ANNUAL REPORT 2004 - Skanska

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BOT business stream Skanska BOT develops and invests in privately financed infrastructure – for example road and hospital projects as well as projects in the energy sector – built and operated as public-private partnerships. SEK M 2004 2003 Net sales 33 87 Operating income 31 27 Investments –188 –115 Divestments 7 1 Operating cash flow –215 –172 Capital employed 1,433 1,243 Return on capital employed, % 1 3.4 3.8 Return on capital employed, % 2 10.9 10.1 1 According to the financial statements 2 According to the definition of financial targets, including change of value in commercial properties and the BOT portfolio Estimated 10-year cash flow in the BOT portfolio given its current composition SEK M 800 600 400 200 0 -200 -400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Estimated cash flow from project companies (dividends, interest payments, loan principal repayments). Remaining investment obligations, total SEK 0.7 billion. 2015 Fortaleza (Breitener), Brazil, is a diesel-powered power generation station intended for production of backup power. The power station, a joint project of Skanska BOT and Skanska Latin America, was completed in only six months. 22 BOT business stream – Skanska Annual Report 2004
In Derby, construction is underway on a new hospital that will be operated as a public-private partnership. The British term for such projects is Private Finance Initiative (PFI). Skanska BOT holds half the ownership consortium, and Skanska UK has the full design-build contract for the hospital, worth GBP 333 M. The first half of the 155,000 sq. m (1.68 million sq. ft.) project will be completed in 2006. Build Own/Operate Transfer (BOT), Public Private Partnership (PPP) and Private Finance Initiative (PFI) are different labels that all refer to alternative financing solutions for public amenities. Skanska BOT develops and invests in privately financed infrastructure − for example roads, hospitals and power generation projects − which are built and operated in public-private partnerships. Value for taxpayers Public-private partnerships are advantageous for customers, taxpayers, users and builders. This model can: – make room for increased investments in public amenities within given budget limits, – spread large public investments over longer time periods, usually 25 to 40 years, – increase the benefit to taxpayers through earlier availability, higher standards and quality, – lower the life-cycle costs through effective solutions, – encourage close cooperation between builder and owner, as well as improve understanding of the needs of users, – be an incentive to speed up completion, since the facility will generate a return only once it is placed in service. Collaboration with construction units Skanska BOT’s operations focus on selected markets and are carried out in collaboration with Skanska’s construction units. These operations generate value by: – providing large construction contracts to Skanska’s construction business, – securing profitability through increased control and more efficient risk-sharing between owner and builder, as well as more proactive management of risks and opportunities during project implementation, – creating long-term service and maintenance contracts, – generating a revenue stream during the operation phase, – realizing a surplus value upon divestment and/or refinancing. Highways As for the ways that revenues are generated, there is a whole spectrum − from systems based on the number of users to a fixed access fees. The Autopista Central highway project in Santiago, Chile is a toll road where motorists pay a direct user fee. The profitability of the project depends on the number of vehicles using the road, and Skanska’s risk and potential depends on the traffic trend. The E 39 European highway project south of Trondheim, Norway employs a different system. The Norwegian Public Roads Administration charges motorists a fee while Skanska’s compensation is based entirely on the availability of the road. Skanska is paid by the Administration to keep the road in good condition, regardless of traffic intensity. On the highway between Helsinki and Lahti, Finland, compensation from the Finnish Road Administration (Finnra) is based mainly on availability, combined with certain payments based on traffic volume. In both these projects, Skanska’s risk is primarily limited to the operation and maintenance phase. Hospitals In British hospital projects, compensation is also based on availability. Skanska’s responsibility is to ensure that there are functional hospital premises for healthcare services. This applies both to the number of hospital beds and to such technical installations as electricity, telecom, water and wastewater systems. Also included are such other functions as indoor climate control, cleaning and security services. However, Skanska is not involved in the actual healthcare, which is provided by the National Health Service. Large, complex projects Preparing tenders for BOT projects is generally very costly. The projects are large, and their complexity requires major work in a number of specialties. To win a tender competition, Skanska’s proposal must be competitive in all respects − not only in terms of price but also when it comes to financing, design, construction, service and maintenance. Skanska has therefore built up close long-term collaboration with a number of reliable partners, among them the UK-based companies Innisfree and Laing, which participate in several of Skanska BOT’s projects. The scale of work varies greatly between different types of projects. In large hospital tenders, for example, the design task is much more extensive than in a road project. The total tender costs for the British hospital projects that Skanska has been awarded have amounted to some 2−3 percent of the entire project value, which often totals several billion Swedish kronor. Those who submit losing tender normally receive little or no compensation for their invested costs. To date, Skanska has been highly successful at being awarded the projects for which it has chosen to tender. Skanska Annual Report 2004 – BOT business stream 23
Page 1 and 2: ANNUAL REPORT 2004
Page 3 and 4: The year in brief Nordic residentia
Page 5 and 6: Skanska’s four business streams C
Page 7 and 8: STRONG RESULTS IN PROJECT DEVELOPME
Page 9 and 10: The units of the Skanska Group coll
Page 11 and 12: Financial targets and their fulfill
Page 13 and 14: Non-residential building and civil
Page 15 and 16: Currently under construction in sub
Page 17 and 18: International energy companies are
Page 19 and 20: Skanska is one of the largest resid
Page 21 and 22: Botanica, a new residential area in
Page 23 and 24: Commercial Project Development is o
Page 25: Skanska Project Development - Book
Page 29 and 30: Sustainable development Our vision
Page 31 and 32: Employees It is the thousands of in
Page 33 and 34: Skanska’s Series B shares are als
Page 35 and 36: the Group’s core business will be
Page 37 and 38: Net sales and percentage outside Sw
Page 39 and 40: Net divestments in project developm
Page 41 and 42: employees. Of the members elected b
Page 43 and 44: Consolidated income statement Conti
Page 45 and 46: SEK M Note 2004 2003 SHAREHOLDERS
Page 47 and 48: Consolidated cash flow statement SE
Page 49 and 50: Parent Company balance sheet SEK M
Page 51 and 52: Notes, including accounting and val
Page 53 and 54: es the exchange rate effect when tr
Page 55 and 56: In connection with contracting assi
Page 57 and 58: Note 2 Effects of changes in accoun
Page 59 and 60: Note 3 Segment reporting The divisi
Page 61 and 62: Note 3 continued B. Secondary segme
Page 63 and 64: Credit risk Credit and counterparty
Page 65 and 66: Note 4 continued The Group’s unre
Page 67 and 68: Note 6 continued Net sales by type
Page 69 and 70: Note 11 Depreciation/amortization D
Page 71 and 72: Note 14 Borrowing costs Borrowing c
Page 73 and 74: Note 17 continued Information about
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Note 22 Associated companies Associ
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Note 26 continued Number of shares
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Note 28 continued Provisions for pe
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Note 31 Expected recovery periods o
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Note 32 continued Assets pledged fo
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Note 33 continued Consolidated bala
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Note 34 continued Relation between
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Note 35 continued Terms for the Boa
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Note 35 continued Absence from work
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Note 40 continued Discontinuing ope
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Note 42 Five-year Group financial s
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Note 43 Definitions Interest-bearin
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Auditors’ Report To the Annual Me
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Corporate governance Skanska AB is
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Annual Shareholders’ Meeting The
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Addresses Skanska AB SE-169 83 Soln
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Production: Skanska Investor Relati
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ANNUAL REPORT 2004 - Skanska

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