Review of 2010 – USD version - Skanska

To win
the New
Karolinska Solna
project, Skanska
brought together its
hospital construction
and PPP expertise
from Sweden, the
U.K. and the U.S.
and payment risks are higher, while it also has major
potential for increasing the return on its investment by
means of more efficient operation and higher utilization.
In the market risk model, Skanska’s investment consists
largely of share capital. Payment streams thus consist
mainly of dividends, which are determined by the profitability
of the facility. The market risk model is more
common in the U.S. and Latin America.
Financing of projects
The financing of a project or project company is allocated
between Skanska and its partner(s), which invest
in the project company in the form of equity and subordinated
shareholder loans. The rest of the financing −
which in availability model projects may total more than
90 percent and in market risk model projects 60–80 percent
of project cost − consists of bank or bond loans.
Cash flows from the project company to Skanska
consist of interest and principal repayments on subordinated
loans issued by Skanska, dividends from
project company profits and, finally, repayment of share
capital. In the current project portfolio, Skanska’s ownership
stake in project companies normally does not
exceed 50 percent, and Skanska thus does not exercise
any controlling ownership role.
Valuation in 2010 (excluding Autopista Central) by category, USD M
Category
Gross Present
Value, Dec 2010
Discount rate,%
2010
Net present value,
remaining
investments 1
Carrying amount,
Dec 2010 2
Unrealized
development gain,
2010
Highways 384 10.8 62 146 175
Social infrastructure 279 9.7 100 99 81
Utilities 7 9.3 5 0 2
Total 669 10.4 167 245 258
1 Nominal value USD 229 M
2 Invested capital, accumulated carrying amount of shares recognized in project company equivalent to Skanska’s ownership.
Definitions, appraisal model
Gross present value
Present value of remaining investments
Net present value
Unrealized development gain
Change in unrealized development gain
The discounted present value of all flows from the project to Skanska.
The discounted present value of remaining investment commitments in ongoing
projects. This is discounted at the same discount rate as the project.
The discounted present value of all flows to/from the project. The same as the sum of
present value of cash flow from projects minus present value of remaining investments.
Net present value minus carrying amount of projects.
Annual change in unrealized development gain.
Project portfolio, USD M
Category Type Country Payment type Phase
Highways
Concession
ends Ownership, %
Year of
operation/full
operation
Invested
capital,
Dec 31, 2010
Total
commitment
A1 (Phase I and II) Highway Poland Availability Construction 2039 30 2007/2012 24 28
Antofagasta Highway Chile Market risk Construction 2030 100 2014 62 88
E18 Highway Finland Availability Steady state 2029 41 2010 11 11
M25 Highway U.K. Availability Construction 2039 40 2012 69 123
Nelostie Highway Finland Availability Steady state 2012 50 1998/1999 5 5
Social infrastructure
Barts Health U.K. Availability Construction 2048 37.5 2006/2016 19 62
Essex BSF Education U.K. Availability Construction 2036 50 2012 1 8
Bristol Education U.K. Availability Ramp up 2034 50 2007/2011 7 7
Coventry Health U.K. Availability Steady state 2042 25 2005/2007 13 13
Derby Health U.K. Availability Steady state 2043 25 2006/2008 15 15
Mansfield Health U.K. Availability Construction 2043 50 2006/2011 17 23
Midlothian Education U.K. Availability Steady state 2037 50 2007/2008 2 2
Walsall Health U.K. Availability Construction 2041 50 2007/2010 7 13
New Karolinska Solna Health Sweden Availability Construction 2040 50 2018 12 87
Utilities
Surrey Street lighting U.K. Availability Construction 2035 50 2015 0 7
Total, Skanska 264 493
Accumulated share
of earnings in joint
ventures –18
Carrying amount 245
Skanska Review of 2010 – USD version
Infrastructure Development 55