MYTILINEOS HOLDINGS | 2015 Annual Report

24

25

Annual Board of Directors Management Report

the projects it has been awarded in the markets of Ghana, Algeria and

Iraq. For the immediate future, METKA will focus on ensuring the suc-

cessful implementation of its contracts abroad and on securing new

projects in existing and/or in new markets, in order to expand its share

of the market for energy infrastructure projects in Europe, Turkey, N.

Africa and the Middle East.

In parallel, the company continues to diversify its activities by expand-

ing to new products, with the establishment of METKA-EGN, active

in the fast-growing global solar energy market, being a recent such

example.

Energy Sector

2016 is expected to be a turning point for the Energy Sector, as the

reduction of natural gas prices favours the competitiveness of the

Group’s thermal plants, especially regarding the merit to order com-

pared to the Lignite fired plants. In addition, PROTERGIA is expected

to continue increasing its share in the retail electricity market, while it

also keeps up with the implementation of its investment plan in new

RES projects.

In this context, the Energy Sector is expected to have an increased

contribution in the Group’s consolidated financial results for 2016.

IV Business Risk Management

Financial risk management aims and policies

The Group’s activities give rise to multiple financial risks, including the

current and interest rate related risks; the volatility in market prices;

credit risks; and liquidity risks. The Group’s risk management program

aims at containing potential negative influence to its financial results,

as this may arise from the inability to predict financial markets and the

volatility with respect to cost and sales variables.

The essential risk management policies are determined by the

Group’s Management. The risk management policy is applied by the

Corporate Treasury Department. The latter acts as a service centre,

operating under specific Management - approved lines.

towards establishing a strong presence in regional

fast growing markets. The total budget for METKA

S.A. is

€

14.4 plus DZD 571.6 million (total approx.

€

19.7 million) and the time schedule is 24 months.

•

Boiler upgrade in Units I and II of SES Agios

Dimitrios for NOx emission reduction with primary

measures and conformity to the requirements of the

European Directive 2010/75/EC

On 23/11/2015 METKA signed a new contract with

the Public Electricity Company S.A. for the design

and engineering, industrialization, tests on site, pro-

curement, transportation and storage of the equip-

ment at the project’s facilities, the erection, con-

struction, assembly, installation, tests on site and

commissioning of the Boilers further to the upgrade

with primary measures (Boilers incorporating the

new equipment and modified existing equipment)

for NOx emission reduction at Units I and II of SES

Agios Dimitrios. The total contract budget for MET-

KA S.A. is

€

13.75 million and the time schedule 22

months including the final Performance Tests.

ΙΙΙ PROSPECTS – RISKS AND

UNCERTAINTIES FOR THE YEAR

AHEAD

Α. Prospects for 2016

Metallurgy & Mining Sector

In the Metallurgy sector, the growth rate of global

aluminium demand is expected to remain strong

during 2016, thus helping support aluminium prices.

After the record-high levels attained at the end of

2014 and their rapid decline fall during 2015, Premia

appear to be stabilised. On the contrary, the signifi-

cant decrease in energy prices, raw materials and

transportation, drives production costs to lower lev-

els. Accordingly, low Aluminium prices, prevailed

also at the beginning of 2016, pose significant chal-

lenges for less competitive, marginal producers,

who are expected to continue curtailing their pro-

duction levels in the upcoming months.

The developments regarding the market’s funda-

mentals, the performance of emerging economies

and especially the Chinese, the energy costs and

the evolution of the Euro/USD parity, along with the

monetary policy by the Central Banks, are expected

to be the catalysts for the sector in the months to

come.

Within this international landscape, the Group is

focusing on further strengthening its competitive-

ness and is expecting a satisfactory financial perfor-

mance from its Metallurgy Sector in 2016.

EPC Sector

Implementation of the signed backlog, currently

standing at

€

1.2 billion, is expected to continue dur-

ing 2016. METKA has laid the foundations for yet

another year of satisfactory results, driven mainly by

On 24/7/2015 METKA signed the sixth contract for the construction of Patriot

anti-ballistic missile defense systems for Raytheon Company, destined for the

government of Saudi Arabia. The contractor is INTRACOM Defense Electronics

through an agreement with Raytheon Company/IDS (Integrated Defense Sys-

tems) and the project is the construction and delivery of 42 semi-trailers and 36

launcher platforms. The total contractual value is $ 37,9 million and final deliveries

are anticipated in 2018.

•

Construction and maintenance of the electricity networks in the areas of

Ioannina-Kefalonia-Komotini & Florina

On 09/06/2015 METKA undertook from the Hellenic Electricity Network Admin-

istrator S.A. the construction and maintenance of the network in the areas of Io-

annina-Kefalonia-Komotini & Florina, starting on 01/07/2015 and for three years

with a total contractual budget of

€

13,6 million.

•

Commercial operation of the power station in Zarka, Jordan

The commercial operation of a combined-cycle 143 ΜW power station in Zarka,

Jordan, on behalf of Samra Electric Power Co. (SEPCO) started within June 2015.

The project is the engineering, procurement, construction, and commissioning

of a 143 MW power station as an extension to the existing power plant, adding

an ALSTOM open-cycle unit to the already operating open-cycle facilities. The

project’s budget is $ 143 million and 11 million JOD. The commercial operation

is expected to be completed at the end of 2015.

•

First major project for METKA in Sub-Saharan Africa, in Ghana

In September, METKA’s 100% subsidiary, Power Projects Sanayi

İ

n

ş

aat Ticaret

Limited

Ş

irketi (Power Projects Limited) had signed a major contract to provide

a fast-track EPC as well as Operation and Maintenance support for a 250MW

Power Plant in Ghana. The project is a 5-year Build, Own, Operate and Transfer

(BOOT). The contract was signed with the Government of Ghana and METKA’s

partners in the deal, Ameri Energy.

The project consists of ten new General Electric TM2500+ mobile gas turbines

together with METKA’s well-proven modular balance of plant concept, already

successfully implemented for forty similar fast-track units internationally. By the

award of this new contract METKA adds its share in this deal, which exceeds

$360mio, in its current backlog.

• Foundation of new subsidiary METKA EGN and new Solar Power EPC

Contracts

In October, METKA S.A. announced the establishment of the new affiliated com-

pany METKA EGN, as a result of the joint venture with EGNATIA Group. METKA

holds 50,1% of the joint venture and the financial results of METKA-EGN will be

fully consolidated for 2015. By the end of the reporting period, METKA EGN, has

signed contracts for turn-key engineering, procurement and construction (EPC)

and operations and maintenance (O&M) for seven solar photovoltaic (PV) power

plants with a total capacity exceeding 116MW and contract value of approximate-

ly of Euro 112 million. The largest of the contracts is with Oriana Energy, LLC, a

subsidiary of the Sonnedix Group for a large scale 57MW project in Puerto Rico.

Furthermore, six contracts have been signed for projects in the United Kingdom

with leading investors – including Lightsource and Moser Baer, and Canadian

Solar which is a new client for METKA EGN.

•

Construction and commissioning of an Open-Type High-Voltage Substa-

tion (AIS) 220/60, 2x120MVA.

On 29/10/2015 METKA signed a new contract with SPA, Société Algérienne de

Gestion du Réseau de Transport de l’Electricité GRTE (GRTE Spa, member of the

Sonelgaz Group, the biggest supplier of electric power in Algeria) in a joint ven-

ture with its subsidiary POWER PROJECTS, for the engineering, procurement,

construction and commissioning of an open-type High-Voltage Substation AIS

220/60, 2x120MVA at site conditions. It is the first High-Voltage Substation and

the sixth project of METKA in Algeria, and highlights the company’s commitment

Credit Risk

The Group does not exhibit any considerable con-

centration of credit risk in any of the contracted par-

ties. Credit risk originates from available cash and

cash equivalents, derivative financial instruments

and deposits at banks and financial institutions; also

from exposure to client derived credit risk.

Regarding commercial and other claims, the Group

is not theoretically exposed to significant credit risks;

as of the multifaceted nature of the Group’s activi-

ties, there is no significant concentration of credit

risk with respect to its commercial requirements,

as this is allocated over a high number of clients.

However, the atypical conditions that dominate the

Greek market and several other markets in Europe

are forcing the Group to constantly monitor its busi-

ness claims and also to adopt policies and prac-

tices to ensure that such claims are collected. By

way of example, such policies and practices include

insuring credits where possible; pre-collection of

the value of product sold to a considerable degree;

safeguarding claims by collateral loans on customer

reserves; and receiving letters of guarantee.

To minimize credit risk on cash reserves and cash

equivalents; in financial derivate contracts; as well

as other short term financial products, the Group

specifies certain limits to its exposure on each indi-

vidual financial institution and only engages in trans-

actions with creditworthy financial institutions of high

credit rating.

The tables below summarize the maturity profile of

the Group’s financial assets as at 31.12.2015 and

31.12.2014 respectively:

MYTILINEOS GROUP

Past due but not impaired

Non past due but not

impaired

Total

(Amounts in thousands

€

)

0-3 months 3-6 months

6-12 months

> 1 year

Liquidity Risk Analysis -

Trade Receivables

2015

51,398

15,765

3,301

31,588

367,963

470,014

2014

37,270

8,761

2,413

130,854

227,720

407,018

MYTILINEOS S.A.