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BOARD OF DIRECTORS ANNUAL REPORT
The present Board of Directors Annual Report pertains to the 2014 fis-
cal period. The Report has been prepared so as to ensure harmoniza-
tion with the relevant provisions of C.L. 2190/1920 as in effect, of law
3556/2007 (GGI 91Α/30.4.2007) and the issued executive decisions
of the HCMC, especially HCMC Board of Directors Decision number
7/448/11.10.2007.
The present report contains financial details on the entity titled «MY-
TILINEOS HOLDINGS S.A.» (hereinafter called the «Company») and
its subsidiaries and associated companies (hereinafter called the
«Group», jointly with the company) for fiscal year 2014. It describes
major events that occurred in the same period and their influence on
annual financial statements. It also describes the main hazards and
risks that may be faced by the Group member companies in the forth-
coming year; finally, it lists major transactions between the Company
and the persons associated with it.
Ι. 2014 REVIEW - PERFORMANCE
AND FINANCIAL POSITION
After six consecutive years of recession and a cumulative contraction
of GDP in excess of 25%, economic activity in Greece began posting
positive growth rates as of the second quarter of 2014, resulting in
an annual growth rate of 0.8% on 31 December 2014. In parallel, the
achievement of primary surplus and the equilibrium in the current ac-
count balance serve as tangible proof of the Greek economy’s recent
stabilisation.
This improvement, which led to a drop in the yields of Greek sovereign
bonds and allowed Greece to successfully raise funds once again in
the international capital markets in the spring of 2014, was however
not enough to restore the country’s full access to the capital markets,
as its momentum was dampened by the uncertainty surrounding the
outcome of Greece’s negotiations with its EU partners regarding the
continuation of the financial assistance programme and the condi-
tionalities that accompany the funds made available for financing the
Greek economy. The result of these negotiations and their duration will
undoubtedly affect crucially the performance of the Greek economy in
2015 but also in the years to come.
On the global level, the ECB’s interventions succeeded in reducing
borrowing costs for Europe’s peripheral economies, with the Euro-
zone achieving a positive aggregate GDP growth rate of 0.9% after
two years of economic recession. In this respect, the ECB has already
announced its intention to provide additional support through its
quantitative easing programme, as the Eurozone is still facing strong
challenges, most notable among which is the risk of deflation. The
recent decline in oil and fuel prices is intensifying overall deflationary
pressures, with Greece posting already since early 2014 negative in-
flation levels which in December 2014 stood at nearly -2.5%.
Despite the feeble growth in the Eurozone, the weakened emerging
markets and the climate of geopolitical instability in Europe and the
Middle East, the global economy in 2014
posted a satisfactory rate that exceeded
3%. This rate is expected to pick up in the
months to follow, in an environment of char-
acterised by the reduction in oil prices and
the strengthening of the US Dollar against
most regional currencies and the Euro.
Throughout the deep recession in the
Greek economy, MYTILINEOS Group re-
mained focused on the expansion of its
business activities to markets abroad, the
implementation of strict cost controls. This
strategy is steadily bearing fruit, as the
Group is currently posting sustained core
profitability and rapidly declining net bor-
rowing levels, while also strengthening its
international profile by increasing the par-
ticipation of foreign institutional investors.
Metallurgy and Mining Sector
In the first quarter of 2014, aluminium pric-
es in the LME dropped to a five-year low of
$1,640/tn in February 2014, only to recover
dynamically, climbing up to $2,114/tn in the
third quarter.
Similarly, during 2014 the Euro/USD par-
ity followed a strong downward trend,
dropping from its 1.39 high in the year’s
first quarter to less than 1.21 at the end of
the year. Compared to 2013, the average
Euro/USD parity remained essentially un-
changed at 1.33.
The average price of aluminium during
2014 (LME 3-month) stood at 1,894 $/tn,
remaining virtually unchanged (+0.38%)
relative to the previous year. In contrast
to LME prices, premia posted new record
highs that helped sustain the total LME +
Premium final price at levels above $2,500/
tn.
The aluminium market fundamentals show
significant improvement, as stocks are
steadily dropping and demand remains
strong, while at the same time certain
producers who previously were forced
to lower production or even suspend the
operation of their less efficient plants now
appear hesitant to raise production levels
back again, because of the low levels of
LME prices.
Against this backdrop, 2014 was a turning point for the Group’s
Metallurgy & Mining Sector, as the successful completion of the
“MELLON” competitiveness recovery programme coincided
with the recovery of aluminium prices from the second half of
the year onwards, resulting in the significant improvement of the
Sector’s financial results.
EPC Sector (Construction)
Throughout the year METKA continued to successfully imple-
ment its international contracts, while effectively handling the
challenges created by the unstable environment in Middle East
markets.
The company accelerated the execution of its projects abroad,
achieving high operating margins and establishing its leading
position in the global EPC market. It also managed to limit its
exposure to the high-risk region of Iraq through an agreement
with its partner, SEPCO III, which is now responsible for the ex-
ecution of the project in Al-Anbar, while METKA has undertaken
the provision of technical support on a fee basis.
In 2014 METKA confirmed its strategic objective to explore op-
portunities in the domestic market, focusing on infrastructure
projects. A significant step in this direction was the official award
of the €273 m. project by ERGOSE, for the construction of the
Kiato – Rododafni railway line.
For one more year the high professionalism, expert know – how
and commitment of its people remained a key contributing fac-
tor in METKA’s successful activity, despite the continuing chal-
lenges of the external environment.
The joint effort of the company’s management and employees
is reflected in the results of the reference period.
The main factors which contributed to the Group’s above course
are :
a) The «Construction and commissioning of a 724 MW power
plant» in Deir Azzour, Syria, with a contractual value of
€
687
million, which in the period under review recorded a turnover of
€
121,0 million.
b) The «Construction and commissioning of a 590,726 MW
open-cycle, three turbine, dual fueled power plant» in Hassi
‘Rmel, Algeria, with a contractual value of
€
154 million and
2.311 million DZD, which in the period under review recorded a
turnover of
€
101,0 million.
c) Τhe continuation of the project «Construction of a thermal
power plant station of 1250 MW» in Iraq, with a contractual value
of $401,2 million which in the period under review recorded a
turnover of
€
76,8 million.
d) The continuation of the project «Con-
struction and commissioning of a 143 MW
power plant» in Zarka, Jordan, with a con-
tractual value of $ 143 million and 11 mil-
lion JOD, which in the period under review
recorded a turnover of
€
64,6 million.
e) The continuation of the project «Con-
struction of a power plant station of 701
MW» in Deir Ali, Syria, with a contractual
value of
€
673 million which in the period
under review recorded a turnover of
€
52,3
million.
f) The «Construction and commissioning
of an open-cycle, natural-gas fired, two
turbine power plant of 368,152 MW» in Al-
geria with a contractual value of
€
72 million
and DZD 2.127 million, which in the period
under review recorded a turnover of
€
44,2
million.
and g) The «Construction of 8 mobile gen-
erators of 179,72 MW» in Algeria, with a
contractual value of $66 million, which in
the period under review recorded a turno-
ver of
€
26,9 million
Energy Sector
The demand for electricity in Greece con-
tinued to be negatively affected by the
weak economic environment in 2014. Al-
though that impact was less than the previ-
ous years, electricity demand fell a further
0.6% compared to last year.
Regarding the generation mix, there was a
significant decrease of the participation of
Gas Fired plants as a consequence of the
changes in the regulatory framework, and
especially those regarding the abolishment
of certain transitional mechanisms. Said
changes resulted in the increase of the
System Marginal Price (SMP) by 39% (from
41,47
€
/MWh to 57,56
€
/MWh) compared
to the previous year, which in turn had a
knock on effect on the increase (4 times
higher) of net imports of electricity form
existing interconnections (from 2.103 GWh
to 8.819 GWh). In 2014 Lignite fired plants
reached a ceiling of 23 GWh of production
and electricity imports the maximum ca-
pacity of available interconnections.
BOARD OF DIRECTORS ANNUAL REPORT
