Annual Report and Consolidated Financial Statements as of June 30, 2010 TEI&C S.A.
Annual Report and Consolidated Financial Statements as of June 30, 2010
TEI&C S.A.
Annual Report and Consolidated Financial Statements as of June 30, 2010
TEI&C S.A.
4 | TEI&C S.A.
PERU LNG Project, Peru. Construction of a 408 km 34” gas pipeline
and the respective facilities.
Thecompany
Annual Report | 5
TEI&C S.A. (TEI&C) generates value to its
clients and shareholders by providing design,
procurement, construction and management
services to develop and execute major engineering
and construction projects.
Due to its wide experience in the market, it is capable
of developing high complexity projects, from basic
design to execution, taking care of the environment
and the well-being of the communities.
Nowadays, the Company provides services to the
following market segments: Oil & Gas Upstream,
Energy, Industrial Plants, Oil Refineries, Mining, and
Major Civil and Architecture Works.
TEI&C develops its projects under ISO 9001 standards,
thus assuring the quality required by the client.
With the aim of providing high impact integral
solutions, the Company relies on highly trained
human resources, state-of-the-art engineering
and constructions techniques, a global network of
suppliers and well-proven management skills.
EnergyIron & Steel andothers industriesOil & GasPipelinesMiningOthers
Revenue 09 - 10 by business segment
16% 11%
27%
33%
3%
7%
ArgentinaBrazilPeruMexicoCentral Americaand CaribbeanCanadaChile
Revenue 09 - 10 by geographic area
Others
29%21%
20%
14%6%4%9%
3%
Key figures
Revenue
EBITDA
EBITDA %
Net Income
Equity with Min.Interest
ROE
07-08
997.6
87.5
9%
21.1
372.7
6%
08-09 09-10
213.6
14%
114.4
605.8
19%
1,598.4 1,530.3
211.6
13%
171.5
484.9
35%
USD millions Personnel
21,036 20,63620,603
07-08 08-09 09-10
Revenue
998
1,598 1,530
07-08 08-09 09-10
Board of Directors’ Report
Overview of the Year
Major Works in Progress per Country
Current Structure
Economic and Financial Information
Prospects for Fiscal Year 2010-2011
Board of Directors
Legal Information
Report of the Auditors
Consolidated Statement of Financial Position
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
TEI&C and subsidiaries’ activities
for the period 2009-2010
09
09
12
15
17
22
24
25
28
30
31
33
34
38
40
104
Index
8 | TEI&C S.A.
Atucha II Project, Lima, Argentina. Engineering Services, Supplies and Mechanical
Assembly at the Ancillary Building of the Reactor.
Annual Report | 9
Overview of the yearDuring the fiscal year ended in June 2010, TEI&C and
its subsidiaries recorded sales for USD 1.53 billion.
The most significant projects were developed in
Argentina, Brazil, Peru and Mexico. In addition,
other important projects were developed in
Bolivia, Chile, Central America and Canada by its
subsidiaries, providing engineering, procurement,
construction, operational and management services
to a wide range of clients in the infrastructure,
industrial and energy areas.
Regarding the activities developed in the energy
sector in Argentina, works at Los Caracoles
Hydroelectric Station were completed for Energía
Provincial Sociedad del Estado (EPSE) in the
province of San Juan, and both generation units
became operational in July and December 2009,
respectively. In November 2009, a contract was
executed with the same client for the construction
of the Punta Negra dam, whose works started in
January 2010. This is a project of a similar size as
Los Caracoles, downstream such project.
In addition, works were continued for the assembly
of the piping system in the UKA building of Atucha II
Nuclear Power Plant, for Nucleoeléctrica Argentina S.A.
In the mining area, the works regarding the
extension of the Veladero Mine were completed
and the Company continued with the detail
engineering and procurement management works
for the development of the Pascua Lama project.
Both contracts are performed by Barrick Gold Corp.
from Canada.
Besides, in January 2010, the Company obtained
the Acknowledgement of Completion for the
engineering, procurement and construction
management activities of the Pirquitas Mine Project,
for Mina Pirquitas Inc. Argentine Branch, subsidiary
of Silver Standard Resources Inc. from Canada.
Boardof Directors’Report
10 | TEI&C S.A.
In the oil & gas sector, in December 2009, an
agreement was executed with Petrobras Bolivia for
engineering, procurement and construction of the
Third Processing Train of Sábalo Gas Treatment Plant,
thus resuming activities in the Bolivian market.
In Brazil, the Company’s subsidiary Techint
Engenharia e Construção S.A. (TEBRA) continued
with the development of large projects for
Petrobras. Progress was made in engineering,
procurement and construction (EPC) activities at the
Presidente Bernardes de Cubatão Refinery, at Lot I
Tanks of Refinaria do Nordeste (RNEST), and at the
Landulpho Alves de Matarife Refinery (RLAM). In
addition, TEBRA continued rendering maintenance
and improvement services for the off-shore
platforms at Macaé Northeast and Marlim.
During the fiscal year, this subsidiary was awarded
the contract to develop EPC works in Complexo
Petroquimico do Rio de Janeiro (COMPERJ). In
turn, the project in Gasduc III was successfully
completed, for Transportadora Associada de Gás –
TAG de Petrobras.
In Peru, the Company maintained its leading
position in the pipeline market by getting two new
contracts – Jungle Loops and the Addition of a
fourth pump to the LNG transportation system -
while continuing to carry out other maintenance
services. On the other hand, Peru LNG a 408 KM 34’’
gas pipeline was successfully completed in January
2010, Chiquintirca Gas Compression Plant was also
accomplished by May 2010 while Loop de la Costa
Gas Pipeline was finished by June 2010. All this
contracts were executed for TGP.
In Mexico, EPC works were finished concerning
the Central Thermoelectric Plant of 750 MW, for
Comisión Federal de Electricidad (CFE). Within the
market of high voltage transmission lines and sub-
stations, the projects of SE 1125 Distribution-Second
Phase and SLT 1119 for CFE were continued.
During the fiscal year
ended in June 2010,
TEI&C and its subsidiaries
recorded sales for
USD 1.53 billion.
Annual Report | 11
for Municipalidad de Maldonado, Corporación Vial
de Uruguay and Obras Sanitarias del Estado.
Works in the iron & steel plants continued; for
TenarisSiderca, and TerniumSiderar, in Argentina
and for TerniumHylsa and TenarisTamsa in Mexico.
In the area of steel & iron services, the Company,
through its subsidiaries, continued rendering
services of Heavy Duty Cleaning, Industrial Cleaning
and Electromechanical Maintenance.
In the engineering market, the following activities
were carried out: concept, basic and detail
engineering works; assistance for the development
of technical specifications, and assessment
of investment and site assistance projects for
several clients, including Exxon Mobil, Repsol –
YPF, Transportadora de Gas del Perú (TGP) and
Pluspetrol Peru Corporation S.A.
All these activities were undertaken recognizing the
importance of, and adhering to, the strict compliance
of the rules and regulations which govern the
protection of the environment, and in search of the
constant improvement of safety & health and the
continuous training of human resources.
In Chile, the Company’s subsidiary Techint Chile S.A.
was awarded the Plant Maintenance Service and
Sea Water Drive Systems Construction Contract for
Minera Escondida Limitada, as well as two contracts
with Anglo American Sur S.A., and Engineering
Services for Compañía Minera Casale.
In Central America and the Caribbean, the Company’s
subsidiary Techint International Construction Corp.
(TENCO) is carrying out, under an engineering,
procurement, and construction management (EPCM)
contractual arrangement, the Alky Acid Unit and
Acid Regeneration Unit of the Gasoline Optimization
Program Upgrade Project for Petroleum Company of
Trinidad and Tobago (PETROTRIN). Additionally, the
Company’s subsidiary Techint S.A. de C.V. (TEMEX)
continued working in the Sistema de Interconexión
de Países de America Central (SIEPAC Project), an
EPC including 1,850 km of transmission lines and 16
substations, crossing through six countries of Central
America for Empresa Propietaria de la Red S.A. (EPR).
In Canada, Techint E&C Inc. (TECAN) successfully
completed the Alberta Clipper Project, a 345-km
long pipeline. In the second part of the period, the
Subsidiary has focused its efforts on developing
activities in the Oil Sands and other oil & gas
producing areas in Western Canada, bidding C and
EPC projects for execution of pipelines and facilities
in these areas belonging to clients such as Enbridge,
CNRL, Suncor and Husky.
In Saudi Arabia, the Company’s subsidiary Saudi
Techint Ltd. (SAUTEC) has successfully completed
the subcontract it was working on, Nuayyim ASL
Crude Increment Facilities Project, with Saudi
Arabian Oil Co. as the final user. Meanwhile, the
Project awarded last fiscal year, Tanajib-Manifa
Water Pipeline, for JGC Corporation, is in full swing
since last May 2010.
In Uruguay, the Company keeps involved in different
projects in the civil and water infrastructure sector,
12 | TEI&C S.A.
management services to develop and execute major
engineering and construction projects. The main
projects currently in progress are listed below.
Major works in progress per countryTEI&C’s subsidiaries provide full engineering,
procurement, construction, operational and
Country Project Client Contract total amount USD millions
Argentina
Brazil
Canada
Central America and the Caribbean
Chile
Energía Provincial Sociedad del Estado (EPSE)
Nucleoeléctrica Argentina S.A. - Atucha II
Barrick Gold Corp.
Barrick Gold Corp.
Ternium - Tenaris
COMPERJ Petroquimicos basicos
Petroleo Brasileiro S.A. (Petrobras)
Petroleo Brasileiro S.A. (Petrobras)
Petroleo Brasileiro S.A. (Petrobras)
ThyssenKrupp (C.S.A.)
Enbridge Pipelines Inc.
Petroleum Company of Trinidad and Tobago Ltd.
Empresa Propietaria de la Red S.A.
Consorcio Abengoa-Inabensa (APCA)
Empresa Propietaria de la Red S.A.
Anglo American Sur S.A.
Minera Esperanza (Antofagasta Minerals S.A.)
Compañía Minera Casale
Minera Escondida Limitada
368
236
136
54
59
1,058
782
380
200
3
251
318
139
57
43
156
133
1
14
(b)
(b)
Punta Negra
Engineering Services, Supplies and Mechanical Assembly at the Ancillary Building of the Reactor
Pascua Lama(a)
Veladero Mine(a)
Works and Services in plants
Unidad de Coque Retardado (COMPERJ)
Diesel Unit of Landulpho Alves-Mataripe Refinery (RLAM)(a)
Gasoline Unit of Pres. Bernardes de Cubatão Refinery (RPBC)
Lot I Tanks Refineria do Nordeste, Abreu e Lima (RNEST)(a)
ThyssenKrupp Companhia Siderúrgica do Atlantico
Canadian Mainline Pipeline Project (Alberta Clipper Project)(a)
Gasoline Optimization Program Upgrade(a)
SIEPAC 1(a)
SIEPAC 2
SIEPAC Substations
Replacement of Mineral Pipeline and Reclaimed Water System
Esperanza Water Pipeline and Concentrate Pipeline
Engineering Services for water and con-centrate transportation system
Mechanical Maintenance
Annual Report | 13
Country Project Client Contract total amount USD millions
Mexico
Peru
Saudi Arabia
Bolivia
Uruguay
Comisión Federal de Electricidad
Comisión Federal de Electricidad
Ternium Hylsa - TenarisTamsa
Comisión Federal de Electricidad
Compañía Operadora de Gas del Amazonas S.A.
Transportadora de Gas del Perú S.A. (TGP)
Transportadora de Gas del Perú S.A. (TGP)
JGC Corporation
Petrobras Bolivia
Obras Sanitarias del Estado
Obras Sanitarias del Estado
Corporación Vial del Uruguay (CVU)
Obras Sanitarias del Estado
Municipalidad de Maldonado
91
46
87
33
126
73
14
48
87
37
20
8
5
2
(b)
(b)
SLT 1119 Transmission and Transformation of the Southeast (a)
195 SE 1125 Distribution (2° phase)
Works and Services in plants
Petacalco Project
Camisea Maintenance
Jungle Loops - Early Works
Expansion of LNG transportation system - Addition of fourth pump
Tanajib - Manifa Water Pipeline
Third Processing Train of the Sabalo Gas Treatment Plant
Maldonado Effluents
Sanitation of Ciudad de la Costa
Road 18
Sanitation of Maldonado
Bridge over Jose Ignacio Stream
(a) Projects under a consortium. The amount corresponds to total contract
amount at 100%.
(b) The amount corresponds to annual estimated sales.
14 | TEI&C S.A.
CanadaPipelinesCanadian MainlinePipeline Project (Alberta Clipper Project)
BrazilOil & GasGasoline Unit at RPBCDiesel Unit at RLAMLot I Tanks at RNESTCoke Unit (COMPERJ)
UruguayInfrastructure Sanitation of Maldonado Maldonado EffluentsSanitation of Ciudadde la CostaRoad 18Bridge overJose Ignacio Stream
ChileMiningPlant Maintenance ServicesReplacement of Mineral Pipeline – Los BroncesConstruction of Stations and Singular Points – Los BroncesPipelinesEsperanza Water and Concentrate Pipelines
Central Americaand the CaribbeanOil & Gas Gasoline Optimization Program Upgrade EnergySiepac Lots I and IISiepac Substations
Others-ArabiaPipelinesTanajib - Manifa Water Pipeline
MexicoIron & Steel PlantsTernium Plant in MonterreyTenaris Plant in VeracruzEnergyCentral Expansion Petacalco SLT 1119 Transmission andTransformation of the Southeast195 SE 1125 Distribution(2nd phase)
ArgentinaMiningPirquitas MineVeladero MinePascua LamaEnergyAtucha IIPunta Negra Hydroelectric Station Iron & Steel PlantsTernium Plant in CampanaTenaris Plant in San Nicolas
PeruPipelinesAddition of a fourth pumpJungle LoopsCAMISEA Pipeline Maintenance
BoliviaOil & GasThird Processing Train for Sábalo
Annual Report | 15
In March, Preglosid S.L.U. (PREGLOSID) subscribed
and paid in a capital increase in its subsidiary
Sidernet Mexicana S.A. de C.V. for USD 1,7 million.
By mid-April 2010, TEI&C contributed to PREGLOSID
the direct participating interest (97.50% of the
capital stock) it held in the Argentine company
Prestaciones Globales Siderúrgicas S.A. Upon this
transaction, PREGLOSID increased its capital stock,
thus consolidating in its shareholders’ equity the
transactions for the supply of steel and iron services
recorded in Argentina, Mexico and Venezuela.
In June 2010, the shareholders of the Argentine
companies Tecnomatter Instalaciones y
Construcciones S.A. and Sidernet S.A resolved
a corporate reorganization, consisting in the
capitalization of both companies, the spin off of
Tecnomatter and the subsequent merge of the spin
off with Sidernet, the latter becoming the successor
for the supply of steel and iron services.
For the purpose of unification of the end of the fiscal
year of engineering and construction companies,
the governing bodies have determined December
31 as the most suitable date. Therefore, the Board
of Directors’ Meeting of TEI&C held on December 9,
2009, resolved that next December 31, 2010 will be
the enforcement date.
Current StructureDuring the fiscal year ended June 30, 2010, TEI&C
recorded the following changes in the participating
interests of related companies in the engineering,
construction and service business (see further detail
in note 1 of the Financial Statements):
In September 2009, the Company contributed
to Techint Ingeniería y Construcciones S.L.U.
(hereinafter, TIC) the direct participating interests it
held as of such date in Argentine engineering and
construction companies, 97.71% of the capital stock
of Techint Inversiones S.A.I.F. and 38.94% of the
capital stock and voting rights of Techint Compañía
Técnica Internacional S.A.C.I. Upon this transaction,
TIC increased its capital stock, thus becoming
also the European holding of this business by
concentrating the operations in Argentina, Mexico,
Canada and Central America.
Throughout this fiscal year, the Mexican subsidiary
Techint S.A. de C.V. (TEMEX) continued with
transactions aimed at reorganizing its business
areas. In August 2009, it transferred together
with Constructora Mexicana Electromecánica y
de Instrumentación, S.A. de C.V. (COMEI) 60%
of the shareholding in Norpower, S.A. de C.V.,
and 100% of the shares of TGT de México, S.A.
de C.V. to companies of the energy sector of the
Techint Group. After the recomposition of capital
of Terminal Portuarias del Pacífico S.A.P.I. de C.V.
(TPP), subsidiary of TEMEX Carbonser S.A. de C.V.,
TEMEX sold its whole participating interest. Finally,
in June 2010, TEMEX acquired 25% of the shares of
Sociedad Mexcarbón S.A. de C.V. and of Sociedad
Carbonser, S.A. de C.V., since the relevant contract
undertaking such purchase had been executed in
November 2008. In December 2009, Tecnopower
S.A. de C.V. was created, but to this date this
company has not engaged in any business activities.
Besides, TEMEX wound up three companies whose
purposes had already been performed.
16 | TEI&C S.A.
The family tree for TEI&C (including the most importantcompanies) as of June 30, 2010, is as follows:
FLINWOK
TEI&C S.A.(Uruguay)
CARBONSER S.A. de C.V. (Mexico)
MEXCARBON S.A. de C.V. (Mexico)
Techint S.A.(Nicaragua)
Techint Servic S.A. de C.V. (Mexico)
Techint S.A. de C.V.(Honduras)
Techint E&C S.A. de C.V.(El Salvador)
Techint S.A.(Guatemala)
Servicios Siderúrgicos SERSISA S.A. (Venezuela)
PREGLOSID S.L.U.(Spain)
Techint Ing y Const S.L.U.(Spain)
BV de NIEUWE WEG(the Netherlands)
Techint S.A. de C.V. (Mexico)
COMEI S.A. de C.V.(Mexico)
Sidernet de Vz C.A.(Venezuela)
Sidernet S.A. de C.V.(Mexico)
SICI S.A. de C.V.(Mexico)
Energ Tamaulipas S.A.de C.V. (Mexico)
Techint E&C Inc.(Canada)
Techint S.A.(Panama)
Costa Azul BMVT S.A.de C.V. (Mexico)
Tanks Tech S.A. de C.V.(Mexico)
Elina 406 S.A. de C.V.(Mexico)
BVT LNG Costa Azul S.R.L. (Mexico)
Nitroelina S.A. de C.V.(Mexico)
100%
100%
99.92%
100%
100%
25%
40%
40%
100%
100%
37.84%
51%
50%
70%
51%
99%
99%
96%
98%
99%
50%
50%
75%
60%
1%
1%
4%
2%
1%
60%
62.16%
Others
49%
Others
49%
Others
50%
Others
30%
Other OT
99.999%
50%
Others
50%
Others
100%
0.0001%
Prest. Glob. Siderúrgicas S.A.I.F. (Argentina)
Sidernet S.A.(Argentina)
97.5%
1.81%
TEARG
2.5%
TEARG
1.19%
FLINWOK
97%
Flinwok S.A.(Uruguay)
100%
100%
Techint Comp Tec Int S.A.C.I. (Uruguay)
Tecnomatter In y Cons S.A.I.F. (Argentina)
TENCO(Colombia Branch)
Saudi Techint Ltd (Saudi Arabia)
96,94%
60%
100%
38.94%
Techint Inversiones S.A.I.F. (Argentina)
Techint Comp Tec Int S.A.C.I. (Argentina)
97.71%
53.68%
7.38%
FLINWOK
0.09%
TEI&C S.A.
3.06%
TEINVA
23.12%
0.01%
76.88%
99.99%
Fluor Techint S.R.L. Consty Serv Ltda (Chile)
Techint Chile S.A.(Chile)
Techint S.A.C.(Peru)
50%
50% Others
40% Others
Cia. Inv. Ferroviaria S.A.I.F. (Argentina)
Ferroexpreso Pampeano S.A. Conc (Argentina)
80%
22.86%
Others
20%
Others
77.14%
Coincar S.A.(Argentina)
TECHINT (Trinidad & Tobago Branch)
100%
Techint Ing y Const S.A.(Bolivia)
95%
65%
35%
Others
TEBRA(Brazil)
SOCOMINTER(Brazil)
99.91%
96%4%
2.5%
TEINVA
2.5%
TEI&C S.A.
Techint Int Const Corp(TENCO) (Bahamas)
100%
2.29%
Annual Report | 17
Economic and financial information
Summary of Income StatementUSD millions
June 30, 2010 June 30, 2009
Revenues from construction contracts and other services
Cost of sales
Gross profit
General, administrative and selling expenses
Other income and expenses, net
Operating income
Gain from the purchase and sale of shares and investments
Financial results, net
Result from investments in companies
Income before income tax
Income tax expense
Net income from continuing operations
Income / (Loss) from discontinued operations
Net income for the year
Attributable to
Equity holder of TEI&C
Non-Controlling interests
1,598.4
(1,332.2)
266.2
(109.5)
1.0
157.7
10.7
21.2
(0.4)
189.2
(14.4)
174.8
(3.3)
171.5
162.0
9.5
171.5
Gross margin reached USD 304.6 million, an increase
of USD 38.4 million with respect to the previous fiscal
year, growing from 17% to 20% on sales.
EBITDA (Earnings before Interest, Tax, Depreciation
and Amortization) for this fiscal year amounted to
a total of USD 213.6 million, representing 14% on
sales, as compared to USD 211.6 million and 13% of
the previous fiscal year, respectively.
The Company’s very good performance during this
fiscal year is reflected in its economic and financial
position.
Revenues of the fiscal year ended June 30,
2010 reached the sum of USD 1,530.3 million,
representing a 4% decrease with respect to the
previous fiscal year.
1,530.3
(1,225.7)
304.6
(134.9)
(4.9)
164.8
0.3
(2.1)
2.7
165.7
(56.5)
109.2
5.2
114.4
109.8
4.6
114.4
18 | TEI&C S.A.
Financial results showed a loss of USD 2.1 million,
compared to the profit of USD 21.2 in the previous
fiscal year, mainly due to exchange differences.
Finally, net income was USD 114.4 million,
representing 8% of revenues, as compared to the
sum of USD 171.5 million and 11% in previous
period, respectively.
Current liabilities, the decrease is due to a sharp
decline in borrowings and trade and other payables.
Thus, the Company’s working capital, as of the end
of the fiscal year, amounts to USD 319.9 million,
representing an increase of USD 112.9 million with
respect to fiscal year 2008/09.
Within non-current assets and liabilities, there was
an increase mainly due to revaluation of property,
plant and equipment and borrowings, respectively.
General, administrative and selling expenses, with
respect to sales showed an increase, representing
9% with respect to 7% of the previous fiscal year,
mainly originated by the escalation in the different
markets where the Company operates.
The other operating results have recorded a loss of
USD 4.9 million, mainly due to a decreased value in
some Property, Plant & Equipment as a result of the
assessment performed by independent professionals.
TEI&C’s consolidated majority shareholders’ equity
as of June 30, 2010 reaches USD 577.7 million as
compared to USD 450.2 million at the beginning of
the fiscal year. The increase of USD 127.5 million is
mainly due to the income obtained, the revaluation
of machinery, net of cash dividend distribution
(USD 33 million).
Current assets have recorded similar values to
those of the previous fiscal year. With respect to
Summary of Balance Sheet USD millions
June 30, 2010 June 30, 2009
Non Current Assets
Current Assets
Equity
Shareholders
Non-Controlling interests
Non Current Liabilities
Current Liabilities
399.7
804.2
1,203.9
577.7
28.1
113.8
484.3
1,203.9
369.8
802.0
1,171.8
450.2
34.7
91.9
595.0
1,171.8
Annual Report | 19
(USD 33 million), mainly, generated an application
of funds of USD 116.1 million.
The main financial indicators are:
All indicators are very satisfactory, and reveal TEI&C’s
good performance in the execution of its operations.
As regards the financial situation, there was a cash
and cash equivalents net increase of USD 59.6
million along the fiscal year, with a final balance of
USD 282.4 million.
TEI&C’s cash increased USD 199.1 million from its
operating activities, which is mainly associated
to the income for the period, net of the items that
didn’t generate cash movements and an increase in
the working capital.
Related to investment activities, there was a cash
decrease of USD 27 million due to the purchases
of fixed assets, net of proceeds from disposal of
those assets.
Regarding financing activities, the repayment of
borrowings and the dividend distribution
Summary of Cash Flow Statement USD millions
June 30, 2010 June 30, 2009
Net cash and cash equivalents at the beginning of the year
Net cash generated by operating activities
Net cash (used in) generated by investing activities
Net cash (used in) financing activities
Net increase in cash and cash equivalents
Effect of exchange rates changes
Net cash and cash equivalents at the end of the year
Indicators
June 30, 2010 June 30, 2009
Financial solvency
Liquidity
Indebtedness
Gross margin
2.01
1.66
0.99
20%
1.71
1.35
1.42
17%
222.8
199.1
(27.0)
(116.1)
56.0
3.6
282.4
131.0
101.4
37.4
(38.8)
100.0
(8.2)
222.8
20 | TEI&C S.A.
Health, Safety and Environment (HSE)Techint has developed a preventive vision focused
on a commitment to safety, occupational health,
environmental protection and the welfare of
communities. In this respect, the Integrated
Management System (IMS) has proved to be
suitable for a corporate management focused
on prevention as to industrial safety, health and
environmental protection.
The system is focused on the identification of risks
associated to the work developed by the Company,
compliance with local laws, application of coherent
preventive procedures for all the Company’s units
together with an ongoing and widespread training,
and by innovating in methods such as behavior-
based safety and preventive safety observation
at work (OST), the goals of which are focused on
reducing sub-standard actions and conditions to
prevent accidents.
To minimize the repetition of accidents, in addition
to performing other actions addressed to equipment
and facilities and to safety in the working place,
individual performance is monitored by means of a
specific indicator, TACOP (Tablero de Comando de
Actividades Operativas de Prevención – Preventive
Actions Command Switchboard- PACS), with the
basic goal of reducing occurrence of behaviors
characterized by non-compliance with safe
operating rules and practices, thus promoting a
strong commitment of employees to become aware
and internalize preventive conducts. This approach
involves management and workers alike, as well as
sub-contractors.
Since its implementation, the IMS has resulted in
the reduction of global accident rates (Frequency
Rate and Seriousness Rate) by over 80%, and this
shows a substantial improvement in preventive
control in execution of works, as well as the
acknowledgement of clients.
•
•
•
The IMS is audited by Det Norske Veritas (DNV)
and certified under international standards (ISO
14.001:2004 and OHSAS 18.001:2007).
Regarding the latter, 21 million hours were
devoted to pipeline works, 10 million hours to oil
& gas services, 7 million hours to refineries and 5
million hours to industrial works without disabling
accidents, in addition to the recognition for good
performance in prevention by our leading clients,
such as Barrick, Petrobras and Hunt Oil, and
partners such as Fluor Daniel.
QualityThe Company is always seeking to constantly
meet and exceed the expectations of its clients,
shareholders, collaborators, suppliers and the
communities where it operates.
In particular, with respect to our clients, this entails
a special focus on the quality of the products and
services provided.
From our processes standpoint, we are clearly
oriented to continuous improvement, paying special
attention to efficiency, simplification of processes
and value added in each of our operations.
In the 2009 – 2010 period, we have completed the
following actions:
Substantial completion of the review and update of
the Company’s Documentary Database.
Redefinition and establishment of the main Quality
Indicators for products associated to the Projects
developed by the Company.
Quantitative and qualitative improvement of
measurement of Client’s Satisfaction in the different
projects, by deeply focusing on the cross-sectional
Annual Report | 21
analysis of information obtained and on generating
actions for improvement.
Boosting and improvement in measurement and
use of quality management indicators for projects,
in particular the PQI (Project Quality Index).
Improvement of the single database of findings
follow-up, by establishing the status follow-up of
each one of them in the projects, as well as an alert
system for the different functional areas with a
direct responsibility.
In December 2009, the Company was recertified
pursuant to ISO 9001:2008 of Quality Management
Systems (certification in force since 1996).
The Company’s Management has decided to
maintain the direction adopted in previous years,
focused on the unification and improvement of
methodologies and the reliance on truthful and
updated information so as to minimize risks. It
also seeks to prevent problems and ensure the
predictability of results in order to comply with our
commitment to meet and exceed the expectations
of all related stakeholders.
Human resourcesHuman resources management is based on the
use of several tools enabling to draft, implement
and follow up plans for personnel development
and training. The long training cycles in this
industry demand a strict planning in order to
anticipate the skills that will be required to face
business challenges. This planning is translated
into recruitment, training and development plans
involving all the Company’s personnel. Thus,
Techint seeks to have within the Company the talent
required to take part in the projects submitted by
our clients.
With a remarkable emphasis on development of
technical and managerial competencies, during
this fiscal year, the Company developed a training
program that comprised different corporate
levels. These actions allowed that over 3% of
worked man-hours were devoted to training. The
foundations of the training plan continued to be
the Project Management Program, addressed to
professionals in different areas of the Company
with the potential required to hold key positions in
project management, and the Young Professionals
Program, seeking to speed up the insertion of newly
graduated professionals in the business. Other
programs are also worth mentioning, such as those
addressed to supervisors of the Company’s projects,
as well as the external and in-house programs
carried out in the Engineering Direction.
•
•
•
22 | TEI&C S.A.
Prospects for fiscal year 2010-2011Although last year’s international crisis has not yet
concluded and still affects the activity of the markets
where the Company operates, we anticipate
reasonable general perspectives since clients seem
to have decided to continue with various investment
projects.
Against this backdrop, the Company subsidiaries’
strategy is to focus on keeping an active presence
in the market of large infrastructure, industrial and
energy works, especially where this presence makes
the difference due to our knowledge, expertise or
track record.
Thus, we continue working to accompany our
clients under the new market conditions, in order to
offer creative alternatives that facilitate investment
decision-making. These alternatives include the
search for technical and financing strategies that
may involve the multilateral lending agencies and
export-promotion agencies of other countries, so
as to work hand in hand with our clients from the
initial stages of study of their investment projects.
In the Oil & Gas sector, the Company is closely
following the development of projects in Argentina,
Brazil, Canada, Colombia, Mexico, Peru and Trinidad
& Tobago. We foresee important opportunities for
the execution of engineering and construction
works in Oil and Gas Transportation Projects
in Peru, Bolivia and Colombia (where we were
recently awarded the engineering contract of
OCENSA’s pumping stations, the first one since the
reopening of Bogota’s business office), as well as in
processing facilities – such as petrochemical plants
and refining – in Brazil (Premium I and Premium II),
Colombia, Peru and Trinidad & Tobago where we are
planning to participate in the corresponding bidding
processes. In Argentina a contract was signed
after the end of the fiscal year for the construction
of a new gas oil hydrotreatment (HTG) plant of
La Plata refinery for YPF, and the Company keeps
The Company
subsidiaries’ strategy is to
focus on keeping an active
presence in the market
of large infrastructure,
industrial and energy
works, especially where
this presence makes the
difference due to our
knowledge, expertise or
track record.
Annual Report | 23
In the Energy area, in Argentina, works will continue
at the Punta Negra hydroelectric station and other
products are being analyzed. After the end of this
fiscal year, a contract was executed for a new stage
in the Atucha II project, thus proving the Company’s
active involvement in the Argentine nuclear plan.
In Mexico, the Company seeks to keep its current
share in the Power Transmission and Distribution
system of the Mexican market, with an active
participation in this sector. At the beginning of
the new fiscal year, the proposal of the Kepco-
Samsung-Techint consortium was signed with
Comisión Federal de Electricidad for the Combined
Cycle Power Plant North II project. The Company
has also focused on the segment of engineering
services which seems to be an interesting niche
for development in the Mexican market, and has
participated in bids submitted to private clients.
The brief description above shows the Company’s
willingness and efforts to maintain its presence
and leadership in the Latin American engineering
and construction market, showing its skills
in the completion of important projects of a
multidisciplinary nature and its high compliance rate.
This Board wishes to express its gratitude to all
employees of TEI&C and its subsidiaries for the
cooperation and effort shown in the project carried
out during the fiscal year. We would also like to
acknowledge financial institutions, suppliers,
customers and sub-contractors for their trust,
assistance and cooperation.
The Board of Directors
its business activities for future undertakings. In
Bolivia, the Company expects to quote several
works for gas separation plants. Meanwhile, in
Canada, it is majorly pursuing opportunities in two
fields Pipelines (with projects out for bid from major
clients such as Transcanada and Enbridge) where
Techint will participate in the bidding process for
the Canadian portion of Keystone, a liquids pipeline
for Transcanada that runs from Hardisty in Alberta
to facilities in Houston, TX. And Oil Sands where
Techint has participated in bid processes for EPC
thermal (in-situ) projects for Husky Energy; next
year it is expected to participate in similar or mine-
type projects in the oil sands for Total, Statoil, CNRL
among others.
Regarding the Mining area, as the sector becomes
stable and the prices of the main minerals recover
and/or improve, we expect that the activities
in several projects –suspended because of the
crisis– will be resumed. In this case, we foresee
important opportunities in copper and other
mineral developments in Peru and Chile; carbon
developments in Colombia; and in Brazil, Vale has
strong expansion programs where we plan to
bid. In Argentina, the Company’s presence will be
reinforced with the beginning of Stage III of the
Argentine-Chilean bi-national project of Pascua
Lama and the participation in the EPC activities at
Río Colorado Potassium Mine, a project in which the
Company is working at an early stage.
In the Infrastructure sector, the Company will
continue analyzing several opportunities regarding
energy projects and civil infrastructure. Such projects
include San Carlos / Melo / Frontera High Voltage
Line in Uruguay, as well as the water and sewage of
Ciudad de la Costa in Canelones, recently awarded
to our subsidiary by Intendencia Municipal de
Canelones. In Brazil, we foresee high activity in this
area, mainly in sanitation, urban transport system,
railways, and ports; besides the urban infrastructure
for sporting events taking place in 2014 and 2016.
24 | TEI&C S.A.
PresidentCarlos Eduardo Bacher
Vice presidentEduardo Nicolás Rocca Couture
DirectorsRicardo Pascale
María Virginia Jubin Vértiz
Mario Osvaldo Lalla
Luis Pablo Solari Damonte.
Directors were appointed at the Regular
Shareholders’ Meeting held on December 2, 2009.
Officers were appointed at the Board of Directors’
Meeting held on that same date.
Boardof Directors
Consolidated Financial Statements | 25
Denomination: TEI&C S.A.
Legal Address: La Cumparsita 1373 7th Floor
Montevideo (11200)
(598-2) 901-9091
Company activity: Investments
Date of registration: February 16, 2005
Expiration of Company Charter: February 16, 2105
Registry number: RUC 21-5098860012
Capital Stock: Shares: 5,181,537,274 1
Face Value: UYU 5,181,537,274 2
Parent Company: Techint Limited
Legal address: Equity Trust House
28-30 The Parade, JE4 8XY
St. Helier, Jersey
Channel Islands
Parent Company activity: Investments
Parent Company: Shares: 88.67%
Votes: 88.67%
Legal Information
1 See note 14 to the consolidated financial statements2 UYU: Uruguayan Pesos
26 | TEI&C S.A.
Punta Negra Hydroelectric Station, San Juan, Argentina.
Consolidated Financial Statements | 27
30 | TEI&C S.A.
Notes June 30, 2010 June 30, 2009
Assets
Equity and Liabilities
4
5
6
7
8
16
9
12
8
11
7
13
15
16
17
18
15
17
18
309,723
2,662
1,389
6,774
38,480
40,735
35,848
-
366,953
116,731
67
1,010
283,567
577,642
28,134
18,648
35,490
23,211
36,472
19,308
-
269,906
92,339
102,789
254,376
2,479
355
6,076
41,340
65,139
27,752
5,265
458,091
83,350
4,287
158
223,140
450,175
34,750
6,658
30,614
17,862
36,780
98,463
3,603
304,131
94,542
94,230
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associated companies
Other investments
Trade and other receivables
Deferred income tax assets
Current assets
Inventories
Derivative financial instruments
Trade and other receivables
Construction contracts work in progress
Held - for - sale assets
Other investments
Cash and cash equivalents
Total assets
Equity
Capital and reserves attributable
to the Company's equity holders
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Deferred income tax liabilities
Trade and other payables
Other liabilities
Current liabilities
Borrowings
Held - for - sale liabilities
Trade and other payables
Construction contracts work in progress
Other liabilities
Total liabilities
Total equity and liabilities
Consolidated Statement of Financial Position
at June 30, 2010 and 2009
All amounts in USD thousands
The accompanying notes are an integral part of these consolidated financial
statements.
399,763
804,176
1,203,939
605,776
113,821
484,342
598,163
1,203,939
369,765
802,043
1,171,808
484,925
91,914
594,969
686,883
1,171,808
Consolidated Financial Statements | 31
Notes June 30, 2010 June 30, 2009
27
27
27
29
28
28
6
30
24
Continuing operations
Revenues from construction contracts and other services
Cost of sales
Gross profit
General and administrative expenses
Selling expenses
Other income and expenses, net
Operating income
Gain from the purchase and sale of shares and investments
Financial income
Financial costs
Result from investments in associated companies
Income before income tax
Income tax expense
Income from continuing operations
Discontinued operations
Income / (Loss) from discontinued operations
Net Income for the year (1)
(1) Attributable to:
Equity holders of the Company
Non - controlling interests
Net Income for the year
Consolidated Income Statement
for the years ended June 30, 2010 and 2009
All amounts in USD thousands
The accompanying notes are an integral part of these consolidated financial
statements.
1,530,337
(1,225,766)
304,571
(124,982)
(9,944)
(4,851)
164,794
246
9,118
(11,189)
2,724
165,693
(56,542)
109,151
5,236
114,387
109,812
4,575
114,387
1,598,409
(1,332,196)
266,213
(101,903)
(7,594)
1,008
157,724
10,678
53,191
(32,033)
(384)
189,176
(14,374)
174,802
(3,251)
171,551
162,038
9,513
171,551
32 | TEI&C S.A.
Gasoline Optimization Program Upgrade Project, Trinidad and Tobago.
As of June 30, 2010, the physical progress rate was 94%.
Consolidated Financial Statements | 33
Notes June 30, 2010 June 30, 2009
4
4
12
Net Income for the year
Other comprehensive income:
Gain on revaluation of PP&E
Decrease of revaluation of PP&E
Depreciation of reserve for revaluation surplus
Decrease of reserve for revaluation surplus due to PP&E disposal
Currency translation differences
Cash flow hedge
Other comprehensive income for the year net of tax
Attributable to:
Equity holders of the Company
Non - controlling interests
Consolidated Statement of Comprehensive Income
for the years ended June 30, 2010 and 2009
All amounts in USD thousands
The accompanying notes are an integral part of these consolidated financial
statements.
114,387
55,995
(4,967)
-
-
(158)
(215)
165,042
157,977
7,065
165,042
171,551
6,178
-
3,269
508
(60,828)
215
120,893
120,653
240
120,893
34 | TEI&C S.A.
Attributable to the Company’s Equity Holders
Capital Stock Irrevocable Contributions
Legal Reserve
72,317
-
-
-
-
-
-
-
-
-
(72,317)
-
-
-
-
2,293
-
-
-
-
-
-
-
-
-
-
-
-
-
2,293
Balance at June 30, 2008
Net income for the year
Other comprehensive income
Gain on revaluation of PP&E net of tax (see note 4)
Depreciation of reserve for revaluation surplus net of tax
Decrease of reserve for revaluation surplus due to PP&E disposal net of tax
Changes in equity reserves (see note 12)
Currency translation differences
Total comprehensive income for the year
Capital Surplus (see note 1)
Disposals of reserve for investment sale
Resolution of the Special Shareholders' meeting held on 09.30.08:
Capitalization of irrevocable contributions
Resolution of the Shareholders' meeting held on 11.07.08:
Board of Directors' fees
Dividend distribution (1)
Changes in non - controlling interests
Balance at June 30, 2009
Consolidated Statement of Changes in Equity
for the years ended June 30, 2010 and 2009
All amounts in USD thousands
146,218
-
-
-
-
-
-
-
-
-
72,317
-
-
-
218,535
(1) The dividends were approved by the Board of Directors’ meeting held on May 8,
2009 and May 20, 2009 and were ratified by the Shareholder's meeting held on
December 2, 2009.
Consolidated Financial Statements | 35
(1,154)
-
-
-
-
-
-
-
(2,884)
-
-
-
-
-
(4,038)
9,127
-
-
-
-
-
(51,555)
(51,555)
-
-
-
-
-
-
(42,428)
63,018
-
6,178
(14,927)
(2,758)
-
-
(11,507)
-
-
-
-
-
-
51,511
-
-
-
-
-
215
-
215
11,914
(11,914)
-
-
-
-
215
60,647
162,038
-
18,196
3,266
-
-
183,500
-
-
-
(60)
(20,000)
-
224,087
20,243
9,513
-
-
-
-
(9,273)
240
-
-
-
-
-
14,267
34,750
372,709
171,551
6,178
3,269
508
215
(60,828)
120,893
9,030
(11,914)
-
(60)
(20,000)
14,267
484,925
CapitalSurplus
CumulativeTranslation
Adjustments
Reserve for PP&ERevaluation Surplus
OtherReserve
RetainedEarnings
Non - ControllingInterests
TotalEquity
36 | TEI&C S.A.
Attributable to the Company’s Equity Holders
Capital Stock Irrevocable Contributions
Legal Reserve
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,293
-
-
-
-
-
-
-
-
-
9,632
-
-
-
-
11,925
Balance at June 30, 2009
Net income for the year
Other comprehensive income
Gain on revaluation of PP&E net of tax (see note 4)
Decrease of revaluation of PP&E net of tax (see note 4)
Depreciation of reserve for revaluation surplus net of tax
Decrease of reserve for revaluation surplus due to fixed assets disposal net of tax
Changes in equity reserves (see note 12)
Currency translation differences
Total comprehensive income for the year
Resolution of the Shareholders' meeting held on 12.02.09:
Board of Directors' fees
Legal Reserve
Dividend distribution
Dividend distribution approved by the Board of Directors’
Meeting held on 02.25.10 (2):
Capital Surplus (see note 1)
Changes in non - controlling interests
Balance at June 30, 2010
Consolidated Statement of Changes in Equity (Cont.)
for the years ended June 30, 2010 and 2009
All amounts in USD thousands
218,535
-
-
-
-
-
-
-
-
-
-
-
-
-
-
218,535
(2) The dividends were approved by the Board of Directors and will be ratified by
the next Shareholder's meeting.
The accompanying notes are an integral part of these consolidated
financial statements.
Consolidated Financial Statements | 37
(4,038)
-
-
-
-
-
-
-
-
-
-
-
-
2,562
-
(1,476)
(42,428)
-
-
-
-
-
-
(2,430)
(2,430)
-
-
-
-
-
-
(44,858)
51,511
-
55,777
(4,967)
(10,771)
(4,015)
-
-
36,024
-
-
-
-
-
-
87,535
215
-
-
-
-
-
(215)
-
(215)
-
-
-
-
-
-
-
224,087
109,812
-
-
10,771
4,015
-
-
124,598
(72)
(9,632)
(24,000)
(9,000)
-
-
305,981
34,750
4,575
218
-
-
-
-
2,272
7,065
-
-
-
-
-
(13,681)
28,134
484,925
114,387
55,995
(4,967)
-
-
(215)
(158)
165,042
(72)
-
(24,000)
(9,000)
2,562
(13,681)
605,776
CapitalSurplus
CumulativeTranslation
Adjustments
Reserve for PP&ERevaluation Surplus
OtherReserve
RetainedEarnings
Non - ControllingInterests
TotalEquity
38 | TEI&C S.A.
Notes June 30, 2010 June 30, 2009
4
5
8
30
20
29
4
28
7
6
Consolidated Statement of Cash Flows
for the years ended June 30, 2010 and 2009
All amounts in USD thousands
114,387
48,033
812
(35,584)
(310)
414
61,473
6,428
(410)
(13,399)
5,701
(3,768)
(1,600)
7,340
(586)
(205)
(246)
(2,724)
99,964
(12,362)
(80,304)
16,619
617
(11,209)
199,081
171,551
53,215
671
(25,577)
11,429
(244)
14,112
6,242
724
(4,639)
-
(18,948)
(2,061)
18,722
(1,640)
(159)
(10,014)
(384)
(23,148)
29,123
(67,924)
(30,534)
2,327
(21,386)
101,458
Cash flows from operating activities
Net Income for the year
Adjustments to reconcile net income to cash flow operations
PP&E depreciation
Intangible amortization
Construction contracts in progress
Net provisions
Net allowance for doubtful accounts
Tax accrued
Social security costs
Unrealized gain / losses on derivate financial instruments
Gain from the sales of PP&E
Impairment loss
Interest accrued from trade and other receivables
Discount at current value credits
Interest accrued from borrowings
Financial results, net and others
Result from other investments
Result from the sale of shares and investments
Result from investments in associated companies
Changes in balances corresponding to:
Trade accounts receivable
Material and supplies
Trade and other payables
Other liabilities
Held - for - sale assets and liabilities net
Currency translation adjustments
Net cash generated by operating activities
Consolidated Financial Statements | 39
Notes June 30, 2010 June 30, 2009
5
13
Cash flows from investing activities
Proceeds from disposal of PP&E
Purchases of PP&E
Purchases of intangible assets
Proceeds from sales of other investments and investment
in associated companies (net)
Derivative financial instruments
Increase due to business combination (see note 1)
Decrease due to sale of subsidiaries (see note 1)
Net cash (used in) / generated by investing activities
Cash flow from financing activities
Repayments of borrowings (net)
Changes in non-controlling interests
Board of Director’s fees
Dividend distribution
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes
Cash and cash equivalents at the end of the year
Non - Cash transactions
Finance leases
Gain on revaluation of machinery, equipment and vehicles,
net of tax effects and decrease
Consolidated Statement of Cash Flows (Cont.)
for the years ended June 30, 2010 and 2009
All amounts in USD thousands
The accompanying notes are an integral part of these consolidated financial
statements.
24,957
(54,411)
(915)
(2,082)
5,460
-
-
(26,991)
(71,879)
(11,120)
(72)
(33,000)
(116,071)
56,019
222,842
3,565
282,426
3,470
50,810
10,635
(41,711)
(976)
12,526
(4,213)
61,282
(95)
37,448
(14,836)
(3,952)
(60)
(20,000)
(38,848)
100,058
130,984
(8,200)
222,842
7,508
6,178
40 | TEI&C S.A.
1. General Information
2. Accounting policies
a. Basis of preparation
b. Consolidation
c. Foreign currency translation
d. Use of estimates
e. Property, plant and equipment
f. Intangible assets
g. Impairment of non-financial assets
h. Financial assets
i. Offsetting financial instruments
j. Derivative financial instruments
k. Inventories
l. Construction contracts work in progress
m. Other investments
n. Trade and other receivables
o. Trade and other payables
p. Cash and cash equivalents
q. Equity
r. Borrowings
s. Current and deferred income tax
t. Employee benefits
u. Provisions
v. Revenue recognition
w. Leases
x. Held for sale assets and liabilities and
discontinued operations
3. Financial risk management
4. Property, plant and equipment
5. Intangible assets
6. Investments in associated companies
7. Other investments
8. Trade and other receivables
9. Inventories
10. Financial instruments by category
11. Held-for-sale assets
12. Derivative financial instruments
13. Cash and cash equivalents
14. Share capital
15. Borrowings
16. Deferred income taxes
17. Trade and other payables
18. Other liabilities
Indexto the Notes to the Consolidated Financial Statements
Consolidated Financial Statements | 41
19. Provisions
20. Employee benefits
21. Participation in Joint Ventures
22. Contingencies and commitments
23. Restricted assets
24. Discontinued operations
25. Related party transactions
26. Subsidiaries
27. Cost of sales and expenses by nature
28. Financial results
29. Other income and expenses, net
30. Income tax expense
31. Main contracts in progress
32. Subsequent events
42 | TEI&C S.A.
1. General Information
TEI&C S.A. (“TEI&C”), a company controlled by
Techint Limited, was registered in Uruguay in
February 2005 and is a part of the Techint Group
(“TG”). TEI&C’s purpose is to engage in investments
by holding equity interests in companies or
organizations whose corporate purpose includes
engineering, construction and services. References
in these consolidated financial statements to
“TEI&C” or “Company” refer to TEI&C S.A. and its
consolidated subsidiaries.
During the current fiscal year, TEI&C experienced
some changes in its investment portfolio as regards
its participating interests in companies related to the
engineering, construction and service businesses,
which are detailed as follows:
In September 2009, the Company contributed
to Techint Ingeniería y Construcciones S.L.U.
(“TIC”) the direct participating interests it held
as of such date in Argentine engineering and
construction companies, i.e. 140,516,186 shares,
representing 97.70538% of the capital stock of
Techint Inversiones S.A.I.F. and 125,981,909 shares
of Techint Compañía Técnica Internacional S.A.C.I.
(“TEARG”), representing 38.94340% of the capital
stock and voting rights. Upon this transaction, TIC
increased its capital stock, and therefore, the new
Company’s participating interest is 5,000,002 shares
plus an issue premium for EUR 81,699,999.99,
thus becoming also the European holding of
this business by concentrating the operations in
Argentina, Canada, Central America and Mexico.
As a result of the capital contribution made in March
2010 by the Company in Socominter Sociedade
Comercial Internacional Ltda. (“SOCOMINTER”),
and the spin off merger of the latter with its parent
company, Techint Engenharia e Construção S.A.
(“TEBRA”), which took place in May, our direct
shareholding in SOCOMINTER is 0.088%.
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•
Throughout this fiscal year, the Mexican subsidiary
Techint S.A. de C.V. (“TEMEX”) continues with
transactions aimed at reorganizing its business areas.
In August 2009, it transferred together with
Constructora Mexicana Electromecánica y de
Instrumentación, S.A. de C.V. (COMEI) 60% of the
shareholding in Norpower, S.A. de C.V., and 100%
of the shares of TGT de México, S.A. de C.V. to
companies of the energy sector of the Techint Group.
After the recomposition of capital of Terminales
Portuarias del Pacífico S.A.P.I. de C.V. (“TPP”),
subsidiary of TEMEX, Carbonser S.A. de C.V. sold
its whole participating interest in TPP. Finally, in
June 2010, TEMEX acquired 25% of the shares of
Mexcarbón S.A. de C.V. and of Carbonser, S.A. de C.V.,
since the relevant contract undertaking such purchase
had been executed in November 2008. The difference
between the price paid and the book value was
charged to equity as capital surplus (USD 2.6 million).
In December 2009, Tecnopower S.A. de C.V. was
created, but to this date this company has not
engaged in any business activities.
Besides, TEMEX wound up the companies the
purpose of which had already been performed
or which were inactive, including the following:
Tecnomatter, S.A. de C.V., Elina 407, S.A. de C.V.,
Elinatech S.A. de C.V., and after the end of the fiscal
year, in September 2010, the company Elina Sureste
S.A. de C.V. was also wound up.
In March 2010, Preglosid S.L.U. (“PREGLOSID”)
subscribed and paid in a capital increase in its
subsidiary Sidernet Mexicana S.A. de C.V. for
21,398,889 shares. By mid-April 2010, TEI&C
contributed to PREGLOSID the direct participating
interest it held in the Argentine company
Prestaciones Globales Siderúrgicas S.A., i.e.
8,445,080 shares, representing 97.50% of the capital
stock. Upon this transaction, PREGLOSID increased
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Consolidated Financial Statements | 43
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
its capital stock, and therefore, the new Company’s
participating interest is 6,500,001 shares plus an
issue premium for the sum of EUR 1,636,499.99,
thus consolidating in its shareholders’ equity the
transactions for the supply of steel and iron services
recorded in Argentina, Mexico and Venezuela.
In June 2010, the shareholders of the Argentine
companies Tecnomatter Instalaciones y
Construcciones S.A. (“TMR”) and Sidernet S.A.
resolved a corporate reorganization, consisting in
the capitalization of both companies, the spin off of
Tecnomatter and the subsequent merger of the spin
off with Sidernet, the latter becoming the successor
for the supply of steel and iron services.
On July 21, 2009 TEARG founded Techint Ingeniería
y Construcción Bolivia S.A. to take part in
construction projects for buildings, roads, dams,
dwelling houses and transformation industrial
plants for any kind of industries and activities.
For the purpose of unification of the end of the fiscal
year of engineering and construction companies,
the governing bodies have determined December
31 as the most suitable date. Therefore, the Board
of Directors’ Meeting of TEI&C held on December 2,
2009, resolved that next December 31, 2010 will be
the enforcement date.
During the previous fiscal year, TEI&C experienced
some changes in its investment portfolio, which are
detailed as follows:
In July 2008, the Company acquired the control over
the Mexican company TEMEX through the purchase
of 51,032 common shares, equal to 100% of the
outstanding shares, from its parent company B.V.
de Nieuwe Weg, a company organized pursuant to
the laws of The Netherlands. The difference between
the price paid and the book value was charged to
equity as capital surplus (USD 9.0 million). This
expansion in the business geographical area in
Mexico and Canada required TEI&C to make capital
contributions in the Dutch company for the sum of
USD 34.8 million. Consequently, during the fiscal
year, TEMEX received capital contributions for
USD 38.4 million whereas Techint E&C Inc.
(“TECAN”) (a Canadian company) increased its
capital stock in CAD 0.5 million (USD 0.4 million).
Throughout the previous fiscal year, several
transactions were concluded in TEMEX in order to
reorganize its business areas. In September 2008,
TEMEX transferred 10% of its shareholding in
Servicios Múltiples de Burgos, S.A. de C.V. The profit
generated by this transaction (USD 11.9 million)
is being disclosed in the Consolidated Income
Statement under “Gain from the purchase and sale
of share and investments”. In November 2008, TEMEX
sold 40% of the shares in Techint S.A. (a Spanish
company), and executed a contract undertaking
to purchase 25% of the shares of Mexcarbón S.A.
de C.V. and of Carbonser, S.A. de C.V. In addition,
TEMEX wound up the companies the purpose of
which had already been performed or which were
inactive, including the following: Corporación
Mexicana de Promociones Energéticas, S.A. de C.V.,
Promociones e Ingeniería de Proyectos, S.A. de C.V.,
Impretech Infraestructura, S.A. de C.V., Divat, S.A. de
C.V., Hidro La Yesca, S.A. de C.V., Laguna de Cuyutlan
LNG, S.A. de C.V., Proyecto La Yesca, S.A. de C.V. and
Elina Noreste S.A. de C.V.
During April 2009, Techint Chile S.A. (“TECHI”), a
subsidiary of Techint International Construction Corp.
(TENCO) (“TENCO”), exercised the put option on the
51% equity interest of Proyectos y Montajes Comin
S.A. and Servicios Industriales Comin S.A. The net
loss generated by this transaction (USD 1.7 million) is
being disclosed in the Consolidated Income Statement
under “Gain from the purchase and sale of share and
investments”, including the return of goodwill.
During February 2009, TEI&C created TIC, a Spanish
company, the purpose of which is the administration
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44 | TEI&C S.A.
and management of security and share interests.
In May 2009, TIC received 100% of the outstanding
securities of B.V. de Nieuwe Weg as capital
contribution.
In June 2009, the Company increased its direct
participating interest in Techint Engenharia e
Construção S.A., through the purchase of 18.25%
and 15% of the shares from TENCO and TEARG,
respectively.
These consolidated financial statements were
approved for issue by the Company’s Board of
Directors on October 29, 2010.
2. 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 to all the years presented,
unless otherwise stated.
a. Basis of preparation
These consolidated financial statements are
prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the
International Accounting Standards Board (“IASB”),
under the historical cost convention, as modified
by the revaluation of machinery equipment and
vehicles (“Revaluation of PP&E”), available-for-sale
assets, financial assets and liabilities (including
derivative instruments) at fair value through profit or
loss, and translation of subsidiaries whose functional
currency is the currency of a hyperinflationary
economy. The consolidated financial statements are
presented in thousands of U.S. dollars (“USD”),
which is the functional currency of TEI&C.
Certain comparative amounts have been reclassified to
conform to changes in presentation in the current year.
The preparation of consolidated financial
statements in conformity with IFRS requires the
•
•
•
•
use of certain critical accounting estimates. It
also requires management to exercise its best
judgment in the process of applying the Company’s
accounting policies. The areas involving a higher
degree of judgment of complexity, or the areas
where assumptions and estimates are significant to
the consolidated financial statements, are disclosed
in note 2.d.
Classification of Venezuela as a hyperinflationary
economy
During the fiscal year, a number of factors arose
in the Venezuelan economy that led the Company
to reconsider the treatment it follows with respect
to the translation of the financial statements
of subsidiaries. Within these factors it is worth
highlighting the level of cumulative inflation
over the past three years; the restrictions to the
official foreign exchange market and, finally, the
devaluation of the Bolivar fuerte.
As a result, in accordance with IFRS, Venezuela
must be considered a hyperinflationary economy.
The main implications of this circumstance are as
follows:
At June 30, 2009 the figures were not restated.
Adjustment of the income statement to reflect the
financial loss caused by the impact of inflation in
the year on net monetary assets (loss of purchasing
power).
All components of the financial statements of the
Venezuelan companies have been translated at the
closing exchange rate, which at June 30, 2010 was
4.3 Bolivares fuertes per USD
Standards and amendments effective in the year
ended June 30, 2010 and adopted by the Company
The following standards and amendments have
been published and were mandatory for the
Company in the year ended June 30, 2010:
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Consolidated Financial Statements | 45
IAS 1 (Revised) “Presentation of Financial
Statements” was issued in September 2007 and was
effective for annual periods beginning on or after
January 1, 2009. The revised standard introduces the
concept of a statement of comprehensive income,
which enables users of the financial statements to
analyze changes in a company’s equity resulting
from transactions with owners separately from non-
owner changes. The revised standard provides the
option of presenting items of income and expense
and components of other comprehensive income
either as a single statement of comprehensive
income or in two separate statements. The Company
has elected to present two statements: an income
statement and a statement of comprehensive
income. The consolidated financial statements
have been prepared under the revised disclosure
requirements.
IAS 27 (Revised), “Consolidated and separate
financial statements” (effective July 1, 2009).
The revised standard requires the effects of all
transactions with non-controlling interests to be
recorded in equity if there is no change in control
and these transactions will no longer result in
goodwill or gains and losses. The standard also
specifies the accounting when control is lost. Any
remaining interest in the entity is re-measured to
fair value, and a gain or loss is recognized in profit
or loss.
IFRS 3 (Revised) “Business Combinations” was
issued in January 2008 and will apply to business
combinations occurring on or after July 1, 2009. The
revised standard introduces a number of changes
in the accounting for business combinations that
will impact the amount of goodwill recognized,
the reported results in the period that a business
acquisition occurs and future reported results. The
adoption of the standard did not have a material
impact on the presentation of the Company’s results
of operations, financial position or cash flows.
IFRS 7 (Amendment) “Financial instruments:
Disclosures” was issued in March 2009 and is effective
for annual periods beginning on or after January 1,
2009. The amendment requires enhanced disclosures
about fair value measurements and liquidity risk.
In particular, the amendment requires disclosure
of fair value measurements by level of a fair value
measurement hierarchy. As the change in accounting
policy only results in additional disclosures, there is no
impact on the presentation of the Company’s results
of operations, financial position or cash flows.
Standards, amendments and interpretations to
existing standards that are not yet effective and
have not been early adopted by the Company
The following standards, amendments and
interpretations to existing standards have been
published and are not yet effective for the Company
in the year ended June 30, 2010:
IFRS 9 “Financial Instruments”, issued in November
2009. This standard addresses the classification
and measurement of financial assets and is likely
to affect the Company’s accounting for its financial
assets. The standard is not applicable until January
1, 2013 but is available for early adoption. The
Company’s management has not yet assessed the
potential impact that the application of IFRS 9 will
have on the Company’s financial statements.
IAS 24 (Revised), “Related party disclosures”, issued
in November 2009. It supersedes IAS 24, ‘Related
party disclosures’, issued in 2003. IAS 24 (revised)
is mandatory for periods beginning on or after
January 1, 2011. Earlier application, in whole or in
part, is permitted.
The revised standard clarifies and simplifies the
definition of a related party and removes the
requirement for government-related entities
to disclose details of all transactions with the
government and other government-related entities.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
46 | TEI&C S.A.
The application of this revised standard is not
expected to have a significant impact on the
presentation of the Company’s results of operations,
financial position or cash flows.
IAS 32 (Amendment), “Financial instruments:
Presentation on classification of rights issues”
issued in October 2009. The amendment addresses
the accounting for rights issues (rights, options or
warrants) that are denominated in a currency other
than the functional currency of the issuer. Prior to the
amendment, such rights issues were accounted for
as derivative liabilities. The amendment states that, if
such rights are issued pro rata to an entity's existing
shareholders for a fixed amount of any currency,
they should be classified as equity, regardless of the
currency in which the exercise price is denominated.
The amendment is effective for annual periods
beginning on or after February 1, 2010. The Company
is assessing the impact in the results of operations,
financial position or cash flows.
As follows, other standards and interpretations to
existing standards not yet effective and not adopted
by the Company before, though they are not
relevant to the Company’s operations:
IFRS 1 (Amendments), “First time adoption, on
'Financial instrument disclosures”.
IFRIC 19 “Extinguishing financial liabilities with
equity instruments”.
IFRIC 14 (Amendment), “Prepayments of a minimum
funding requirement”.
Improvements to International Financial Reporting
Standards
In May 2010, the IASB published the annual
improvements with several international accounting
and financial reporting standards amendments.
Entities shall apply these amendments for annual
periods beginning on or after January 1, 2011. If
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•
•
entities apply these amendments to an earlier
period, they shall disclose this fact.
The Company’s management estimates that the
application of these amendments will not have a
material effect on the Company’s financial condition
or results of operations.
b. Consolidation
Subsidiary companies
Subsidiaries are entities which are controlled
by TEI&C as a result of its ability to govern an
entity’s financial and operating policies generally
accompanying a shareholding of more than 50%
of the voting rights. Subsidiaries are consolidated
from the date on which control is exercised by the
Company and are no longer consolidated from the
date control ceases.
The purchase method of accounting is used to
account for the acquisition of subsidiaries by TEI&C.
The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of
acquisition. This cost includes the fair value of
any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related
costs are expensed as incurred. Identifiable assets
acquired, liabilities and contingent liabilities
assumed in a business combination are measured
initially at their fair values at the acquisition date.
The excess of the cost of acquisition over the fair
value of TEI&C share of the identifiable net assets
acquired is recorded as goodwill. If the cost of
acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is
recognized directly in the income statement.
If the companies acquired were under common
control, the assets and liabilities of such companies
(and their respective subsidiaries) are accounted
for at the predecessor’s cost, reflecting the carrying
amount of such assets and liabilities contributed
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Consolidated Financial Statements | 47
to the Company. Accordingly, the consolidated
financial statements include the financial position
of the abovementioned companies at historical
book values and no adjustment has been made to
reflect fair values at the time of the contribution. The
difference between the price paid and the historical
book value was charged to equity.
Material inter-company transactions, balances
and unrealized gains on transactions between
TEI&C and its subsidiaries have been eliminated in
consolidation. Unrealized losses are also eliminated.
Accounting policies of subsidiaries have been
changed where necessary to ensure consistency
with the policies adopted by TEI&C.
According to the laws of the countries of certain
subsidiaries, a portion of the profit of the year is
separated to constitute statutory reserves until
they reach statutory capped amounts. These legal
reserves are not available for dividend distribution
and can only be released to absorb losses.
See note 26 to the consolidated financial statements
for the list of consolidated subsidiaries.
Transactions and non-controlling interests
The Company treats transactions with non-
controlling interests as transactions with equity
owners of TEI&C. For purchases from non-
controlling interests, the difference between 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 to
non-controlling interests are also recorded in equity.
When TEI&C ceases to have control or significant
influence, any retained interest in the entity is
remeasured to its fair value, with the change in
carrying amount recognized in profit or loss.
Associated companies
Associated companies are entities in which TEI&C
has significant influence but not control, generally
accompanying a shareholding of between 20% and
50% of the voting rights (see note 6). Investments in
associates are accounted for by the equity methods
of accounting and are initially recognized at cost.
The Company’s investment in associates includes
goodwill identified on acquisition, net of any
accumulated impairment loss.
The Company’s share of its associates’ post-
acquisition profits or losses is recognized in the
income statement, and its share of post-acquisition
movements in reserves is recognized in reserves.
The cumulative post-acquisition movements
are adjusted against the carrying amount of the
investment. When the Company’s share of losses
in an associate equals or exceeds its interest in
the associate, including any other unsecured
receivables, the group does not recognise further
losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealized gains on transactions between TEI&C
and its associated companies are eliminated to the
extent of TEI&C’s interest in the associated companies.
Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment
indicator of the asset transferred. Financial statements
of associated companies have been adjusted where
necessary to ensure consistency with IFRS.
Joint Ventures
Joint Ventures (“J.V.”) are jointly controlled entities,
which involve the establishment of a corporation,
partnership or other entity in which each venturer
has an interest.
TEI&C’s interest in jointly controlled entities is
accounted for by the proportionate consolidation
method. TEI&C consolidates its share of the joint
ventures’ individual income and expenses, assets
and liabilities on a line-by-line basis with similar
items in TEI&C’s financial statements. See note 21 to
the consolidated financial statements.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
48 | TEI&C S.A.
The Company recognises the portion of gains or
losses on the sale of assets by the Company to
the joint ventures that is attributable to the other
ventures. The Company does not recognise its
share of profits or losses from the joint ventures
that result from the Company’s purchase of assets
from the joint ventures until it re-sells the assets
to an independent party. However, a loss on the
transaction is recognized immediately if the loss
provides evidence of a reduction in the net realizable
value of current assets, or an impairment loss.
c. Foreign currency translation
i Functional and presentation currency
Items included in the financial statements of each
entity in which TEI&C holds participating interests are
measured using the currency that best reflects the
economic substance of the underlying events and
circumstances relevant to that entity (“the functional
currency”). The consolidated financial statements
are presented in thousands of U.S. dollars, which is
the functional currency of TEI&C. The consolidated
companies’ first record transactions using their
functional currency and their financial statements are
then translated to U.S. dollars with the only purpose
of being consolidated by TEI&C.
ii Balances and transactions in currencies other
than the functional currency
Transactions in currencies other than the functional
currency are accounted for at the exchange rates
prevailing on the date of the transactions, and
the corresponding exchange gains and losses are
recognized in the income statement.
Monetary assets and liabilities in currencies other
than the functional currency are translated at the
year-end exchange rate.
iii Translation of balances and results of
consolidated companies
The results and financial position of all the
consolidated companies that have a functional
•
•
•
currency different from the Company’s presentation
currency are translated into the presentation
currency as follows:
assets and liabilities of each balance sheet are
translated at the closing rate on the date of that
balance sheet;
income and expenses for each income statement
are translated at an 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 translated at the rate on the dates of
the transactions);
all resulting exchange differences are recognized as
a separate component of equity.
In the case of sale or other disposition of any such
subsidiary, any accumulated translation adjustment
would be recognized in the income statement as
part of the gain or loss on sales.
The financial statements of subsidiaries companies
whose functional currency is the currency of a
hyperinflationary economy are adjusted for inflation
in accordance with the procedure described in the
following paragraph prior to their translation to
USD. Once restated, all the items of the financial
statements are converted to USD using the closing
exchange rate. Amounts shown for prior years for
comparative purposes are not modified.
To determine the existence of hyperinflation,
TEI&C assesses the qualitative characteristics of
the economic environment of the country, such
as the trends in inflation rates over the previous
three years. The financial statements of companies
whose functional currency is the currency of a
hyperinflationary economy are adjusted to reflect
the changes in purchasing power of the local
currency, such that all items in the statement of
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Consolidated Financial Statements | 49
financial position not expressed in current terms
(non-monetary items) are restated by applying
a general price index at the financial statement
closing date, and all income and expense, profit and
loss are restated monthly by applying appropriate
adjustment factors. The difference between initial
and adjusted amounts is taken to profit or loss.
d. Use of estimates
The preparation of consolidated financial
statements requires Management to estimate and
evaluate both recorded and contingent assets and
liabilities as of a certain date, as well as income and
expenses recorded during the reporting period. The
future actual results may differ from estimates made
as of the date of preparation of these consolidated
financial statements.
Estimates and judgments are continually evaluated
and are based on historical experience and other
factors, including expectations of future events
that are believed to be reasonable under the
circumstances.
There follows a description of the most relevant
estimates used to prepare these consolidated
financial statements:
Percentage of completion method
The Company uses the percentage-of-completion
method in accounting for its contract revenues and
expenses. Use of the percentage-of-completion
method requires the Company to estimate the
services performed to date as a proportion of the
total services to be performed. Furthermore, in
determining the contract revenue, TEI&C considers
the estimated outcome for each of the construction
contracts which are in progress.
Income taxes
The Company is subject to income taxes in
numerous jurisdictions. Significant judgment
is required in determining the worldwide
provision for income taxes. There are transactions
and calculations for which the ultimate tax
determination is uncertain. TEI&C recognises
liabilities for anticipated tax audit issues based
on estimates of whether additional taxes will be
due. Where the final tax outcome of these matters
is different from the amounts that were initially
recorded, such differences will impact the current
and deferred income tax assets and liabilities in the
period in which such determination is made.
Allowances for doubtful accounts
Management maintains an allowance for trade
and other receivables to account for estimated
losses resulting from the inability of clients to
make required payments. When evaluating the
adequacy of an allowance for trade receivables,
Management bases its estimates on the aging of
accounts receivable balances and historical write-off
experience, client credit worthiness and changes in
client payment terms.
Other estimations
In addition, the Company’s Management makes
estimations to calculate, at certain moment the
recoverable amounts of assets, the depreciation
and amortization and the provision for cost and
contingencies.
e. Property, plant and equipment
Machinery, equipment, vehicles and others
As a general rule, TEI&C has adopted historical
acquisition or construction cost less accumulated
depreciation as the measurement criterion for PP&E.
However, in the case of machinery, equipment and
vehicles used in the construction business, TEI&C
has adopted fair value as the measurement criterion
(see note 4).
Land and buildings
Land and buildings are stated at historical cost.
Buildings are depreciated using the straight-line
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
50 | TEI&C S.A.
method, by applying annual ratios sufficient to
terminate the value of each item as of the end of
their estimated useful life.
Fixed assets of Ferroexpreso Pampeano S.A.C.
(“FEPSA”)
These assets represent improvements on the assets
received under concession by FEPSA, as well as
those devoted to service rendering, which will be
transferred to the assignor upon termination of
the concession. Such assets are valued at their
acquisition or construction cost less accumulated
depreciation.
The straight-line method has been used to calculate
depreciation, by applying annual ratios sufficient
to terminate the value of each item as of the end of
their estimated useful life or upon termination of
concession, whichever occurs first.
Useful lives used to calculate depreciation charges
are as follows:
The residual values and useful lives of significant
machinery, construction equipment and vehicles are
reviewed, and adjusted if appropriate, at each year-
end date.
Where the carrying amount of an asset is higher
than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
Gains and losses on disposals are determined by
comparing proceeds with carrying amounts. When
revalued assets are sold, the amounts included
in the reserve for PP&E revaluation surplus are
transferred to retained earnings.
Repairs and maintenance expenses are charged
to the consolidated income statement during the
financial period in which they are incurred.
f. Intangible assets
Systems development
Acquired computer software licenses are capitalized
on the basis of the costs incurred to acquire and bring
to use the specific software. These costs are amortized
over their estimated useful lives (three to five years).
Costs associated with developing or maintaining
computer software programs are charged to
expenses as incurred. Costs that are directly
associated with the production of identifiable and
unique software products controlled by TEI&C and
that will probably generate economic benefits
exceeding costs beyond one year, are recognized as
intangible assets. Direct costs include the software
development employee costs and an appropriate
portion of relevant overhead.
Computer software development costs recognized
as assets are amortized over their estimated useful
lives (not exceeding five years).
Goodwill
TENCO and subsidiaries
Goodwill represents the excess of the cost of an
acquisition over the fair value of the Company’s
share of the net identifiable assets of the acquired
subsidiaries at the date of acquisition. Goodwill on
acquisitions of subsidiaries is included in intangible
assets and it is tested for impairment annually as
part of the overall balances (see note 5).
Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to
the entity sold.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
20-50 years
10-20 years
4-10 years
Not depreciated
Buildings and improvements
Production equipment
Vehicles, furniture and fixtures,
and other equipment
Land
Consolidated Financial Statements | 51
Compañía Inversora Ferroviaria S.A.I.F. (“COINFER”)
Goodwill represents the greater cost derived from
the investment in the subsidiary FEPSA as a result
of the compulsory subscription and payment of the
portion of capital corresponding to Ferrocarriles
Argentinos (16%) and the portion corresponding to
staff (4%) pursuant to the concession contract.
Goodwill is valued at original cost, less accumulated
amortization; it is calculated over the term of the
concession of the service provided by FEPSA.
g. Impairment of non-financial assets
Assets that have an indefinite useful life, for
example Goodwill, are not subject to amortization
and are tested annually for impairment.
Property and equipment and other non-current
assets subject to depreciation, including intangible
assets, are reviewed for impairment losses
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 carrying amount of the
asset exceeds its recoverable amount, which is the
higher of an asset net selling price and its value
in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash flows.
h. Financial assets
The Company classifies its financial assets in the
following categories: at fair value through profit or
loss, loans and receivables, and 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.
Financial assets at fair value through profit or loss.
Financial assets at fair value through profit or loss
are financial assets held for trading. A financial asset
is classified in this category if acquired principally
for the purpose of selling in the short-term.
Derivatives are also categorized as held for trading
unless they are designated as hedges. Assets in this
category are classified as current assets.
Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. They are included in
current assets, except for maturities greater than 12
months after the date of the statement of financial
position. These are classified as non-current assets.
Available-for-sale financial asset
Available-for-sale financial assets are non-derivatives
that are either designated in this category or not
classified in any of the other categories. They are
included in non-current assets unless management
intends to dispose of the investment within 12
months of the end of the reporting period.
Recognition and measurement
Regular purchases and sales of financial assets are
recognized on the trade - date - the date on which
the Company 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
carried at fair value through profit or losses are
initially recognized at fair value and transaction costs
are expensed in the statement of income. Financial
assets are derecognized when the rights to receive
cash flows from the investments have expired or have
been transferred and the Company has transferred
substantially all risks and rewards of ownership.
Available-for-sale financial assets and financial assets
at fair value through profit or loss are subsequently
carried at fair value. Loans and receivables are carried
at amortized cost using the effective interest method.
i. Offsetting financial instruments
Financial assets and liabilities are offset and the
net amount reported in the statement of financial
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
•
•
•
52 | TEI&C S.A.
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.
j. Derivative financial instruments
Derivatives are initially recognized at fair value on
the date a derivative contract is entered into and
are subsequently re-measured at their fair value.
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 Company designates certain
derivatives as hedges of a particular risk associated
with a highly probable forecast transaction as cash
flow hedge.
The Company 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. TEI&C
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.
The fair values of various derivative instruments are
disclosed in note 12.
Cash flow hedge
The effective portion of changes in the fair value
of derivatives denominated and qualified as cash
flow hedging is disclosed in other Comprehensive
income. The gain or loss related to the ineffective
portion is immediately disclosed in the consolidated
income statement.
The amounts accumulated in equity are disclosed in
the consolidated income statement in the periods in
which the hedged item affects gains and losses.
k. Inventories
Inventories are stated at the lower of cost or net
realizable value less the corresponding allowance
for obsolescence. Net realizable value is the
estimated selling price in the ordinary course of
business, less the costs of completion and direct
selling expenses. In general, cost is determined by
using weighted average price.
The allowance for obsolescence has been calculated
based on Management’s analysis of aging.
l. Construction contracts work in progress
A construction contract is a contract specifically
negotiated for the construction of an asset or a
combination of assets that are closely interrelated or
interdependent in terms of their design, technology
and functions or their ultimate purpose or use.
When the outcome of a construction contract
cannot be reliably estimated, contract revenue is
recognized to the extent of contract costs incurred
where it is probable those costs will be recoverable.
Contract costs are recognized when incurred.
When the outcome of a construction contract
can be reliably estimated, contract revenue and
contract costs are acknowledged by the percentage
of completion method. The stage of completion is
measured by reference to the relationship contract
costs incurred for work performed to date bear to
the estimated total costs for the contract. When it is
probable that total contract costs will exceed total
contract revenue, the expected loss is immediately
recognized as an expense.
Costs incurred in the year in connection with future
activity on a contract are excluded from contract
costs in determining the stage of completion. They
are presented as inventories, prepayments or other
assets, depending on their nature.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Consolidated Financial Statements | 53
When a construction contract includes reimbursable
works and the Company is responsible for providing
design, engineering and construction services and
labor and all equipment and materials, construction
equipment and supplies, the amount of these works
is recognized in revenues and costs.
TEI&C shows as an asset (within Construction
contracts work in progress) the gross amount
due from clients for construction contracts for all
contracts in progress for which costs incurred plus
recognized profits (less recognized losses) exceed
progress billings.
TEI&C presents as a liability (within Construction
contracts work in progress) the gross amount due
to clients for construction contract for all contracts
in progress for which progress billings exceed costs
incurred plus recognized profits (less recognized
losses).
m. Other investments
Other investments include deposits in investments
funds and equity instruments, which are classified
as financial assets “at fair value through profit and
loss” or “available for sale”.
Other investment funds comprise mainly financial
resources within offshore trusts, the purpose of which
is exclusively to ensure that the financial needs for the
normal development of their operations are met.
Investments in companies in which TEI&C has less
than 20% of the voting rights are valued at cost,
because its fair value cannot be measured reliably.
n. Trade and other receivables
Trade and other receivables are initially measured
at their fair value, which is generally their nominal
value, unless the effect of discounting is material,
subsequently measured at amortized cost less
provision for impairment.
An allowance for doubtful accounts is established
when there is objective evidence that the Company
will not be able to collect all amounts due according
to the original terms of receivables.
o. Trade and other payables
Trade and other payables are obligations to pay
for goods or services that have been acquired in
the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they
are presented as non-current liabilities.
Trade and other payables are recognized initially at
fair value and subsequently measured at amortized
cost using the effective interest method.
p. Cash and cash equivalents
Assets recorded in cash and cash equivalents are
carried at fair market value or at historical cost
which approximates fair market value. For the
purposes of the consolidated statement of cash
flows, cash and cash equivalents comprise cash
on hand, demand deposits with banks and other
short-term highly liquid investments with original
maturities of three months or less and bank
overdrafts.
Bank overdrafts are included within borrowings in
current liabilities in the consolidated statement of
financial position.
q. Equity
Ordinary shares are classified as equity. The
balances of the consolidated statement of changes
in equity at June 30, 2010 and 2009 include:
The value of share capital, irrevocable contributions,
capital surplus, reserve for PP&E revaluation
surplus, legal reserve, other reserve, and retained
earnings in accordance with IFRS.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
•
54 | TEI&C S.A.
The currency translation differences of TEI&C’s
subsidiaries.
Non-controlling interests in subsidiaries.
Dividends distributions are recorded in the
Company’s financial statements when Company’s
shareholders have the right to receive the payment,
or when interim dividends are approved by the
Board of Directors in accordance with the by-laws of
the Company.
r. Borrowings
Borrowings are initially recorded based on the
fair value of the net proceeds. Borrowings are
subsequently stated at amortized cost using the
effective yield method; any difference between
proceeds (net of transaction costs) and the
redemption value is recognized in the income
statement over the life of the borrowings.
Borrowings are classified as current liabilities unless
TEI&C has an unconditional right and firm intention
to defer settlement of the liability for at least twelve
months after the balance sheet date.
s. Current and deferred income tax
The current income tax charge is calculated on the
basis of the tax laws in force in the countries in which
TEI&C and each one of its subsidiaries operate.
Deferred income tax is recorded in full, using the
liability method, on temporary differences arising
between the tax basis of assets and liabilities and
their carrying amounts in the financial statements.
Currently enacted tax rates are used in the
determination of deferred income tax.
Deferred tax assets are recognized to the extent
that it is probable that future taxable profit will be
available to offset temporary differences.
Deferred income tax is provided on temporary
differences arising on investments in subsidiaries,
associates and joint ventures, except where the
timing of the reversal of the temporary difference can
be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
t. Employee benefits
Certain TEI&C’s subsidiaries have in force benefit
plans under the modality of “non-funded defined
benefits” and “other long-term benefits” which,
subject to certain conditions established by
such companies, are granted during the term of
employment and after retirement, which plans are
recorded following the guidelines of accounting
rules and regulations in force and effect.
The provisioned liabilities for such employee
benefits are recorded at the current value of the
future flows of funds, the amount being charged
during the relevant employees’ remaining years
of services up to the moment when the conditions
necessary for the granting of each benefit are
satisfied. Such liabilities are calculated by
independent actuaries, at least once a year, using
the “Projected credit unit” method.
Other subsidiaries have implemented a
supplementary pension benefit plan with two
programs: “PGBL - Plano Gerador de Benefício
Livre” and “ VGBL - Programa de Seguro de Vida
com Cobertura por Sobrevivência”. These programs
are generally funded through payments by the
subsidiaries to independent insurance companies.
Both programs are defined contribution plans.
Pension plans and other post-retirement benefits
Certain TEI&C’s subsidiaries officers are covered by
a specific employee retirement plan designed to
provide retirement, termination and other benefits
to those officers.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
•
•
Consolidated Financial Statements | 55
TEI&C’s subsidiaries are accumulating assets for
the ultimate payment of those benefits in the form
of investments. The investments are not part of
a particular plan, nor are they segregated from
TEI&C’s other assets. Due to these conditions, the
plan is classified as “unfunded” under IFRS.
Retirement costs are assessed using the projected
unit credit method: the cost of providing retirement
benefits is charged to the statement of income over
the service lives of employees based on actuarial
calculations. This provision is measured at the
present value of the estimated future cash outflows,
using applicable interest rates. Actuarial gains and
losses are recognized over the average remaining
service lives of employees.
Benefits provided by the plan are calculated on a
seven-year salary average.
The laws in the different countries in which
TEI&C’s subsidiaries carry out their operations
provide for pension benefits to be paid to retired
employees from government pension plans and/
or private funds managed plans. Amounts payable
to such plans are generally calculated based on a
percentage of employee salaries and are accounted
for on an accrual basis.
Termination benefits
Termination benefits are payable whenever an
employee’s employment is terminated before the
normal retirement date or whenever an employee
accepts voluntary redundancy in exchange for these
benefits.
TEI&C’s subsidiaries recognize termination benefits
when it is demonstrably committed to either
terminatimg the employment of current employees
according to a detailed formal plan without
possibility of withdrawal, or providing termination
benefits as a result of an offer made to encourage
voluntary redundancy. Benefits falling due more
than twelve months after balance sheet date are
discounted to present value.
Profit-sharing and bonus plans
A liability for employee benefits in the form of
profit-sharing and bonus plans is recognized
in other provisions when there is no realistic
alternative but to settle the liability and provided at
least one of the following conditions is met:
there is a formal plan and the amounts to be paid
are determined before the time of issuing the
financial statements; or
past practice has created a valid expectation in
employees that they will receive a bonus/profit-
sharing and the amount can be determined before
the financial statements are issued.
Liabilities for profit-sharing and bonus plans are
expected to be settled within twelve months and are
measured at the amounts expected to be paid when
they are settled.
Contribution plans
A defined contribution plan is a pension plan under
which the companies pay fixed contributions to a
separate entity. Companies have no further payment
obligations once the contributions have been paid.
The contributions are recognized as employee benefit
expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund
or a reduction in the future payments is available.
Contributions by the companies include: (a)
Basic contribution – Companies are committed
to contribute amounts equal to the amounts
contributed by the employees up to certain limits,
(b) Extraordinary contributions- Are non-mandatory
contributions that can be made on a voluntary basis
either by the companies or the employees.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
•
•
56 | TEI&C S.A.
u. Provisions
Provisions are recognized when TEI&C 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 a reliable
estimate of the amount can be made. When TEI&C
expects a provision to be reimbursed, for example
under an insurance contract, the reimbursement is
recognized as a separate asset but only when the
reimbursement is virtually certain.
v. Revenue recognition
Revenues and cost recognition for long-term
construction contracts
See note 2.l.
Sales of services
The Company sells maintenance services. The
revenue is generally recognized in the period the
services are provided, using a straight-line basis
over the term of the contract.
Other revenues
Other revenues earned by TEI&C are recognized on
the following bases:
Interest income: on the effective yield basis.
Dividend income from investments in other
companies: when TEI&C’s right to collect is established
w. Leases
Leases in which a significant portion of the risks
and rewards of ownership are transferred from
the lessor to TEI&C are classified as finance leases.
At the commencement of the lease term, TEI&C
recognizes finance leases as assets and liabilities in
the statement financial position at amounts equal
to the value of the leased property or, if lower, the
present value of the minimum lease payments, each
determined at the inception of the lease. The discount
rate used in calculating the present value of the
minimum lease payments is the interest rate implicit
in the lease should this be practicable to determine;
otherwise, the lessee’s incremental borrowing cost is
used. Any initial direct costs of the lessee are added
to the amount recognized as an asset.
See amounts of assets and liabilities held under
finance leases in note 23.
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 (net of any incentives received from
the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
x. Held for sale assets and liabilities and
discontinued operations
When the Company intends to dispose of, or
classify as held for sale, a business component
that represents a separate major line of business
or geographical area of operations it classifies such
operations as discontinued. The post tax profit or
loss of the discontinued operations is shown as
a single amount on the face of the consolidated
income statement, separate from the other results
of the Company.
The measurement of the held-for-sale assets and
liabilities is the book value of the group of assets
and liabilities. Thus, the carrying amount of this
held-for-sale assets and liabilities does not represent
their fair value at the moment of the measurement.
3. Financial risk management
The nature of TEI&C’s operations as well as its
multinational character expose the Company to
a variety of risks, including the effects of changes
in foreign currency, exchange rates, capital risk,
concentration of credit risk, liquidity risk and
interest rates risk. The nature of its contracts implies
that TEI&C has to manage risks regarding uncertain
conditions in the hiring of procurement, which is
usually a large part of the scope of work.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
•
•
Consolidated Financial Statements | 57
To manage the high volatility related to these financial
matters, Management evaluates exposures on a
consolidated basis to take advantage of its global and
multinational activity. For some of these exposures,
the Company or its subsidiaries enter into derivative
transactions in order to manage potential adverse
impacts on the Company’s financial performance.
a) Capital Risk
The Company seeks to maintain an adequate debt
to total equity ratio considering the risks involved in
the industry and the markets where it operates. The
year end ratio of debt to total equity (where “debt”
comprises all financial borrowings and “equity” is
the sum of financial borrowings and shareholders’
equity) is 0.06 as of June 30, 2010, in comparison
with 0.18 as of June 30, 2009. The Company
does not have to comply with regulatory capital
adequacy requirements.
b) Foreign exchange risk
TEI&C’s business activities are conducted in the
respective functional currencies of the subsidiaries.
However, the Company transacts in currencies
other than the respective functional currencies of
the subsidiaries. There are significant monetary
balances held by the Company at each year-end
that are denominated in US dollars (non-functional
currency).
The following tables show a breakdown of the
TEI&C’s net monetary position in various currencies
for the main functional currency in which the
Company operates:
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
ARS
BOB
CAD
EUR
GTQ
HNL
MXN
NIO
SVC
USD
VEF
-
-
-
(371)
-
-
-
-
-
2,592
-
2,221
(183)
-
-
-
-
-
-
-
-
2,218
-
2,035
-
282
-
666
208
(41)
18,961
12
1,713
-
2,658
24,459
-
-
-
(978)
-
-
-
-
-
(1,102)
-
(2,080)
-
-
-
-
-
-
-
-
-
29,087
-
29,087
-
-
-
1,190
-
-
-
-
-
42,701
-
43,891
-
-
-
-
-
-
-
-
-
(1,689)
-
(1,689)
-
-
-
-
-
-
-
-
-
12,322
-
12,322
-
-
-
-
-
-
-
-
-
13,545
-
13,545
-
-
-
-
-
-
-
-
-
24,587
-
24,587
-
-
(10)
1
-
-
-
-
-
1,021
-
1,012
(183)
282
(10)
508
208
(41)
18,961
12
1,713
125,282
2,658
149,390
Net monetary position Asset / (Liability)
VEFUYUUSDSARPENMXNEURCHLCADBRLARS Total
June 30, 2010
Functional Currency (in thousand USD)
ARS= Argentine Peso, BRL= Brazilian Real, BOB= Bolivian Peso, CAD= Canadian
Dollar, CHL= Chilean Peso, EUR= Euro, GTQ= Guatemalan Quetzal, HNL= Honduran
Lempira, MXN= Mexican Peso, NIO= Nicaraguan Cordoba Oro, PEN= Peruvian
Nuevo Sol, SAR= Saudi Riyal, SVC= El Salvador Colon, UYU= Uruguayan Peso,
VEF= Venezuelan Bolivar Fuerte
58 | TEI&C S.A.
The Company estimates that the impact under IFRS on
the net exposure at June 30, 2010 of a simultaneous
1% favorable or unfavorable movement in the main
exchange rates would result in a maximum pre-tax
gain or loss of approximately USD 1,494 thousands
as compared with a maximum pre-tax gain or loss of
approximately USD 659 thousands at June 30, 2009.
The Company’s net exposure to the currency other
than the functional currency is managed on a case-by-
case basis, partly by hedging certain expected cash
flows with foreign exchange derivative contracts.
c) Credit risk
Most accounts receivable relate to clients
operating in a range of industries and countries
with contract which require ongoing payments
as the development project progresses, upon the
rendering of services or upon completion and
delivering of the project. It is normal practice
that the Company reserves the right to suspend
the project if there is a remarkable breach of the
contract term, in particular the non-payment of
amounts owed.
In general the greatest risk for such assets is the risk
of not collecting a trade account receivable. This
is because, a) it may be a significant value in the
development of works or in the provision of services;
b) it is beyond the Company’s control. However, the
risk of customers being unable to make a payment
in such contracts is considered to be low, and
typically relate to problems characterized as technical
matters, i.e relating to the risk inherent in the service
rendered, under the Company’s control.
The following table sets forth details of the age of
trade receivables:
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
CAD
EUR
GTQ
HNL
MXN
NIO
SVC
USD
VEF
-
(592)
-
-
-
-
-
(2,737)
-
(3,329)
-
-
-
-
-
-
-
(904)
-
(904)
-
(70)
1,369
64
230
(14)
473
-
5,514
7,566
-
14
-
-
-
-
-
(1,308)
-
(1,294)
-
-
-
-
-
-
-
19,901
-
19,901
-
2,362
-
-
-
-
-
34,078
-
36,440
-
-
-
-
-
-
-
2,352
-
2,352
-
(43)
-
-
-
-
-
3,371
-
3,328
-
-
-
-
-
-
-
1,079
-
1,079
(9)
(261)
-
-
-
-
-
989
-
719
(9)
1,410
1,369
64
230
(14)
473
56,821
5,514
65,858
Net monetary position Asset / (Liability)
VEFUYUUSDSARPENMXNCHLCADBRLARS Total
June 30, 2009
Functional Currency (in thousand USD)
ARS= Argentine Peso, BRL= Brazilian Real, BOB= Bolivian Peso, CAD= Canadian
Dollar, CHL= Chilean Peso, EUR= Euro, GTQ= Guatemalan Quetzal, HNL= Honduran
Lempira, MXN= Mexican Peso, NIO= Nicaraguan Cordoba Oro, PEN= Peruvian
Nuevo Sol, SAR= Saudi Riyal, SVC= El Salvador Colon, UYU= Uruguayan Peso,
VEF= Venezuelan Bolivar Fuerte
Consolidated Financial Statements | 59
At the date of these consolidated financial
statements most credits past due 1-180 days have
been collected. Receivables overdue for more than
180 days are in the process of approval for payment
by the ENARGAS (Argentine Gas Regulatory Board).
d) Liquidity risk
Management maintains sufficient cash and cash
equivalents to finance normal operations and
believes that TEI&C also has access to market for
short-term working capital requirements.
TEI&C financing strategy is to maintain adequate
financial resources and access to additional
liquidity. During the year ended June 30, 2010 TEI&C
has counted on cash flows from operations as well
as additional bank financing to fund its transactions.
TEI&C has a conservative approach to the
management of its liquidity, which consists of cash
and cash equivalents, comprising cash in banks,
short-term money market funds and highly liquid
short-term securities.
TEI&C holds its cash and cash equivalents primarily
in USD. Liquid financial assets as a whole are 24% of
total assets at June 30, 2010 (19% at June 30, 2009).
See note 15 for the maturity of borrowings and note
17 for the maturity of trade and other payables.
e) Interest rate risk management
The Company’s financing strategy is to manage
interest expense using a mixture of fixed-rate and
variable-rate debt.
The following table summarizes the proportions of
variable-rate and fixed-rate debt as of each year end.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
June 30, 2010
Trade Receivables
Allowance for doubtful accounts
Net Value
224,739
(10,923)
213,816
167,104
-
167,104
21,875
(10,886)
10,989
35,760
(37)
35,723
Trade Receivables
Not Due Past due 1 - 180 days
Past due > 180 days
June 30, 2009
Fixed rate
Variable rate
66%
34%
69,217
35,904
PercentageBorrowings
June 30, 2010
65%
35%
24,690
13,266
PercentageBorrowings
60 | TEI&C S.A.
As the Company has no significant interest-bearing
assets, the Company’s income and operating cash
flows are substantially independent from changes in
market interest rates.
The Company estimated that, if interest rates would
have been 100 basic points higher, with all other
variables held constant, total profit for the year ended
June 30, 2010 would have been USD 132 thousands
lower (USD 359 thousands lower at June 20, 2009).
The item consists in the following:
f) Fair value estimation
The carrying amount of financial assets and liabilities
with maturities of less than one year approximates to
their fair value.
See note 10 – “Determining fair values”.
4. Property, plant and equipment
The item evolution is as follows:
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Beginning of the year
Additions
Disposals
Annual depreciation
Translation differences
Other movements
Revaluation Surplus (2)
Impairment loss
June 30, 2010
Land and buildings
Equipment and machinery
Vehicles
Other assets
Total June 30, 2010
49,261
2,985
-
(2,244)
(122)
5,212
-
-
55,092
75,960
301,356
109,143
128,883
615,342
254,376
50,941
(11,558)
(48,033)
(1,470)
-
71,168
(5,701)
309,723
53,654
13,794
(3,264)
(10,158)
(1,202)
1,494
2,446
(568)
56,196
36,186
8,593
(2,000)
(12,521)
(74)
(8,734)
27,205
(517)
48,138
55,092
150,297
48,138
56,196
309,723
115,275
25,569
(6,294)
(23,110)
(72)
2,028
41,517
(4,616)
150,297
(20,868)
(151,059)
(61,005)
(72,687)
(305,619)
Lands and buildings
OriginalValue
Equipment and machinery
AccumulatedDepreciation
Vehicles
Net ValueJune 30, 2010
TotalJune 30, 2010
Otherassets (1)
Non-current
(1) It includes deferred costs of our subsidiary FEPSA and miscellaneous assets. (2) It includes gain on revaluation of PP&E USD 76,976 and decrease of revaluation
of PP&E USD 5,808.
Consolidated Financial Statements | 61
Lease rentals amounting to USD 44,946 thousand
relating to the lease of machinery, construction
equipment and vehicles, are included in the income
statement.
Technical appraisal of PP&E
On June 30, 2010, a technical appraisal was
performed by external professionally qualified
valuation specialists in relation to machinery,
The item evolution is as follows:
The item consists in the following:
construction equipment and vehicles, based on
periodic valuations of the assets in order not to
differ materially from their fair value at the financial
statements date.
Management believes that the resulting value
approximates fair value. As per International
Accounting Standard No. 16 “Property, plant and
equipment” (“IAS 16”), when an item of property
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Land and buildings
Equipment and machinery
Vehicles
Other assets
Total June 30, 2009
67,295
259,132
102,519
116,513
545,459
49,261
115,275
36,186
53,654
254,376
(18,034)
(143,857)
(66,333)
(62,859)
(291,083)
OriginalValue
AccumulatedDepreciation
Net ValueJune 30, 2009
Beginning of the year
Additions
Disposals
Annual depreciation
Translation differences
Other movements
Revaluation Surplus
Increase due to business combinations
(see note 1)
Decrease due to sale / deconsolidation
of subsidiaries (see note 1)
June 30, 2009
49,866
5,802
(95)
(1,360)
(5,896)
-
-
944
-
49,261
268,031
49,219
(5,866)
(53,215)
(37,440)
(133)
9,506
26,864
(2,590)
254,376
66,989
13,944
(1,252)
(8,750)
(10,352)
(8,846)
1,014
1,696
(789)
53,654
44,534
6,202
(1,885)
(20,003)
(9,229)
2,856
79
14,988
(1,356)
36,186
106,642
23,271
(2,634)
(23,102)
(11,963)
5,857
8,413
9,236
(445)
115,275
Lands and buildings
Equipment and machinery
Vehicles TotalJune 30, 2009
Otherassets (1)
Non-current
(1) It includes deferred costs of our subsidiary FEPSA and miscellaneous assets.
62 | TEI&C S.A.
thousand (2009: USD 3,328 thousand) in other
comprehensive income and accumulated in equity
under the heading of “Reserve for PP&E revaluation
surplus”. The decrease in the carrying amount of
asset as a result of revaluation (amounting to
USD 5,701 thousand) has been recorded in the
Consolidated Income Statement in “Other income
and expenses, net”, during the fiscal year ended
June 30, 2010. The decrease of prior revaluation
increases of the same asset were charged to other
comprehensive income and accumulated in equity
under “Reserve for PP&E revaluation surplus”
amounted to USD 5,808 thousand and has been
recorded net of tax effects USD 841 thousand.
If machinery, equipment and vehicles had been
valued at historical cost, the values would have
been the following:
The “Reserve for PP&E revaluation surplus”
is reversed, net of tax effects, through (i) the
retirement of the equipment appraised or (ii)
depreciation charges. The difference between
depreciation of appraised assets and depreciation
of the historical values of such assets is charged
against accumulated results.
The straight-line method has been used to calculate
depreciation, by applying annual ratios sufficient
to terminate the value of each item as to the end of
their estimated useful life.
and equipment is revalued, the entire class of
property and equipment to which that asset belongs
should be revalued. Machinery, construction
equipment and vehicles corresponding to the
subsidiaries that did not make the abovementioned
revaluation are not significant.
The “sales comparison” method was used to obtain
the fair value of these assets for which there is a wide
and transparent secondary market. This approach
consists in obtaining information from recent sales or
offers of assets bearing similar characteristics, age and
condition. Correction factors that take into account the
status of the market offer and demand prevailing as
of the date of the appraisal, the relative age, probable
residual useful life, state of conservation and asset
obsolescence are applied to the sales price. The “cost
less depreciation” method was used to obtain the fair
value of assets with a restricted sales market.
Depreciation was computed based on generally
used and accepted engineering criteria which led
to establishing the reasonable value of PP&E. Such
criteria take into account factors such as the age
of each asset, probable residual or expected life,
state of conservation and degree of obsolescence.
The market value was obtained by applying the
depreciation ratio to the value of a new asset.
These subsidiaries intend to perform this appraisal
with the frequency required by IAS 16 in order to
keep fair values of appraised assets updated.
The increase in value of machinery, construction
equipment and vehicles resulting from the technical
appraisal performed on June 30, 2010 amounted to
USD 76,976 thousand (2009: USD 9,506 thousand)
and has been recorded net of tax effects USD 20,981
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
168,218
(132,696)
35,522
240,858
(156,628)
84,230
Historical cost
Accumulated depreciation
Residual value
June 30, 2009 June 30, 2010
Consolidated Financial Statements | 63
5. Intangible assets
The item evolution is as follows:
The item consists in the following:
The item evolution is as follows:
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Beginning of the year
Additions
Amortization
Translation differences
June 30, 2010
1,839
915
(760)
102
2,096
2,479
915
(812)
80
2,662
640
-
(52)
(22)
566
Systems development
Goodwill COINFER
June 30, 2010
Systems development
Goodwill – COINFER
Total June 30, 2010
13,270
1,870
15,140
2,096
566
2,662
(11,174)
(1,304)
(12,478)
OriginalValue
AccumulatedAmortization
Net Value atJune 30, 2010
Beginning of the year
Additions
Amortization
Increase due to business combination (see note 1)
Decrease due to business combination (see note 1)
Translation differences
June 30, 2009
1,215
976
(584)
485
(16)
(237)
1,839
2,447
-
-
-
(2,447)
-
-
4,532
976
(671)
485
(2,463)
(380)
2,479
870
-
(87)
-
-
(143)
640
Systems development
Goodwill TENCO and subsidiaries
Goodwill COINFER
June 30, 2009
64 | TEI&C S.A.
6. Investments in associated companies
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
The item consists in the following:
Systems development
Goodwill – COINFER
Total June 30, 2009
12,469
1,936
14,405
1,839
640
2,479
(10,630)
(1,296)
(11,926)
OriginalValue
AccumulatedAmortization
Net Value atJune 30, 2009
Non-Current
Norpower S.A. de C.V.
Fluor Techint S.R.L. Construcción y Servicios Ltda. (1)
Consorcio Stabile Infrastrutture
Other
Total Investment in associated companies
100%
50%
30%
-
-
-
170
185
355
Book value
June 30, 2009
% of ownership
40%
50%
0.01%
-
886
297
-
206
1,389
Book value
June 30, 2010
% of ownership
(1) At June 30, 2009 the investment is recorded in liabilities
Beginning of the year
Translation differences
Dividends received
Result from investments
Sale and disposal of investments
Investment adquisition and contributions
Increase due to business combination (see note 1)
Amount recorded in liabilities at the beginning of the year
Amount recorded in liabilities at the end of the year
End of the year
355
208
-
2,724
(254)
1,027
-
(2,671)
-
1,389
120
84
(972)
(384)
-
-
238
(1,402)
2,671
355
June 30, 2009 June 30, 2010
Consolidated Financial Statements | 65
7. Other investments
The result from investments has arisen from
the Company’s participation in the results of the
following companies:
The following amounts represent the assets,
liabilities, revenues and results of the most important
associated companies as of June 30, 2010:
Non-Current
Current
Government Bonds
Other investment fund
La Nacion’s Trust fund
Other
Total other investments
Low liquidity funds in correspondent accounts
Government Bonds
Temporary placements
Total other investments
Fluor Techint S.R.L.Construcción y Servicios Ltda.
Norpower S.A. de C.V.
Others
Norpower S.A. de C.V.
Fluor Techint S.R.L. Construcción y Servicios Ltda.
-
6,597
140
37
6,774
990
-
20
1,010
2,329
705
(310)
2,724
34
5,821
162
59
6,076
-
137
21
158
408
-
(792)
(384)
1,763
4,659
5,584
36,241
7,184
9,291
9,400
9,886
June 30, 2010
June 30, 2010
Liabilities RevenuesAssets
June 30, 2009
June 30, 2009
Results
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
66 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Non-Current
Current
At the beginning of the year
Translation differences
Result from other investment
Investments currently consolidated (a)
Increase due to business combination (see note 1)
Increase of other investments
Reclassification
Decrease of other investments
At the end of the year
At the beginning of the year
Translation differences
Reclassification
Increase of other investments
Decrease of other investments
At the end of the year
6,076
(205)
205
-
-
1,091
(33)
(360)
6,774
158
(5)
33
990
(166)
1,010
6,448
(1,197)
159
(448)
21
1,251
(138)
(20)
6,076
281
(57)
138
-
(204)
158
June 30, 2010 June 30, 2009
(a) During the year ended June 30, 2009 Servicios y Prestaciones Techint Funchal
- Serviços, Comércio e Gestão de Projetos Lda. acquired 80.78% equity interest of
Techint Compañía Técnica Internacional S.A. therefore the Company controls 97.33%
of this company and increased its indirect participation in Compañía Interamericana
de Trabajos Civiles Comintrac S.A (97.84%) and Cotecol Compañía Técnica de
Construcciones S.A. (97.73%)
Consolidated Financial Statements | 67
Non-Current
Current
Other trade receivables - net
Guarantee deposit for investment acquisition
Receivables for sales of investments
Invoice holdback
Tax credit
Trade receivables from related parties (see note 25)
Other receivables from related parties (see note 25)
Other
Total trade and other receivables
Trade receivables - net
Trade receivables from related parties (see note 25)
Invoice holdback
Other trade receivables – net
Other receivables from related parties (see note 25)
Other receivables
Advanced to suppliers and subcontractors
Prepayments
Tax credit
Total trade and other receivables
12,393
-
3,755
5,491
5,032
914
8,639
2,256
38,480
213,816
28,477
11,862
565
2,090
26,841
32,239
3,569
47,494
366,953
15,170
8,250
-
727
6,985
-
9,240
968
41,340
301,855
42,173
13,212
613
3,876
28,283
25,874
1,940
40,265
458,091
June 30, 2010 June 30, 2009
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
8. Trade and other receivables
68 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
9. Inventories
The item consists in the following:
At June 30, 2010 and 2009 the evolution of the
allowance for doubtful accounts that was deducted
from Trade receivables is:
Non-Current
Current
Values at the beginning of the year
Translation
Additions
Values at the end of the year
Values at the beginning of the year
Translation
Increase due to business combination (see note 1)
Reversal
Additions
Used
Values at the end of the year
-
(15)
870
855
10,955
425
-
(529)
73
(1)
10,923
-
-
-
-
14,976
(2,808)
140
(272)
28
(1,109)
10,955
June 30, 2010 June 30, 2009
Materials and spare parts
Others
Valuation allowance
Total Inventories
30,424
324
(2,996)
27,752
41,786
160
(6,098)
35,848
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 69
Values at the beginning of the year
Translation
Reversal
Additions
Used
Values at the end of the year
2,996
118
(24)
4,478
(1,470)
6,098
742
(139)
-
2,504
(111)
2,996
June 30, 2010 June 30, 2009
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
At June 30, 2010 and 2009 the evolution of the
valuation allowance that was deducted from
inventories is:
10. Financial instruments by category
Assets as per balance sheet
Trade and other receivables
Other investments
Cash and cash equivalents
Total
At June 30, 2010
Liabilities as per balance sheet
Borrowings
Financial lease liabilities
Trade and other payables
Other liabilities
Total
349,338
7,784
283,567
640,689
35,340
2,616
173,705
139,261
350,922
-
37
-
37
35,340
2,616
173,705
139,261
350,922
349,338
990
-
350,328
-
6,757
283,567
290,324
Assets at fair value through the profit and loss
Loans and receivables
Total
Total
Available for sale
Other financial liabilities at amortized cost
70 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Assets as per balance sheet
Derivative financial instruments
Trade and other receivables
Other investments
Cash and cash equivalents
Total
Liabilities as per balance sheet
Borrowings
Financial lease liabilities
Trade and other payables
Other liabilities
Total
5,265
450,241
6,234
223,140
684,880
89,620
15,501
209,431
131,010
445,562
-
-
59
-
59
89,620
15,501
209,431
131,010
445,562
-
450,241
-
-
450,241
4,789
-
6,175
223,140
234,104
476
-
-
-
476
Assets at fair value through the profit and loss
Derivatives used for hedging
Loans and receivables
Total
Total
Available for sale
Other financial liabilities at amortized cost
Determining fair values
The table below analyzes financial instruments
carried at fair value, by valuation method.
The different methods have been defined as follows:
Level 1- Quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2- 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- Inputs for the asset or liability that are
not based on observable market data (that is,
unobservable inputs).
Comparative information is not presented for
the first year of application, as permitted by the
transitional provisions of the standard.
The following table presents the assets that are
measured at fair value at June 30, 2010.
•
•
•
Assets
Cash and cash equivalents
Other investments
Total
283,567
6,757
290,324
-
140
140
-
-
-
283,567
6,617
290,184
Level 3Level 2Level 1 Total
At June 30, 2009
Consolidated Financial Statements | 71
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
11. Held-for-sale assets
The item consists in the following:
12. Derivative financial instruments
As of June 30, 2010, all the Company’s outstanding
derivative financial instruments were realized. In
addition, the Company has no foreign currency
forward contracts as of such date.
As of June 30, 2009, the Company has denominated
as accounting hedging some future contracts for
the sale of USD the reasonable value of which
contracts as of June 30, 2009, has generated a net
income of USD 476 thousand, and has been stated
in accounting records as follows: (i) charge to other
reserves of the equity for USD 215 thousand, net of
the tax effect, which amounts to USD 92 thousand;
and (ii) charge to results for USD 169 thousand
for those hedged contracts that turned out to be
ineffective. In addition, during the year ended on
June 30, 2009, the settlement of 8 contracts was
recorded in results, the settled expense of which
contracts was USD 3,451 thousand, the reasonable
value of such contracts in force as of June 30, 2008
for USD 1,469 thousand was reversed.
On October 31, 2008 the Company entered into a
foreign-currency swap with an initial amount of BRL
10,500, equivalent to USD 5,000. Under the swap
the Company receives a fixed amount of USD plus
interest of 5.95% and pays interest at 100% of the
Interbank Deposit Certificate. The fair value as of
June 30, 2009 is USD 4,789. The swap had a 361
days maturity and matured on October 27, 2009.
There are no derivatives outstanding as of June 30,
2010.
The net fair values of derivative financial
instruments at the balance sheet date were:
Discontinued operations (see note 24)
Advances to suppliers for equipment to be sold
Other investment
Total held – for – sale assets
45
-
22
67
4,048
239
-
4,287
June 30, 2010 June 30, 2009
Net fair value of derivative financial instruments
Forward foreign exchange contracts
Swap foreign currency
Total
476
4,789
5,265
-
-
-
-
-
-
-
-
-
Assets
At June 30, 2009
LiabilitiesAssets
At June 30, 2010
Liabilities
72 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
13. Cash and cash equivalents
Cash, cash equivalents and bank overdrafts include
the following for the purposes of the consolidated
statement of cash flows:
14. Share capital
The composition of the Company’s capital is as
follows:
The ordinary shares have a value of UYU 1 per
share and one vote per five shares. All issued shares
are fully paid.
At June 30, 2008 the authorized capital stock
amounts to UYU 4,600,000 thousand.
On June 26, 2008, the Special Shareholders’ Meeting
decided to increase the authorized capital to UYU
5,500,000 thousand and accepted an Irrevocable
Contribution of USD 30,000 thousand (equivalent to
UYU 586,830 thousand) from Techint Investments NV,
the parent company of Techint Limited.
The Special Shareholders' Meeting of September
30, 2008 ratified the decisions taken at the previous
Special Shareholders' Meetings and decided
to change from nominative shares to bearer
shares and capitalize all the pending irrevocable
contributions (USD 72,317 thousand).
The new authorized capital, the capitalization and
the change in the type of shares are under process
of authorization in the AIN.
Cash at bank and on hand
Short-term bank deposits
Total cash and cash equivalents
Cash and cash equivalents
Bank overdrafts
Total cash and cash equivalents
56,033
227,534
283,567
283,567
(1,141)
282,426
69,676
153,464
223,140
223,140
(298)
222,842
June 30, 2010
June 30, 2010
June 30, 2009
June 30, 2009
In thousands of shares
At June 30, 2009 (1)
At June 30, 2010 (1)
5,181,537
5,181,537
5,181,537
5,181,537
Number of shares
Ordinaryshares
(1) Including a provisional certificate by UYU 581.537 thousands, to be replace by
bearer shares after the Auditoría Interna de la Nación (AIN) authorization
Consolidated Financial Statements | 73
16.80%
16.80%
14.00%
-
LIBOR6M + 2%
-
-
-
-
5.85%
-
-
-
4.70%
-
12.80%
-
39
365
13
-
10,928
-
-
-
-
6,445
-
-
-
848
-
10
-
-
18,648
45
-
41
34
-
435
248
2,051
262
-
693
2,003
136
-
408
220
40
42
6,658
ARS
ARS
ARS
-
USD
-
-
-
-
USD
-
-
-
CLP
-
USD
-
June 30, 2010Company Lender June 30, 2009
AmountAmount InterestRate
Currency
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
15. Borrowings
Non-Current COINFER
TEARG
TENCO
Techint S.A.C.
Techint Cía. Técnica
Internacional S.A.C.I. - Uruguay
TECHI
Sidernet S.A.
Sidernet Mexicana S.A. de C.V.
Other
Banco Supervielle S.A.
Banco Itaú BBA S.A.
Standard Bank Argentina S.A.
BBVA Banco Frances S.A.
Banco Itaú S.A (New York)
Banco Itaú S.A (New York)
HSBC Bank Argentina S.A.
Santa María Financial S.A.
Banco Itaú BBA S.A.
Caterpillar Leasing Chile S.A.
HSBC Bank Perú S.A.
Banco Internacional del Perú S.A
– Interbank
HSBC Bank (Uruguay) S.A.
Banco Itaú Chile S.A.
Standard Bank Argentina S.A.
CGM Leasing Argentina S.A.
Banco Nacional de México S.A.
(*)
(*)
(*)
(*)
(*)
(*)
(*) Variable Rate
74 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
16.80%
-
11.80%
-
-
LIBOR 6M + 2%
LIBOR + 2,5%
-
14.00%
-
-
8.75%
-
-
6.00%
9.50%
-
-
-
-
14.00%
12.80%
2.00%
2.00%
13
-
32
-
-
1,166
440
-
27
-
-
220
-
-
2,176
251
-
-
-
-
411
211
39
29
62
317
228
475
132
12,242
870
210
597
2,021
6,110
337
1,407
1,000
-
-
1,338
47
180
210
682
273
-
50
ARS
-
ARS
-
-
USD
USD
-
ARS
-
-
USD
-
-
USD
ARS
-
-
-
-
ARS
USD
USD
USD
June 30, 2010Company Lender June 30, 2009
AmountAmount InterestRate
Currency
Current COINFER
TEARG
TMR
Sidernet S.A.
Prestaciones Globales
Siderúrgicas S.A.
Prestaciones Globales
Siderúrgicas S.A.
Banco Supervielle S.A.
Sociedad Comercial del Plata S.A.
BBVA Banco Frances S.A.
BBVA Italia
Banco Itaú BBA S.A.
Banco Itaú S.A. (New York)
Banco Itaú S.A. (New York)
Banco Itaú BBA S.A. (Brazil)
Standard Bank Argentina S.A
Banco de San Juan S.A.
Banco Itaú Argentina S.A.
HSBC Bank Argentina S.A.
HSBC Bank Argentina S.A.
Santa María Financial S.A.
Santa María S.A.I.y F.
BBVA Banco Frances S.A.
Santa María Financial S.A.
Banco Hipotecario S.A.
Banco Hipotecario S.A.
Banco Itaú BBA S.A.
Standard Bank Argentina S.A
CGM Leasing Argentina S.A.
Santa María S.A.I.y F.
Agrupación Fdo. Copartic.
Financ. ACE
(*)
(*)
(*)
(*)
(*)
(*)
(*)
(*)
(*)
Consolidated Financial Statements | 75
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
-
LIBOR 6M + 2.5%
5.85%
4.70%
7.00%
7.00%
-
4.50%
-
-
7.00%
-
LIBOR + 2.65%
-
-
3.94%
3.56%
-
-
-
273
1,531
136
220
71
-
600
-
-
284
-
42
-
-
5,018
5,015
-
-
1,103
19,308
18,160
271
-
-
6,325
3,412
1,344
-
150
171
-
260
96
20,203
10,000
-
-
5,876
2,167
1,240
98,463
-
USD
USD
CLP
USD
USD
-
USD
-
-
UYU
-
MXN
-
-
USD
USD
-
-
June 30, 2010Company Lender June 30, 2009
AmountAmount InterestRate
Currency
Current TENCO
TECHI
Techint S.A.C.
Techint Cía. Técnica
Internacional S.A.C.I. - Uruguay
Techint Inversiones S.A.I.F.
Sidernet Mexicana S.A. de C.V.
TEMEX
TECAN
Other
Banco Itaú BBA S.A.
Banco Itaú BBA S.A.
Caterpillar Leasing Chile S.A.
Banco Itaú Chile S.A.
HSBC Bank Perú S.A.
Banco Internacional del Perú S.A
- Interbank
Banco Internacional del Perú S.A
- Interbank
HSBC Bank (Uruguay) S.A.
HSBC Bank (Uruguay) S.A.
HSBC Bank (Uruguay) S.A.
Crédit Uruguay Banco S.A.
Santa María S.A.I.y F.
Banco Nacional de Mexico S.A.
BNP Paribas S.A. (Spain)
Banco Nacional de México S.A.
Banco Nacional de México S.A.
Santander S.A.
BNP Paribas S.A. (Canada)
BNP Paribas S.A. (Canada)
(*)
(*)
(*)
(*)
(*) Variable Rate
76 | TEI&C S.A.
4 - 5 years3 - 4 years2 - 3 years1 year or less
Without due date
1 - 2 years Over 5 years
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
The maturity of borrowings is as follows:
The fair value of borrowings equals their carrying
amount, as the impact of discounting is not significant.
16. Deferred income taxes
As further explained in note 2.s., TEI&C and most of
the Company’s subsidiaries are subject to income
taxes. At June 30, 2010 and 2009 the Company
discloses under the caption “deferred income
tax assets” the net balance recognized by those
subsidiaries that recorded a net deferred income
tax asset, while the net balance recognized by those
subsidiaries that recorded a net deferred income tax
liability has been disclosed under “deferred income
tax liabilities” in the consolidated statement of
financial position.
The main subsidiaries generating deferred income
tax balances are detailed below:
June 30, 2010
June 30, 2009
Financial leases
Other borrowings
Total borrowings
Interest to be accrued
Financial leases
Other borrowings
Total borrowings
Interest to be accrued
37
6,684
6,721
-
-
-
-
-
217
2,548
2,765
49
-
-
-
-
207
2,866
3,073
165
-
-
-
-
400
2,710
3,110
276
23
-
23
-
414
2,565
2,979
388
3,624
3,011
6,635
429
1,341
17,967
19,308
713
11,854
86,609
98,463
1,583
-
-
-
-
-
-
-
-
Deferred Income Tax Assets
Deferred Income Tax Liabilities
TEBRA
Sidernet de Venezuela C.A.
TEMEX’s Subsidiaries
Other
TEARG
TENCO’s Subsidiaries
FEPSA
Other
36,639
-
3,682
414
40,735
(14,959)
(7,160)
(9,867)
(3,504)
(35,490)
45,106
2,868
16,083
1,082
65,139
(10,620)
(9,556)
(10,259)
(179)
(30,614)
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 77
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
At June 30, 2010 and 2009 the deferred tax balance
is originated by the following items:
The amounts shown in the balance sheet include
the following:
Deferred Income Tax Assets
Deferred Income Tax Liabilities
Tax-loss carry-forwards
Provisions
Deferred costs/Construction contracts
Exchange differences
Advances from clients
Different criterion used to assess the tax gain/
(loss) of the J.V.Techint Cía. Técnica Internacional
S.A.C.I. - Impregilo S.p.A. (Suc.Argentina) - Iglys S.A.
Other
Subtotal
Committed investment FEPSA
Different criterion used to assess the tax gain/
(loss) of the J.V.Techint Cía. Técnica Internacional
S.A.C.I. - Impregilo S.p.A.(Suc.Argentina) - Iglys S.A.
PP&E
Exchange differences
Deferred income/Construction contracts
PP&E revaluation (see note 4)
Inventories
Effect of restatement in constant currency
Other
Subtotal
Net deferred income tax asset
54,914
37,997
2,705
-
1,308
353
1,065
98,342
11,970
-
1,436
349
41,493
31,741
2,731
29
3,348
93,097
5,245
44,908
40,284
5,199
740
1,303
-
1,865
94,299
11,760
1,161
644
502
23,874
17,414
2,294
618
1,507
59,774
34,525
June 30, 2010 June 30, 2009
Deferred tax assets to be recovered within 12 months
Deferred tax liabilities to be recovered within 12 months
21,069
26,334
June 30, 2010
78 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
The evolution of net deferred income tax asset /
(liability) during the year is as follows:
The evolution of deferred income tax assets and
liability during the year is as follows:
Deferred Tax Assets
At the beginning of the year
Translation differences
Income statement charge / (Credit)
At the end of the year
Deferred Tax Liabilities
At the beginning of the year
Translation differences
PP&E revaluation
Income statement charge / (Credit)
At the end of the year
44,908
3,191
6,815
54,914
40,284
170
(2,457)
37,997
5,199
386
(2,880)
2,705
1,303
5
-
1,308
11,760
(411)
-
621
11,970
23,874
(1,761)
-
19,380
41,493
17,414
(928)
20,140
(4,885)
31,741
2,294
-
-
437
2,731
2,605
512
(1,699)
1,418
4,432
419
-
311
5,162
94,299
4,264
(221)
98,342
59,774
(2,681)
20,140
15,864
93,097
Other
Other
Advances from clients
Inventories
Provisions
Deferred Income/Construction
contracts
Deferred costs/Construction
contracts
PP&E revaluation
Tax-loss carry-forwards
Committed investment
FEPSA
Total
Total
At the beginning of the year
Translation differences
Increase due to business combinations (see note 1)
Decrease due to sale of subsidiaries (see note 1)
PP&E revaluation (net) (see note 4)
Future contracts
Income statement (charge) / credit
At the end of the year
34,525
6,945
-
-
(20,140)
-
(16,085)
5,245
(13,292)
(416)
14,710
(18)
449
(92)
33,184
34,525
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 79
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
The tax loss carry-forwards mature as detailed below:
The recoverable value of deferred tax assets
depends on the existence of future income subject
to income tax, sufficient to be used before their
legal prescription. In this regard, Management
estimates that TEI&C’s subsidiaries will generate
sufficient taxable income in future periods so as to
offset the net balance of deferred income tax assets
recorded at June 30, 2010.
17. Trade and other payables
Year 2010
Year 2011
Year 2012
Year 2013
Year 2014
Year 2015
Year 2016
Year 2017
Year 2018
Year 2019
Year 2020
Without maturity
-
2
38
82
1,302
3,129
89
20,463
33,272
21,716
32,203
108,049
220,345
767
2,816
2,784
87
2,372
20
113
18,280
31,028
27,568
-
112,729
198,564
June 30, 2010 June 30, 2009
Non-Current
Current
Trade payables
Social security and other taxes
Total trade and other payables
Trade payables
Social security and other taxes
Amounts due to related parties (see note 25)
Other payables
Total trade and other payables
467
22,744
23,211
149,444
114,543
4,120
1,799
269,906
246
17,616
17,862
192,974
107,951
3,206
-
304,131
June 30, 2010 June 30, 2009
80 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
The maturity of trade and other payables is as follows:
18. Other liabilities
At June 30, 2010
Trade and other payables
Total Trade and other payables
8,110
8,110
269,906
269,906
7,146
7,146
2,198
2,198
1,021
1,021
4,736
4,736
3 - 4 years2 - 3 years1 year or less
1 - 2 yearsWithout due date
Over 4 years
Non-Current
Current
Provisions (see note 19)
Amounts due to related parties (see note 25)
Other liabilities
Total other liabilities
Provisions (see note 19)
Advances received on construction contracts
Advances received on construction contracts from related parties (see note 25)
Amounts due to related parties (see note 25)
Other liabilities and provisions
Total other liabilities
26,332
748
9,392
36,472
14,607
81,677
115
1,000
5,390
102,789
31,113
3,750
1,917
36,780
10,300
76,653
784
2,166
4,327
94,230
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 81
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
19. Provisions
Non-Current
Current
Non-Current
Current
Values at June 30, 2009
Translation
Reversal
Additions
Used
Values at June 30, 2010
Values at June 30, 2009
Translation
Reversal
Additions (a)
Used
Values at June 30, 2010
Values at June 30, 2008
Translation
Reversal
Additions
Increase due to business
combination (see note 1)
Used
Values at June 30, 2009
Values at June 30, 2008
Translation
Additions
Increase due to business
combination (see note 1)
Used
Values at June 30, 2009
11,107
5
(2,000)
2,290
(2,141)
9,261
630
-
-
6,137
(525)
6,242
7,970
468
(555)
1,181
193
9,257
4,459
(16)
(1,500)
790
-
3,733
5,061
394
(5,118)
1,270
(326)
1,281
3,586
-
-
-
-
3,586
6,975
138
(2,408)
3,647
(1,819)
6,533
1,625
14
-
960
(1,553)
1,046
31,113
1,005
(10,081)
8,388
(4,093)
26,332
10,300
(2)
(1,500)
7,887
(2,078)
14,607
522
(124)
-
1,825
10,907
(2,023)
11,107
1,118
-
-
-
(488)
630
3,776
(602)
(697)
6,853
-
(1,360)
7,970
1,568
(341)
47
3,497
(312)
4,459
6,640
(1,238)
(7,718)
7,485
-
(108)
5,061
-
-
3,586
-
-
3,586
6,950
(1,548)
(2,289)
4,208
-
(346)
6,975
7
(1)
1,121
503
(5)
1,625
17,888
(3,512)
(10,704)
20,371
10,907
(3,837)
31,113
2,693
(342)
4,754
4,000
(805)
10,300
Other
Other
Civils
Civils
Taxes
Taxes
Labor
Labor
Total
Total
(a) The Saudi Techint Ltd.’s minority shareholder filed a complaint against TENCO
before the 15th Commercial Tribunal of the Board of Grievances of Saudi Arabia
seeking relief for damages and claim; therefore, the Company created an allowance
for USD 6 million, i.e. the amount estimated by the Company and its legal counsel
that should be paid to settle such dispute.
82 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
20. Employee benefits
Non-funded defined benefits and other
long-term benefits
The amounts recognized in the consolidated
statement financial position are determined as follows:
The amounts recognized in the income statement
are as follows:
Present value of unfunded obligations
Costs for services rendered in the past not recorded
Unrecognized actuarial losses
Liability in the consolidated statement financial position
Current service cost
Interest cost
Net actuarial (gains) losses recognized in the year
Amortization of costs for services rendered in the past not recorded
Total included in Labor costs
27,033
(1,251)
(7,907)
17,875
2,201
2,833
879
515
6,428
18,578
(724)
(4,849)
13,005
1,496
2,881
1,544
321
6,242
Year endedJune 30, 2010
Year endedJune 30, 2010
Year endedJune 30, 2009
Year endedJune 30, 2009
Consolidated Financial Statements | 83
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
At June 30, 2010 and 2009, the main actuarial
premises used for calculation of such plans
contemplate a discount rate of 7% and of 6%
(real) and a salary increase rate of 2% and 3 %,
respectively. The actuarial premises used in TEMEX
for calculation of such plans contemplate a discount
rate of 8.58% (real) for both years and a salary
increase rate of 6.08% and 6.40% respectively.
Contribution plans
During the year ended June 30, 2010 TEBRA
contributed USD 1,229 to the defined contribution
plans.
The amounts and movements in the liabilities
recognized in the consolidated statement financial
position are determined as follows:
At the beginning of the year
Translation
Transfers and new participants of the plan
Total expense
Services rendered in the past not recorded
Contributions paid
At the end of the year
13,005
(387)
(315)
6,428
773
(1,629)
17,875
10,490
(2,419)
69
6,242
-
(1,377)
13,005
Year endedJune 30, 2010
Year endedJune 30, 2009
84 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
21. Participation in Joint Ventures
The Company’s subsidiaries were part of different J.V.s
which also perform engineering, procurement and
construction activities. The Company’s participation
in those J.V.s was recorded through proportional
consolidation of assets, liabilities and results.
The following balances represent the J.V.s assets
and liabilities at June 30, 2010 and 2009:
Techint Cia. Técnica Internacional S.A.C.I. - Panedile
Argentina S.A. - Unión Transitoria de Empresas -
Complejos “Los Caracoles” and “Punta Negra“ (1)
Techint Cia. Técnica Internacional S.A.C.I. - Impregilo
S.p.A (Sucursal Argentina)- Iglys S.A. - Unión Transitoria
de Empresas - Complejo Penitenciario Ezeiza (1)
Techint Cia. Técnica Internacional S.A.C.I. - Luis M.
Pagliara S.A. - Unión Transitoria de Empresas - C. Re.
Ma. Malla 332 (1)
Techint Cia. Técnica Internacional S.A.C.I. - B.Roggio
e Hijos S.A. - Unión Transitoria de Empresas – Subte
Linea A (1)
Techint Cia. Técnica Internacional S.A.C.e I. - FLUOR
Inc. - Unión Transitoria de Empresas - Proyecto:
Pascua Lama (1)
Techint Cia. Técnica Internacional S.A.C.e I. - FLUOR
Inc. - Unión Transitoria de Empresas - Proyecto:
Expansión Veladero (1)
Consórcio Techint UMSA II - Alumina do Norte do
Brasil S.A. - Boilermaking (2)
Consórcio Techint UMSA III - Alumina do Norte do
Brasil S.A.- Electromechanical Assembly West Area (2)
26,071
17,248
1,162
588
1,998
2,677
-
-
12,450
20,471
1,219
2,182
2,445
14,362
30,320
34,010
24,683
2,011
131
971
3,846
12,363
-
-
75.00%
65.00%
60.00%
50.00%
50.00%
50.00%
60.00%
80.00%
26,820
1,580
236
88
2,250
518
-
-
75.00%
65.00%
60.00%
50.00%
50.00%
50.00%
-
-
Total J.V.'s Liabilities
Total J.V.'s Liabilities
Total J.V.'s Assets
Total J.V.'s Assets
Main Joint Ventures
June 30, 2009June 30, 2010
% of ownership
% of ownership
Consolidated Financial Statements | 85
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Consórcio Techint Confab UMSA - Lot I Tanks
Refinaria do Nordeste, Abreu e Lima (RNEST) (2)
Consórcio Andrade Gutierrez - Techint (AG-TECH) Diesel
Unit of Landulpho Alves - Mataripe Refinery (RLAM) (2)
Consórcio Odebrecht-Techint (ODETECH)-Gasduc III (2)
Tamburí Comércio de Máquinas e Serviços de
Engenharia Ltda. (Tamburí) (2)
Consórcio Andrade Gutierrez - Techint (TE - AG) (2)
ABB Lummus Techint Trinidad Joint Venture - Gasoline
Optimization Program Upgrade - Petroleum Company
of Trinidad and Tobago Limited - Construction
Management Services (1)
ABB Lummus Techint Bahamas Joint Venture - Gasoline
Optimization Program Upgrade - Petroleum Company of
Trinidad and Tobago Limited - Engineering, Procurement
and Management Services (3)
Chiquintirca Joint Venture - Chiquintirca Gas
Compression Plant (3)
Techint / Somerville - Waupisoo Project (4)
Techint / Somerville - Corridor Project (4)
Techint / Somerville - Clipper Project (4)
Techint / Black & Veatch - LNG Costa Azul Project (4)
136,741
7,266
196
54,574
16,946
13,448
17,097
13,003
-
70
26,774
3,093
75
43,661
97,985
13,880
-
13,623
33,396
51,765
812
2,856
80,702
22,456
1,233
29,103
17,655
8,858
-
8,735
17,500
47,907
2,390
2,704
49,532
58,416
60.00%
50.00%
50.00%
50.00%
-
50.00%
50.00%
60.00%
50.00%
50.00%
50.00%
50.00%
82,551
10,968
174
46,734
10,518
10,425
2,142
11,105
1,452
1,679
3,631
8,485
60.00%
50.00%
50.00%
50.00%
50.00%
50.00%
50.00%
60.00%
50.00%
50.00%
50.00%
50.00%
Total J.V.'s Liabilities
Total J.V.'s Liabilities
Total J.V.'s Assets
Total J.V.'s Assets
Main Joint Ventures
June 30, 2009June 30, 2010
% of ownership
% of ownership
(1) Controlling interest through TEARG.
(2) Controlling interest through TEBRA.
(3) Controlling interest through TENCO.
(4) Controlling interest through TEMEX.
86 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
The following balances represent the J.V.s results at
June 30, 2010 and 2009:
Techint Cia. Técnica Internacional S.A.C.I. - Panedile Argentina S.A.
- Unión Transitoria de Empresas - Complejos “Los Caracoles“ and
“Punta Negra“ (1)
Techint Cia. Técnica Internacional S.A.C.I. - Impregilo S.p.A (Sucursal
Argentina) - Iglys S.A. - Unión Transitoria de Empresas - Complejo
Penitenciario Ezeiza (1)
Techint Cia. Técnica Internacional S.A.C.I.- Luis M. Pagliara S.A.-
Unión Transitoria de Empresas-C. Re. Ma. Malla 332 (1)
Techint Cia. Técnica Internacional S.A.C.I. - B. Roggio e Hijos S.A. -
Unión Transitoria de Empresas - Subte Linea A (1)
Techint Cia. Técnica Internacional S.A.C.e I. - FLUOR Inc. - Unión
Transitoria de Empresas - Proyecto: Pascua Lama (1)
Techint Cia. Técnica Internacional S.A.C.e I. - FLUOR Inc. - Unión
Transitoria de Empresas - Proyecto: Expansión Veladero (1)
Consórcio Techint UMSA II - Alumina do Norte do Brasil S.A. -
Boilermaking (2)
Consórcio Techint UMSA III - Alumina do Norte do Brasil S.A.-
Electromechanical Assembly West Area (2)
Consórcio Techint Confab UMSA - Lot I Tanks Refinería do Nordeste,
Abreu e Lima (RNEST) (2)
Consórcio Andrade Gutierrez - Techint (AG-TECH) Diesel Unit of
Landulpho Alves - Mataripe Refinery (RLAM) (2)
Consórcio Odebrecht - Techint (ODETECH) - Gasduc III (2)
11,258
(2,200)
(117)
(572)
1,229
2,625
-
-
17,146
10,542
78,316
(17,278)
1,784
(88)
(1,174)
505
4,405
329
6,338
480
27,388
39,610
75.00%
65.00%
60.00%
50.00%
50.00%
50.00%
60.00%
80.00%
60.00%
50.00%
50.00%
75.00%
65.00%
60.00%
50.00%
50.00%
50.00%
-
-
60.00%
50.00%
50.00%
J.V.'sResults
J.V.'s Results
Main Joint Ventures
June 30, 2009June 30, 2010
% of ownership
% of ownership
Consolidated Financial Statements | 87
J.V.'sResults
J.V.'s Results
June 30, 2009June 30, 2010
% of ownership
% of ownership
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Tamburí Comércio de Máquinas e Serviços de Engenharia Ltda.
(Tamburí) (2)
Consórcio Andrade Gutierrez - Techint (TE - AG) (2)
ABB Lummus Techint Trinidad Joint Venture - Gasoline Optimization
Program Upgrade - Petroleum Company of Trinidad and Tobago
Limited - Construction Management Services (1)
ABB Lummus Techint Bahamas Joint Venture - Gasoline Optimization
Program Upgrade - Petroleum Company of Trinidad and Tobago
Limited - Engineering, Procurement and Management Services (3)
Chiquintirca Joint Venture - Chiquintirca Gas Compression Plant (3)
Techint / Somerville - Waupisoo Project (4)
Techint / Somerville - Corridor Project (4)
Techint / Somerville - Clipper Project (4)
Techint / Black & Veatch - LNG Costa Azul Project (4)
2,352
4,806
(1,805)
(486)
4,905
180
1,595
114,489
(2,017)
3,790
-
4,554
1,836
6,845
13,090
36,584
46,090
22,218
50.00%
-
50.00%
50.00%
60.00%
50.00%
50.00%
50.00%
50.00%
50.00%
50.00%
50.00%
50.00%
60.00%
50.00%
50.00%
50.00%
50.00%
Main Joint Ventures
(1) Controlling interest through TEARG.
(2) Controlling interest through TEBRA.
(3) Controlling interest through TENCO.
(4) Controlling interest through TEMEX.
88 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
22. Contingencies and commitments
a. Guarantees and bonds granted
TEI&C and its subsidiaries have entered into a
series of guarantee contracts with third parties
through which they undertake the unconditional
and irrevocable obligation to guarantee the prompt
and complete payment and performance of certain
liabilities incurred by related parties. In addition,
b. Works executed under a trust, construction, and
leasing agreement
TEARG, as a member of the J.V. Techint Compañía
Técnica Internacional S.A.C.I. – Impregilo S.p.A.
(Sucursal Argentina) – Iglys S.A., has signed a contract
with the Argentine Government for the construction
of a penitentiary institution, under the turnkey system,
located in Ezeiza, province of Buenos Aires, payable in
60 quarterly installments as canon, nominated in USD.
The J.V. accepted the pesification of canons at
a ARS 1-USD 1 rate and the application of the
Reference Stabilization Index (RSI) until the effective
date of payment, according to the Agreements
executed by the J.V. with the Ministry of Justice
and Human Rights, dated November 19, 2003 and
September 9, 2004. The canons collected plus RSI
certain of the Company’s subsidiaries issued a
number of guarantees to provide for the obligations
assumed in the normal course of business.
As of June 30, 2010 and 2009, TEI&C issued the
following guarantees on behalf of other companies,
as follows:
after the Agreement dated September 9, 2004, were
Nos. 17, 18, 19, 20, 21 and 22. On the other hand,
before execution of such Agreement, canon No. 8
was also collected plus RSI in January 2003.
That notwithstanding, the J.V. received from such
Ministry payments for several canons not applying
the RSI, which have been taken by the J.V. as partial
payments of the total amount due and payable arising
from the Agreement dated September 9, 2004.
Thus, from January 2006 to the date of issue of
these financial statements, the J.V. received as
partial payment a total amount of USD 40,0771
thousand corresponding to canons 10 to 16 and 23
to 43 at a ARS 1-USD 1 rate, not applying the RSI.
Taking into account this situation, in the past fiscal
SIDOR C.A.
Barrick Explotaciones Arg. S.A.
Caterpillar Financial Services Corporation
Siderca S.A.I.C.
ABB Lummus Global Overseas Corporation
ABB Lummus Global Inc.
JGC Arabia Limited
JGC Corporation
Anglo American Sur S.A.
Total
Granted in favor of:
(in million of USD)
10.9
23.0
0.3
0.8
7.0
9.5
18.4
30.1
116.2
216.2
10.9
23.0
6.7
0.8
7.0
9.5
-
-
-
57.9
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 89
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
year the J.V. Management made a new estimate of
the date of probable collection of the RSI past due
and to become due.
The proportional participation of TEARG in the total
balance receivable of the J.V. with the Argentine
Government as of May 31, 2010 amounts to
USD 56,6301 thousand (at May 31, 2009: USD 62,776
thousand).
The amount of such credit recorded in these
consolidated financial statements, which arises from
discounting the amounts mentioned above from
their current value on May 31, 2010, is equal to USD
28,2851 thousand, capital USD 10,0871 thousand and
RSI USD 18,1981 thousand, (at May 31, 2009: USD
31,8021 thousand, capital USD 12,9621 thousand and
RSI USD 18,8401 thousand) of which the amount of
USD 10,8571 thousand is past due at June 30, 2010 (at
June 30, 2009: USD 10,514 thousand).
All these financial credits correspond to the canons
receivable from the Argentine Government, due
and to become due, which were recorded as per the
Agreement executed on September 9, 2004 with the
Undersecretariat of Coordination and Innovation
under the National Ministry of Justice and Human
Rights, in Pesos at a rate of ARS 1-USD 1 and
adjusted with RSI up to December 31, 2008. As from
such date, credits were no longer adjusted with
RSI as a result of the filing of the Arbitration Claim
before the International Court of Arbitration of the
International Chamber of Commerce stated in the
following paragraph.
Taking into account the Ministry of Justice’s delay
as to a resolution and payment of the overdue
debt, Santander Río Trust S.A., in its capacity as
Trustee and Grantor of the Leasing, on July 4, 2008,
following the J.V.’s express instructions, submitted
a note demanding payment of amounts due.
Upon failure to answer by the Ministry of Justice,
on November 28, 2008, an Arbitration Claim was
filed before the International Court of Arbitration
of the International Chamber of Commerce, for
the purpose of appointing an arbitration tribunal
consisting of three arbitrators and to hold the
respondent, the Argentine Government, liable for
payment of the amounts claimed plus any interest
that may be accrued and the new terms of the
debt to expire during the arbitration process. The
arbitration claim was notified to the Argentine
Government in May 2009, the Arbitral Tribunal was
constituted and the process is now at the stage of
issue of the Mission Statement. In the opinion of
the J.V.’s Management and of its legal advisors, it
is estimated that, by application of the legal rules
and regulations regarding pesification (application
of RSI to due canons) which should be applicable to
this contractual structure, the J.V. has a solid legal
position to collect its credits within the scope of the
abovementioned legal rules and regulations.
In May 2009, the J.V. was informed of the passing
of Executive Order No. 541/09, which empowers
UNIREN to renegotiate the Construction, Trust and
Leasing Agreement executed in 1998 in relation
to Penitentiary Complex I (Ezeiza). The J.V. has not
consented to the provisions of such executive order
by virtue of the defects thereof. On June 18, 2009,
a letter was submitted through Santander Río Trust
S.A., in its capacity as Trustee and Grantor of the
Leasing, following the J.V.’s express instructions,
to the above-stated respect claiming the unlawful
nature of such executive order.
(1) Outstanding collecting amounts are nominated in argentine peso.
The figures shown in USD belong to the amounts in argentine pesos which were
translated at the year end exchange rate.(2010: USD 1 – ARS 3,931
and 2009: USD 1 – ARS 3,797)
90 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
As of the date of issue of these financial statements,
while the arbitration proceeding continues, the
claimants and respondent continue holding
conversations in order to assess the possibility of an
eventual solution of the conflict.
c. Other Contingencies and uncertainties
The company has tax and civil lawsuits for which
the legal advisors consider the possibility of loss
is possible and, therefore, no provision was set
up. The amounts of these contingencies amount
as of June 30, 2010 to USD 9,611 thousand for tax
contingencies and USD 4,198 thousand for civil
contingencies.
23. Restricted assets
TENCO and subsidiaries
At June 30, 2010 and 2009, the net carrying amounts
of the PP&E held under finance lease amount to
USD 5,992 thousand and USD 17,579 thousand,
respectively. At June 30, 2010 and 2009, liabilities
for finance leases amount to USD 1,275 thousand
and USD 12,433 thousand, respectively.
TEARG
At June 30, 2010, there are PP&E with a residual
book value of USD 748 thousand (at June 30,
2009: USD 1,655 thousand) which are pledged as
guarantee for liabilities under leasing agreements
for USD 279 thousand (at June 30, 2009: USD
1,163 thousand) and USD 13 thousand (at June
30, 2009: USD 322 thousand), included in the
account "Borrowings" (current and non-current,
respectively).
Coincar S.A.
Under the Credit Facility Agreement entered into
by Coincar S.A. with Banco Río de la Plata S.A.
and Banco de Galicia y Buenos Aires, Coincar S.A.
agrees not to sell nor cause to be sold, assign in
ownership and/or use and/or usufruct, mortgage,
pledge, loan and/or loan for use, levy in any manner
whatsoever, lease and/or enter into a leasing, grant
a security and/or personal interest with respect to,
not to transfer and/or in any manner dispose of,
either in a transaction or a series of transactions, all
or a substantial portion of any of its assets, goods
and/or rights and/or of its assets, goods and/or
rights to be acquired in the future, nor to distribute
dividends, pay fees to the company’s directors
or consultants, without the prior consent of the
majority of the banks that granted the Credit Facility
Agreement.
Compañía Inversora Ferroviaria S.A.I.F. (COINFER)
Licensed assets:
In conformity with the regulations established in
the bid specifications and the License Agreement,
the subsidiary FEPSA received from Ferrocarriles
Argentinos assets of its own to be used in the
operation (included in “Property, plant and
equipment” non-current). They primarily comprise
infrastructure (main and secondary railway
network), real property (warehouses and buildings),
transportation material (locomotives and coaches),
fixed facilities and other. Upon expiration of the
license, the assets will be returned to Ferrocarriles
Argentinos, at no additional cost, in their normal
condition of maintenance, except for the wear and
tear over time and the normal use.
TEBRA
At June 30, 2010, the Company had USD 4,007
thousand (at June 30, 2009: USD 5,884 thousand)
in assets granted as guarantee for different
proceedings.
TEMEX
At June 30, 2010 and 2009, TEMEX and its
subsidiaries had obtained resources from financial
entities amounting to USD 45,639 thousand
and USD 28,246 thousand respectively, which
are supported with percentage-of-completion
certificates for projects in process. Those resources
have been paid by assigning the above-mentioned
collection rights.
Consolidated Financial Statements | 91
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Sidernet S.A.
At June 30, 2010, there are PP&E with a residual book
value of USD 1,205 thousand (at June 30, 2009: USD
1,836 thousand) which are pledged as guarantee
for liabilities under leasing agreements for USD
622 thousand (at June 30, 2009: USD 955 thousand)
and USD 10 thousand (at June 30, 2009: USD 628
thousand), included in the account "Borrowings"
(current and non-current, respectively).
24. Discontinued operations
In April 2008, the Government of the Bolivarian
Republic of Venezuela made public its decision
to nationalize SIDOR C.A., Sidernet de Venezuela
C.A. (“Sidernet”) and Servicios Siderúrgicos
Sersisa, S.A. (“Sersisa”)’s only client. On April 29,
2008, the National Assembly of Venezuela agreed
to declare SIDOR C.A.’s shares of public use and
social interest. On April 30, 2008, the President of
Venezuela sent to the Supreme Court of Justice
an Executive Order with the rank, value and force
of an Organic Law (Ley Orgánica de Ordenación)
to regulate the companies involved in iron & steel
activities in the Region of Guayana, for such Court
to render an opinion on the constitutional standing
of the Executive Order’s organic nature. On May
9, 2008, the Supreme Court of Justice declared the
constitutionality of the organic nature and ordered
the transformation of SIDOR C.A, its affiliates
and subsidiaries into state-owned companies,
and declared the activities performed by SIDOR
C.A., its affiliates and subsidiaries, as well as the
works, tasks and services required to perform such
activities, of public use and social interest.
Based on the foregoing, on June 12, 2008, the
Sidernet’s management sent a notification to SIDOR
C.A.’s new board stating its intention to transfer
the services rendered by the Company to SIDOR
C.A. through the sale of all its pieces of equipment,
fixtures and fittings and other investments made,
as well as to transfer its entire and detailed payroll,
except for expatriated personnel, together with the
stock of spare parts, tools and consumables in the
inventory, and the services paid in advance as of the
date the service is transferred.
On September 26, 2008, SIDOR was notified of the
company’s intention to early terminate the contract,
which early termination took place on April 7, 2009.
On such date, SIDOR and Sidernet executed the
Agreement for Early Termination of “The Contract”,
Final Receipt of services and delivery of equipment
and spare parts, whereby both parties stated that
the business relationship existing between them
by virtue of such Contract was terminated, and
therefore, all the obligations to do (affirmative
covenants) assumed by the companies deriving
from the execution of “The Contract” became
extinguished, except as otherwise provided for in
such document.
Based on the facts and circumstances described
above the Company ceased consolidating Sidernet
and Sersisa’s results of operations as from July 1,
2007 and classified a group of assets and liabilities
as held-for-sale.
The results of operations generated by Sidernet
and Sersisa as held-for-sale were presented
as discontinued operations in these financial
statements.
92 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Analysis of the result of discontinued operations:
Revenues from construction contracts and other services
Cost of sales (see note 27)
Gross (loss) / profit
General and administrative expenses (see note 27)
Other income and expenses, net (see note 29)
Operating profit / (loss)
Financial results, net (see note 28)
Results before income tax
Income tax (see note 30)
Results from discontinued operations
-
(494)
(494)
(1,173)
13,969
12,302
(2,135)
10,167
(4,931)
5,236
7,581
(5,305)
2,276
(2,885)
238
(371)
(3,142)
(3,513)
262
(3,251)
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 93
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
25. Related party transactions
The group is controlled by Techint Limited, which
owns 88.67% of the company’s shares. The ultimate
parent of the group is San Faustin N.V.
Year-end balances with related parties others than
the Parent Company.
Transactions with associated parties
914
8,639
711
1,699
2,410
26,067
2,090
748
-
115
1,000
4,120
2,244
-
9,240
103
-
103
42,070
3,876
3,750
2,051
784
2,166
3,206
2,965
June 30, 2010 June 30, 2009
Non-Current Assets
CurrentAssets
Non-Current Liabilities
Current Liabilities
Trade receivables from related parties
Other receivables from related parties
Trade receivables
Fluor Techint S.R.L. Construcción y Servicios Limitada - Chile
Norpower S.A. de C.V.
Trade receivables from associated parties
Trade receivables from related parties
Other receivables from related parties
Other liabilities due to related parties
Borrowings from related parties
Advances received on construction contracts from related parties
Other liabilities due to related parties
Trade and other payables due to related parties
Borrowings from related parties
8
8
8
8
8
18
15
18
18
17
15
Notes
Sales of goods and services
Fluor Techint S.R.L. Construcción y Servicios Limitada - Chile 3,363 3,755
June 30, 2010 June 30, 2009
94 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Transactions with related parties others than the
Parent Company
The aggregate compensation of the directors and
executive officers earned during 2010 and 2009
amounts to USD 12,105 thousand and USD 9,889
thousand, respectively.
Sales of goods and services
Purchases of goods and services
191,206
6,773
220,592
20,914
June 30, 2010 June 30, 2009
Consolidated Financial Statements | 95
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
26. Subsidiaries
% of ownership
June 30, 2009 (*)
B.V. de Nieuwe Weg
BVT LNG Costa Azul, S. de R.L. de C.V.
Caminos del Oeste S.A.
Carbonser, S.A. de C.V.
Carbontec, S.A. de C.V.
Cimimontubi S.A.
Coincar S.A.
Compañía Interamericana de Trabajos Civiles Comintrac S.A.
Compañía Inversora Ferroviaria S.A.I.F.
Constructora Mexicana Electromecánica y de Instrumentación, S.A. de C.V.
Cotecol Compañía Técnica de Construcciones S.A.
Elina 406, S.A. de C.V.
Elina de Occidente, S.A. de C.V.
Elina LT, S.A. de C.V.
Elina Sureste, S.A. de C.V.
Elinatech, S.A. de C.V.
Energía Tamaulipas S.A. de C.V.
Ferroexpreso Pampeano S.A.C.
Fidelis Management S.A.
Flinwok S.A.
Mexcarbón, S.A. de C.V.
Nitroelina, S.A. de C.V.
Norgas S.A.
Norpower, S.A. de C.V.
Preglosid S.L.U.
Prestaciones Globales Siderúrgicas S.A.
Saudi Techint Ltd.
Servicios Siderúrgicos Sersisa, S.A.
Servicios y Prestaciones Techint Funchal - Serviços, Comércio e Gestão de
Projetos Lda.
SICI - Servicios de Ingeniería y Construcciones Industriales S.A. de C.V.
Sidernet S.A.
Sidernet de Venezuela C.A.
Sidernet Mexicana S.A. de C.V
Socominter Sociedade Comercial Internacional Ltda.
Tanks Technologies, S.A. de C.V.
Holland
Mexico
Argentina
Mexico
Mexico
Venezuela
Argentina
Ecuador
Argentina
Mexico
Colombia
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Argentina
Panama
Uruguay
Mexico
Mexico
Argentina
Mexico
Spain
Argentina
Saudi Arabia
Venezuela
Portugal
Mexico
Argentina
Venezuela
Mexico
Brazil
Mexico
100.00%
50.00%
(1)
50.00%
50.00%
100.00%
65.00%
100.00%
77.14%
100.00%
99.86%
51.00%
100.00%
50.00%
53.00%
(3)
100.00%
(4)
100.00%
100.00%
50.00%
70.00%
50.00%
(6)
100.00%
100.00%
60.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
51.00%
Company
Country % of ownership
June 30, 2010 (*)
100.00%
50.00%
(1)
25.00%
25.00%
100.00%
65.00%
100.00%
77.14%
100.00%
99.86%
51.00%
100.00%
50.00%
53.00%
100.00%
100.00%
(4)
100.00%
100.00%
25.00%
70.00%
50.00%
100.00%
100.00%
100.00%
60.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
51.00%
(2)
(2)
(2)
96 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
% of ownership
June 30, 2009 (*)
Techint Chile S.A.
Techint Compañía Técnica Internacional S.A.C.I.
Techint Compañía Técnica Internacional S.A.C.I.
Techint Compañía Técnica Internacional S.A.
Techint E&C, S.A. de C.V.
Techint Engenharia e Construção S.A.
Techint E&C, Inc.
Techint International Construction Corp. (TENCO)
Techint Ingeniería y Construccion Bolivia S.A.
Techint Ingeniería y Construcciones, S.L.U.
Techint Inversiones S.A.I.F.
Techint Nigeria Limited
Techint S.A.C.
Techint, S.A.
Techint, S.A. de C.V.
Techint, S.A. de C.V.
Techint, S.A.
Techint, S.A.
Techint Servicios, S.A. de C.V.
Tecnomatter Instalaciones y Construcciones S.A.I.F.
Tecnomatter S.A. de C.V.
Tecnopower S.A de C.V.
Terminales Portuarias del Pacífico, S.A.P.I. de C.V.
TGT de México, S.A. de C.V.
Chile
Argentina
Uruguay
Venezuela
El Salvador
Brazil
Canada
Bahamas
Bolivia
Spain
Argentina
Nigeria
Peru
Guatemala
Honduras
Mexico
Nicaragua
Panamá
Mexico
Argentina
Mexico
Mexico
Mexico
Mexico
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
(3)
66.66%
(5)
(7)
Company
Country % of ownership
June 30, 2010 (*)
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
(5)
12.00%
100.00%
(2)
(*) Direct and indirect participating interests are included.
(1) At June 30, 2010 the Company decided to include its proportional shareholders’
equity in the liabilities since the subsidiary has a negative shareholders’ equity. At
June 30, 2009, assets, liabilities and results are not included in the consolidated
financial statements because the Company decided to set up an allowance for the
full investment value.
(2) TEMEX has the power to govern the financial and operating policies of the entity
(3) During the fiscal year, these companies were wound-up.
(4) Controlling interest through Compañía Inversora Ferroviaria S.A.I.F.
(5) See note 1.
(6) On August 27, 2009, TEMEX sold 60% of its shares in Norpower, S.A. de C.V.
(7) On August 27, 2009, TEMEX sold 100% shares owned in TGT de Mexico SA de C.V.
Consolidated Financial Statements | 97
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
27. Cost of sales and expenses by nature
June 30, 2009
Labor costs
Taxes, rates and contributions
Fees and technical advice
Sub-contract for services
Purchases of material and supplies
PP&E depreciation
Intangible assets Amortization
Work structure expenses
Office structure expenses
Participation in J.V. balances
Unallocated costs
Subtotal
Discontinued operations (See note 24)
Total June 30, 2010
Total June 30, 2009
589,634
28,469
51,748
219,034
247,311
48,033
812
27,065
58,892
53,481
37,880
1,362,359
(1,667)
1,360,692
-
4,348
1,116
222
2,785
95
-
-
54
14
-
1,310
9,944
-
9,944
7,594
66,203
7,305
15,126
10,952
565
4,024
655
3,879
8,118
-
9,328
126,155
(1,173)
124,982
101,903
519,083
20,048
36,400
205,297
246,651
44,009
157
23,132
50,760
53,481
27,242
1,226,260
(494)
1,225,766
1,332,196
June 30, 2010Selling expenses
Cost of sales General and administrative
expenses
511,631
58,774
44,213
263,084
293,126
53,215
671
18,586
42,235
130,494
33,854
1,449,883
(8,190)
-
1,441,693
98 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
28. Financial results
10,723
-
586
1,600
2,870
26
15,805
(6,687)
9,118
(7,344)
(6,832)
(304)
(101)
(3,648)
(1,782)
(20,011)
8,822
(11,189)
21,835
29,123
-
2,061
274
214
53,507
(316)
53,191
(18,867)
-
(5,551)
(5,374)
(2,969)
(2,730)
(35,491)
3,458
(32,033)
June 30, 2010 June 30, 2009
Income
Costs
Interests and indexation
Net foreign exchange transaction
Derivate financial instruments
Discount at current value credits Techint Cia. Técnica Int. S.A.C.I.-
Impregilo S.p.A (Suc. Argentina) - Iglys S.A. - U.T.E.
Holding results
Other
Discontinued operations (see note 24)
Interests and indexation
Net foreign exchange transaction
Derivate financial instruments
Holding results
Comissions
Other
Discontinued operations (see note 24)
Consolidated Financial Statements | 99
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
29. Other income and expenses, net
13,399
(5,701)
601
819
9,118
(13,969)
(4,851)
4,639
-
(5,363)
1,970
1,246
(238)
1,008
June 30, 2010 June 30, 2009
Gain from the sale of PP&E
Impairment loss
Net result for provisions for legal claims and contingencies
Other
Discontinued operations (see note 24)
100 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
30. Income tax expense
The net difference between the tax calculated at the
rate in effect in each country and the total charge for
the year is generated by the following:
(45,388)
(16,085)
(61,473)
4,931
(56,542)
(60,066)
1,153
4,180
-
544
(7,765)
-
2,514
(1,410)
5,582
(2,944)
(3,261)
(61,473)
(47,296)
33,184
(14,112)
(262)
(14,374)
(64,626)
2,696
(684)
3,050
1,419
1,045
37,367
8,724
(2,505)
-
(110)
(488)
(14,112)
June 30, 2010
June 30, 2010
June 30, 2009
June 30, 2009
Current income tax
Deferred income tax
From discontinued operations (see note 24)
Tax calculated at the applicable rate on the result for the year
Effect of restatement in constant currency
Result due to participating interests in subsidiaries and related companies
Sale of participating interests
Dividends earned
Provisions for deferred tax assets
Recognition of deferred tax assets
Tax benefit arising from the reversal of impairment of net operating losses recognized in prior years
PP&E
Tax-deductible interest on own capital
Non-deductible expenses
Other, net
Income Tax
Consolidated Financial Statements | 101
Physical progress
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
31. Main contracts in progress
At June 30, 2010 and 2009, the main contracts are
the following:
80
280
368
236
54
30
136
15
87
428
127
50
152
133
156
48
7
5
8
37
20
100%
100%
3%
95%
100%
100%
100%
100%
3%
100%
100%
100%
67%
11%
100%
18%
10%
20%
0%
70
224
-
118
50
28
118
16
-
416
110
38
123
-
-
-
4
15
-
-
-
82%
98%
-
67%
89%
99%
75%
97%
-
72%
71%
23%
-
-
-
50%
67%
-
-
-
Country / Work
Argentina
Campana Refinery
Los Caracoles Hydroelectric Station
Punta Negra Hydroelectric Station
Engineering Services, Supplies and Mechanical Assembly at the
Ancillary Building of the Reactor - Atucha II
Veladero Mine
Pirquitas Mine
Pascua Lama
Underground "A" Line - Renewal of Stations
Bolivia
Third Processing Train of the Sábalo Gas Treatment Plant
Peru
LNG Pipeline
Chiquintirca Gas Compression Plant
Loop de la Costa Gas Pipeline
Camisea Maintenance
Chile
Construction of Sea Water Drive Pipeline- Minera Esperanza
Replacement of Mineral Pipeline and Reclaimmed Water System
Arabia
Manifa Water Pipeline
Uruguay
Av. Ferreira Aldunate
Sanitation of Maldonado
Road 18
Maldonado Effluents
Sanitation of Ciudad de la Costa
Total contract amount (USD million)
Total contract amount (USD million)
June 30, 2010 June 30, 2009
Physical progress
(1)
(1)
(2)
(2)
(2)
(3)
102 | TEI&C S.A.
Notes to the Consolidated Financial Statements
All amounts are shown in USD thousands, unless otherwise stated
Physical progress
149
202
380
782
200
387
1,058
30
46
91
158
90
73
251
318
96
43
139
57
100%
100%
92%
49%
30%
100%
1%
100%
67%
90%
100%
100%
100%
100%
94%
100%
72%
74%
64%
155
201
332
628
157
295
-
30
-
91
158
90
73
224
293
92
43
139
57
100%
95%
58%
18%
4%
60%
-
95%
-
14%
98%
100%
100%
60%
88%
99%
40%
52%
55%
Country / Work
Brazil
Maintenance and Improvement of Offshore Platforms at Macaé –
Northeast
Maintenance and Improvement of Offshore Platforms at Macaé –
Marlim
Gasoline Unit of President Bernardes de Cubatão Refinery (RPBC)
Diesel Unit of Landulpho Alves-Mataripe Refinery (RLAM)
Lot I Tanks Refinaria do Nordeste, Abreu e Lima (RNEST)
Gasduc III
Unidad de Coque Retardado - Complexo Petroquímico do Río de
Janeiro (COMPERJ)
Mexico
SE 1125 Distribution
SE 1125 Distribution - Phase II
SLT 1119 Transmission and Transformation of the Southeast
Central Expansión Petacalco Thermoelectric Plant
Canada
Waupisoo Pipeline Project
Corridor Pipeline Expansion Project
Canadian Mainline Pipeline Project
Central America & Caribbean
Gasoline Optimization Program Upgrade Project for Petroleum
Company of Trinidad and Tobago
Pipeline Limón – La Garita
Siepac Substations
Siepac I
Siepac II
Total contract amount (USD million)
Total contract amount (USD million)
June 30, 2010 June 30, 2009
Physical progress
(1) The Company's participation is 75%
(2) The Company's participation is 50%
(3) The Company's participation is 60%
(4) The Company's participation is 43%
(2)
(3)
(2)
(2)
(4)
(2)
(2)
(2)
(2)
32. Subsequent events
After June 30, 2010, no events, situations or
circumstances have occurred which might significantly
affect the Company's equity or financial position,
which have not been adequately contemplated or
mentioned in these consolidated financial statements.
Consolidated Financial Statements | 103
Gasoline Unit of President Bernardes de Cubatão Refinery (RPBC), Brazil. The main physical amounts are: 11,400 m3 of concrete,
730 tons of metallic structures, 2,300 tons of equipment, 1,549 tons of piping, 423,000 m of cables and 5,917 instruments.
104 | TEI&C S.A.
ARGENTINADuring the fiscal year ended in June 2010, total
revenue in the country amounted to USD 325 million.
The main projects developed during the fiscal year
include:
EnergyLos Caracoles Hydroelectric Station - Energía
Provincial S.E. The project was handled by the
Techint-Panedile Argentina S.A. Joint Venture
(JV), where the Company has a 75% participating
interest. Its purpose is to generate power and
improve the stream-flow regulation of San Juan
River, the main water resource of the province of the
same name. With a power of 125 MW, Los Caracoles
will provide a mean power capability of 715 GWh,
and this would represent a significant step towards
San Juan’s power self-sufficiency.
The total contract amount was USD 280 million,
at 100% of the JV. The two generation units
became operational in July and December 2009,
respectively. Civil works were completed during this
fiscal year, and the works are now in the warranty
period since the Company has already obtained the
Provisional Acknowledgments of Receipt.
Punta Negra Hydroelectric Station – Energía
Provincial S.E. In November 2009, a contract was
executed between Empresa Provincial S.E. and the
Techint-Panedile JV where the Company has a 75%
participating interest. This project is on the San Juan
River, 20 Km. downstream Los Caracoles project, and
it is intended to increase the regulation of this river,
which is essential for San Juan’s economy, and to add
65 MW to the generation system of the Province. The
contract amount is USD 368 million and the execution
term is 54 months. Works were commenced in
January 2010; at present, the construction of the river
deviation channel and the engineering tasks devoted
to review the executive design are in progress. As of
June 30, 2010, the progress rate of construction is 3%.
TEI&C subsidiaries’ activities for the period 2009-2010Revenue
369
457
325
07-08 08-09 09-10
Annual Report | 105
Engineering Services, Supplies and Mechanical
Assembly at the Ancillary Building of the Reactor
- Nucleoeléctrica Argentina S.A. - Atucha II. This
is a service contract to perform the piping system
assembly in the ancillary building of the reactor
(UKA building). This building is divided into four
main sectors, having different functions: radioactive
waste processing and storage, heavy water
enrichment, ventilation systems, locker rooms and
access to restricted zone.
This project is carried out in two stages. The
first stage corresponds to piping assembly and
comprises 235 tons of supports and 280 tons of
piping. The physical progress rate for the piping
assembly as of June 30, 2010, is 95%. The second
stage, the contract of which was executed after the
end of the fiscal year, comprises piping ends, Civil
Works, Painting, Insulation and Auxiliary Electricity
Services, in the same Building. Both stages works
will reach USD 236 million.
MiningIn this sector, the Company has the experience and
resources required to perform civil works, roads,
runways, assembly of processing plants, installation
of tubing and soil movement.
Sales during the fiscal year reached the sum of
USD 29 million.
During the period under analysis, the Company kept
on developing the following projects:
Veladero Mine - Barrick Gold Corp. In October 2009,
the Company completed the works of extension of
the current facilities, executed in association with
Fluor Argentina Inc., under a JV on a 50%/50%
basis. The total amount was USD 54 million.
Also in October 2009, Techint was awarded the
repair of 3.5 km. of the transportation belt as well
as works on 30” piping corresponding to part of the
106 | TEI&C S.A.
second stage of pumping, which works were
completed in May 2010.
Pirquitas Mine - Mina Pirquitas Inc. Argentine
Branch. During this fiscal year, Mina Pirquitas Inc.
Argentine Branch, subsidiary of Silver Standard
Resources Inc. from Canada, acknowledged
receipt of the project, upon execution of the
Acknowledgement of Completion in January 2010.
The works consisted in the provision of services
of basic and detail engineering, procurement
management, construction direction and start-up of
an opencast silver, tin and zinc mine, with facilities
to process 9,000 tons a day through flotation and
gravimetric concentration. The total contract amount
was USD 30 million.
Pascua Lama - Barrick Gold Corp. Bi-national gold
and silver mining undertaking, located in the border
between Chile and Argentina. The Company is
associated in a JV with Fluor Daniel Argentina Inc.
Argentine Branch (on a 50%/50% basis) to carry
out the works divided into three phases: Phase I -
Consolidation of Basic Engineering and Feasibility
Study of the Project; Phase II - Detail Engineering
and Procurement Management, and Phase III
- Construction Management and Construction.
During this fiscal year, works were continued in
Phase II, starting in April 2007. The total expected
amount for this phase is USD 136 million. In
addition, the preliminary works have been started
for commencement of Phase III, which phase is
expected to begin during the next fiscal year.
Architecture and infrastructure works As regards infrastructure activities, the Company
has the capacity and expertise required to
develop projects related to roads, highways,
bridges, tunnels, railroad and underground
tracks, aqueducts, ports, airports, effluent and
sewage water treatment plants, dams and
telecommunication systems. In addition, the
Company performed architectural works, such
During the fiscal year
ended in June 2010,
total revenue in the
country amounted to
USD 325 million.
Annual Report | 107
Oil & GasCampana Refinery - ESSO. During the first half
of the fiscal year, the works committed under
Assignment No. 10 of the EPC – RC- 1585 umbrella
contract were completed.
The works developed comprised management
service, development of engineering, procurement
and construction for the re-adaptation of the facilities
for import and export of low-sulfur fuels (50 ppm),
the execution of a new 33kv line, in a covered duct
way (with a total length of 1,150 m), as well as
facilities for interconnection of the Campana Refinery
with the HMU (Hydrogen Manufacturing Unit).
In October 2009, the applicable turnover /
acceptance notices were signed, and during the
subsequent 2-month period the demobilization and
closing of the project took place.
The final accumulated certified amount was
USD 80 million
Iron & Steel Industry and Other Industries The Company has developed highly specialized
resources to provide design, engineering,
construction and main maintenance services
to steel-making plants, lamination workshops,
blast and electric furnaces, production facilities,
metallurgical plants, aluminum-making plants and
precious metals plants.
The amount of sales reached during this fiscal year
was USD 64 million.
Several works were executed in Argentina for
Tenaris Siderca and Ternium Siderar, among which
the following stand out:
Ternium Iron & Steel Projects. Relining of Blast
Furnace 1. The project consists in increasing the
capacity of Blast Furnace 1 from 3000 Tn/day to
3600 Tn/day. The scope of works includes: change
as business offices and buildings, housing unit
complexes, cultural and educational premises,
penitentiary complexes and hospitals.
During this fiscal year, the following projects were
developed:
Renewal of Line A Underground Stations –
Secretaría de Transporte de la Nación. This project
was performed under a JV with Benito Roggio
e Hijos S.A., where the Company holds a 50%
participating interest, and for a total amount of
USD 15 million. During this fiscal year, the works
were completed and delivered. Such works
consisted in the completion of the overall renewal
of several underground stations of the Line A of the
City of Buenos Aires.
Crema 332 - Dirección Nacional de Vialidad
(National Road Department). The contract included
the performance of recovery and maintenance
works in the roads of the province of San Juan and
was awarded to the Joint Venture (JV) formed by the
Company and L. M. Pagliara S.A. (with a 60% and a
40% participating interest, respectively). Works were
completed on May 2, 2010, and maintenance works
are currently in progress to obtain the Provisional
Acknowledgement of Receipt. The total contract
amount was $ 61 million, at 100% of the JV.
Road 14 - Dirección Nacional de Vialidad (National
Road Department). The contract was awarded to the
Joint Venture (JV) formed by the Company, with a
60% participating interest, and ICF S.A. and Hidraco
S.A., with a 20% each. The works consisted in the
construction of a second roadway on National Road
No. 14, in the province of Corrientes, in the so-called
Tranche No. 7, between the junction with National
Road No. 127 and the junction with Provincial
Road No. 126. During this fiscal year, the Dirección
Nacional de Vialidad approved the assignment by
the Company of 100% of its participating interest in
such JV to ICF S.A.
108 | TEI&C S.A.
of internal heat-resisting steel and cover in tap
hole area, increase of refrigeration system capacity
(construction of new pump rooms and cooling
towers), construction of a new casting room,
construction of an INBA granulation system and
alternative granulation basin and new electrical
rooms, among other tasks.
Total man-hours used were approximately 4.5 million
and the general progress rate is 99%.
New extension of Silo High Voltage Line (Línea
Alta de Silos - LAS). The scope of works included:
disassembly of the existing Coke Conveyor Belt and
replacement by the new C1A and C1B conveyor belt;
expansion of Rancho Negro (electrical room); lifting
of Conveyor Belt 5; assembly of two new automated
trippers, directed from a control tower; assembly of
a control tower; new extension of the whole power
source line and lighting of the sector and assembly
of level sensors at silos.
Total man-hours used in LAS were 186,700 and the
progress rate during the fiscal year was 100%.
Total income in this fiscal year reached the sum of
USD 48 million, using 2.5 million man-hours.
Tenaris Iron & Steel Projects. The most remarkable
works performed during this fiscal year include the
change of five beams in Section 7, fume extraction
2nd stage in the steel-making area and extraordinary
repair of Plant 2009 - 10.
Total income of the period reached USD 10.9 million,
using 562,000 man-hours.
Other Investments and ServicesRailway Cargo Transportation
Ferroexpreso Pampeano S.A. (FEPSA), a company
under the control and corporate decision of Techint
through Compañía Inversora Ferroviaria S.A.I.F.,
is the concession holder of the railway cargo
transportation. This company provides services
towards the ports of Bahía Blanca, Rosario,
Annual Report | 109
San Lorenzo and San Martín to exporters, stockers
and large-scale producers within a vast area of the
Wet Pampa region.
During this fiscal year, 3.4 million tons of cargo
were transported, which represents a 15% volume
reduction with respect to the preceding period.
Puentes del Litoral S.A. - Rosario - Victoria
The Company is a minority stockholder (with an 8%
participating interest) and together with Impregilo
S.p.A., Iglys S.A., Hochtief Aktiengesellschaft
Vorm. Gebr. Helfmann, Benito Roggio e Hijos
S.A., Sideco Americana S.A. and Iecsa S.A., forms
the road company connecting the city of Rosario
(Santa Fe) and Victoria (Entre Ríos), the temporary
commissioning of which occurred in May 2003.
On May 22, 2007, the reorganization proceedings
concerning such company began before the
National Court of First Instance in Commercial
Matters No. 13, Court Clerk Office No. 26, of the
City of Buenos Aires. On December 30, 2009, the
Court passed a ruling approving the composition
settlement agreed between the company and its
creditors and thus, the reorganization proceedings
are terminated. As of the date of this Annual Report,
the Company has paid the obligations undertaken
in such composition settlement. In addition,
negotiations continue to settle the Concession
Contract with the Unidad de Renegociación de
Contratos de Obras y Servicios Públicos (UNIREN).
BRAZILTechint Engenharia & Construção S.A. (TEBRA) -
Brazil performs activities related to engineering,
construction, assembly, works management, off-
shore projects, power generation, transmission
and distribution, iron & steel units, transportation
systems and infrastructure works in general.
Revenues for this fiscal year have increased by 19%,
from USD 39 million to USD 396 million.
Revenue
243
331
396
07-08 08-09 09-10
110 | TEI&C S.A.
During the current fiscal year, works were
performed in the following projects:
Oil & GasPetroleo Brasileiro S.A. - Gasoline Unit of President
Bernardes de Cubatão Refinery (RPBC). In March
2007, a contract was executed with Petrobras for the
preparation of the consistency review of the basic
project, preparation of the detail project, partial
supply of equipment, supplies of bulk material,
civil construction, electromechanical assembly,
pre- commissioning, commissioning and technical
assistance during the pre-operation and start-up of
the units of Cracked Gasoline Hydrodesulphurization
(HDS), Diethanolamine (DEA) and Coke Gasoline
Hydrotreatment (HDT) at the Refinery Presidente
Bernardes de Cubatão, State of São Paulo.
The total updated contract value amounts to USD
380 million. The works are performed under a Lump
Sum Contract.
The main physical amounts are: 11,400 m3 of
concrete, 730 tons of metallic structures, 2,300 tons
of equipment, 1,549 tons of piping, 423,000 m of
cables and 5,917 instruments.
The general progress rate of the project is 92%.
Petroleo Brasileiro S.A. - Diesel Unit of Landulpho
Alves-Mataripe Refinery (RLAM). On June, 2008,
a contract was signed with Petrobras for the
preparation of the consistency review of the basic
project, preparation of the detail project, partial
supply of equipment, supplies of bulk material,
civil construction, electromechanical assembly,
pre-commissioning, commissioning and technical
assistance during the pre-operation, start-up and
assisted operation of the HDT of Diesel (U-37) and
UGH (U-38) units, the Power Sub-station SE-37
and the Control Room (K-3701) at the Refinery
Landulpho Alves de Mataripe, State of Bahía.
It is a Lump Sum contract for an updated total
amount of USD 782 million, under a horizontal
consortium (50% / 50%) with Andrade Gutierrez.
The total execution term is expected to be 36 months.
The main physical amounts reach: 11,000 m2 of
concrete, 408 tons of metallic structures, 4,751 tons
of equipment, 1,570 tons of piping, 240,000 m of
cables, and 2,732 instruments.
The general progress rate is 49%.
Petroleo Brasileiro S.A. - Lot I Tanks Refinaria
do Nordeste, Abreu e Lima (RNEST). On March,
2009, a contract was entered into with Petrobras
for the preparation of the consistency review of
the basic project, detail engineering, supply of
materials, supply of equipment, civil construction,
electromechanical assembly, preservation,
conditioning, support and tests for the pre-operation
of Lot I Tanks of RNEST Refinery, belonging to
Petrobras, in Ipojuca, State of Pernambuco.
The project includes three raw water tanks
(Ø 65.0 m; 14.7m high; and 670 tons each) and eight
crude oil tanks (Ø 98.5m; 14.7m high; and 2,430 tons
each). The main physical amounts are 9,637 m3 of
concrete, 21,558 tons of assembly and 177,300 m2
of painting.
It is a Lump Sum Contract being executed under
a consortium with Equipamentos y Usiminas
Mecânica, in which Techint has a 60% participating
interest.
The activities started in April 2009 and will
be completed in May 2012. The updated value
of the contract is USD 200 million (at 100% of
the consortium).
The general progress rate of the project is 30%.
Annual Report | 111
Petroleo Brasileiro S.A. – Retarded Coke Unit
–Complexo Petroquímico do Río de Janeiro
(COMPERJ). On April, 2010, a contract was executed
with COMPERJ Petroquimicos Basicos for the
preparation of the consistency review of the basic
project, preparation of the detail project, partial
supply of equipment, supplies of bulk material,
civil construction, electromechanical assembly,
pre- commissioning, commissioning and technical
assistance during the pre-operation and assisted
operation start-up of the Retarded Coke Unit
(U2200), Manipulation and Storage Yard (U6821)
and 2 Electrical Sub-stations.
It is an EPC Lump Sum contract, with guaranteed
physical amounts.
Techint is part of the TE-AG Consortium with Andrade
Gutierrez, with a 50% participating interest each,
under the leadership of Techint. The total value of
the contract is USD 1,058 billion (at 100% of the
Consortium), within a contractual term of 36 months.
The main physical amounts are as follows: 46,204
m3 of concrete, 4,062 tons of metallic structures,
7,433 tons of static and rotating equipment,
2,411 tons of piping, over one million meters of
electricity and instrument cables, 78,529 meters of
electroducts, and 4,938 instruments.
The general progress rate is 1%.
PipelinesTransportadora Associada de Gás - Gasduc III –
Pacote 01. In August, 2008, a contract was executed
with Transportadora Associada de Gás – TAG, of
Petrobras, for the consistency review of basic
engineering, and construction and assembly of
the trunk line, special works, civil, mechanical,
electrical, instrumentation and hydraulic works,
tests, conditioning and support to the pre-operation
of Package I of Gasduc III Gas Pipeline Project.
112 | TEI&C S.A.
Package I of the gas pipeline extends from Macaé
to Cachoeiras de Macacú. Such pipeline will have a
38" diameter and will be 104 km long. Overall, the
pipeline will cover 178 km and will go from Estación
de Cabiúnas to Estación de Campos Elíseos, located
in the municipality of Duque de Caxias, in the State
of Río de Janeiro.
It is an EPC contract, with Unit Prices, and will
be executed under a horizontal consortium with
Constructora Norberto Odebrecht S.A. (50% / 50%).
The works were completed in January 2010. The
updated value of the contract is USD 387 million (at
100% of the consortium).
Off ShorePetroleo Brasileiro S.A. - Maintenance and
Improvement of Offshore Platforms at Macaé. The
updated contract value is USD 351 million, divided
into two contracts: Northeast, USD 149 million and
Marlim, USD 202 million. Both contracts are for unit
prices and are developed in 10 offshore platforms
in the Campos Basin, opposite to the shores of
the State of Rio de Janeiro. The Northeast contract
was completed in March 2009, whereas the Marlim
contract was completed in September 2009.
Iron and Steel Industry and Other IndustriesThyssenKrupp – Companhia Siderúrgica do
Atlântico (CSA). The contract encompasses the
rendering of Technical Support and Management
Services, including technical analysis, preparation
of welding procedures, construction management,
contract management and audit management,
among other activities. The updated contract value
is USD 3.4 million and the works are estimated to be
completed by June 2011.
The general progress rate of the project is 57%.
The Northeast contract
of maintenance and
improvement of Offshore
Platforms at Macaé was
completed in March
2009, whereas the Marlim
contract was completed
in September 2009.
Annual Report | 113
PERUThe fiscal year ended with a minimum sales
decrease in the country as a result of the progress in
the projects under development. For next years, we
foresee good chances of sustainable development
through the identification and progress in execution
- mainly at early stages - of new projects throughout
the country.
The main projects developed during this fiscal year
were as follows:
LNG Pipeline - PERU LNG S.R.L. Construction
of a 408 km 34” gas pipeline and the respective
facilities. The main activities included consistency
review of engineering provided by the client, the
supply of materials (excluding the casing and main
equipment) as well as construction, assembly and
pre-commissioning tasks. The contract amount was
USD 428 million. The project was completed
in January 2010 (Mechanical Completion
Certificate Date).
Camisea Maintenance – Compañía Operadora de
Gas del Amazonas S.A. The Company provides the
maintenance of this gas pipeline. The total contract
amount is USD 152 million by June 2010.
In July 2010, this contract was renewed for a thirty-
month period. The total amount of this renewal is
USD 126 million.
Chiquintirca Gas Compression Plant Transportadora
de Gas del Perú S.A. (TGP). The contract consisted
in the construction of a gas compression plant. To
carry out this project, the Company partnered with
GyM S.A. and formed the Proyecto Chiquintirca
Consortium, with a 60% and 40% participating
interest, respectively. The contract total amount
was USD 127 million, and includes USD 43 million
corresponding to purchases made directly by the
client. The project was completed in May 2010.
Revenue
106
317
259
07-08 08-09 09-10
114 | TEI&C S.A.
Loop de la Costa Gas Pipeline - Transportadora de Gas
del Perú S.A. (TGP). On February, 2009, the Company
received from TGP the notice to proceed with the
construction of a 107 km 24” gas pipeline and the
respective facilities. The total amount of the contract
was USD 50 million and it was completed in January
2010. The project was accomplished by January 2010.
During this fiscal year, the Company was awarded
two new Projects:
Jungle Loops – Early Works (TGP). In March 2010,
the Company received from TGP the notice to
proceed with the early services for the construction
of two pipelines of 32” and 24”, 150 km each,
including detailed engineering and early works
activities (erection of camps, issue of permits, land
rental and others activities).
The total amount of this first scope of the project
is around USD 73 million and it is expected to
be completed in March 2011. As of June 2010, the
project reached an 8% progress rate.
Expansion of LNG transportation system - Addition
of fourth pump (TGP). On June, 2010, the Company
received from TGP a contract and notice to proceed
with the Expansion of the LNG transportation
system, by adding a fourth pump in each pumping
station, two of them in the jungle and the other two
in the mountain section.
The total amount of this project is around
USD 14 million and it is expected to be completed
in April 2011. The project started in July 2010.
Annual Report | 115
MEXICOIn the year ended on June 30, 2010, Techint S.A.
de C.V. (TEMEX) consolidated its ongoing projects
in this country and continues working in the
development of new business.
Throughout its history, TEMEX has participated in
the engineering and construction of major industrial
and infrastructure projects.
The main projects developed during this fiscal year
were as follows:
EnergyCentral Expansion Petacalco Thermoelectric Plant
– Mitsubishi – Comisión Federal de Electricidad
(CFE). Turnkey contract for design, supply,
construction, testing and commissioning of a new
power generation unit of 750 MW of the Central
Thermoelectric Power Station Presidente Plutarco
Elías Calles, in the city of Petacalco, Guerrero. The
Company’s scope of work is the balance of plant of
the unit. As of June 30, 2010, the project reached a
100% progress rate and the total contract amount
was USD 158 million.
SE 1125 Distribution – CFE. Lump sum financed
public works contract and unit price contract with
CFE for the execution of six works: four distribution
substations and two high voltage lines with a length
of 111 km, whose locations are in the states of San
Luis Potosi, Hidalgo and Queretaro. As of June 30,
2010, the project reached a 100% progress rate and
the contract amount was USD 30 million.
Revenue
53
171
210
07-08 08-09 09-10
116 | TEI&C S.A.
SLT 1119 Transmission and Transformation of the
Southeast – CFE. Lump sum financed public works
contract and unit price contract with CFE for the
execution of engineering, supply and transportation
of installation materials, equipment inspection,
supervision of civil and electro mechanic works, pre-
operative tests, and technical support to allow for
the start up of electric substation and transmission
lines, located in the state of Tabasco. The contract is
being developed under a consortium where TEMEX
participating interest is 43%. As of June 30, 2010,
the overall progress for the project was 90% and the
contract total amount was USD 91 million.
195 SE 1125 Distribution (2nd phase) – CFE. Lump
sum financed public works contract and unit price
contract with CFE for the execution of nine works:
six distribution substations and three high voltage
lines with a length of 168 km, whose locations are
in the states of San Luis Potosi, Aguascalientes and
Zacatecas. As of June 30, 2010, the project reached
a 67% progress rate and the contract amount was
USD 46 million.
Iron and Steel Industry and Other IndustriesConstruction Works at Monterrey Plant – Ternium.
Provision of personnel and materials for the
execution of construction works (including civil and
electro mechanic works) and structure mountings.
During the period, the Company executed different
works in Ternium plants all over Monterrey and
Puebla in Mexico. Worth mentioning are some
works executed in Churubusco Plant, like the
construction and assembly of a cold lamination
facility and the construction of rolls transfer line.
In the North Plant the Company was working in
the construction and assembly of a cooling water
system and smoke collection system. In Juventud
Plant main works were the construction of trailer
entrance and external illumination systems. In
Universidad Plant the most important works were
the completion of a shipping warehouse, the
hydrogen system construction and the demolition
of several buildings. Lastly, in Puebla Plant there
were works related to a steel bars storage system
and installation of a casting machine system.
At present, there are around 500 persons, but there
were peaks of 600 people working for this contract
on a direct basis.
The sales obtained during the fiscal year amounted
to USD 17.5 million.
Construction Works at Veracruz Plant – Tenaris.
Provision of personnel and materials for the
execution of construction works (including civil and
electro mechanic works) and structures erection.
Maintenance and steel & iron services works were
continued with an average headcount of 1,800
persons.
At present, in the Plant Expansion Project contract
and the main contract, there are 3,089 persons
working on a direct basis. It is estimated that in the
first four-month period of 2011, such number will
exceed 1,000 people.
In the 09/10 fiscal year, the consolidated sales were
for USD 64 million.
Heavy Duty Cleaning Service – Tenaris. The annual
billing was approximately USD 5.4 million. In general
terms, the service comprises the transportation and
processing of slag, and the recovery, cutting and
classification of junk. The current contract in force
was awarded in 2009 for a 9-year term.
Petacalco Project – CFE. Carbonser, S. A. de C.V. was
established on 8 August 1994 and its main activity is
to provide services to load and transport coal to the
Power Plant President Plutarco Elias Calles, located
in Petacalco Guerrero. In the year ended on June
30, 2010, the Company unloaded 5.06 million tons
Annual Report | 117
of coal and delivered 5.80 million tons to the CFE
terminal in Lázaro Cárdenas. Total revenue for this
fiscal year amounted to USD 33 million.
CHILEFounded in 1951, Techint Chile S.A. engages in
activities related to engineering, construction
and assembly of pipelines; mining projects;
power generation, transmission and distribution;
transportation systems and infrastructure works in
general. Tenco holds a 76.88% participating interest
in Techint Chile S.A.’s capital stock.
During this fiscal year, the Company resumed its
level of activity, which had suffered a decrease
during the previous fiscal year. Works were
performed mainly in the following projects:
Minera Esperanza – Construction of Sea Water Drive
System. During July 2009, the Company received
the notice to proceed regarding the contract
for “Construction of Sea Water Drive System
and Transportation and Concentrate System”
[“Construcción del Sistema de Impulsión de Agua
de Mar y Sistema de Transporte y Concentrado”],
for Minera Esperanza. The work consists in an
engineering, procurement and construction (EPC)
contract and the scope of works contemplates
the construction of the concentrate transportation
system, consisting in the line to transport
concentrate from the Mina Esperanza plant to
the port of Michilla, with the applicable energy
dissipation station. In addition, works contemplate
the construction of the sea water transportation
and drive system, which shall transport water from
fore bay at the port of Michilla to a pool near the
Esperanza plant. The amount of the contract is USD
133 million and the execution term is 14 months.
Anglo American Sur S.A. – Replacement of Mineral
Pipeline and Reclaimed Water System. In December
2009, the Company received, from Anglo American
Sur S.A., the notice to proceed and then, the contract
Revenue
110
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for “Construction of Replacement Pipes Phase 1-A,
New 28” Mineral Pipeline and Reclaimed Water
System (Phase II)” [“Construcción de Tuberías
Reemplazo Fase 1-A, Nuevo Mineroducto 28” y
Sistema de Agua Recuperada (Fase II)] for their Los
Bronces Development Project. The work consists in
replacement of pipes corresponding to Phase I of the
existing mineral pipeline and the implementation of a
new 28” mineral pipeline, from San Francisco upper
sector to Las Tórtolas sector, on the existing track. In
addition, the work contemplates an expansion of the
capacity of the recirculated water drive system from
Las Tórtolas to the grinding facility, by means of a
new drive system contemplating the reutilization of
pipe sections of Phase I to be replaced. The term for
completion of all aspects of the contract is July 30,
2011 and the total amount of the contract is
USD 156 million.
Anglo American Sur S.A. Construction of Stations
and Singular Points for the reclaimed water system.
In April 2010, the Company received the notice to
proceed regarding the works related to the stations
corresponding to the reclaimed water system for
Los Bronces Development Project, which shall
constitute addenda to the contract for the Mineral
Pipeline and Reclaimed Water System already
executed with Anglo American.
Minera Escondida Limitada Service of Mechanical
Maintenance. During November 2009, the new
contract “Service of Mechanical Maintenance per
Families and Equipment of Processes” [“Servicio
de Mantenimiento Mecánico por Familias y Equipos
de Procesos”] was executed with Minera Escondida
(MEL). This contract contemplates the service
of mechanical maintenance of Los Colorados,
Laguna Seca and Área Seca de Hidrometalurgia
concentration plants. The term of the contract is
until October 31, 2012.
Annual Report | 119
Sociedad Contractual Minera el Morro (Detail
Engineering Service). During June 2009, the
Company was awarded “El Morro” project by
Sociedad Contractual Minera El Morro (Xstrata
Copper). The scope of the contract contemplated
detail engineering of Phase I of the desalinated
sea water transportation system located in the 3rd
Region of Chile. In December 2009, services were
completed and the Company received the final
acknowledgment of receipt.
Compañia Minera Casale – Engineering Services
for water and concentrate transportation system.
In May 2010, the Company received the notice to
proceed with works of basic and detail engineering
of the water and concentrate transportation system
of the Cerro Casale Project owned by Barrick Gold
and Kinross. Works will be executed in collaboration
with Brass. The execution term is 15 months.
In addition, two flats (2600 m2) were bought in the
region of Las Condes (Santiago) to move Techint
Chile’s offices. The delivery and subsequent move of
Techint Chile’s office will take place in the first half
of 2011.
CANADADuring the fiscal year 2009 – 2010, Techint E&C Inc
(TECAN) completed the execution of most of the
works under the ongoing contracts. The efforts
were focused on developing activities in the Oil
Sands and other oil & gas producing areas in
Western Canada; TECAN, either as a stand-alone
company or in partnership with other firms, has
bidded C and EPC projects for the execution of
pipelines and facilities in these areas belonging to
clients such as Enbridge, CNRL, Suncor and Husky.
As of June 2010, Techint E&C Inc. is waiting for the
results of some of such bids.
Revenue
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The main projects developed during this fiscal year
were as follows:
PipelinesCorridor Pipeline Expansion Project (CPX) and
Products Pipeline NPS 20 - Interpipeline Funds. The
contract was signed in March, 2008. To undertake this
project, TECAN associated with Robert B. Somerville,
through a JV on a 50%/50% basis. The works under
this contract included a 32 km 42" pipeline and a
second one of 42 km 20" pipeline. The contract total
amount is USD 73 million. The mechanical completion
took place in November 2008. Final completion notice
was received on January 29th, 2010.
Canadian Mainline Pipeline Project (Alberta Clipper
Project) - Enbridge Pipelines Inc. The contract was
awarded in July 2007 to the JV formed by TECAN
and Robert B. Somerville, where the Company has
a 50% participating interest. The project includes
Spreads 3, 4 and 5, with a total length of 345 km
and 36" diameter. The contract, originally structured
as a Cost plus Fee, was replaced for the Spread 5
by a Lump Sum plus Unit Prices contract. The total
contract amount is USD 250.6 million. The Spread 5
was substantially completed in October 2009, and
Spreads 3 and 4 received Final Acknowledgement
as of September 2009. As of June 30, 2010, the Joint
Venture is working in the correction of deficiencies
and warranty attention in the three spreads, and
works are expected to be completed by fall 2010. The
contracts have been paid in full by Enbridge with
the exception of the 10% Holdback and the Warranty
Fund, a sum provided for the warranty period.
Business Development/ EngineeringCO2 Slurry Pipeline Joint Industry Project
-Pathfinders- As part of the Pathfinders Group,
Techint jointly participates with Enbridge, Syncrude,
Snamprogetti, Electric Power Research Institute, SNC
Lavalin, Cimarron Engineering and Stantec in the
design of a CO2 slurry pipeline to transport sulfur,
coke, limestone and other solid products from the
During the fiscal year
2009 – 2010, Techint E&C
Inc. (TECAN) completed
the execution of most
of the works under the
ongoing contracts.
Annual Report | 121
Fort McMurray area to the Southern markets in a
pipeline with dense phase CO2 as the carrier.
CENTRAL AMERICA AND THE CARIBBEAN
Sales in this region reached USD 96 million, and
include several works that are being executed by
the Company’s subsidiaries.
Oil & GasGasoline Optimization Program Upgrade Project
for Petroleum Company of Trinidad and Tobago
(PETROTRIN). This project is being developed in
Trinidad and Tobago by a joint venture with ABB
Lummus Global Overseas Corporation (currently,
CB&I), in which the Company holds a 50%
participating interest. It comprises the following
works: basic and detail engineering, procurement
management, construction and pre-commissioning
management, commissioning assistance, start-up
assistance and performance tests for the Gasoline
Optimization Program. The amount of the contract
for the JV is USD 74.9 million, plus a fixed fee of
USD 10.5 million for procurement management in
addition to refundable costs of around USD 232.6
million. As of June 30, 2010, the physical progress
rate was 94%.
PipelinesPipeline Limón – La Garita Refinadora Costarricense
de Petroleo S.A. Turnkey contract involving the
design, engineering, outfitting, construction and
startup of a 12-inch, 123 kilometer pipeline, plus
three pumping stations in Costa Rica. As of June 30,
2010, the overall progress for the project was 100%
and the contract amount was USD 95.6 million.
EnergySIEPAC 1 – Empresa Propietaria de la Red S.A.
Lump sum turnkey contract for the design of final
engineering, the supply of materials and equipment,
civil works, electromechanical works, final testing and
startup of SIEPAC line 1. The purpose of the Electrical
Revenue
144
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Interconnection System for the countries of Central
America (SIEPAC) is to establish an electrical market
in the region that will traverse Guatemala, El Salvador
and Honduras (SIEPAC I) as well as Nicaragua,
Panama and Costa Rica (SIEPAC II). As of June 30,
2010, the project reached a 74% progress rate and the
total contract amount was USD 139 million.
SIEPAC II – Consorcio Abengoa- Inabensa (APCA).
Lump sum turnkey subcontract for the design
of final engineering, the supply of materials and
equipment, civil works, electromechanical works,
final testing and startup of SIEPAC II. As of June 30,
2010, the overall progress for the project was 64%
and the contract amount was USD 57 million.
SIEPAC Substations – Empresa Propietaria de la
Red S.A. Contract for design, supply, construction,
testing and startup of the SIEPAC I and II Projects,
which connect the 15 substations pertaining to this
project. As of June 30, 2010, the project reached a
72% progress rate and the contract amount was
USD 43 million.
BOLIVIATechint Ingeniería y Construcción Bolivia S.A.
was founded on July 21, 2009, is to take part in
construction projects for buildings, roads, dams,
dwelling houses and transformation industrial
plants for any kind of industries and activities.
Oil & GasThird Processing Train of the Sábalo Gas Treatment
Plant – Petrobras Bolivia S.A. On December 28, 2009,
the Company and Petrobras Bolivia S.A. executed a
contract for construction, assembly, interconnection,
pre-commissioning, commissioning, start-up and
performance test of the Third Processing Train of
Sábalo Gas Treatment Plant, located at Tarija.
Such contract contemplates the expansion of the plant
by means of the construction of a processing plant
of gas from well-head, sweetening with amines and
Annual Report | 123
adjustment of dew point; as well as the construction of
Condensate Storage Tanks and other facilities required
for the operation of the Plant. The execution term is 18
months and the contract amount is USD 87 million.
URUGUAYOur historical presence in Uruguay was again
ratified during this fiscal year. Sales reached the
amount of USD 16 million, exceeding the sales of
the previous period.
The development of projects within the road and
water markets continued, including the following:
Maldonado Effluents. During this period, the
Company started the works related to the call for
bids “Treatment and final disposal of Maldonado
and Punta del Este system effluents” [“Tratamiento
y disposición final de efluentes del sistema
Maldonado y Punta de Este”]. The contract, entered
into between the consortium TECHINT, Montec,
Belfi and Obras Sanitarias del Estado (OSE), for
an amount of USD 37 million, comprises the
construction of 35 kilometers of tubing, 1 land
outfall of 4 kilometers and civil and architecture
works in 7 pumping stations, to be executed by
Techint, and 1 off-shore outfall, 1 km long, to be
executed by Montec, Belfi. The execution term is
36 months, and so far the project reached a 20%
progress rate.
Sanitation of Ciudad de la Costa. A contract was
entered into with OSE for USD 20 million for the
construction of 34 Km of sanitation networks, 56 Km.
of gutters and 32 Km. of road works at Ciudad de la
Costa, Department of Canelones. Some works related
to construction site facilities and setting out have
already been performed, and the commencement of
works is planned for the next fiscal year.
Road 18. In January 2010, works were commenced
under the contract executed with Ministerio de
Transporte y Obras Públicas through Corporación
Revenue
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Vial de Uruguay, CVU, for an amount of
USD 8 million. Works consist in the structural
reinforcement of 22 km of road in the Department
of Treinta y Tres, remarking the elaboration of around
60,000 tons of asphalt mixtures for which around
70,000 tons of rock must be ground, plus foundation
works, verge reconstruction and signaling.
Av. Ferreira Aldunate. In May 2010, the works
under this contract were completed. This contract
was executed with Municipalidad de Maldonado
for USD 7 million. Works consisted in the
construction of a double paved way and
surrounding streets on the current Av. Ferreira
Aldunate (to the North of downtown Maldonado)
which included, in addition to road works, hydraulic
infrastructure and lighting works.
Sanitation of Maldonado - Punta del Este. Works
were resumed for OSE, UGD Maldonado, upon
agreement on a third contractual phase for
USD 5.0 million. Works executed include: sanitation
of Punta del Este and Maldonado, removal and
replacement of pavement and network maintenance
in both cities, in addition to infrastructure works at
Planta del Chileno. For this contractual phase, the
works have reached an 18% progress rate.
Bridge over José Ignacio Stream. A bridge is being
built over José Ignacio Stream, Department of
Maldonado, under a contract with Corporación Vial
del Uruguay for an amount of USD 2 million. Works,
including placement of 200 m3 of reinforced concrete
and construction of 24 prefabricated beams, started in
August 2009 and have reached a 70% progress rate.
SAUDI ARABIAPipelinesTanajib - Manifa Water Pipeline – JGC Corporation.
During this period, we started the works under the
contract with JGC at Tanajib – Manifa, awarded
last year. This project consists in an 18” pipeline,
about 60 km long, which will connect the Tanajib
Annual Report | 125
water treatment plant and the Central Processing
Facilities. It also includes a surface facility with a
manual cut-off valve halfway along the course. The
contract total amount is USD 48 million with a two-
year term for execution.
ENGINEERINGDuring this fiscal year, the level of activity
developed, measured in man-hours, was around
1.8 million. The main engineering works performed
are related to projects under development and
others already completed, among which the
following are highlighted:
Punta Negra Hydroelectric Station (San Juan).
Conceptual, detail and basic engineering; including
detail engineering of works for the deviation of San
Juan River.
Pascua Lama Project - Barrick Gold (Argentina-Chile).
Basic engineering and project feasibility study, work
schedule and control budget. Detail engineering and
procurement, including management of purchase
orders placed by the client.
Pirquitas Mine Project (Jujuy). Basic engineering and
project feasibility study, work schedule and investment
estimate. Detail engineering and procurement,
including management of purchase orders.
Esso Clean Fuels Project (Campana). Assistance to
complete basic and detail engineering works, as
well as procurement.
YPF – Sulfur Reduction Phase 1 (Argentina).
Detail engineering and preparation of the bidding
conditions for an EPC contract.
Petrotrin Alky Acid Project (Trinidad & Tobago).
Completion of basic engineering, detail engineering
and procurement management.
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Atucha II Nuclear Plant (Argentina). Construction
engineering works of piping installations.
Perú LNG (Perú). Construction engineering and
assistance for works.
TGN-TGS Loops (Argentina). Detail engineering
for the expansion of the gas transportation pipeline
network
Camisea Expansion (Peru). Gas separation and
fractioning plants of Camisea. Conceptual, basic and
detail engineering. Procurement management of
equipment and material.
TGP - Chiquintirca Gas Compression Plant (Peru).
Conceptual, basic and detail engineering and
assistance for works. Procurement management of
equipment and materials.
TGP - NG Loop de la Costa Expansion (Peru).
Detail engineering. Procurement management of
equipment and material. Technical bidding terms for
EPC contract.
TGP - NGL Fourth Pump Expansion (Peru). Detail
engineering. Technical bidding terms for EPC contract.
TGP - Camisea Loops de la Selva (Peru). Conceptual
and basic engineering.
PLUSPETROL – Camisea 2nd Expansion (Peru).
Conceptual and extended basic engineering,
plus the preparation of bidding conditions for the
extension of Malvinas and Pisco plants.
El Morro Water Pipeline (Chile). Completion of basic
engineering and detail engineering.
MINERA ESPERANZA – Esperanza Pipelines (Chile).
Completion of detail engineering.
126 | TEI&C S.A.
cutting lines of 2.8 tons for L2C2 consisting of 1 roller,
one loading device and one walking beam each one.
TENARIS - LC2F-PEMA, INDUCTION FURNACE
REVAMPING (Campana -Argentina). The project
addressed the replacement of 2 induction furnaces,
and the design of a new reel carrier.
TENARIS - BAR LOADING TABLE FOR HOT MILL #2
(Canada). Installation of a new bar loading line.
TENARIS - FAT3 (Veracruz - Mexico). Installation
of all cold-cycle equipment for the new plant of
TENARIS TAMSA.
TENARIS - FAT3 - CASING THERMAL TREATMENT
(Veracruz - Mexico). Installation of seamless tubing
thermal treatment up to 7”.
PROCUREMENT The main works performed regarding supplies are
associated to the projects under development stated
in the preceding section, Engineering.
Procurement contributes to improve the Company’s
competitiveness by means of a comprehensive
revision of the respective purchasing strategies and
of processes and procedures, seeking to optimize
costs, reliability and transparency in management.
In this respect, the Company put the emphasis on
the specialization of procurement headcount and
the increased use of IT tools, with a focus on the
following aspects of procurement management:
(i) Increasing the contribution of value by focusing
the purchasing strategy on the critical success
factors, management total cost, productivity and
strategic factors.
(ii) Encouraging the specialization of the sector and,
consequently, organizing the structure based on
demand.
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ANGLOAMERICAN / BECHTEL - Los Bronces.
Pipelines and Stations (Chile): Two contracts,
including detail engineering completion.
Cerro Casale (Chile). Detail engineering for a slurry
line for Barrick mining company.
PETROBRAS - RNEST (Brazil). Detail engineering for
a storage tanks’ yard.
PETROBRAS – COMPERJ (Brazil). Detail engineering
for a new coking unit at the Petrochemical Complex
of Río de Janeiro.
EPR – Siepac Bahías & Líneas (Mexico). Detail
engineering for transmission lines and electrical
sub-stations.
CFE – SE 1125 Distribution Second Phase (Mexico).
Detail engineering for transmission lines and
electrical sub-stations.
CFE – SLT 1119 Southeast Transmission and
Transformation 1st Phase (Mexico). Detail
engineering for five power transmission lines and
two transformation sub-stations.
TENARIS - STEEL-MAKING AREA – FUME
EXTRACTION (Campana - Argentina). Installation of
new refrigerated pipelines for primary extraction of
dust in furnace 5 and non-refrigerated pipelines for
secondary extraction of furnace 4 – Steel-making area.
TENARIS - LC2F (Continuous cold-strip mill) - AJUS
1 / 2 / 3 – Non-Destructive Control Equipment (CND)
ENTRANCE (Campana - Argentina). Insertion in 3
existing ways of tilting rotators to perform a 90°
turn of master tubes, before they enter the CND for
subsequent calibration of the latter.
TENARIS - LACO 2 HOT LAMINATION - BAR CUTTING
2 (Campana - Argentina). Installation of new bar
Annual Report | 127
(iii) Boosting the use of IT supporting systems for
bids and suppliers’ management.
During the next fiscal year, the Company will keep
on working on the abovementioned actions which
will impact on the management indicators defined.
TECHINT EQUIPMENT DIVISION (TEPAM)During this fiscal year, TEPAM, in addition to the
administration, maintenance, repair, assistance
and allocation of equipment to the different
projects for use, continued to provide assistance
to Warehouse and General Services –areas that
centralize the Company’s logistics, with the
objective of supporting the beginning of works
upon commissioning, and subsequently, monitoring
their needs throughout the development of projects.
The program for the total renewal of TEPAM
equipment in 10 years continues, with the purpose
of setting the aging of such machinery in 5 years;
this will help reduce costs for repairs and obtain a
competitive improvement.
In the area of building infrastructure, we acquired
a location in La Negra- Antofagasta (Chile) and we
entered into a rental agreement in Chincha Alta
(Peru) in order to comply with the requests of our
internal clients.
The investment value in machinery, vehicles and
tools for the 2009-2010 fiscal year was
USD 21.8 million.
TEI&C S.A.