acquired and liabilities assumed were reviewed. |
As a result of the above, the purchase price was adjusted to US $87.5 million (equivalent to S/258.6 million); the provisional fair values of certain asset and liabilities were modified, giving rise to an adjustment of goodwill to US$35.2 million (equivalent to S/103 million).
The table below summarizes the consideration paid by Morelco and the determination of the fair value of the assets acquired and liabilities assumed as well as anon-controlling interest at the date of acquisition:
Provisional fair values | Final amounts | |||||||||||||||
S/ | US$000 | S/ | US$000 | |||||||||||||
Cash and cash equivalents | 69,930 | 23,514 | 69,930 | 23,514 | ||||||||||||
Trade receivables | 92,138 | 30,981 | 67,716 | 22,769 | ||||||||||||
Work in progress remaining to collect from customers | 101,533 | 34,140 | 110,777 | 37,248 | ||||||||||||
Other accounts receivables | 63,949 | 21,503 | 63,949 | 21,504 | ||||||||||||
Inventories | 18,037 | 6,065 | 18,037 | 6,065 | ||||||||||||
Prepaid expenses | 2,133 | 717 | 2,127 | 715 | ||||||||||||
Financial asset through profit or loss | 7,291 | 2,452 | 5,747 | 1,932 | ||||||||||||
Property, plant and equipment | 70,756 | 23,792 | 69,081 | 23,228 |
(All amounts expressed in thousands of S/ unless otherwise stated)
Intangibles | 64,491 | 21,685 | 64,491 | 21,685 | ||||||||||||
Deferred income tax asset | 8,031 | 2,700 | 24,560 | 8,258 | ||||||||||||
Other short-term financial liabilities | (31,204 | ) | (10,492 | ) | (31,204 | ) | (10,492 | ) | ||||||||
Other long-term financial liabilities | (9,315 | ) | (3,132 | ) | (9,315 | ) | (3,132 | ) | ||||||||
Trade accounts payables | (103,739 | ) | (34,882 | ) | (102,438 | ) | (34,444 | ) | ||||||||
Other accounts payable | (87,863 | ) | (29,544 | ) | (87,863 | ) | (29,544 | ) | ||||||||
Contingent liabilities | (17,533 | ) | (5,895 | ) | (24,993 | ) | (8,404 | ) | ||||||||
Deferred income tax liabilities | (3,801 | ) | (1,278 | ) | (18,404 | ) | (6,188 | ) | ||||||||
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Fair value of net assets | 244,834 | 82,326 | 222,198 | 74,714 | ||||||||||||
Non-controlling interest (30.00%) | (73,450 | ) | (24,697 | ) | (66,659 | ) | (22,414 | ) | ||||||||
Goodwill (Note 18) | 105,764 | 36,118 | 103,055 | 35,240 | ||||||||||||
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Purchase consideration | 277,148 | 93,747 | 258,594 | 87,540 | ||||||||||||
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Cash paid atyear-end | 231,464 | 78,462 | 231,464 | 78,462 | ||||||||||||
Cash and cash equivalents of the acquired subsidiary | (69,930 | ) | (23,514 | ) | (69,930 | ) | (23,514 | ) | ||||||||
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Direct cash outflows for acquisition for the year | 161,534 | 54,948 | 161,534 | 54,948 | ||||||||||||
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Acquisition-related costs of S/4.5 million have been recognized to 2014’s profits within administrative expenses.
If Morelco had been consolidated from January 1, 2014 revenue and profit would have been S/722.57 million and S/80.8 million, respectively.
Put and call options ofnon-controlling interest-
Under the shareholder agreement signed for the acquisition of Morelco, the subsidiary GyM signed a purchase-sale agreement for 30% of Morelco’s capital stock held by thenon-controlling shareholders. By this agreement, thenon-controlling shareholders obtained a right to sell their shares over a period and for an amount set in the agreement (put option). The period to exercise the option began on the second anniversary of the acquisition of the option and expires on its tenth anniversary. The option exercise price is based on a EBITDA multiple less the net debt and until months 51 and 63 until from the date of the agreement a minimum amount is set that is based on the price per share that GyM paid to buy 70% of Morelco’s share capital.
On the other hand, the subsidiary GyM obtains call option to buy those shares over a period of 10 years and at a price that is determined the same way as the put option price is determined, except for the fact the minimum amount is effective for the entire effective period of the option (call option).
Under the IFRS framework, the put option is for the Company an obligation to purchasenon-controlling interest shares, and therefore, the Group recognizes a liability measured on the basis of the present value of that option. Since the Group arrived at the conclusion that as a result of this agreement, it did not obtained the risks and rewards inherent to the ownership of this share package underlying the option, initial recognition of this liability was a charge to equity of controlling shareholders within other reserves.
The amount of the liability arising from the put option was estimated at the present value of the redemption amounts expected on the basis of minimum amount of the Morelco’s agreement and the exercise rights of the option. The Company expects that purchase options are to be exercised at the date following the date of transfer. The expected redemption of thenon-controlling interest is as follows: 41.66% in the second year, 41.66% in the fourth year and the remaining shares will be sold on the fifth anniversary of the option grant date. The discount rate used to determine the present value of the expected redemption amounts is a risk-free rate available to comparable market participants and indicates the fact that the Group estimates to pay the minimum price of the agreement. At December 31, 2016 the liability is estimated to be S/109.9 million, using a 0.78% discount rate for the first year, 1.37% discount rate for the third year and 1.76% for the fourth year (at December 31, 2015 it was S/113.5 million, using a 0.65% discount rate for the first year, 1.31% discount rate for the third year
(All amounts expressed in thousands of S/ unless otherwise stated)
and 1.76% for the fourth year). In 2016 the changes in the present value of the put option estimated to be S/0.7 million were recognized in the statement of income (an expense by S/1 million stated within “Other income and expenses, net” and an income by S/1.7 million stated within “Exchange losses, net”, Note 28).
c) | Acquisition of |
In October 2012,March 2014, through the Group’s subsidiary GyMCAM Chile S.A., the Group acquired 74%control of equity shares in Vial y Vives S.A.C.,Coasin Instalaciones Limited with the purchase of 100% of its capital shares. Coasin is an entity basedincorporated in Chile whichand is mainly engaged in carrying out activitiesproviding installation and maintenance services for networks and equipment related to construction, engineering works, civil work projects and electromechanical assemblies, architecture, installations. the telecommunications industry.
This acquisition is part of the Group’s plan to increase its presence in markets that present highmarket share considering the significant growth potential as in Chile, and in other attractive industries, such as mining and energy.utilities.
During a period of twelve months after the date of acquisition, the Group reviewed the allocation of the purchase price for the acquisition of Coasin Instalaciones Limitada.
Over a period of twelve months after the acquisition, date the Group reassessedreviewed the allocation of the purchase price allocation from the acquisition of Vial y Vives S.A.C. which was made in October, 2012 and reallocated the amount of S/.24.7 million from goodwill (net of tax impact of S/.6.3 million and non-controlling interest of S/.6.4 million) to fixed assets, other accounts receivable and contingent liabilities in the amounts of S/.15.4 million, S/.16.8 million and S/.5.1 million respectively. This effect corresponds to the measurement period adjustment of the preliminary fair value assigned to thevalues determined provisionally for certain assets and liabilities acquired.
The price paid by GyM for the acquisition of Vial y Vives amounted to US$55.6 million (equivalent to S/.142 million) and resulted in the recognition of goodwill for S/.28.9 million, at the acquisition date, which is detailed as follows:
Previous reported | Revised | |||||||||||||||
S/.000 | US$000 | S/.000 | US$000 | |||||||||||||
Cash and cash equivalents | 10,445 | 4,094 | 10,445 | 4,094 | ||||||||||||
Marketable securities | 61,664 | 24,172 | 61,664 | 24,173 | ||||||||||||
Trade accounts receivable, net | 10,862 | 4,258 | 10,862 | 4,258 | ||||||||||||
Other accounts receivable | 4,002 | 1,569 | 20,765 | 8,140 | ||||||||||||
Inventories | 2,182 | 855 | 2,182 | 855 | ||||||||||||
Prepaid expenses | 1,020 | 400 | 1,020 | 400 | ||||||||||||
Property, plant and equipment | 23,746 | 9,309 | 39,184 | 15,360 | ||||||||||||
Intangibles (“Order Backlog” and Brand) | 98,869 | 38,757 | 98,869 | 38,757 | ||||||||||||
Investments | 15,128 | 5,930 | 15,128 | 5,930 | ||||||||||||
Deferred income tax | 535 | 210 | 535 | 210 | ||||||||||||
Accounts payable from related parties | (9,550 | ) | (3,744 | ) | (9,550 | ) | (3,744 | ) | ||||||||
Trade accounts payable | (3,806 | ) | (1,492 | ) | (3,806 | ) | (1,492 | ) | ||||||||
Other accounts payable | (17,115 | ) | (6,709 | ) | (17,115 | ) | (6,709 | ) | ||||||||
Provisions | (4,965 | ) | (1,946 | ) | (4,965 | ) | (1,946 | ) | ||||||||
Advances from clients | (47,085 | ) | (18,457 | ) | (47,086 | ) | (18,457 | ) | ||||||||
Contingent liabilities | (11,130 | ) | (4,363 | ) | (6,006 | ) | (2,355 | ) | ||||||||
Deferred income tax liability | (14,730 | ) | (5,774 | ) | (20,993 | ) | (8,229 | ) | ||||||||
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Fair value of net assets | 120,072 | 47,069 | 151,133 | 59,245 | ||||||||||||
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Non-controlling interest (26.42%) | (31,757 | ) | (12,449 | ) | (38,108 | ) | (14,792 | ) | ||||||||
Goodwill | 53,654 | 21,033 | 28,944 | 11,200 | ||||||||||||
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Total paid for acquisition | 141,969 | 55,653 | 141,969 | 55,653 | ||||||||||||
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Cash payment for the acquisition | 141,969 | 55,653 | 141,969 | 55,653 | ||||||||||||
Cash and cash equivalent of the acquired subsidiary | (10,445 | ) | (4,094 | ) | (10,445 | ) | (4,094 | ) | ||||||||
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Direct cash outflow from acquisition | 131,524 | 51,559 | 131,524 | 51,559 | ||||||||||||
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The cash payment for the acquisition comprises an indemnification asset of S/.6,006 which was deposited in an escrow account to compensate any future disbursements related to contingent liabilities acquired with the business combination.
The income and the profit generated for the period from the acquisition date to December 31, 2012 amounted to S/.23.9 million and S/.1.7 million, respectively.
If Vial y Vives had been consolidated from January 1, 2012, the income generated would have been S/.59.6 million and S/.7.9 million, respectively.
F-94
(All amounts are expressed in thousands of S/. unless otherwise stated)
On March 1, 2012 GyM obtained control over certain business which it carry jointly with an entity called Stracon S.A.C. (hereinafter Stracon), as well as the control over certain interests owned by Stracon both individually and with other partners.
This acquisition was made effective through an entity that GyM and Stracon formed for this purpose. In fact, both entities established Stracon GyM S.A. (hereinafter Stracon-GyM), over which GyM exercises control and to which both the above-mentioned companies contributed with equity packages comprising various assets and liabilities associated with the mining industry.
This acquisition is part of the Group’s strategy to group in one single entity all businesses related to the mining industry, including existing businesses that were conducted jointly with Stracon, own business, and businesses owned by Stracon conducted with third parties. This strategy is intended to generate synergies, economies of scale and tax efficiencies from the integration of the mining-related businesses and taking advantage of the individual experience of both entities now conducting this restructured business.
The structure of this transaction consisted of transactions made by both entities to obtain a certain percentage of interest in Stracon-GyM, and an additional contribution of GyM.liabilities. As a result of this process, the several contributions that each party engagesbalance of goodwill was changed to make, the share capital structure of Stracon-GyM was attributedUS$2.2 million (equivalent to shareholders as follows: 74.15% to GyMS/6.4 million).
Provisional values | Final amounts | |||||||||||||||
S/ | US$000 | S/ | US$000 | |||||||||||||
Cash and cash equivalents | 3 | 1 | 3 | 1 | ||||||||||||
Trade accounts receivables | 4,675 | 1,564 | 3,811 | 1,275 | ||||||||||||
Inventories | 276 | 92 | 276 | 92 | ||||||||||||
Prepaid expenses | 33 | 11 | 33 | 11 | ||||||||||||
Property, plant and equipment | 711 | 238 | 711 | 238 | ||||||||||||
Intangibles | 1,377 | 461 | 1,377 | 461 | ||||||||||||
Deferred income tax liability | (178 | ) | (60 | ) | 16 | 4 | ||||||||||
Trade accounts payables | (3,592 | ) | (1,202 | ) | (3,592 | ) | (1,202 | ) | ||||||||
Contingent liabilities | (2,658 | ) | (889 | ) | (2,658 | ) | (889 | ) | ||||||||
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Fair value of net assets | 647 | 216 | (23 | ) | (9 | ) | ||||||||||
Goodwill (Note 18) | 5,743 | 1,921 | 6,413 | 2,146 | ||||||||||||
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Consideration provided for the acquisition | 6,390 | 2,137 | 6,390 | 2,137 | ||||||||||||
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Payment for the acquisition settled in cash | 6,390 | 2,137 | 6,390 | 2,137 | ||||||||||||
Cash and cash equivalents of the subsidiary acquired | (3 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||
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Direct outflow of cash for the acquisition | 6,387 | 2,136 | 6,387 | 2,136 | ||||||||||||
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Revenue and 25.85% to Stracon. GyM has control over the overall operation and it applies IFRS 3 to account for this transaction.
The consideration paid by GyMprofit resulting for the purchase of Stracon—GyM is comprised of the book value of net assets transferred in an amount equal to S/.24.9 million plus a cash amount for a total of US$16.4 million (in aggregate equivalent to S/.42 million; see Note 5-d) and resulting in the recognition of goodwill of S/.13.4 million at the acquisition date, is a follows:
S/.000 | US$000 | |||||||
Cash and cash equivalents | 885 | 347 | ||||||
Trade accounts receivable, net | 120,184 | 47,131 | ||||||
Other accounts receivable | 3,862 | 1,515 | ||||||
Inventories | 16,674 | 6,539 | ||||||
Prepaid expenses | 24 | 9 | ||||||
Property, plant and equipment | 206,153 | 80,844 | ||||||
Intangibles (“Order Backlog” and customer relationships) | 9,976 | 3,912 | ||||||
Deferred income tax assets | 674 | 264 | ||||||
Other assets | 36 | 14 | ||||||
Financial obligations | (64,058 | ) | (25,121 | ) | ||||
Trade accounts payable | (39,267 | ) | (15,399 | ) | ||||
Accounts payable to related parties | (81,820 | ) | (32,086 | ) | ||||
Other accounts payable | (1,316 | ) | (516 | ) | ||||
long-term liabilities | (126,202 | ) | (49,491 | ) | ||||
Deferred income tax liability | (7,327 | ) | (2,873 | ) | ||||
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Fair value of net assets | 38,478 | 15,089 | ||||||
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Non-controlling interest (25.85%) | (9,947 | ) | (3,901 | ) | ||||
Goodwill | 13,366 | 5,242 | ||||||
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Consideration given for the acquisition) | 41,897 | 16,430 | ||||||
Net assets transferred | (24,994 | ) | (9,802 | ) | ||||
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16,903 | 6,628 | |||||||
Cash paid in 2011 | 13,894 | 5,448 | ||||||
Cash paid in 2012 | 3,009 | 1,180 | ||||||
Cash and cash equivalent of the acquired subsidiary | (885 | ) | (347 | ) | ||||
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Direct cash outflow from acquisition | 2,124 | 833 | ||||||
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F-95
(All amounts are expressed in thousands of S/. unless otherwise stated)
The following table provides a breakdown of the book value of assets and liabilities transferred in connection with the acquisition of Stracon-GyM:
Details of Assets and Liabilities Transferred
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On January 19, 2011, CAM Holding SPA and Inversiones y Construcción GyM Limitada, two subsidiaries created by the Group to carry out this transaction, signed an agreement of “Assignment of Capital Stock” with Enersis S.A. and Chilectra S.A. (the “selling parties”) to transfer their respective holdings of 99.958802% and 0.041197%, respectively, in the capital stock of Compañía América de Multiservicios Limitada—CAM (hereinafter CAM). As consideration, Group subsidiaries paid the sellers an initial price of US$20.2 million, subject to adjustments based on several variables, such as changes in equity of CAMperiod between the date the price was setof acquisition and the date the transaction was executed.
CAM is en entity based in Chile and formed in 1998 with three business units: energy consumption measurement, implementation of electric power work and logistical services, that are provided directly or through subsidiaries operating in 5 countries in South America (Chile, Argentina, Brazil, Peru and Colombia).
On February 24, 2011, the CAM purchase transaction was closed. Immediately following the closing, the Company sold to a partner 25% of the capital stock of CAM under the same terms and conditions under which it was acquired. The partner paid US$5.0 million for the 25% interest. The final purchase price paid by the Group was reduced by both the effect of the incoming partner, as well as certain seller adjustments to the final purchase price. Taking into account these adjustments, the price paid by the Group for the 75% interest in CAM’s capital was US$10.8 million.
This purchase was a part of the Group’s strategy to position its investments in Chile, and enter into profitable business segments to generate growth for the Group.
F-96
(All amounts are expressed in thousands of S/. unless otherwise stated)
The Group distributed the price paid based on the fair values of the assets acquired and liabilities assumed on February 24, 2011, the date of acquisition. A breakdown of this calculation is shown as follows:
S/.000 | US$000 | |||||||
Fair value of assets and liabilities of CAM: | ||||||||
Cash and cash equivalents | 60,675 | 22,497 | ||||||
Trade and other accounts receivable | 220,783 | 81,862 | ||||||
Inventories | 57,150 | 21,190 | ||||||
Other accounts receivable | 20,311 | 7,531 | ||||||
Long-term trade accounts receivable | 27,696 | 10,269 | ||||||
Property, plant and equipment | 73,156 | 27,125 | ||||||
Intangibles (“Order Backlog”) | 10,952 | 4,061 | ||||||
Deferred income tax | 21,675 | 8,037 | ||||||
Other assets | 13,010 | 4,824 | ||||||
Short- and long-term loans | (35,781 | ) | (13,267 | ) | ||||
Trade and other accounts payable | (155,464 | ) | (57,643 | ) | ||||
Contingent liabilities | (24,466 | ) | (9,072 | ) | ||||
Provisions | (102,776 | ) | (38,107 | ) | ||||
Deferred income | (12,946 | ) | (4,800 | ) | ||||
Other accounts payable | (15,076 | ) | (5,410 | ) | ||||
Long-term trade accounts payable | (29,675 | ) | (11,003 | ) | ||||
Deferred income tax liability | (17,806 | ) | (6,602 | ) | ||||
Other long-term liabilities | (12,529 | ) | (4,645 | ) | ||||
|
|
|
| |||||
Fair value of net assets | 98,889 | 36,847 | ||||||
|
|
|
| |||||
Non-controlling interest (25%) (*) | (24,722 | ) | (9,167 | ) | ||||
Gain on acquisition | (45,152 | ) | (16,742 | ) | ||||
|
|
|
| |||||
Total paid for purchase | 29,015 | 10,938 | ||||||
|
|
|
| |||||
Cash payment for the acquisition | 29,015 | 10,938 | ||||||
Cash and cash equivalent of the acquired subsidiary | (60,675 | ) | (22,497 | ) | ||||
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|
|
| |||||
Direct cash inflow from acquisition | (31,660 | ) | (11,559 | ) | ||||
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|
|
This acquisition has generated a gain of S/.45.2 million which resulted in, as established by IFRS 3, a review of the values initially attributed to assets and liabilities of the acquired entity. As of the date of the financial statements, the Group completed its review and in accordance with Note 4.2, concluded its distribution process of the amount paid for the purchase and accordingly, it recognized this gain in the income statement under “Business combination gain”.
The contribution of CAM to the income and profit of the Group from February 24 to December 31, 2011 amounts2014 amounted to S/.466.766.3 million and S/.29.4 million, respectively. If CAM had been consolidated as from January 1, 2011, income and profit would have been S/.558.2 million and S/.210.7 million, respectively.
DIVIDENDS |
At the General Shareholders’ meeting held on March 26, 2013, it was agreed to distribute dividends amounting to S/.86,986.2 (S/.0.156 per share), which correspondDue to the profits of 2012.loss reported for fiscal 2016, no dividends will be paid.
At the General Shareholders’ meeting held on March 30, 2012, it29, 2016 the decision was agreedmade to distribute dividends amounting tofor S/.86,722.430,853 (S/.0.1560.0467 per share), which correspond to the profits for the year 2011.2015 earnings.
At the General Shareholders’ meeting held on March 30, 2011, it27, 2015 the decision was agreedmade to distribute dividends for S/104,911 (S/0.159 per share), which correspond to 2014 earnings.
(All amounts expressed in thousands of S/ unless otherwise stated)
At the General Shareholders’ meeting held on March 28, 2014, the decision was made to distribute dividends amounting to S/.55,015.9112,127 (S/.0.0980.169 per share), which correspondcorresponding to the profits for the year 2010.
F-97
(All amounts are expressed in thousands of S/. unless otherwise stated)
A dividend of S/.0.169 per share, amounting to S/.111,888,104, will be submitted to the Annual General Shareholders’ meeting which will be held on March 28, 2014. The financial statements do not reflect these dividends payable.2013 earnings.
EARNINGS (LOSSES) PER SHARE |
Basic earnings per share are calculated by dividing the net profit of the period attributable to common shareholders of the Group by the weighted average number of common shares outstanding during the year. No diluted earnings per common share were calculated because there are no common or investment shares with potential dilutive effects (i.e., financial instruments or agreements that give the right to obtain common or investment shares); therefore, it is equal to basic earnings per share.
The basic earnings per share are broken down as follows:
2011 | 2012 | 2013 | ||||||||||
Profit attributable to the controlling interest in the Company | 289,076 | 289,954 | 320,363 | |||||||||
|
|
|
|
|
| |||||||
Weighted average number of shares in issue at S/.1.00 each, at December 31, 2013 and 2012 and S/.0.7 each at December 31, 2011) | 558,284,190 | 558,284,190 | 600,346,925 | |||||||||
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| |||||||
Basic and diluted earnings per share (in S/.) | 0.518 | 0.519 | 0.534 | |||||||||
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|
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2014 | 2015 | 2016 | ||||||||||
Profit (Losses) attributable to the controlling interest in the Company | 299,743 | 7,097 | (509,699 | ) | ||||||||
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| |||||||
Weighted average number of shares in issue at S/1.00 each, at December 31, | 660,053,790 | 660,053,790 | 660,053,790 | |||||||||
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| |||||||
Basic and diluted earnings per share (in S/) | 0.454 | 0.011 | (0.772 | ) | ||||||||
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|
|
TRANSACTIONS WITHNON-CONTROLLING INTERESTS |
a) |
i) | In |
ii) | In |
iii) | In July 2014, GyM S.A. acquired 13.49% of additional shares in Stracon GyM at a price of US$24.9 million (equivalent to S/72.8 million). The carrying amount ofnon-controlling interest at the acquisition date was S/22.5 million. The Group eliminated thenon-controlling interest and recognized a decrease in equity attributable to the parent owners of S/50.7 million. |
iv) | In August, November and December 2014, the Company acquired 4.567% (2.25%, 1.95% and 0.367% respectively) additional shares in GyM S.A. at a total purchase price of S/93.2 million. The carrying amount of thenon-controlling interest at the acquisition date was S/24.6 million. The Group eliminatednon-controlling interest and recognized a decrease in equity attributable to the owners of the parent for S/71.5 million. |
v) | In August 2014, the Company acquired 1.37% additional shares in Viva GyM S.A. at a price of S/9.4 million. The carrying amount of thenon-controlling interest at the acquisition date was S/3.4 million. The Group eliminatednon-controlling interest and recorded a decrease in equity attributable to |
(All amounts expressed in thousands of S/ unless otherwise stated)
The effect of these changes is broken down as follows:
December 31, | ||||||||
2012 | 2013 | |||||||
Carrying amount of acquired non-controlling interest | 4,757 | 29,257 | ||||||
Consideration paid to non-controlling interest | (4,393 | ) | (63,868 | ) | ||||
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| |||||
Lower (higher) consideration paid attributable to the Company’s controllers | 364 | (34,611 | ) | |||||
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|
|
F-98
(All amounts are expressed in thousands of S/. unless otherwise stated)
2014 | 2015 | 2016 | ||||||||||
Carrying amount ofnon-controlling interest acquired | 50,109 | 971 | 35,972 | |||||||||
Consideration provided fornon-controlling interest | (178,331 | ) | (1,865 | ) | (51,139 | ) | ||||||
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| |||||||
Higher payment attributable to the Company’s controlling interest | (128,222 | ) | (894 | ) | (15,167 | ) | ||||||
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b) | Disposal of interests in subsidiary without loss of control - |
In January 2012, the Company sold 0.17% (S/.708) of its total interest of 93.84% held in GyM S.A. for S/.555. The carrying amount of the non-controlling interest in GyM S.A. at the disposal date was S/.25,682 (that is, 6.16% interest).
i) | In March 2015, GyM S.A. sold 0.048% (S/97) of its total 87.64% interest held in Stracon GyM for a payment of S/377. The carrying amount of thisnon-controlling interest in Stracon GyM at the date of disposal was S/23.7 million (a 12.36% interest). |
In January 2012, the Company sold 0.40% (S/.194) of its total interest of 99.97% held in Concar S.A. for S/.638. The carrying amount of the non-controlling interest in Concar S.A. at the disposal date was S/.14.5 (that is, 0.03% interest).
ii) | In June 2015, GyM S.A. sold 1.92% (S/385) of its total 82.04% interest held in Vial y Vives - DSD S.A. for a payment of S/385. The carrying amount of thisnon-controlling interest in Vial y Vives - DSD S.A. at the date of disposal was S/3.6 million (a 17.96% interest). |
iii) | In April 2015, CAM Holding Spa sold a 2.45% (S/2,045) of its total 75.61% interest held in CAM Chile S.A. for S/880. The carrying amount of thenon-controlling interest in CAM Chile at the disposal date was S/20.4 million (a 24.39% interest). |
iv) | In November 2014, GyM Chile Spa sold 1.01% (S/1.6 million) of its total 82.04% interest held in Vial y Vives - DSD for a total US$0.582 million (equivalent to S/1.6 million). The carrying amount of thisnon-controlling interest in Vial y Vives - DSD at the date of disposal was S/1.6 million |
The effect of thethis changes in the interests held by GyM S.A. and Concar S.A. in the share capital attributable to the Company’s controllersat December 31 is broken down as follows:summarized below:
| ||||
| ||||
| ||||
There were no transactions with non-controlling interest in 2011.
2014 | 2015 | 2016 | ||||||||||
Carrying amount of thenon-controlling interest sold | (1,627 | ) | (2,527 | ) | (236 | ) | ||||||
Consideration received fromnon-controlling interest | 1,627 | 1,642 | 335 | |||||||||
|
|
|
|
|
| |||||||
Decrease in equity of the Company‘s controlling interest | — | (885 | ) | 99 | ||||||||
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|
|
c) |
December 31, | ||||||||
2012 | 2013 | |||||||
Changes in equity attributable to Company controllers arising from: | ||||||||
Acquisition of additional interest in subsidiary | 364 | (34,611 | ) | |||||
Disposal of interest in a subsidiary without loss of control | 291 | — | ||||||
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|
|
| |||||
Decrease in equity of the Company controllers | 655 | (34,611 | ) | |||||
|
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|
|
ComprisingThis balance mainly corresponds to the contributions and returns made by the partners of subsidiary Viva GyM S.A. forof their real estate projects. At December 31 the amounts contributed were the following:this balance comprises:
2011 | 2012 | 2013 | ||||||||||
Contributions | — | 30,224 | 59,387 | |||||||||
Returns of contributions | (13,328 | ) | (4,128 | ) | (24,613 | ) | ||||||
|
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| |||||||
Increase in equity of non-controlling interest | (13,328 | ) | 26,096 | ) | 34,774 | |||||||
|
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|
|
|
2014 | 2015 | 2016 | ||||||||||
Viva GyM S.A.: | ||||||||||||
Contributions received | 48,793 | 20,446 | 6,380 | |||||||||
Returns of contributions | (4,240 | ) | (14,987 | ) | (27,134 | ) | ||||||
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| |||||||
44,553 | 5,459 | (20,754 | ) | |||||||||
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| |||||||
Plus: | ||||||||||||
Contributions from other subsidiaries | 2,823 | 4,870 | 1,655 | |||||||||
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|
|
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| |||||||
Increase (decrease) in equity of non controlling parties | 47,376 | 10,329 | (19,099 | ) | ||||||||
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|
Contribution returns
(All amounts expressed in thousands of S/ unless otherwise stated)
Returns of contributions mainly correspond to profit attributable to the partyfollowing projects: “Los Parques de Comas” for the housing projectS/6.3 million, “Los Parques de Villa El Agustino I, which has been completedSalvador II” for S/12.6 million and most of the apartments have been delivered to the customers.“Klimt” for S/7.1 million in 2016 (“Los Parques del Callao” for S/6.7 million, “Los Parques de San Martín de Porres” for S/4.8 million and “Los Parques de Piura” for S/3.3 million in 2015).
In 2013 the Group assessed its interests in Concesión La Chira S.A. and Logistica Quimica del Sur S.A.C (LQS) concessions, which were considered as subsidiaries during the prior fiscal year, and determined that such concessions comprise a joint operation and joint venture, respectively according to IFRS 11. At December 31, 2013, consolidated assets and liabilities were returned as well as the corresponding non-controlling interest which amounted to S/.12,535 for La Chira and S/.6,842 for LQS
F-99
(All amounts are expressed in thousands of S/. unless otherwise stated)
Comprising the capitalization of debt arising from obligations made by Stracon GyM with its investors, GyM and Stracon S.A.C., and amounted to S/.12.2 million in 2012.
Dividends - |
At December 31, 2013, 20122016, 2015 and 20112014 dividends were distributed for S/.51.825.5 million, S/.37.54.5 million and S/.14.968.1 million, respectively.
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION |
Norvial S.A. obtained
a) | Early termination of the GSP’s concession agreement - |
According to a notification issued by the Ministry of Energy and Mines of Peru on January 23, 201424, 2017, the early termination of the Concession Contract was declared, based on the provisions of clause 6.7 of the Concession Agreement “Improvements to the country’s energy security and development of the South Peru Gas Pipeline “, as GSP failed to certify the financial closing within the established contractual deadline and proceeded to the immediate execution of the performance guarantee. This situation generated the execution of the counter-guarantees offered by the Group to the company issuing the performance guarantee of the Concession Contract for US $ 52.5 million (S /. 176.6 million) and US $ 129 million (S / 433.3 million). for the corporate guarantee of the bridge loan granted to GSP.
On October 11, 2017, the agreement was signed for the delivery of the goods of the Southern Peru Gas Pipeline concession between GSP and the Ministry of Energy and Mines (MEM). As stated in the agreement, GSP delivered most of the Concession Assets in possession to the administrator designated by the MEM for its custody and conservation. The assets include all the works, equipment and facilities provided for the execution of the project, as well as the engineering studies that were prepared by the concessionaire company.
After the termination of the contract, the Peruvian Government, in accordance with the contract, had to hire an audit entity of recognized international prestige to calculate the Net Book Value (“VCN” for its Spanish definition “Valor Contable Neto”) of the Concession Assets and the subsequent call for up to three public auctions, being the base amount for the first of them 100% of the VCN, guaranteeing in any case that after the third auction, in case the concession has not been awarded, the payment to GSP would be at least 72.25% of the VCN. Having elapsed more than a short term loan with Banco de Créditoyear since the termination of the contract, the Peruvian Government has not taken any action to calculate the VCN and call for anauctions. In the opinion of the external and internal legal advisors, since the previous procedure had not been done within the established deadlines, the Peruvian Government would be obliged to pay GSP 100% of the VCN. Regarding the amount of up to S/.150 million,the VCN there is a previous calculation commissioned by GSP reviewed by an audit firm as an independent expert as of December 31, 2016, which is guaranteed by its shareholders. The first disbursement for S/.50 million was used to prepay the loan (including the associated prepayment costs) that this subsidiary maintained with the Interamerican Development Bank (IDB) and the International Finance Corporation (IFC) on January 27, 2014. In addition, the short term loan will be used to finance the startdetermined a VCN of constructionUS $ 2,602 million.
GSP as of the second stage of the concession pursuant to the obligatory investments that Norvial must execute. It is expected that the short term loan will be repaid with the project financingDecember 4, 2017 entered into a bankruptcy proceeding that will be structured during 2014.carried out by the National Institute for the Defense of Competition and Intellectual Protection of Peru (hereinafter, INDECOPI), and the Group registered a claim for accounts receivable in 2017 charge for US $ 434,465.77 and the fiduciary based in its capacity as administrator accounts receivable amounting US $ 169,287,006
F-100
(All amounts are expressed in thousands of S/. unless otherwise stated)
Based on the amount of the VCN, applying the payments foreseen in the insolvency proceedings, the subordination contracts and the loan cession agreements between the Group and GSP partners, the assumption that an international arbitration will be required to achieve the payment by the Government, and, in accordance with the conclusions of the internal and external legal advisors, it is estimated that the international arbitration would take approximately 5 years to resolve. This is why an impairment of the investment was recorded, which includes a finance update and estimation of costs for US $ 202.3 million before taxes at the income statement, as indicated in notes 13. c) and 16.
In addition, considering the early termination of the GSP contract, the Group evaluated the impairment of the financial statements of CCDS. As a result, a net loss before taxes of S / 15.2 million was determined (Note5.1-f), that was recognized in gross profit in the Engineering and Construction segment.
Same as in the Emergency Decree 003, Law 30737 (see note 1 c) iii) in its First Section, includes Odebrecht and its related companies, which include GSP. According to this Law, GSP will not be able to make transfers abroad, will require the consent of the Ministry of Justice in case it wishes to sell assets and must deposit the proceeds of such sale in a guarantee trust. Likewise, the entities of the Government that must make some payment to the entities included in the Law, must withheld according to the contract 10%, equivalent to the net profit margin, and deposit it in the aforementioned trust in guarantee. According to our internal and external legal advisors, Government payment for the VCN is not within the scope of the withholding, as this payment does not include net profit margin, nor is a sale of assets.
b) | Renegotiations of liabilities and credit lines - |
i) | Credit Suisse Syndicated Loan |
On June 27, 2017, the Company renegotiated the terms of this loan to clear breaches related to the termination of the GSP concession. The new terms establish repayment by December, 2020. See Note 19-i)
ii) | GSP Performance Guarantee |
On March 31, 2017, the Company renegotiated the terms for repayment obligations regarding the proportional share of the performance guarantee issued in connection with the GSP concession (Note 22). The new terms require repayment by June 30, 2018, with interest accrual 6% per year, and provide a security interest over our shares in CAM, and lien on certain assets’ cash flows.
(All amounts expressed in thousands of S/ unless otherwise stated)
iii) | GSP Bridge Loan |
On June 27, 2017 the Company entered in a new US$78.7 million term loan with Natixis, BBVA, SMBC and MUFJ, the proceeds of which were used to repay the GSP bridge loan. The maturity is June, 2020. See Note 19-ii)
iv) | Financial Stability Framework Agreement - |
On July 31, 2017, GyM S.A., Graña y Montero S.A.A., CAM Peru S.A., Vial and Vives—DSD S.A. and Concesionaria Vía Expresa Sur S.A. entered into a Financial Stability Framework Agreement (together with certain complementary contracts) with the following financial entities: Scotiabank Peru S.A.A., Banco Internacional del Perú S.A.A, BBVA Banco Continental, Banco de Crédito del Perú, Citibank del Peru SA And Citibank N.A.. The Framework Agreement (together with its complementary contracts) was intended to: (i) grant GyM S.A. a line of a syndicated revolving loan for working capital of up to US$1.6 million and S/143.9 million (extendable to an additional US$14 million subject to certain conditions; (ii) grant GyM S.A. anon-revolving line of up to US$51.6 million and S/33.6 million; (iii) grant GyM S.A., Graña y Montero S.A.A., CAM Peru S.A., Vial and Vives—DSD S.A. and Concessionaire Vía Expresa Sur S.A anon-revolving line to finance the amounts payable resulting from the performance bonds that may become enforceable; (iv) grant a line of a syndicated loan to GyM S.A. and Graña y Montero S.A.A. for the newly-issued performance bonds of up to US$100 million (extendable up to US$150 million, subject to compliance with certain conditions); and (v) commit to maintaining the existingstand-by letters of credit issued at the request of GyM S.A. and Graña y Montero S.A.A as well as of CAM Perú S.A., Vial andVives-DSD S.A. and Concesionaria Vía Expresa Sur S.A.
c) | Divestment process - |
(All amounts expressed in thousands of S/ unless otherwise stated)
d) | Legal processes arising in 2017 - |
i) | Consorcio Rio Mantaro |
a) | On February 2, 2017, ULMA Encofrados Perú S.A. (hereinafter “ULMA”) started an arbitration process against Consorcio Río Mantaro (hereinafter, the “Consortium”) involving S/5.1 million for the alleged breach of returning in optimum conditions the equipment that was leased to them, and for not making the corresponding payment to ULMA for the reduction of the equipment |
On September 14, 2017, the Consortium and ULMA signed anout-of-court settlement for which ULMA agrees to grant Consortium a final reduction in the amount due to shortages and unusable. Therefore, the Consortium was obliged to pay ULMA the total amount of S/2 million, amount that includes the VAT.
b) | On June 1, 2017, Consorcio Rĺo Mantaro (the “Consortium”) filed a lawsuit against Andritz Hydro GmbH; Andritz Hydro SRL and Andritz Hydro S.A ( the “Subcontractors”) , who participated as electromechanical subcontractors of the Cerro del Águila Project (Hydroelectric Power Plant). The Consortium demands US$ 73.5 million (US $ 36.7 million what corresponds to GyM) for several breaches (including delays) in the execution of the electromechanical subcontract that binds them, in addition to demanding compensation for the other damages caused by the subcontractors. |
To date, the Consortium has complied with submitting its briefs to the Arbitral Tribunal, so we are waiting for the counterclaim.
ii) | Consorcio Ermitaño |
On March 3, 2017, Consorcio Ermitaño (hereinafter, the “Consortium”) initiated an arbitration against the Potable Water and Sewerage Service of Lima S.A. (hereinafter, “SEDAPAL”) for:
a. | recognition of the Extension of Term No. 5 and payment of the respective general expenses, equivalent to S/13 million (being S/6.5 million what corresponds to GyM S.A.) |
On May 10, 2018, the Court heard oral arguments on this matter..
b. | recognition of the Term Extensions N ° 3 and N ° 4 and payment of the respective variable general expenses, equivalent to S/9.3 million (being S/4.6 million what corresponds to GyM SA). |
To date, the Arbitral Tribunal has declared that the arbitration is in a period to be waived, which expires on June 14.
c. | claiming the variable general expenses corresponding to the Extension of Term No. 6, equivalent to S/10.7 million (with S/5.3 million corresponding to GyM S.A.). |
(All amounts expressed in thousands of S/ unless otherwise stated)
On April 9, 2018, by means of Resolution No. 20, the Arbitral Tribunal declares that the arbitration is within a period of 30 business days
d. | recognition of the Extension of Term N ° 7 and N ° 9 and payment of the respective variable general expenses, equivalent to S / 4.4 million (S / 2.2 million corresponds to GyM ). |
To date, it is still pending that the Arbitral Tribunal sets the rules of the arbitration, after which the period to formulate the claim will begin.
e. | On April 12, 2018, (the “Consorcio”) initiated an arbitration against “SEDAPAL” by recognition of the Extension of Term N ° 7 and N ° 9 and payment of the respective variable general expenses, equivalent to S / 4.4 million (S / 2.2 million corresponds to GyM). |
iii) | Consorcio Constructor Ductos del Sur |
On May 31, 2017, Elecnor Perú S.A.C. (hereinafter “ELECNOR”) started an arbitration process against Consorcio Constructor Ductos del Sur, through the Companies partners of this Consortium, at their proportional share, to honor a payment of US$29.3 million (equivalent to S/95.9 million), for the alleged breach of the obligations expressly set forth in the contract.
On June 14, 2017, CCDS filed and responded to ELECNOR’s arbitration request.
At the reporting date, two arbitrators have been appointed and a third one remains pending to appoint.
iv) | Consorcio La Gloria |
On August 9, 2017, the Consorcio La Gloria (hereinafter, the “Consortium”) initiated an arbitration against the Drinking Water and Sewerage Service of Lima S.A. (hereinafter, “SEDAPAL”), with the aim of resolving all pending matters pertaining to the settlement of the work contract signed with SEDAPAL.
On March 7, 2018 the Consortium filed its claim with the Arbitral Tribunal, and now we are waiting for the reply from SEDAPAL.
v) | GyM S.A. |
On October 10, 2017, Workbe Latam S.p.A. (hereinafter, “Workbe”) initiated an arbitration to order GyM S.A. (hereinafter, “GyM”) the compensation payment of US$0.7 million (equivalent to S/2.3 million) for early termination of service contract signed between the parties in 2016.
On April 26, 2018, GyM submitted to the Arbitral Tribunal the answer to the lawsuit.
vii) | Consorcio Italo Peruano |
On January 26, 2018, GyM S.A. (hereinafter, “GyM”) initiated an arbitration against the National Institute of Neoplastic Diseases (hereinafter, “INEN”), its claim being the approval of the Extension of Term No. 1 for a period of 62 calendar days and, recognition of expenses S / 1.3 million (S / 664 thousands corresponds to GyM SA).
To date, the installation of the Arbitral Tribunal is pending.
(All amounts expressed in thousands of S/ unless otherwise stated)
vii) | Consorcio Norte Pachacutec. |
On February 8, 2018, the North Pachacutec Consortium (hereinafter, the “Consortium”) initiated an arbitration against the Drinking Water and Sewerage Service of Lima S.A. (hereinafter, “SEDAPAL”), its main claim being the determination of the final cost of the work executed by the Consortium, considering unrecognized, recognized concepts and awards previously issued and that has not yet been met with the payment in favor of the Consortium, equivalent to the sum of S / 36.3 million (S / 17.8 million corresponds to GyM).
To date, the installation of the Arbitral Tribunal is pending.
38 | DISCONTINUED OPERATION |
As part of the divestment process conducted by the Company (Note 37 c) subsidiaries and joint ventures were dispose. The effect in the consolidated income statement is summarized as follows:
SUBSIDIARIES
GMD | ||||||||
2015 | 2016 | |||||||
Revenue | 232,582 | 279,289 | ||||||
Operating costs | (219,433 | ) | (257,294 | ) | ||||
Finance costs, net | (8,249 | ) | (9,758 | ) | ||||
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|
|
| |||||
Operating profit from discontinued activities before taxation | 4,901 | 12,237 | ||||||
Income tax expense | (3,129 | ) | (7,466 | ) | ||||
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|
| |||||
Profit from discontinued ordinary activities after taxation | 1,772 | 4,771 | ||||||
Profit from discontinued activities attributable to owners of the Company | 1,581 | 4,257 | ||||||
|
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|
| |||||
Earnings per share relating to the discontinued operation are as follows: | ||||||||
Basic | 0.138 | 0.372 | ||||||
|
|
|
| |||||
Cash flows relating to the discontinued operation are as follows: | ||||||||
Operating cash flows | (14,193 | ) | 78,286 | |||||
Investing cash flows | (17,499 | ) | (30,712 | ) | ||||
Financing cash flows | (53,501 | ) | (48,516 | ) | ||||
STRACON GyM S.A. | ||||||||
2015 | 2016 | |||||||
Revenue | 1,476,764 | 1,222,707 | ||||||
Operating costs | (1,305,806 | ) | (1,099,789 | ) | ||||
Finance costs, net | (21,478 | ) | (3,104 | ) | ||||
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| |||||
Operating loss from discontinued activities before taxation | 149,480 | 119,814 | ||||||
Income tax expense | (40,492 | ) | (32,558 | ) | ||||
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| |||||
Profit from discontinued ordinary activities after taxation | 108,988 | 87,256 | ||||||
Profit from discontinued activities attributable to owners of the Company | 95,463 | 76,428 | ||||||
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| |||||
Earnings per share relating to the discontinued operation are as follows | ||||||||
Basic | 1.395 | 1.117 | ||||||
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|
| |||||
Cash flows relating to the discontinued operation are as follows: | ||||||||
Operating cash flows | 166,438 | 49,105 | ||||||
Investing cash flows | (19,914 | ) | (31,132 | ) | ||||
Financing cash flows | (120,655 | ) | (71,382 | ) |
(All amounts expressed in thousands of S/ unless otherwise stated)
JOINT OPERATION
CONSORCIO CONSTRUCTOR DUCTOS DEL SUR | ||||||||
2015 | 2016 | |||||||
Revenue | 154,110 | 998,463 | ||||||
Operating costs | (133,674 | ) | (977,729 | ) | ||||
Finance costs | (882 | ) | (3,670 | ) | ||||
|
|
|
| |||||
Operating profit from discontinued activities before taxation | 19,554 | 17,064 | ||||||
Income tax expense | (5,471 | ) | (19,347 | ) | ||||
|
|
|
| |||||
Profit from discontinued ordinary activities after taxation | 14,083 | (2,283 | ) | |||||
|
|
|
|
JOINT VENTURE
TECGAS N.V. | ||||||||
2015 | 2016 | |||||||
Revenue | 426,487 | 457,554 | ||||||
Finance costs | 16 | 215 | ||||||
|
|
|
| |||||
Operating profit from discontinued activities before taxation | 1,876 | (3,209 | ) | |||||
Income tax expense | (892 | ) | (4,078 | ) | ||||
|
|
|
| |||||
Loss from discontinued ordinary activities after taxation | 984 | (7,287 | ) | |||||
|
|
|
|
Supplementary Data (Unaudited)
Oil and Gas Producing Activities
In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 932, “ExtractiveActivities-Oil and Gas,” and regulations of the U.S. Securities and Exchange Commission (SEC), the Companycompany has included certain supplemental disclosures about its oil and gas exploration and production operations.
A. Reserve QuantityAll information in the following supplemental disclosures related to Blocks I, III, IV and V. Information with respect to Blocks III and IV has been included from April 5, 2015, when the company began operating these blocks.
A. | Reserve Quantity Information |
Graña y Montero Petrolera S.A. net proved reserves in the fields in which they operate and changes in those reserves for operations are disclosed below. The net proved reserves represent the company’s best estimate of proved oil and natural gas reserves. For 20132015 and 2016 reserve estimates have been evaluated by our Technical Staffits technical staff (reservoir engineers and geoscience professionals) and submitted to ourits Reserve Development Committee. The estimates for all years presented conform to the definitions found in FASB ASC paragraph932-10-65-1 and Rule4-10(a) of RegulationS-X.
Proved oil reserves are those quantities of oil, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible, based on prices used to estimate reserves, from a given date forward from known reservoirs, and under existing economic conditions, operating methods, and government regulation prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain.
The term “reasonable certainty” implies a high degree of confidence that the quantities of oil actually recovered will equal or exceed the estimate. To achieve reasonable certainty, the Company’scompany’s engineers and independent petroleum consultants relied on technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used to estimate the Company’scompany’s proved reserves include, but are not limited to, well logs, geologic maps, seismic data, well test data, production data, historical price and cost information and property ownership interests.
PROVED RESERVES (1)
Total | Peru | Total | Peru | |||||||||||||||||||||||||||||
Oil (MBBL) | Gas (MMCF) | Oil (MBBL) | Gas (MMCF) | Oil (MBBL) | Gas (MMcf) | Oil (MBBL) | Gas (MMcf) | |||||||||||||||||||||||||
Proved developed and undeveloped reserves, December 31, 2011 | 4,710 | 18,445 | 4,710 | 18,445 | ||||||||||||||||||||||||||||
Proved developed and undeveloped reserves, December 31, 2014 | 4,007 | 16,709 | 4,007 | 16,709 | ||||||||||||||||||||||||||||
Revisions of previous estimates | -186 | 3,483 | -186 | 3,483 | (1,127 | ) | (3,380 | ) | (1,127 | ) | (3,380 | ) | ||||||||||||||||||||
Improved recovery | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Enhanced oil recovery | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Purchases | 0 | 0 | 0 | 0 | 21,417 | 40,504 | 21,417 | 40,504 | ||||||||||||||||||||||||
Extensions and discoveries | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Production (a) | (570 | ) | (3,730 | ) | (570 | ) | (3,730 | ) | ||||||||||||||||||||||||
Sales in place | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Proved developed and undeveloped reserves, December 31, 2015 | 23,727 | 50,103 | 23,727 | 50,103 | ||||||||||||||||||||||||||||
Revisions of previous estimates | 2,472 | (36,543 | ) | 2,472 | (36,543 | ) | ||||||||||||||||||||||||||
Enhanced oil recovery | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Purchases | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Production | -513 | -2,013 | -513 | -2,013 | (1,008 | ) | (3,039 | ) | (1,008 | ) | (3,039 | ) | ||||||||||||||||||||
Sales in place | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Proved developed and undeveloped reserves, December 31, 2012 | 4,011 | 19,916 | 4,011 | 19,916 | ||||||||||||||||||||||||||||
Revisions of previous estimates | 227 | -3,264 | 227 | -3,264 | ||||||||||||||||||||||||||||
Improved recovery | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Purchases | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Extensions and discoveries | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Production | -485 | -2,446 | -485 | -2,446 | ||||||||||||||||||||||||||||
Sales in place | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Proved developed and undeveloped reserves, December 31, 2013 | 4,266 | 14,205 | 4,266 | 14,205 | ||||||||||||||||||||||||||||
Proved developed and undeveloped reserves, December 31, 2016 (2)(3) | 25,191 | 10,521 | 25,191 | 10,521 |
(1) | Proved reserves estimated in oil and gas properties located in |
F-101
(All amounts are expressed in thousands of S/. unless otherwise stated)
(2) | The revisions in reserve estimates are based on new information obtained as a result of drilling activities and workovers. |
(3) | As of |
RESERVE QUANTITY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 20102014
Total | Peru | |||||||||||||||
Gas | ||||||||||||||||
Oil (MBBL) | (MMCF) | Oil (MBBL) | Gas (MMCF) | |||||||||||||
Proved developed reserves | ||||||||||||||||
Beginning of year | ||||||||||||||||
End of year | ||||||||||||||||
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|
F-102
(All amounts are expressed in thousands of S/. unless otherwise stated)
RESERVE QUANTITY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2011
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RESERVE QUANTITY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2012
| ||||||||||||||||
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Proved undeveloped reserves | ||||||||||||||||
Beginning of year | ||||||||||||||||
|
RESERVE QUANTITY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2013
| ||||||||||||||||
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| ||||||||||||||||
| 1,386 | 5,018 | 1,386 | 5,018 | ||||||||||||
End of year | 1,125 | 4,748 | 1,125 | 4,748 |
RESERVE QUANTITY INFORMATION
F-103
(All amounts are expressed in thousands of S/. unless otherwise stated)
Total | Peru | |||||||||||||||
Gas | ||||||||||||||||
Oil (MBBL) | (MMCF) | Oil (MBBL) | Gas (MMCF) | |||||||||||||
Proved developed reserves | ||||||||||||||||
Beginning of year | 2,882 | 11,960 | 2,882 | 11,960 | ||||||||||||
End of year | 9,168 | 23,384 | 9,168 | 23,384 | ||||||||||||
Proved undeveloped reserves | ||||||||||||||||
Beginning of year | 1,125 | 4,748 | 1,125 | 4,748 | ||||||||||||
End of year | 14,562 | 26,719 | 14,562 | 26,719 |
B. Capitalized Costs Relating to Oil and Gas Producing ActivitiesRESERVE QUANTITY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2016
Total | Peru | |||||||||||||||
Gas | ||||||||||||||||
Oil (MBBL) | (MMCF) | Oil (MBBL) | Gas (MMCF) | |||||||||||||
Proved developed reserves | ||||||||||||||||
Beginning of year | 9,168 | 23,384 | 9,168 | 23,384 | ||||||||||||
End of year | 8,521 | 10,521 | 8,521 | 10,521 | ||||||||||||
Proved undeveloped reserves | ||||||||||||||||
Beginning of year | 14,562 | 26,719 | 14,562 | 26,719 | ||||||||||||
End of year | 16,670 | — | 16,670 | — |
B. | Capitalized Costs Relating to Oil and Gas Producing Activities |
The following table sets forth the capitalized costs relating to the Company’scompany’s crude oil and natural gas and crude oil producing activities for the years indicated:
Total Peru | Total Peru | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
(in US$ thousands) | (in US$ thousands) | |||||||||||||||||||||||||||||||||||
Proved properties | ||||||||||||||||||||||||||||||||||||
Mineral property wells and related equipment | 29,393 | 31,837 | 53,255 | 44,974 | ||||||||||||||||||||||||||||||||
Mineral property, wells and related equipment | 53,255 | 44,974 | 47,267 | 54,582 | 39,069 | |||||||||||||||||||||||||||||||
Drilling and Works in progress and Replacement Units | 8,760 | 15,081 | 12,834 | 11,444 | 12,834 | 11,444 | 11,290 | 5,682 | 6,188 | |||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||
Total Proved Properties | 38,154 | 46,919 | 66,090 | 56,418 | 66,090 | 56,418 | 58,557 | 60,264 | 45,257 | |||||||||||||||||||||||||||
Unproved properties | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
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|
|
| ||||||||||||||||||||||||||||
Total Property, Plant and Equipment | 38,154 | 46,919 | 66,090 | 56,418 | 66,090 | 56,418 | 58,557 | 60,264 | 45,257 | |||||||||||||||||||||||||||
Accumulated depreciation, depletion, and amortization, and valuation allowances | (6,781 | ) | (8,662 | ) | (10,990 | ) | (13,864 | ) | (10,990 | ) | (13,864 | ) | | ( 13,735 | ) | (17,875 | ) | (17,774 | ) | |||||||||||||||||
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|
|
| ||||||||||||||||||||||||||||
Net capitalized costs | 31,373 | 38,256 | 55,099 | 42,554 | 55,099 | 42,554 | 44,822 | 42,389 | 27,482 | |||||||||||||||||||||||||||
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|
|
C. Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration and Development Activities
C. | Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration and Development Activities |
The following table sets forth costs incurred related to the Company’scompany’s oil and natural gas activities for the years ended December 31, 2010, 2011, 2012, 2013, 2014 2015 and 20132016 (in thousands):
Total Peru | Total Peru | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
(in US$ thousands) | (in US$ thousands) | |||||||||||||||||||||||||||||||||||
Acquisition costs of properties | ||||||||||||||||||||||||||||||||||||
Proved | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Unproved | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
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|
|
|
|
|
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| ||||||||||||||||||||||||||||
Total acquisition costs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Exploration costs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Development costs | (6,642 | ) | (8,534 | ) | (10,869 | ) | (13,465 | ) | (10,869 | ) | (13,465 | ) | (13,126 | ) | (17,179 | ) | (19,161 | ) | ||||||||||||||||||
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|
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| ||||||||||||||||||||||||||||||||
Total | (10,869 | ) | (13,465 | ) | (13,126 | ) | (17,179 | ) | (19,161 | ) | ||||||||||||||||||||||||||
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|
|
|
(1) | The company has not incurred in any cost related to Oil and Gas property acquisition |
F-104
(All amounts are expressed in thousands of S/. unless otherwise stated)
D. Results of Operations for Oil and Natural Gas Producing Activities
D. | Results of Operations for Oil and Natural Gas Producing Activities |
The results of operations for oil and natural gas producing activities, excluding overhead costs and interest expenses, are as follows for the years indicated:
Total Peru | Total Peru | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
(in US$ thousands) | (in US$ thousands) | |||||||||||||||||||||||||||||||||||
Revenues | 31,862 | 44,221 | 52,172 | 58,275 | 52,172 | 58,275 | 59,233 | 57,938 | 50,556 | |||||||||||||||||||||||||||
Additional Revenues of Gas Extraction Services (1) | 11,892 | 11,892 | ||||||||||||||||||||||||||||||||||
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|
|
|
|
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|
| ||||||||||||||||||||||||||||
Total Revenues (2) | 31,862 | 44,221 | 52,172 | 70,167 | 52,172 | 70,167 | 59,233 | 57,938 | 50,556 | |||||||||||||||||||||||||||
Production Costs | (9,807 | ) | (12,812 | ) | (13,802 | ) | (16,692 | ) | (13,802 | ) | (16,692 | ) | (16,257 | ) | (25,976 | ) | (24,645 | ) | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||
Costs of Labor | (2,024 | ) | (1,715 | ) | (1,602 | ) | (1,660 | ) | (1,767 | ) | ||||||||||||||||||||||||||
Repairs and Maintenance | (911 | ) | (1,024 | ) | (958 | ) | (1,828 | ) | (1,563 | ) | ||||||||||||||||||||||||||
Materials, supplies, and fuel consumed and supplies utilize | (4,482 | ) | (7,103 | ) | (6,486 | ) | (10,775 | ) | (9,540 | ) | ||||||||||||||||||||||||||
External services, insurances, security and others | (2,975 | ) | (3,297 | ) | (3,605 | ) | (6,938 | ) | (6,388 | ) | ||||||||||||||||||||||||||
Operation office and staff expenses | (3,410 | ) | (3,553 | ) | (3,607 | ) | (4,776 | ) | (5,388 | ) | ||||||||||||||||||||||||||
Additional Natural Gas supply costs after price adjustment (1) | (14,843 | ) | (14,843 | ) | ||||||||||||||||||||||||||||||||
Royalties | (7,982 | ) | (7,402 | ) | ||||||||||||||||||||||||||||||||
DD&A Expenses | (6,858 | ) | (8,635 | ) | (10,949 | ) | (13,811 | ) | (10,949 | ) | (13,811 | ) | (13,672 | ) | (16,931 | ) | (17,223 | ) | ||||||||||||||||||
Income (loss) before income taxes | 15,197 | 22,774 | 27,421 | 24,821 | 27,421 | 24,821 | 29,304 | 7,048 | 1,286 | |||||||||||||||||||||||||||
Income tax expense (3) | (4,559 | ) | (6,832 | ) | (8,226 | ) | (7,446 | ) | (8,226 | ) | (7,446 | ) | (8,791 | ) | (1,974 | ) | (373 | ) | ||||||||||||||||||
Results of operations from producing activities | 10,638 | 15,942 | 19,195 | 17,375 | 19,195 | 17,375 | 20,513 | 5,075 | 913 |
(1) | During 2013, GMP finished a negotiation setting prices of |
(2) |
(3) | 30% of income before income |
E. Standardized Measure of Discounted Future Net Cash Flows
E. | Standardized Measure of Discounted Future Net Cash Flows |
The standardized measure of discounted future net cash flows, related to the proved reserves is based on estimates of net proved reserves and the period during which they are expected to be produced. Future cash inflows are computed by applying the twelve12 month period unweighted arithmetic average of the price as of the first day of each month within that twelve12 month period, unless prices are defined by contractual arrangements, after royalty share of estimated annual future production from proved oil and gas reserves.
Future production and development costs to be incurred in producing and further developing the proved reserves are based on year end cost indicators. Future income taxes are computed by applying year end statutory tax rates.
F-105
(All amounts are expressed in thousandsStandardized measure of S/. unless otherwise stated)
Total | Total | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
(in US$ thousands) | (in US$ thousands) | |||||||||||||||||||||||||||||||||||
Future Cash inflows (1) | 330,772 | 432,181 | 375,655 | 360,386 | 375,655 | 360,386 | 251,695 | 1,461,565 | 1,106,849 | |||||||||||||||||||||||||||
Future production costs (2) | (83,249 | ) | (75,402 | ) | (94,793 | ) | (107,031 | ) | (94,793 | ) | (107,031 | ) | (72,857 | ) | (507,212 | ) | (285,608 | ) | ||||||||||||||||||
Future development costs (2) (3) | (40,014 | ) | (35,915 | ) | (43,663 | ) | (63,643 | ) | ||||||||||||||||||||||||||||
Future development costs | (43,663 | ) | (63,643 | ) | (37,423 | ) | (368,873 | ) | (463,224 | ) | ||||||||||||||||||||||||||
Future production and development costs | (123,263 | ) | (111,317 | ) | (138,455 | ) | (170,674 | ) | (138,455 | ) | (170,674 | ) | (110,280 | ) | (876,085 | ) | (748,832 | ) | ||||||||||||||||||
Future income tax expenses | (62,253 | ) | (96,259 | ) | (71,160 | ) | (56,913 | ) | (71,160 | ) | (56,913 | ) | (37,264 | ) | (153,178 | ) | (105,615 | ) | ||||||||||||||||||
Future Net cash flows | 145,256 | 224,605 | 166,040 | 132,798 | 166,040 | 132,799 | 104,151 | 432,301 | 252,402 | |||||||||||||||||||||||||||
10% annual discount for estimates timing of cash flows | (54,024 | ) | (79,001 | ) | (49,887 | ) | (35,324 | ) | (49,887 | ) | (35,325 | ) | (29,483 | ) | (209,039 | ) | (115,028 | ) | ||||||||||||||||||
Standardized measure of discounted Future Net Cash Flows | 91,232 | 145,604 | 116,152 | 97,474 | 116,153 | 97,474 | 74,668 | 223,262 | 137,374 |
(1) | For oil volumes, per barrel prices after deductions of Graña y Montero Petrolera S.A.’s share government royalties used in determining future cash inflows for the years ended December 31, |
(2) | Production costs and developments costs relating to future production of proved reserves are based on the continuation of existing economic conditions. Future estimated decommissioning costs are included. |
(3) |
Taxation is computed using the appropriateyear-end statutory corporate income tax rates. |
Future net cash flows from oil production are discounted at 10% regardless of assessment of the risk associated with its |
F. | Changes in standardized Measure of Discounted Future Net Cash Flows |
Standardized measure of discounted Future Net Cash Flows, beginning of the year. Revenue less production and other costs Net changes in future development costs Changes in price, net of production costs Development cost incurred Revisions of previous quantity estimates Accretion of discount Net change in income taxes Timming difference and other Standardized measure of discounted Future Net Cash Flows, end of the year.F-106 Year Ended December 31, 2012 2013 2014 2015 2016 (in US$ thousands) 145,604 116,153 97,474 74,668 223,262 (65,974 ) (89,810 ) (75,490 ) (103,058 ) (75,202 ) 18,441 24,533 11,497 (185,387 ) (53,464 ) (15,482 ) (34,973 ) (53,214 ) (284,832 ) 560 10,869 13,465 13,126 17,179 19,161 (2,245 ) 47,511 23,273 674,410 (54,052 ) 23,931 23,616 16,836 67,666 55,438 10,452 3,593 9,286 (53,715 ) 21,327 (9,444 ) (6,613 ) 31,879 (16,330 ) (343 ) 116,153 97,474 74,668 223,262 137,374
(All amounts are expressed in thousands of S/. unless otherwise stated)
F. Changes in standardized Measure of Discounted Future Net Cash Flows
Year Ended December 31, | ||||||||||||||||
2010 | 2011 | 2012 | 2013 | |||||||||||||
(in US$ thousands) | ||||||||||||||||
Standardized measure of discounted Future Net Cash Flows, beginning of the year. | 84,683 | 91,232 | 145,604 | 116,152 | ||||||||||||
Revenue less production and other costs | (41,669 | ) | (57,033 | ) | (65,974 | ) | (89,810 | ) | ||||||||
Net changes in future development costs | 10,867 | 7,149 | 18,441 | 24,533 | ||||||||||||
Changes in price, net of production costs | 44,387 | 80,540 | (15,482 | ) | (34,973 | ) | ||||||||||
Development cost incurred | 6,642 | 8,534 | 10,869 | 13,465 | ||||||||||||
Revisions of previous quantity estimates | (22,513 | ) | 4,637 | (2,245 | ) | 47,511 | ||||||||||
Accretion of discount | 19,658 | 26,085 | 23,931 | 23,616 | ||||||||||||
Net change in income taxes | (3,444 | ) | (23,444 | ) | 10,452 | 3,593 | ||||||||||
Timming difference and other | (7,379 | ) | 7,903 | (9,444 | ) | (6,613 | ) | |||||||||
Standardized measure of discounted Future Net Cash Flows, end of the year. | 91,232 | 145,604 | 116,152 | 97,474 |
F-107
EXHIBIT INDEX
* | Incorporated herein by reference to exhibit 1.01 of the registrant’s Form20-F (FileNo. 333-172855) filed with the SEC on April 30, 2014. |
** | Incorporated herein by reference to exhibit 4.1 to the registrant’s registration statement on FormF-1 (FileNo. 333-178922) filed with the SEC on June 4, 2013. |
*** | Incorporated herein by reference to exhibit 4.2 to the registrant’s registration statement on FormF-1 (FileNo. 333-178922) filed with the SEC on June 4, 2013. |
*** | This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. §78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. |
+ | Confidential treatment requested. |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report on Form20-F on its behalf.
GRAÑA Y MONTERO S.A.A. | ||
By: | /s/ Luis Francisco Díaz Olivero | |
Name: | Luis Francisco Díaz Olivero | |
Title: | Chief Executive Officer | |
By: | /s/ Monica Miloslavich | |
Name: | Monica Miloslavich | |
Title: | Chief Financial Officer |
Date: May 15, 2018