A Finmeccanica Company

ANNUAL
REPORT
2 0 0 5
A Finmeccanica Company
ANNUAL REPORT 2005
Ansaldo Energia S.p.A.
16152 Genova - Italia - Via N. Lorenzi. 8
Tel. +39 010 6551 - fax +39 010 6556209
[email protected]
www.ansaldoenergia.it
A Finmeccanica Company
INDEX
CORPORATE BOARDS
3
DIRECTORS’ REPORT
4
Results of Ansaldo Energia Spa
6
Commercial activity analysis
8
Corporate events and organisational structure
13
Manufacturing performance
14
Human resources
17
Quality
20
Investments
21
Research, development and
technical innovation
22
Results of the group
main companies
25
Transactions with subsidiaries,
associates and holding companies
26
Analysis of the results and financial position
28
Market prospects and competitive positioning
33
Significant events after year-end
35
Business outlook
36
FINANCIAL STATEMENTS
2
Balance sheet
38
Memorandum accounts
39
Income statement
40
Notes to the financial statements
42
PROPOSAL TO THE SHAREHOLDERS’ MEETING
82
RREPORT OF THE STATUTORY AUDITORS
83
REPORT OF THE INDEPENDENT AUDIT FIRM
85
CORPORATE BOARDS
BOARD OF DIRECTORS
(For the three-year period 2004-2006)
GIUSEPPE VEREDICE
Chairman
GIUSEPPE ZAMPINI
Managing Director
Directors
SIMONE BEMPORAD
GIANPIERO CUTILLO
ALBERTO DE BENEDICTIS
ROBERTO MAGLIONE
MARIO ORLANDO
BOARD OF STATUTORY AUDITORS
(For the three-year period 2005-2007)
GIORGIO CUMIN
Chairman
Standing members
MARIA GABRIELLA ATTARDI
GIORGIO CAMBONI
INDEPENDENT AUDIT FIRM
(For the three-year period 2003-2005)
DELOITTE & TOUCHE SpA
AnsaldoEnergia
Alternate members
ENRICO CASANOVA
ALDO PARODI
3
DIRECTOR’S REPORT
To this extent, the first milestone has been the
Dear Shareholders
partial acquisition (45%) of the Swiss company ESG
Ansaldo Energia’s positive trend achieved during
A.G., whose core business is on-site services for
recent years has been fully confirmed in 2005. By
power generation equipment. As part of the deal,
reorganising the business at the end of 2004 and
Ansaldo Energia was granted a call option for the
investing in the technology independence plan, your
remaining 55% shares, to be exercised in 2006.
Company has created the foundation for its future,
and today is ideally positioned for long term growth.
The last, but not least, change in 2005 was the set
The first strategic cornerstone of 2005 was the
up of Ansaldo Nucleare S.p.A. as of November 1st.
mutual and amicable conclusion of the technology
Previously managed as a Division of Ansaldo Energia,
licence agreement with Siemens; today as a result,
all nuclear activities and headcount (178 employees)
your Company operates in the power generation
have been transferred to an existing legal entity
market with full authority and without any licence
which has been renamed Ansaldo Nucleare S.p.A.
whatsoever. This new scenario puts Ansaldo Energia
The newly incorporated entity will operate in three
in a better position to compete with the major
different business segments (decommissioning/
players in the industry such as GE, Siemens and
waste treatment, new plants, and service) and will
Alstom.
benefit from the renewed interest in nuclear energy
Moreover,
4
the
technological
expertise
and
production, both at a domestic and international
capabilities of Ansaldo Energia are also confirmed
level.
by over seventy (70) patents registered in recent
It is within this context that your Company recorded
years, and by our customers’ continued confidence
a net profit of Euro 17.5 million in 2005, equal to 2.3%
and support.
of revenues, a significant improvement compared to
Equally important, the second strategic objective in
previous years.
2005 has been the development of the Service
The operating result of Euro 32.3 million increased
business. From a Service perspective, the past
by 10% compared to the previous year, and thus
experience as a licensee of gas turbines, steam
resulted in an ROS of 4.3%.
turbines and electric generators is a plus, from which
The results are even more impressive when it is
your Company will capitalise. As a matter of fact,
considered that they were achieved after deducting
over the years, Ansaldo Energia has developed a
research and development costs of Euro 12.5 million,
wealth of know-how and operational experience on
equal to 2% of revenues.
a very large installed fleet, encompassing different
Along with a growth on revenues, your Company
technologies.
Original
maintained its focus on profitability, which will be
Equipment Manufacturer skills and worldwide
further increased over the next few years through
reputation, Ansaldo Energia is also developing an
growth in service.
Independent Service Provider strategy, which will be
The very solid backlog (Euro 2,314 million) was
achieved by complementing its existing expertise
boosted by Euro 1,007 million in new orders, a 7%
with the acquisition of small and medium size service
increase versus the previous year. In this frame, it is
operations.
worth mentioning the two 400 MW-combined cycles
While
leveraging
its
in Leinì and Napoli Levante, both include long term
has consistently been positive for the past five years.
maintenance contracts, the repowering of the group
The very high level reached in 2005, which has
n° 2 in Moncalieri, and a power island for a combined
continually exceeded expectations, has been driven
cycle plant to be installed in Spain.
upward by an increased order level on plants, a
rigorous management of the contracts and working
It is worth noting that many of these orders were
capital optimisation. It also confirms the positive
awarded after the expiration of the licence
relationship developed with the suppliers, many of
agreement with Siemens, which is a clear sign of the
whom have signed master agreements leading to
renewed confidence of the market in the reliability
satisfactory results for both parties.
and the quality of Ansaldo Energia products.
The very solid financial position should be confirmed
in 2006, as the cash absorbed by the production
Your company is therefore confirmed as the market
activities on 2005 orders will be compensated by the
leader in Italy, with 7,400 MW of power plants
advance payments on a new plant on order in early
awarded in the four-year period 2002-2005, equal to
2006.
51% share of the total ordered.
A confirmation of the positive performance achieved
recent years, in Euro/millions, are summarised here
is the Euro 214 million net financial position, which
below:
AnsaldoEnergia
The key financial data, and their trends for the most
5
RESULTS OF ANSALDO ENERGIA
REVENUES
850
843
800
802
Euro millions
750
774
700
650
2001
2002
2003
718
743
2004
2005
29
32
2004
2005
OPERATING INCOME
40
36
30
Euro millions
20
38
27
10
0
2001
2002
2003
NET INCOME
20
17.5
15
Euro millions
10
9
5
3
3
0
6
2001
2002
2003
6
2004
2005
ORDERS ACQUIRED
1200
1000
800
Euro millions
905
848
600
937
1007
2004
2005
676
400
200
0
2001
2002
2003
NET FINANCIAL POSITION
250
200
Euro millions
214
150
100
50
0
53
56
2001
2002
79
80
2003
2004
2540
2478
2005
EMPLOYEES
3000
2500
2805
2580
2000
1500
1000
500
0
2001
2002
2003
2004
2005
AnsaldoEnergia
units
2270
7
COMMERCIAL ACTIVITY ANALYSIS
I
n 2005, Ansaldo Energia acquired orders
amounting to Euro 1,007.5 million.
The new orders split by business lines and
geographical areas are as follows:
Orders by business line (Euro/millions)
2005
%
2004
%
Plant and equipment
582,3
58
534,1
57
Service
392,5
39
373,0
40
Nuclear
(January/October)
32,7
3
29,5
3
1007,5
100
936,6
100
2005
%
2004
%
Italy
684,4
68
845,2
90
Overseas
323,1
32
91,4
10
1007,5
100
936,6
100
Total
Orders by geographical area (Euro/millions)
Total
The results on the commercial front were very
satisfactory in 2005 with an increase in orders of 7.5%
compared to the previous year. All of the business
divisions contributed to this growth with a significant
increase in the quality of the industrial content and
in the margins in 2005. The number of orders
received during the year for the company’s main
equipment totalled 22 units compared to 15 units in
2004. The margins grew by 2% compared to 2004,
principally due to the contribution of the service
sector.
The result is also satisfactory as 2005 marked the
end of Ansaldo Energia’s 15-year long license
agreement with Siemens on the turbogas product.
This mutually agreed decision did not have any impact
on the order book for the year, as the above tables
illustrate that Ansaldo Energia was entrusted by its
clients to offer a technologically advanced and
competitive product.
By equipment type the orders were split as follows:
Products
8
2005
2004
Gas turbines
5
4
Steam turbines
6
4
Generators
11
7
Total
22
15
Plant and equipment
In 2005, Ansaldo Energia maintained its leadership
position in the domestic market through the
acquisition of several important turnkey plant
contracts.
Significantly:
• A 400 MW Multishaft combined cycle for the Leinì
plant, awarded by Piemonte Energia.
• The repowering of the second thermal group at
Moncalieri, awarded by AEM Turin.
• A 400 MW Combined cycle of for the Levante
Naples plant, awarded by Tirreno Power.
• Two steam turbines and generators for the Priolo
plant, awarded by ERG Nuove Centrali.
The Italian market therefore continues to remain
pivotal in relation to the Company’s commercial
policies and to the relevance of the investments made
by the various operators on equipment and plants
dedicated to the production of energy.
Ansaldo Energia was awarded 7,400 MW out of a total
market of 14,500 MW for the period 2002-2005,
equal to a 51% share of the total market.
In the short to medium terms there are some
opportunities for new combined cycle plants, however
the long-term outlook is less positive due to a number
of factors: the number of plants already authorised
and/or under construction, increasing local difficulties
in obtaining authorisation for new sites and the recent
problems in the procurement of gas.
New investments are however expected for
rehabilitation/repowering of existing power plants
with the utilisation of alternative fuels ( i.e. coal).
The order from Enelpower for two turbogas V94.3A(4)
and generators; a steam turbine and a generator for
the Escatron plant in Spain is to be considered in
this context. The order is strategically important as it
represents the first international supply of the most
advanced technology gas turbine model available, and
in a strongly expanding market previously dominated
by our competitors.
The commercial drive on the international marketplace
must take into consideration the special characteristics
of Ansaldo Energia: its production capacity and size
compared to that of competitors.
The limited size of our company requires a very
selective approach in the international marketplace
which permits us to operate only in those countries
which have a risk profile compatible with our strategy.
AnsaldoEnergia
On the international front, the company stepped up
its activities compared to previous years while
maintaining the company’s policy of risk containment.
In anticipation of the expected slowdown in Italy of
new plant construction, action was taken to focus the
commercial drive on international markets.
9
Therefore a certain number of potential target
countries were identified by product lines and an
intense positioning campaign began during 2005 in
order to monitor the short and medium term
prospects.
Service
The year 2005 marked another success story in the
service business growth. In the “flow” business, which
includes spare parts, repairs, upgrades, maintenance
and technical assistance contracts, orders went up 66%
versus 2004, exceeding Euro 151 million. Long Term
Service Agreements were also very strong, leading to
a total order approaching Euro 400 million (namely
Euro 392 million).
The successes on the “flow” business were equally
divided between domestic and international markets,
while the Long Term Service Agreements marked a
peak in the domestic market.
Such remarkable achievements were made possible
by an increased commercial intensity and proactiveness, a rigorous prioritisation of the efforts and
an enhanced local presence.
More details are provided below on the 2005
performance by region:
Italy
Ansaldo Energia confirmed its market leadership.
The award of the Long Term Service Agreement on
the group No. 3 in AEM-Moncalieri power plant (on
a V94.3A2 machine built by Siemens), and the
growth in the orders of the “current service”
sector, which more than doubled compared to the
previous year. In a particularly competitive
environment, the greatest challenge was increasing
volumes without impacting upon the margins.
10
Europe
In the “flow” business, the important commercial
results in Russia and in Belgium, together with Greece
and the United Kingdom, saw a tripling in this region
compared to the previous year. Important long-term
contracts were also won for the Polish plants at
Lublino and Rzeszow.
Africa
Previous year results were confirmed, mainly thanks
to the performance in Algeria which continues to
represent the principal country for Ansaldo Energia
in this region. At the same time, the foundations
were created for future expansion in other countries
on the continent.
The Americas
Of particular importance was a spare parts order in
the Dominican Republic for a V64.3 turbogas machine
built by Siemens. Other orders in Argentina and Brazil
contributed significantly to an increase in volumes
compared to the previous year.
Middle East
The region confirms its importance for “current
service” contracts, in particular with successes in the
United Arab Emirates and Oman.
Asia
The principal orders in 2005 were:
“Long Term Service Agreements”:
– AceaElectrabel – LTSA for 9 years on a V94.3A2
turbogas machine at Leinì
– ECL – two LTSA contracts for 8 and 5 years
respectively on V64.3 turbogas machines at Lublino and Rzeszow (Poland)
– Edelnor – LTSA for 4 years on a V94.2 turbogas
machine at the Mejillones plant (Chile)
– Tirreno Power – LTSA for 12 years on a V94.3A2
plant at the Levante Naples plant
– AEM Torino – two LTSA contracts for 14 years for
the No. 2 and No. 3 groups at the Moncalieri
plant (2 V94.3A2 turbogas machines)
“Current service” contracts:
– ENEL – maintenance and strategic spare parts for
V94.3A2 machines installed in Italy
– ENEL – strategic spare parts for the V94.3A2
machine at Escatron (Spain)
– Electrabel – master agreement to supply spare
parts for the V94.2 turbogas machines in the
Benelux
– Edipower – revamping of five hydroelectric alternators at the Mese plant
– Cogentrix – strategic spare parts for the V64.3
turbogas machine at the San Pedro plant (Dominican Republic)
– Dewa – strategic spare parts for the V94.2 turbogas machine at the Jebel Ali plant (United
Arab Emirates)
Nuclear
The year 2005 experienced considerable renewed
interest for nuclear energy on the international front.
This was due to the increase in the price of
hydrocarbon and, a general increased concern on
securing supplies. This renewed interest was also
seen in Italy, with ENEL participating in electro-nuclear
companies and new plants abroad.
In Italy, however, significant difficulties remain in the
decommissioning of plants, which highlight the
obstacles that the country still must overcome to
seriously reconsider any nuclear option.
AnsaldoEnergia
The region grew in 2005 compared to the previous
year, led by the commercial successes in India and
Pakistan.
11
With this background, the commercial performance
for the first 10 months of the year in the Nuclear
sector (and prior to the conferment of the division to
Ansaldo Nucleare S.p.A.) was in line with expectations.
Orders amounted to Euro 32.7 million, almost entirely
recorded overseas, increasing compared to 2004.
The three segments of activity are analysed further
below:
New Plants
The work continued on the completion of the 2nd Unit
at Cernavoda, which resulted in total new orders of
Euro 25 million, largely due to reimbursable services
in the original contract, but also to significant new
supplies’ orders.
As far as the Innovative Reactors line, additional work
was undertaken on the AP1000 reactor, through the
acquisition of engineering services from Westinghouse
to support the NUSTART programme, through which
a group of seven US utilities intend to obtain the
12
Early Site Permits and Construction Licenses for
plants to be ordered by 2009.
Orders were also acquired in relation to the European
programmes for the fusion and transmutation of
actinides (ADS).
Waste Treatment / Decommissioning
The decommissioning of the SOGIN plants incurred
further delays, mainly due to the accumulated delays
of the Client in getting the authorisation processes.
The work continued on the construction of the New
Waste Liquid Storage Tanks at the Saluggia Centre,
which is expected to be completed in 2006.
Service
The orders acquired in the service segment (Euro
6.1 million) are in line with previous years: the
penetration of ANSALDO in the Eastern European
market continues with the aim of increasing market
share.
A good result was achieved in the service for the
Superphoenix plant, while that for the Cernavoda 1
plant was in line with expectations.
CORPORATE EVENTS AND
ORGANISATIONAL STRUCTURE
In this context, the operation has the goal of improving
market positioning within the nuclear sector, thus
guaranteeing operational independence to pursue
opportunities in Italy and internationally, which the
renewed interest and the recent energy crisis may
generate.
With the exception of the nuclear operation, in 2005
there were no significant changes in the size and
structure of the company. The company was instead
involved in a consolidation process of the new
organisational structure introduced in the second
half of the previous year with the aim of improving
production efficiencies and control, with particular
reference, but not exclusively, to those actions
promoted by the shareholder Finmeccanica.
AnsaldoEnergia
T
he most important change in relation to the
organisational structure was the transfer of the
“Nuclear Division” business unit to the 100% subsidiary Sopren S.p.A., which changed its name to
Ansaldo Nucleare S.p.A., becoming fully operational in November 1, 2005.
The Nuclear Division, created as the technology
vehicle of the nuclear sector (after the referendum in
1987) has permitted Ansaldo Energia S.p.A. to
maintain scientific and managerial expertise in this field
through international projects, as well as the active
participation in the development of new plant
concepts with greater intrinsic and passive security and
the application of the systems and plants expertise to
the design of future machines for fusion.
13
MANUFACTURING PERFORMANCE
Production
In 2005, the new manufacturing organisation was
consolidated, with the complete generational change
of the heads of the principal divisions and the
conclusion of the changeover phase.
Important restructuring and rationalisation took place
in the Fegino workshop, areas which relate to the
production of spare parts for service and tools. This
restructuring related to the conversion of an area
only partly in use which has now become a specialised
machining workshop for the production of spare
parts, tools and emergency parts.
The synergy of the two divisions will permit production
recoveries, reduce costs and improve the expertise
in the spare parts and tools production for the factory.
An area was also made available for the Service
warehouse which will permit a reduction in the areas
used and costs for external storage.
The area left vacant from the tooling division will
allow for a better flow of materials in the blades
production division and create space for new
machinery.
During the year, important results were obtained in
terms of productivity in the “hot blades” division, and
the achievement of total independence from external
suppliers for conventional machining and electroerosions.
• N. 9
turbo-alternators
• N. 2
hydro-alternators
• N. 4
steam turbines
in addition to other hardware allocated to spare parts
or to the revamping of power plants.
Finally, an important improvement programme was
implemented for “a tooling warehouse”, which in
effect replaces the old and obsolete system and
integrates with the company other management
programmes.
Sites work and start-up
During 2005, activities were divided between the
plants at: Enipower (Ferrera Erbognone, Brindisi),
During the year 2005, a total of 22 complete machines
were delivered sub-divided as follows:
Tractebel (Voghera and Rosignano) and Egl (Sparanise).
It is worth pointing out that as in last year, there
were no delays in deliverables and in some cases
14
• N. 3
V94.2
bonuses were obtained from clients for better than
• N. 4
V94.3A2
expected deliveries and performance of the plants.
Engineering
In 2005, the work involved in achieving full technology
independence on the Turbogas product line
continued, as well as those to improve the current
production line.
which the Company has introduced into the workforce
in recent years in order to provide the company with
specialists in the field of materials, fluid dynamics, heat
transfer, combustion and mechanical integrity, which
can be applied across several product lines.
On the other product lines, steam turbines and
generators, full technology independence has already
been achieved.
The principal activities commenced or completed
were:
Gas Turbines
• Improved performance on all models
• Auxiliary optimisation (gas and oil systems,
already available lubricant)
• Environment reduction impact (Emissions reduction)
• Independence in the supply chain and approved
new blade suppliers
• Burner optimisation
Steam turbines
• Development of a new High Pressure – Medium
Pressure combined section
Service
• New solutions construction of rotors
The mix between “current service” and “programmed
maintenance contracts” in 2005 was substantially
similar to 2004, with a small increase in production
volumes. The growth trend of LTSA (long term service
agreement) contracts will become more prevalent
from 2007, driven by the current order backlog.
The general maintenance contracts increased
significantly compared to 2004 (+65%) with
consequent important increases in the resources in the
field.
In this regard, the generational change of personnel
continues to build on previous years with young
trainee technicians working alongside experienced
Generators
• Evolution of the 23 Z project to the new size
350/400 MVA
• High conduction of the isolation system
The above activities were carried out thanks to the
work performed by the Centres of Excellence created
in 2004.
The centres employ young and qualified resources
AnsaldoEnergia
• Development of a last stage blade 48”
15
personnel. The trainees undergo an in-house training
course at the actual production facility before they are
sent to work at jobsites.
The service organisation and its principal production
processes were completely revamped with the aim to
simplify the business which further improves the
speed and the quality of the work. In 2005, IT systems
were introduced for the management of the
commercial and production phases increasing
productivity.
The significant increase in the LTSA orders, with
guarantees on availability and performance, also
resulted in a greater focus on complex managerial
instruments for the creation of special spare parts
warehouses and the optimisation of the strategic
inventories.
As far as production, the activities of manufacturing,
repairs and maintenance support were further
integrated with the principal lines, in order to benefit
from a greater number of resources and more up-todate management systems.
During the year, two pilot projects were also
commenced, based on the “6 Sigma” method. In
2006, a decision will be taken on whether to extend
the use of the 6 Sigma method on a wider scale
based on the results and value generated for the
clients,
16
Management of contracts
During 2005, the contract management activity
resulted in important economic and financial results.
The programmed contractual milestones were
achieved during the year. The acceptance (PAC) of the
Electrabel plant at Voghera and another four (4)
Enipower units at Mantova and Brindisi was of
particular importance.
All of the Iranian order machines were completed
and delivered (gas turbines and generators) and the
Final Acceptance Certificate was received for the
Ballylumford plant in Ireland.
In addition, the end of the guarantee period on the
Neyveli plant in India was reached which will allow for
the closure of this challenging project during 2006.
Particular attention was given to the management of
the Iranian contract. This was in order to minimise the
risks which arose through the instability of its relations
with countries in the Western world.
The consolidated capacity of the company to
successfully undertake high plant content contracts
is confirmed by the fact that 75% of the volumes in
the year were combined cycle plants. The respecting
of manufacturing, assembly and start-up programme
schedules and the improvements in margins on these
contracts represent an important result, especially
in consideration of the managerial complexities in
coordinating the work between the factory and the
sites.
HUMAN RESOURCES
T he year was noteworthy (even more than the
previous year) by the actions taken to increase the
professional mix of the personnel.
This was achieved by means of a combination of the
introduction of medium and high level educated
personnel or highly qualified professionals, the
provision of training courses and termination
incentives for those with skills no longer compatible
with the needs of the company. The development and
training projects were based on the objectives of the
parent company.
The year 2005 was not marked by any unusual or
complex issues, but rather saw the development and
commencement of actions towards productivity
improvement, the motivation of human resources,
and of their professionalism and evaluation.
Industrial relations
The trade union dialogue was centred, on one hand,
on the monitoring of the collective incentive system
related to the “Result Premium” (with particular
attention placed on the new “management
performance” indicator, due to the containment of
direct and indirect costs), and on the other hand on
production recoveries in the factory, through the
launch of the mixed workgroups operating in the
three product lines.
This work began in February 2005 with two “study
days” in which the trade union representatives and the
divisional and product managers created proposals to
improve organisational and productivity efficiency.
Following this project, approximately 20 study groups
were formed which resulted in substantial reductions
in cycle times through operations on work procedures
and the use of equipment and logistics at the
workplace.
The Company and the trade union representatives
periodically agreed upon the changes to work
practices.
The integrated agreement also included new
monetary and regulatory conditions for transfers
within the national territory. After prolonged
negotiations, the agreement was signed on June 1,
2005.
The consultation procedure required by law on the
transfer of the Nuclear Division to the company
Ansaldo Nucleare took place in the final quarter of
2005 without any issues.
AnsaldoEnergia
Trade union relations in 2005 principally concerned the
application of the integrated agreement signed in
December of the previous year and were only
marginally impacted by tensions due to the difficult
issue of the renewal of the National Collective
Agreement, which however resulted in the loss of
almost 40,000 man-hours due to work absenteeism.
17
Personnel
New recruits
The number of personnel decreased from 2,478 at the
end of 2004 to 2,270 at the end of 2005.
During the year, the Nuclear Division was spun off with
the consequent transfer of 178 employees to Ansaldo
Indefinite period contracts
Definite period contracts:
• Insertion contracts
115
40
• Law 398, contracts for definite periods overseas 69
Transfer from group companies
5
Nucleare.
The total number of new recruits was 155, consisting
of 1 executive, 75 managers and white-collar workers
and 75 blue-collar workers.
With reference to the level of education, 70% of the
white-collar workers have degrees while the remaining
30% have diplomas.
Among the blue-collar workers 42% have diplomas.
The new recruits holding degrees or specialists were
almost exclusively specialist personnel operating in
technology development (Centres of Excellence),
plant engineering and Service. This is in line with the
PERSONNEL
31/12/2005
31/12/2004
Executives
75
104
Managers
187
226
White collar
995
1,122
Blue-collar direct
662
692
Blue-collar indirect
219
212
Overseas employees
132
122
2,270
2,478
Total
Training
The movements in terminations and hiring are shown
below, net of the 178 employees transferred from
Ansaldo Nucleare.
Terminations
Termination contracts for indefinite periods
Termination contracts for definite periods
• Insertion contracts
180
3
• Law 398, contracts for definite periods overseas 76
18
company objectives of achieving technology
independence, to obtain plant contracts and strong
growth in the service sector.
A training course was held in the second half of the
year for human resource managers, executives and
other management, which will continue in 2006 with
further editions for personnel with coordination roles.
This course, complementary to those undertaken by
Finmeccanica, is important due to its focus on specific
internal needs within the company.
In 2005, particular attention was placed on the
workplace security training. This commitment will be
increased in 2006 focusing both on the managers of
the production divisions and those in charge of
external service and assembly sites.
project was co-financed through FSE.
During the year there were 46,257 man-hours of
With respect to the training of new employees, the
Machine Utilities Operators course was completed for
training, confirming the increase trend of previous
years, with a +13% compared to 2004.
numeric control with the qualification of 21 trainees.
A course also began for “ machining and assembly
A total of 57% of the training courses received
workers” for 22 trainees in the service area. This
contributions from FSE.
AnsaldoEnergia
In addition, training took place on technical issues
concerning the workshop, engineering and service.
19
QUALITY
I
20
n 2005 Supervision activities were carried out
which obtained important feedback that will support
in all areas in order to ensure the correct application
of the Company Management System (Quality-Envi-
our actions for improvement.
In addition, the System support (Quality, Environment
ronment-Security). These activities occurred at both
and Security) activity continued in respect to the
offices and on-site. Furthermore, the action was
“Offer, Acquisition Order, Contract Management”
extended outside of the company, involving the
Suppliers which were required to measure their
process.
With the support of external consultants, improvement
performance for orders closed during the year.
projects were implemented based on “lean
As a result of this systematic action, the objective to
meet the verifications conducted by the Certification
Organisations for the review/renewal of the
enterprise” and “6 sigma” methods for the following
areas:
– Improvement of the quality on jobsites
certifications was achieved :
– Analysis of the plant engineering processes.
UNI EN ISO 14001 (Environment – offices and sites);
UNI EN ISO 9001 edition 2000 (Quality – offices and
The service area was involved in the following areas:
– Intervention on mixing chamber
– Bid process review.
site);
UNI EN ISO 729-2 (Welding – offices).
These projects, which began in the summer of 2005,
have the purpose, in addition to attaining their specific
objectives, to identify new methods to handle issues
As in 2004, the ISO 9001-2000 norms that particularly
of quality, application and other processes.
emphasise attention to company processes were
applied. They were identified and monitored through
Particular attention was also dedicated to the
promotion of internal and external courses to improve
indicators, in order to define actions for improvement,
where necessary.
The main Clients were consulted, in a spirit of
“Customer Satisfaction”, through questionnaires
the know-how of trainees.
Overall, the activities undertaken during the year
had as primary objectives:
– satisfying client requirements in terms of quality
and reliability of products in full respect of technical specifications, legislation, environment and
security;
– involving company personnel, encouraging a sense of responsibility and constructive dialogue in
relation to environment, quality and security;
– periodically re-examining the Company Management System in order to ensure its efficiency and
effectiveness;
– retaining focus on the objective of continuous
improvement.
INVESTMENTS
T
he capital investments in 2005 were principal-
ly focused on the technological maintenance and
upgrading of the machine tools, started in previous
years, to allow for continuous improvement in quality and efficiency. In particular, the replacement
continued on the work centres which are now technologically obsolete, of the steam turbine blade line
and turbogas compressors with the objective of
balancing the mix between internal and external
production.
In addition, the following projects were started and
partly completed:
– A rationalisation project of the production areas
at Fegino. The objectives are the reorganisation
of some areas and a more efficient allocation of
the Tools and Spare Parts Workshop. The rationalisation of these two divisions and the transfer to
a single area has created an efficient mechanical
workshop dedicated to spare parts, tools and
emergencies, due also to the replacement of
some obsolete machine tools with new state-ofthe-art machines. As for to the “blades machining”, the changes will allow for a better flow of
materials. It will now also be possible to build a
new line for the fabrication of burners for the gas
turbines, which are currently not manufactured in
the factory.
– The upgrading of the Service and plant commissioning equipment, in order to guarantee the
efficiency of the revision on the installed machinery and acquire new diagnostic capacity on-site
and at head office in order to guarantee an efficient and immediate service operation.
AnsaldoEnergia
– Operations to maintain factory capacity, with the
objective to guarantee quality, efficiency and the
availability of the potential production installed in
the Genoa factory. Other important operations
related to: the extraordinary maintenance of a
horizontal lathe for the machining of large disks;
the operations on the gantries at the factory; the
commencement of a series of actions on the
magnetic cutting blades for electric machines,
which no longer permit the required quality due
to the age of the plant.
21
RESEARCH, DEVELOPMENT
AND TECHNICAL INNOVATION
T
he year 2005 has seen a follow-up of the activity foreseen in the plan aimed at the achievement
and consolidation of the company’s technology
independence plan for all of its product lines. The
successful conclusion of the gas turbine licence
agreement confirmed the strategies outlined in the
Plan.
improved version (plus), now ready for commercial
application, and the upgrades were developed for
other models to increase competitiveness .
Good results were also obtained with respect to low
emission combustion systems, auxiliary machine
systems and measurement and evaluation instruments.
The consolidation of the Centres of Excellence set up
in the previous year has permitted the programmed
development of the different product lines.
Gas turbines
As in the previous year, focus was placed on the
development of new blades, especially the 48” blade
whose project, in spite of a delay due principally to
the project partner Skoda, will be completed in 2006
The project for the approval of suppliers of turbine
blades and other high technology content parts
with the experimental testing of the prototype.
Activities also continued on high temperature
completed the study phase, and the production phase
commenced. The final controls and supply of the first
materials and a project began for the development
of high pressure modules to increase competitiveness
on the MT series and for their use on smaller machines,
series for production are expected in 2006.
The base V64.3A project was completed in its
22
Steam turbines
prevalently for industrial applications.
Turbogenerators
The project on the 250 MVA air-cooled machine was
completed, and a new 350 MVA air-cooled machine
was developed for its application on the most recent
version of the larger sized gas turbine. The new turbo
generator model is now commercially available.
In addition, the activity of development and supplier
qualification on materials and isolation systems
continued with the results being applied to the new
turbo generator models.
Combined Cycle Plants
Further delays on financing caused a significant
slowdown in the planned plant dynamic simulator
project, which can be expected to be developed in
2006.
Important activity was carried out on advanced control
systems and on auxiliary systems for environment
impact containment.
Nuclear
With respect to the Plant Decommissioning, the
Integrated Management System was further
developed: it is based on a three-dimensional plant
model (available both in Intergraph and Autocad) in
order to achieve the greatest integration possible
of both physical and radioactive information
associated with the plant dismantling. In the
radioactive waste treatment field, the chemical
decontamination process of seized mechanical items
of the plant was further analysed, in view of its future
utilisation and with the contribution of the university:
AnsaldoEnergia
The activities in the “nuclear division” of Ansaldo
Energia in the first 10 months of 2005 will be continued
in the subsidiary Ansaldo Nucleare S.p.A. to where the
division was transferred.
23
24
the chemical decontamination the optimal
composition of the processing baths and of the
the COBRA-4 code which allows for thermal hydraulic
calculations of the VVER reactor core
regeneration was studied, while at the same time
the dose effect on the personnel and the consequent
In 2005, a Research Contract was signed with the
protection.
European Commission (Sixth Master Program) called
IP-EUROTRANS
(“European
Transmutation”
In the field of service to thermal reactors activity
sponsored by the Organisation for Economic
Cooperation and Development (OECD), it continued
with the safety analysis of the Russian water
pressurized reactors (VVER-1000) This permits Ansaldo
to gather experimental data from the PSB facility
(VVER plant simulator). Ansaldo has developed a
model of the facility and carried out , tests to validate
Integrated Project), a continuation of the “Accelerator
Driven System” Project undertaken in recent years.
It consists of a four-year project involving 26
organisations representing all of the principal Research
Centres, Universities and European industries. Work
on the project commenced in April. All research and
development spending in 2005 was charged directly
to the income statement, totalling Euro 12.5 million.
RESULTS OF THE GROUP
MAIN COMPANIES
Ansaldo Nucleare S.p.A.
The results are summarised as follows:
• Net profit: Euro 0.1 million
The company, formerly Sopren S.p.A., wholly owned
• Revenues from production: Euro 9.1 million
by Ansaldo Energia and previously non-operative,
was conferred the “Nuclear Division” business unit on
• Net equity: Euro 0.5 million
October 24, 2005. The company began its operational
• Net financial position: Euro +2.3 million
activity in the electric-nuclear energy production field
• Employees: 44 units
on November 1, 2005.
The company recorded a closetobreak-even result in
2005, although the results corresponded to only a two-
Asia Power Projects Private Ltd
month period.
The results are summarised as follows:
• Net profit: Euro 0.1 million
The company, based in Bangalore, India, manages the
on-shore contracts which Ansaldo Energia has
• Revenues from production: Euro 7.3 million
• Net equity: Euro 0.6 million
• Net financial position: Euro +11.1 million
acquired in the region, and performs service/spare
parts supply for the local unit.
In 2005 the company settled a dispute on the
construction of a plant for Akrimota which resulted in
• Employees: 180 units
the recognition of a claim of approximately Euro 4
million.
The activities continued on the completion of the
Sagem Italia Srl
lignite plant at Neyveli, which concluded the guarantee
The Company operates in the management and
maintenance of treatment and waste disposal plants,
co-generation and district heating and renewable
energy plants.
In 2005, the company undertook new projects in
order to diversify its business.
period in 2005 and which should be completed in the
next year.
The results are summarised as follows:
• Net profit: Euro 4.8 million - the positive result is
due to the claim on the Akrimota plant as previously mentioned
• Revenues from production: Euro 17.3 million
• Net equity: Euro -11.3 million
• Net financial position: Euro -11.4 million, including
payable of Euro 10.5 million to Ansaldo Energia.
• Employees: 35 units
AnsaldoEnergia
At the end of the year, Ansaldo Energia transferred
the facility management contract on the Genoa Campi
factory to Sagem Italia Srl. When completed in 2006,
this will permit Sagem Italia to establish a foothold in
a very important sector and with a high growth
potential.
25
TRANSACTIONS WITH SUBSIDIARIES,
ASSOCIATES AND HOLDING COMPANIES
Holding company
Sheet and Memorandum Accounts include both
Finmeccanica SpA’s relationship with the Company is
transactions of a commercial and of a financial nature
under normal market conditions. An exception to
essentially that of a Holding Company providing
support of a financial nature.
this is the loan with the Indian subsidiary ASPL, noninterest bearing in line with Indian legislation.
The transactions of both a short and medium/long
term nature are regulated at market conditions.
The Company also has a mandate, for residual activity,
from Finmeccanica SpA for the management of several
overseas contracts.
Subsidiary and
associated companies
26
Associated companies
Ansaldo Energia S.p.A undertakes transactions with
Companies of the Finmeccanica Group, exclusively of
a commercial nature for the reciprocal supply of
goods and services at normal market conditions.
With regard to Ansaldo Industria, in liquidation,
reciprocal mandates remain for the management of
Ansaldo Energia Spa operates with the Companies in
which it has holdings as an industrial partner, providing
contracts.
adequate commercial and financial support.
The amounts shown in the Income Statement, Balance
The receivables/payables, costs and revenues of the
above-mentioned companies are summarised as follows:
T R A N S A C T I O N S W I T H H O L D I N G , S U B S I D I A RY A N D
A S S O C I AT E D C O M PA N I E S (Euro/thousands)
Balance Sheet
Assets
Holding companies:
Financial
Finmeccanica
(Group VAT)
213,751
TOTAL HOLDING COMPANIES
Trade
Income Statement
Liabilities
Others
Financial
145
Trade
Costs
Others
767
Revenues
Financial
Trade
Financial
Trade
206
3,192
3,262
102
206
3,192
3,262
102
20
39,504
611
39
20
761
59
39,524
3,481
213,751
145
10,601
242
71
781
3,481
0
767
2,013
1,680
0
Subsidiary companies:
Sagem Italia
ASPL
Ansaldo Nucleare
TOTAL SUBSIDIARY COMPANIES
10,601
1,094
12,024
0
14,037
1,680
0
0
1,372
1
329
18
2,637
Related companies:
TOTAL RELATED COMPANIES
TOTAL
6
92
1
1,621
730
4
3,163
1,669
11,330
317
169
130
1
6
97
655
781
38
1,890
697
16
1,861
0
2,455
1,669
0
6,087
0
6
15,041
1
3,000
224,352
3,694
5,150
14,037
8,534
0
271
57,757
3,263
4,474
AnsaldoEnergia
Elsag
Ansaldo Ricerche
Ansaldo Fuel Cells
Ansaldo Industria in liq.
Ansaldo T & D
Mecfin
Alenia Spazio
Elsag Gest
Fata
Fata Zust
27
ANALYSIS OF THE RESULTS
AND FINANCIAL POSITION
SCHEDULE FOR THE ANALYSIS
OF RESULTS (Euro/thousands)
A. - REVENUES
Change in work-in-progress, finished and
semi finished goods
Increase of internal works capitalised
B. - “NORMAL” VALUE OF PRODUCTION
Cost of raw materials and external services
C. - VALUE ADDED
31/12/2005
31/12/2004
735,743
720,422
7,429
(2,839)
40
329
743,212
717,912
(568,583)
(543,045)
174,629
174,867
(128,952)
(128,798)
D. - EBITDA
45,677
46,069
Amortisation & depreciation
12,775
12,771
Personnel costs
Other adjustments
28
2,485
Provision for risks and charges
20,500
4,750
Other income (charges)
19,897
3,100
E. - EBIT
32,299
29,163
Financial income and charges
4,598
1,052
Adjustment of financial assets
3,608
2,072
F. - RESULT BEFORE EXTRAORDINARY
ITEMS AND TAXES
40,505
32,287
Extraordinary income and expenses
(4,748)
(16,816)
G. - PRE-TAX RESULT
35,757
15,471
Current taxes and deferred tax income/charge
18,212
8,987
H. - PROFIT FOR THE YEAR
17,545
6,484
SCHEDULE FOR THE ANALYSIS
OF THE BALANCE SHEET (Euro/thousands)
31/12/2005
31/12/2004
A. - FIXED ASSETS
Intangible assets
Tangible fixed assets
Financial fixed assets
360
450
107,450
106,656
14,480
13,543
122,290
120,649
3,167,054
3,582,797
312,081
396,560
B. - WORKING CAPITAL
Inventories
Trade receivables
Other assets
Trade payables
Advances
Provision for risks and charges
Other liabilities
69,538
45,472
(259,618)
(249,027)
(3,388,105)
(3,751,066)
(101,185)
(74,973)
(51,865)
(61,329)
(252,100)
(111,566)
(129,810)
9,083
(42,157)
(50,057)
(171,967)
(40,974)
C. - CAPITAL EMPLOYED
less operating liabilities
D. - EMPLOYEE LEAVING INDEMNITY
E. - CAPITAL EMPLOYED
less liabilities and Employee leaving indemnity
financed by:
F. - OWN FUNDS
Share capital paid in
11,967
11,967
Retained earnings
12,642
12,318
Net Profit
17,545
6,484
42,154
30,769
8,311
13,308
medium/long term debt
long term loans receivable
(2,703)
(2,613)
5,608
10,695
H. - SHORT-TERM INDEBTEDNESS
(NET CASH AVAILABLE)
short-term debt
liquid assets and short-term financial receivables
I. - TOTAL
14,814
949
(234,543)
(83,387)
(219,729)
(82,438)
(171,967)
(40,974)
AnsaldoEnergia
G. - MEDIUM/LONG-TERM INDEBTEDNESS
29
CASH FLOW STATEMENT
31/12/2005
31/12/2004
82,438
82,541
(Euro/thousands)
A. - BEGINNING CASH AVAILABLE
(BEGINNING SHORT-TERM DEBT)
B. - CASH FLOW FROM OPERATING ACTIVITIES
Net profit/(loss) for the year
17,545
6,484
Amortisation & depreciation
12,775
12,771
(Gains) losses on fixed assets disposals
(Revaluations) write-downs of fixed assets
Changes in share capital
Net change in employee leaving indemnities
49
(1)
(324)
(280)
140,594
(6,568)
(2,249)
(217)
168,390
12,189
(13,703)
(12,331)
C. - CASH FLOW FROM FIXED ASSETS
Investments in fixed assets:
intangible assets
tangible assets
financial
Disposal of fixed assets
(450)
(2,779)
(263)
1,809
2,064
(14,673)
(10,980)
D. - CASH FLOW FROM FINANCING ACTIVITIES
(Increase) or decrease in financial assets
Repayment of loans
1,376
(2,688)
(2,929)
(1,312)
E. - DISTRIBUTION OF PROFITS
(6,160)
F. - CASH FLOW IN THE YEAR
144,628
F1. - EFFECT OF CORPORATE OPERATIONS ON
AVAILABLE CASH
G. - ENDING CASH AVAILABLE
(CLOSING SHORT-TERM DEBT)
30
(102)
(2,827)
(103)
(7,337)
219,729
82,438
The year 2005 ended with growth in revenues of
again illustrating the constant attention in the
approximately 3.5%; this growth was achieved in all
of the business lines (plant equipment, service and
reduction of all costs.
The adjustments in value of financial assets mainly due
nuclear division), although 2005 includes the results
to the positive result of the Indian subsidiary Aspl Ltd
of the “Nuclear Division” for only 10 months, while
which in 2005 settled an important dispute with a
in 2004 it included the full year. In particular, the
increase in plant and equipment is attributable to
client receiving a claim of approx. Euro 4 million.
The extraordinary charges, which have decreased
the increase in orders acquired in 2004 and 2005.
significantly compared to the previous year, principally
Against an increase in revenues, the gross operating
margin remained substantially unchanged. In fact,
the company significantly committed to achieving
include termination incentive payments to personnel,
mainly executives.
The income taxes of Euro 18.2 million (Euro 8.6 million
full technology independence, increased research
Italian regional tax and Euro 9.6 million overseas
and development expenses by approx. Euro 4.0
million (total amount Euro 12.5 million) and covered
these expenses with higher profit margins.
income tax) increased significantly compared to the
previous year, principally due to the overseas
component. In particular, provisions were made of
Personnel costs are in line with the previous year,
with an average workforce lower by approx. 70
employees. The principal factors impacting upon this
Euro 3.5 million for Iranian tax which matures based
on the execution of the local services and Euro 4.6
million for taxes in India. The company is currently in
result were the renewal of the company’s collective
dispute with the local fiscal authorities in relation to
bargaining contract and the normal salary increases.
Amortisation and depreciation are in line with the
the application of this latter amount.
previous year and mainly due to tangible assets.
The non-current assets amount to Euro 122 million and
include Euro 0.4 million on the rights to use a turbogas
model, Euro 107.4 million of tangible fixed assets,
relating to the factory at Genoa Campi and to the
building at Legnano, and Euro 14.4 million of financial
receivables and equity investments. In 2005, this
latter amount increased following the acquisition of
45% in ESG AG, a Swiss company operating in the
service sector representing a change in the growth
strategy for services.
The provisions for risks and other adjustments
amounted to Euro 20.5 million, which included an
inventory provision of Euro 3.5 million on the
obsolescence risks associated with some generator
models, and an increase of Euro 17 million in the
provision for disputes. These provisions allow for
adequate cover of the risks especially in the South
America region.
Other income of Euro 19.9 million relates to the
restatement of assets and the SACE reimbursement
on receivables previously written down and to the
receipt of register tax paid in previous years. The
account “other income” demonstrates the ability of
the company to pursue all avenues in the recovery of
assets.
The significant improvement in financial income is
due to the average cash position during the year
which has increased significantly from the previous
year and to a reduction of commissions and expenses,
The working capital decreased by approximately
Euro 141 million. This improvement results from a close
attention to the working capital management , and
due for approximately Euro 52 million to a decrease
in inventories, net of payments on account, made
possible by the contractual conditions on new plant
contracts and for approx. Euro 85 million to a
reduction in trade receivables following normal
collections on the completion of work.
The provision for risks and charges increased by
AnsaldoEnergia
ANALYSIS OF THE RESULTS
AND FINANCIAL POSITION
31
approximately Euro 26 million as previously described,
and permits the company to consider all foreseeable
risks reasonably covered.
The contained increase in trade payables is due to the
increase in the costs of materials and services. It
should be noted that the payment terms are in line
with market conditions and that the supplier
conditions were subject to a project on transparency
and reciprocal commitment in respect of the
conditions which resulted in a new level of trust
between suppliers and the company.
The employee termination provision decreased due
to the departures at the end of the year previously
commented upon and due to the transfer to Ansaldo
Nucleare S.p.A. of 178 employees of the Nuclear
Division.
The net financial position, totalling approx. Euro 214
million, and compared to Euro 142 million in the
previous year, is expected to remain at extremely
high levels again for the current year.
32
MARKET PROSPECTS
AND COMPETITIVE POSITIONING
The power generation market
Again referring to the partial figures for the first nine
months, as far as the open market is concerned, the
The figures for the “power generation” plant market
in the first nine months of 2005 confirm the level of
orders in 2004. The open market has remained stable
Asian market continues to be the primary one for
demand, accounting for 34% of total orders,
compared to 21% for the Middle East region, while
– that is excluding the figures for to the Chinese
Europe with almost 8 GW (a significant decrease
market – with volumes just under 40 GW, while
compared to 11% in 2004) and North America (which
appears to have slowed down compared to 15% in the
confirming the change in the demand.
previous year) amount to respectively 20% and 9% of
The “bubble” in the Chinese market with respect to
the total.
the steam turbine orders is no longer prevalent:
although consisting of almost 35% of the total market,
the volumes in this market have lost approximately
Growth continues in the Middle East region,
65% compared to the previous year (9.4 GW
amounting to 22% of global turbogas orders and
16% of steam turbine orders.
compared to 27 in 2004).
Excluding China, Asia is the leading region in orders
for steam turbines, again accounting for almost half
of the orders in the open market (45%). The growth
in the Indian market remains strong which, although
less dynamic than in the previous year, alone covers
around 30% of the steam turbines on the open market.
AnsaldoEnergia
This is a confirmation of the continuing growth in
the coal rich markets, with the worldwide level of
orders for steam turbines (27 GW) again above the
orders for gas turbines in the “power generation”
market, at around 23 GW. The steam turbine market
therefore appears to be heading for a better result
than the previous year, which is expected to be
around 30 GW for the full year in 2005.
33
Competition and positioning of
Ansaldo Energia
The orders in the first nine months of 2005 reveal a
very close battle for leadership in the gas turbine
market.
On the global market, General Electric and Siemens
have a similar market share at around 35% each.
While GE is by far the leader in the segment below
50 MW with over 60% of the orders compared to the
23% of Siemens, this latter is leader in the large sizes,
with approximately 40% of the market ahead of GE
(32%), which is leader by number of units ordered.
If the figures for the full year confirm this position, we
will see an “historic” change in the leadership position,
which will significantly influence the future commercial
policies of both Players.
In both size segments, other constructors trail
considerably, with only Rolls-Royce and Mitsubishi
having market shares above 10% – in the machines
below 50 MW (Rolls-Royce, 13.1%) and above that size
(Mitsubishi, 15%).
34
Noteworthy is the good position of Ansaldo Energia,
with a market share close to 6% , placing the company
in fourth position behind Mitsubishi.
The leaders in the steam turbine open market are
Siemens and Mitsubishi,, both with around 15% of the
orders, ahead of BHEL with 13% which accounts for
this good result due to continuous growth in its
domestic market.
There is a similar situation in the machines above 50
MW: Siemens confirms its leadership position with
15.7% of the market, followed by Mitsubishi (14%) with
Alstom, LMW, BHEL, and GE all at around 13%.
The other constructors are at some distance, with
Ansaldo Energia’s a market share at around 5%.
SIGNIFICANT EVENTS
AFTER THE YEAR-END
O
n February 22, 2006, an important “turnkey”
contract was signed for a combined cycle plant of
800 MW at Rizziconi (Reggio Calabria) and the associated scheduled maintenance.
and is particularly significant, as in addition to the
loyalty and confidence of the client EGL, the contract
will contribute significantly to production volumes
and cash flow already in the current year.
AnsaldoEnergia
The value of the contract, is approx. Euro 490 million,
35
BUSINESS OUTLOOK
T
he commitments of Ansaldo Energia in 2006
In particular, the company has backlog orders of Euro
require further efforts in growth in order to maintain
the momentum which began in recent years and
2,314 million which will see the saturation of its
production capacity in 2006 – both for manufacturing
continued through 2005.
and engineering. However the market scenario, which
foresees a slowdown in the domestic market, requires
Ansaldo Energia to create commercial opportunities
abroad. This growth in international markets must be
accompanied by an even greater rigorous analysis of
the risks in order to minimise the risk profile.
In this scenario, particular importance is given to the
company’s strategy in the service area in order to
affirm Ansaldo Energia as a leading international
player in a highly profitable sector. The strategy is for
significant growth in service volumes, which will be
attained through full optimisation of the technological
expertise of the company and alliances or acquisitions.
The spin-off that took place at the end of 2005 enables
Ansaldo Nucleare S.p.A to better take advantage of
the opportunities in this sector, which should translate
into a significant increase in business volume in 2006.
From the technology independence point of view,
2006 will consolidate the already excellent results
achieved in 2005 on all product lines and in particular
in the turbogas segment.
With respect to margins, further growth will be
achieved, placing maximum attention on the
rationalisation of the processes and continuous search
for improvement in both purchasing and production.
36
AnsaldoEnergia
FINANCIAL STATEMENTS AS AT 31.12.05
37
FINANCIAL STATEMENTS AS AT 31.12.05
BALANCE SHEET – ASSETS
(in Euro)
FIXED ASSETS
INTANGIBLE ASSETS
Concessions, licenses, trademarks and similar rights
TANGIBLE FIXED ASSETS
Land and buildings
Plant and machinery
Commercial and industrial equipment
Other assets
Assets in progress and payments on account
FINANCIAL ASSETS
Equity investments in:
subsidiary companies
associated companies
other companies
Receivables (*)
others
TOTAL
TOTAL FIXED ASSETS
CURRENT ASSETS
INVENTORY
Raw materials, supplies and cons. stores
Work in progress and semi-finished products
Contract work in progress
Advances
RECEIVABLES
trade receivables
from subsidiary companies
from associated companies
from parent companies
tax receivables
others
CASH AT BANK AND ON HAND
Bank and postal deposits
Cash and cash equivalent
TOTAL CURRENT ASSETS
PREPAYMENTS AND ACCRUED INCOME
Total assets
(*) Amounts payable within one year, of which:
38
31/12/2005
31/12/2004
360,000
360,000
450,000
450,000
54,262,865
42,487,596
2,417,491
1,304,639
6,977,654
107,450,245
55,773,981
40,968,360
3,677,060
1,633,363
4,603,125
106,655,889
1,176,083
2,499,469
806,540
4,482,092
613,678
77,608
854,945
1,546,231
12,700,645
12,700,645
14,609,667
14,609,667
17,182,737
16,155,898
124,992,982
123,261,787
51,289,110
59,964,297
3,018,333,224
37,467,429
3,167,054,060
46,446,604
52,535,353
3,457,259,921
26,554,881
3,582,796,759
307,362,095
11,693,928
217,377,090
19,392,661
39,100,805
594,926,579
395,537,659
11,292,417
581,934
55,894,313
12,841,827
25,422,499
501,570,649
10,142,425
41,589
10,184,014
12,110,266
99,404
12,209,670
3,772,164,653
4,096,577,078
11,051,880
11,638,622
3,908,209,515
4,231,477,487
2,788,000
2,698,000
BALANCE SHEET LIABILITIES
(in Euro)
NET EQUITY
SHARE CAPITAL
LEGAL RESERVE
RETAINED EARNINGS
NET PROFIT FOR THE YEAR
PROVISIONS FOR RISKS AND CHARGES
provisions for pension and similar
taxation
others
31/12/2005
31/12/2004
11,966,812
940,140
11,702,513
17,545,000
42,154,465
11,966,812
615,923
11,702,513
6,484,334
30,769,582
876,077
13,377,203
86,931,832
101,185,112
772,477
5,041,242
69,159,445
74,973,164
42,157,522
50,056,856
3,439,282
5,647,687
3,388,105,452
257,170,956
15,717,666
767,060
3,895,571
13,886,273
25,986,642
3,714,616,589
7,518,384
6,549,254
3,751,065,559
245,179,589
4,018,118
4,132,715
3,686,460
15,204,578
24,802,126
4,062,156,783
8,095,827
13,521,102
3,908,209,515
4,231,477,487
5,681,000
10,480,000
279,000
485,000
3,953,789,000
3,215,266,000
1,225,325,506
5,179,393,506
1,274,831,997
4,490,582,997
EMPLOYEE LEAVING INDEMNITY
PAYABLES (*)
Payables to bank
Payables to other lenders
Advances
Trade payables
Payables to subsidiary companies
Payables to parent companies
Tax payables
Social security institutions
Other payables
ACCRUED LIABILITIES AND DEFERRED INCOM
TOTAL LIABILITIES
(*) Payable beyond one year
others
MEMORANDUM ACCOUNTS
(in Euro)
Guarantees
- given to third parties
Sales and purchase commitments
Others
AnsaldoEnergia
Unsecured guarantees given
39
FINANCIAL STATEMENTS AS AT 31.12.05
INCOME STATEMENT
(in Euro)
VALUE OF PRODUCTION
Revenues from sales of goods and services
Changes in inventory of work-in-progress,
semi finished and finished
Changes in contract work-in-progress
Increase of internal works capitalised
Other income and revenues
operating grants
recovery of various costs
gain on disposals
other income
COSTS OF PRODUCTION
for raw materials, consumables and supplies
services
use of third party assets
personnel costs
wages and salaries
social security contributions
employee leaving indemnity
pension and similar costs
other costs
Amortisation, depreciation and provisions
amortisation of intangible fixed assets
depreciation of tangible fixed assets
provisions made of amounts in current assets
and liquid assets
Changes in inventory of raw materials, ancillary,
and consumables
Provision for risks
Other provisions
Other operating charges
loss on asset disposal
other taxes
others
DIFFERENCE BETWEEN VALUE AND COST OF PRODUCTION
40
31/12/2005
31/12/2004
1,176,423,729
390,708,876
7,428,944
(440,680,557)
40,184
(2,838,966)
329,122,473
329,115
373,514
7,690,654
18,408
30,315,108
781,609,984
590,274
6,846,167
64,419
11,716,718
736,539,076
335,473,335
253,440,163
3,087,998
313,197,409
232,448,309
2,578,684
93,213,996
27,905,705
6,444,142
685,957
702,700
128,952,500
92,285,280
28,450,244
6,612,886
628,265
821,661
128,798,336
90,000
12,685,470
12,771,410
0
12,775,470
2,484,606
15,256,016
(8,342,506)
17,000,000
3,500,000
5,204,625
4,750,000
2,029,857
67,518
2,074,133
1,281,163
3,422,814
63,295
1,668,800
1,380,813
3,112,908
749,309,774
707,376,144
32,300,210
29,162,932
(in Euro)
FINANCIAL INCOME AND CHARGES
Income from equity investments
dividends from associated companies
Other financial income
from receivables classified under non-current assets
others
other income than above
interest and commissions from subsidiaries
interest and commissions from parent companies
interest and commissions from others and various incomes
Interest expense and other financial charges
interest and commissions from subsidiaries
interest and commissions from parent companies
interest and commissions from other and various charges
Exchange gains and losses
TOTAL INCOME AND FINANCIAL CHARGES
ADJUSTMENTS TO FINANCIAL ASSET VALUES
Revaluations
of equity investments
Write-downs
of equity investments
TOTAL ADJUSTMENTS TO FINANCIAL ASSETS
EXTRAORDINARY INCOME AND CHARGES
Income
gain on disposals
over-accruals and similar
Charges
employee leaving incentive
taxes previous year
under-accruals and similar
provisions for extraordinary items
TOTAL EXTRAORDINARY ITEMS
Pre-tax result
Current income taxes
NET PROFIT FOR THE YEAR
31/12/2005
31/12/2004
0
0
84,381
84,381
579,320
579,320
736,342
736,342
336
3,262,530
20,560,283
23,823,149
1,361
818,650
17,012,192
17,832,203
58,402
205,794
20,095,543
20,359,739
11,218
235,870
16,694,221
16,941,309
554,727
(659,490)
4,597,457
1,052,127
3,607,787
2,124,478
0
(51,825)
3,607,787
2,072,653
0
107,621
107,621
336
2,628,789
2,629,125
4,769,960
0
86,004
0
4,855,964
5,921,460
2,113,605
1,010,082
10,400,000
19,445,147
(4,748,343)
(16,816,022)
35,757,111
18,212,111
17,545,000
15,471,690
8,987,356
6,484,334
AnsaldoEnergia
INCOME STATEMENT
41
NOTES TO THE FINANCIAL STATEMENTS
FORM AND CONTENTS OF THE FINANCIAL STATEMENTS
The financial statements for the year 2005 have been prepared in accordance with the statutory requirements,
updated in accordance with the provisions of the company law reform contained in the Legislative Decree No. 6
of January 17, 2003 and subsequent amendments and integrations, as required by articles 2424, 2424 bis, 2425,
and 2425 bis of the Civil Code for the income statement and balance sheet, and as required by articles 2427 and
2497 bis of the Civil Code for the notes to the financial statements. In addition, all of the complementary
information considered necessary in order to provide a true and fair view is included, even if not required by specific
provisions in the legislation.
In relation to the Balance Sheet and Income Statement, no re-groupings have been made of account items. All
of the amounts are expressed in Euro.
No departures have been made in the preparation of the financial statements as permitted by the 4th paragraph
of article 2423 of the Civil Code.
The notes to the financial statements are expressed in thousands of Euro; the information required by the Civil
Code are in some cases supplemented by detailed schedules attached, which are considered as an integral part
of the Notes. For a better understanding of the financial statements the values are provided, in attachment No.
14, as at 31/10/2005 relating to the conferment of the “Nuclear Division” business unit to the subsidiary Ansaldo
Nucleare S.p.A.
The Share Capital of the company is held 100% by Finmeccanica S.p.A., with head office in Rome, Piazza
Montegrappa 4.
The Company avails of the faculty not to prepare Consolidated Financial Statements in accordance with paragraph
3 of article 27 of Legislative Decree No. 127 of 1991. A copy of the consolidated Financial Statements of
Finmeccanica S.p.A., of the directors’ report and the statutory and independent auditors’ reports are made public
in accordance with statutory requirements.
42
43
AnsaldoEnergia
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The valuations of the amounts in the financial statements have been made with consideration to the general
criteria of prudence and accruals, in accordance with the going concern concept.
The accounting policies adopted in the preparation of the financial statements are those as required by article
2426 of the Civil Code and the accounting principles issued by the Italian Accounting Profession (Consiglio
Nazionale dei Dottori Commercialisti e dei Ragionieri e dall’Organismo Italiano di Contabilità).
The most significant accounting policies adopted in the preparation of the financial statements are those as
shown below, with any significant variations from the previous years shown in the individual comments to the
notes in the financial statements.
Intangible assets and long-term charges
They relate to the acquisition costs, if external, or production, if internal, that do not exhaust their utility in
the year they are incurred but demonstrate a capacity to produce future economic benefits. Amortisation is
made over the period of their future economic utility, normally over five years, except for software and knowhow which are amortised over three years.
The costs of set-up and expansion, and research and development are recorded with the approval of the
Statutory Auditors.
Where during the year there is a permanent impairment in the future utility, the amount is written down.
Tangible assets and depreciation
They relate to the acquisition costs, if external, or production, if internal, increased for the effect deriving from
the application, in the past, of legal monetary revaluations.
Some assets have been revalued to market value following operations of an extraordinary nature, such as
mergers by incorporation.
The depreciation is charged to the income statement on a straight-line basis on rates taking into consideration
the asset’s estimated useful life.
For the first year of use, the depreciation rates are reduced to 50%.
On-going maintenance costs are charged directly to the income statement in the year in which they are incurred.
Extraordinary maintenance costs are capitalised in the year in which they are incurred.
Assets whose value at the balance sheet date have incurred permanent impairment in value are written down
to their economic value; the original value is written back in successive years where the conditions for their
write-off no longer exist, adjusted only for depreciation.
Financial fixed assets
Equity investments
Equity investments are measured at cost or under the equity method. The equity method is applied when
the results from the participation are significant, in order to give a fairer representation of the result and net
44
equity of the company, considering the fact that Ansaldo Energia avails of the faculty provided to sub-groups
not to prepare consolidated financial statements. For the other holdings, the cost method is applied - being
the purchase price or subscription paid. The cost is reduced for permanent impairment in values where any
losses are not expected to be covered by profits in the immediate future; the original value is written back
in successive years when the conditions for their write-down no longer exist. If the losses are greater than
the subscription value, the difference is recorded in a “provision for losses on investments” within “Other
Provisions for risks and charges” under liabilities.
The financial statements used are those approved in the Shareholders’ meeting or prepared by the Board
of Director’s for approval.
Receivables
Long-term receivables are recorded at realisable value and adjusted for the year-end exchange rate.
Inventory
Raw material and finished products
They are measured at the lower of cost and market value. The cost is determined with reference to the average
cost method.
The inventories of obsolete or slow moving articles are written down through their recording in a specific
provision account.
Semi-finished
The production to be completed of a definite sale or made for inventory is measured at production cost.
Contract work-in-progress
Work-in-progress on long-term job orders are measured as per the contractual revenues in accordance with
the percentage of completion method. This method provides for the measurement of the contract based on
the total compensation agreed upon and the advancement of the work determined by comparing the costs
incurred to-date to the total costs forecast.
The losses on job orders, forecast based on objective and reasonable measurements, are fully charged to the
income statement in the year in which they are noted and recorded in a specific work-in-progress provision
account.
For the contracts that are agreed in foreign currencies, the conversion of revenues in Euro is made:
• at the exchange rate at the date of invoicing, for the part invoiced and not covered by specific exchange risk cover contracts;
• at the spot exchange rate for the amounts covered with a specific exchange risk cover contract;
The costs at the year-end still to be incurred in foreign currencies are converted to Euro at the current exchange
rate.
The costs sustained in the offer phase are charged directly to the income statement in the year in which they
are incurred.
AnsaldoEnergia
• at the exchange rate at the year-end for the part not invoiced and not covered by exchange risk cover
contracts.
45