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ANNUAL REPORT TEI&C S.A.
JUNE 30, 2005
‘04
‘05
07
JUL
08
AUG
09
SEP
10
OCT
11
NOV
12
DEC
01
JAN
02
FEB
03
MAR
04
APR
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MAY
06
JUN
COVER: CARACOLES HYDROELECTRIC POWER PLANT, ARGENTINA.
THE DAM WILL ATTAIN A CAPACITY OF 565 CUBIC METERS AND A DAM AREA OF 1,300 HECTARES. ITS PURPOSE IS TO EXPAND
THE ENERGY SECTOR TO 705 GWH/YEAR AND TO INCREASE THE IRRIGATION AREA BY 15,000 HECTARES.
INDEX
THE COMPANY_ 8
BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT_ 18
LEGAL INFORMATION_ 19
REPORT OF THE AUDITORS_ 22
CONSOLIDATED BALANCE SHEET_ 24
NOTES TO THE CONSOLIDATED BALANCE SHEET_ 25
ADDITIONAL INFORMATION_ 52
TEI&C AND SUBSIDIARIES’ ACTIVITIES FOR THE PERIOD JULY 1, 2004-JUNE 30, 2005_ 53
PRO FORMA - CONSOLIDATED INCOME STATEMENT_ 72
VELADERO PROJECT, ARGENTINA.
In the last fiscal period, Techint performed several works for Barrick Gold’s gold field located in the province of
San Juan: the engineering and construction of a fully equipped camp site for 1,260 employees, as well as civil
engineering, electromechanical assembly of all process areas, and procurement and assembly of metallic struc-
tures and tanks.
_ 8 TEI&C S.A. JUNE 30, 2005
TECHINT GROUP
Techint Group is a conglomerate of more than 300 companies that operates
internationally. In addition to TEI&C’s activities, TG is involved in the
steel and energy sectors by Tenaris S.A. manufacturing seamless and weld-
ed steel tubes (mostly for the oil industry), flat and long steel products
companies controlled through Ternium S.A. (mostly for the construction
industry), participating in the energy market –oil and gas exploration and
production1, operating gas and oil pipelines and distribution and trans-
portation networks2, and participating in other engineering and construc-
tion activities in the European, Chinese and African markets3. In addition
to this, TG is present in different endeavors in areas such as healthcare,
telecommunications, rail freight, and others.
Techint Group’s highlights:
(IN USD MILLIONS)
2004-05 2003-04 2003-02
Total sales 11,325 6,421 6,267
Total assets 12,502 8,374 7,611
Total permanent staff 34,200 26,800 27,100
THE COMPANY
TEI&C S.A. (“TEI&C”), incorporated in Uruguay, is the holding company of the Engineering, Construction, and Services
(“EC&S”) area in South America, Central America, and the Middle East for the Techint Group (“TG”).
1. Tecpetrol International S.A. is the holding company control-ling oil and gas operations in Argentina, Ecuador, Peru, Mexico,Venezuela, etc.
2. TG holds a minor interest in: Transportadora de Gas del NorteS.A. and Transportadora de Gas del Mercosur S.A. (Argentina),both companies being involved in gas transportation.
3. The Engineering and Construction business in Europe, China,Egypt, Mexico, and Africa are developed under the control ofTechint European Holding (Netherlands) B.V.
_
_
_
THE COMPANY _ 9
EC&S’s activities developed by the TG led to the definition of 3,000 projects
–300 power projects, 20,000 kilometers of power lines laid, 7,500 kilometers
of roads tended, etc.– and currently employing 18,000 people. EC&S’s works
performed and backlog for the period ended 06.30.2005 reached USD 1,641
million, geographically segregated as follows:
TEI&C AND SUBSIDIARIES
Since its beginnings in the 1940s, TEI&C and its subsidiaries have constant-
ly grown, providing services to customers located mostly in Latin America
and the Middle East. The companies grouped today under TEI&C have
designed and built more than 70,000 kilometers of gas and oil pipelines
throughout the world, including 16 pipelines laid across the Andean moun-
tains, reaching altitudes of 5,000 meters above sea water level. These com-
panies are also active in infrastructure for such projects, such as water and
waste treatment plants, mineral pipelines, telecommunication networks,
power transmission lines, transportation networks (railways, undergrounds,
roads, bridges, and highways), aqueducts, dams, reservoirs, and airports.
Manufacturing plants have been yet another area where TEI&C’s subsidiaries
have developed international expertise, including steel, chemical and petro-
chemical plants, gas treatment and separation refineries, concrete refineries,
and other light industry plants. Furthermore TEI&C is also widely experi-
enced in thermal and hydroelectric power generation plants.
All the above-mentioned projects have enabled TEI&C and its subsidiaries
to gather substantial experience and know-how in the most complex chal-
lenges posed by our customers, thus reaching international level quality
and service standards.
SALES AND BACKLOGGEOGRAPHICAL DISTRIBUTION(IN USD MILLIONS)
EUROPE, MIDDLEEAST AND AFRICA
686
MEXICO341
ARGENTINA300
BRAZIL242
OTHER (AMERICA)72
_ 10 TEI&C S.A. JUNE 30, 2005
Some of the most important projects are:
PROJECT
Heavy Crude Pipeline (OCP)
Camisea Gas Pipeline and Polyduct
Loma de la Lata-Bahía Blanca-Buenos Aires Gas Pipeline
Yanbu-Medinah Aqueduct
Units for the RLAM Refinery
Profertil Fertilizer Complex
Norandino Gas Pipeline
Revamping of Luján de Cuyo Distillery
Hawiyah Gas Plant
Cupiagua Central Processing Facilities (CPF)
Muglad Basin Oil Development Project
Hawiyah Gas Pipeline
Central Puerto Combined Cycle Plant
Vasconia-Coveñas Oil Pipeline
Second Continual Seamless Steel Tubes Laminator for Siderca
* (IN USD MILLIONS)
CUSTOMER
Heavy Crude Oil (OCP) Ecuador S.A. (Alberta Energy, Kerr-McGee, Occidental Petroleum, Repsol YPF, AGIP Oil, and Pérez Companc)
Transportadora de Gas del Peru S.A. (Tecgas Argentina S.A. Pluspetrol, Hunt Oil Company, Sonatrach, Graña y Montero, SK Corporation, and Tractebel)
Gas del Estado S.E.
Saline Water Conversion Corporation (SWCC)
Petrobras - Petróleo Brasileiro S.A.
Profertil S.A.
Norandino S.A.
YPF S.A.
Saudi Arabian Oil Co.
Oleoducto Central S.A.
Greater Nile Petroleum Operating Company Ltd,
Saudi Arabian Oil Co.
Central Puerto S.A.
Oleoducto de Colombia S.A.
Siderca S.A.I.C.
COUNTRY
Ecuador
Peru
Argentina
Saudi Arabia
Brazil
Argentina
Argentina - Chile
Argentina
Saudi Arabia
Colombia
Sudan
Saudi Arabia
Argentina
Colombia
Argentina
AMOUNT*
900.0
650.0
475.0
433.0
393.0
380.0
330.0
296.0
280.0
273.0
272.0
258.0
240.0
236.0
235.0
CAMISEA PROJECT, PERU. SUCH WORKS COMPRISED SIGNIFICANT LOGISTICS, TOPOGRAPHY, AND WEATHER-RELATED CHALLENGES.
THE COMPANY _ 11
Main current projects4:
PROJECT
Caracoles Hydroelectric Central and Dam
Haradh Arabian Light Crude Increment Facilities, Gas and oil separation plant
Macaé - Maintenance of Campo de Marlin platform
Veladero Mining Project - Miscellaneous tasks
Macaé - Maintenance of Nordeste platform
PRA I - Autonomous re-pumping platform
Expansion Loops 2005
Expansion Loops 2005
Underground Line A - Tracks and Track machinery renovation
ALUNORTE - Boiler works I
Elicabe Refinery - Sulfur Recuperation unit
Maldonado - Punta del Este Sanitation works
Rabigh Development Project - Utilities & Offsites
Electromechanic assembly, maintenanceworks, structure repairs, industrial cleaning, boiler works and other works
* (IN USD MILLIONS). ** UNDERGOING NEGOTIATION
CUSTOMER
Energía Provincial Sociedad del Estado
Saudi Arabian Oil Co.
Petrobras - Petróleo Brasileiro S.A.
Minera Argentina Gold S.A.
Petrobras - Petróleo Brasileiro S.A.
Petrobras - Petróleo Brasileiro S.A.
Transportadora de Gas del Norte S.A.
Transportadora de Gas del Sur S.A.
Secretaría de Transporte del Ministerio de Planificación Federal, Inversión Pública y Servicios
Alumina Do Norte Do Brazil S.A.
Petrobras Energia S.A.
Obra Sanitaria del Estado - OSE
Saudi Aramco and Sumitomo Chemical Japan J.V.
Siderar S.A.I.C., Siderca S.A.I.C., Sidor C.A., Tenaris S.A., Tubos de Acero de Venezuela S.A. and Hylsa S.A. de C.V.
COUNTRY
Argentina
Saudi Arabia
Brazil
Argentina
Brazil
Brazil
Argentina
Argentina
Argentina
Brazil
Argentina
Uruguay
Saudi Arabia
Argentina, Venezuela, and Mexico
AMOUNT*
152.0
147.0
138.8 5
104.0
75.4 5
70.8 5
34.4
31.3 5
23.5 5
21.3 5
14.4
5.0
u.n. **
u.n. **
4. See a detail of projects under “Additional Information:TEI&C’s activities for the period July 1, 2004 - June 30, 2005”
5. Approximate amounts in USD.
_
_
PRA-1. THE ORIGINAL AND ADDITIONAL CONTRACTS COMPRISE THE CONSTRUCTION OF A FIXED OIL PUMPING PLATFORM.
_ 12 TEI&C S.A. JUNE 30, 2005
STRUCTURE OF TEI&C
TEI&C was incorporated, through its controlling company Techint Limited
(Jersey), in order to concentrate in one single holding company the control
of the subsidiaries doing business in TG’s areas in South America, Central
America and the Middle East.
At the end of June 2005, the headcount totalized 13,746 employees (includ-
ing temporary) located in several countries: Saudi Arabia, Argentina, Brazil,
Chile, Ecuador, Mexico, Peru, Uruguay, Venezuela and others.
The family tree for TEI&C (including the most important companies) at June 30,
2005 is:
TEI&CURUGUAY
TECHINT INT. CONST. CORP.(TENCO) BAHAMAS
100%
FLINWOKURUGUAY
100%
LOSA-LAD. OLAVARRÍAARGENTINA48
%
52%
COINCARARGENTINA35
%
65%
COMP. INV. FERROVIARIAARGENTINA23
%
77% TECHINT
BRAZIL51%
49%
FERROXPRESO PAMPEANOARGENTINA20
%
80% SOCOMINTER
BRAZIL
100%
TECHINTPERU
100%
TECNOLOGÍA SERV. URB.ARGENTINA54
%
46% TECHINT CHILE
CHILE23%
77% WILTSE CORPORATION
URUGUAY
100%
TECNOMATTERARGENTINA97
% 3%
SERV. P. TECHINT FUNCHALPORTUGAL49
%
51%
SIDERNET ARGENTINA5% 95
% SIDERNET DE VENEZUELAVENEZUELA10
0%
SIDERNET MEXICANAMEXICO75
%
25%
TECHINTURUGUAY
100%
INV. S. CATALINA DE S.ARGENTINA98
% 2%
SAUDI TECHINTSAUDI ARABIA60
%
40%
TECHINT CO. TEC. INT.ARGENTINA49
%
22%
29%
OTHERS
OTHERS
OTHERS
(1)
(1)
(3) (2) (2)
(1)
(1)
OTHERS
OTHERS
FLINWOK
1. These participations belong to another company of theTechint Group.
2. On August 11th, 2005, the participation that represents25% of the equity of Sidernet Mexicana S.A. de C.V. wasacquired from third parties of the Techint Group.
3. On July 19th, 2005, Servicios y Prestaciones TechintFunchal-Serviços, Comércio E Gestão de Projecto LDA. acquired100% of the equity of Sidement Venezuela C.A.
_
_
_
TEI&C-FINANCIAL AND EQUITY STRUCTURE
TEI&C and its subsidiaries have adopted the International Financial Reporting
Standards (IFRS, formerly IAS) issued by the International Accounting
Standards Board (IASB) as accounting standards for the preparation of this
financial information.
During the fiscal year, TEI&C has included in its investment portfolio sev-
eral participations in companies within the field of engineering, construc-
tion and others, as shown below:
Since these subsidiaries were not officially included in TEI&C’s portfolio
during the twelve-month period ended June 30, 2005, a consolidated
income statement would not include the subsidiaries’ results for such peri-
od, and would only show results from the acquisition date of each sub-
sidiary, until the end of the fiscal year.
THE COMPANY _ 13
COMPANY
Techint Compañía Técnica Internacional S.A.I.C. –Argentina – and Subsidiaries
Techint International Construction Corporation (TENCO) –Bahamas– and Subsidiaries
Techint Compañía Técnica Internacional S.A.I.C. –Argentina– and Subsidiaries
L.O.S.A. Ladrillos Olavarria S.A.
ACQUISITION DATE
02.23.05
05.11.05
05.11.05
06.28.05
%
21.75
100.00
29.46
52.05
BUSINESS
Engineering, construction and services
Engineering & construction
Engineering, construction and services
Manufacture and sales of ceramic tiles
Regardless of this, and considering the controlled companies have been
operating during the twelve-month period ended June 30, 2005, a Pro
Forma Consolidated Income Statement has been prepared for such period,
as shown below, exclusive before reference and to illustrate the pro forma
consolidated results of TEI&C as if the acquisition dates of these sub-
sidiaries had been July, 1 2004
(IN USD MILLIONS)
JUNE 30, 2005
Net sales 592.1
Cost of sales (523.0)
Gross profit 69.1
Administrative expenses (51.0)
Sales expenses (4.9)
Other operating expenses (0.5)
Operating income 12.7
Financial results, net 6.3
Other income and expenses, net 8.6
Loss from investment in associates (2.4)
Income before income tax 25.2
Income tax expense (14.8)
Income for the fiscal year 10.4
ATTRIBUTABLE TO
Equity holder of TEI&C 4.3
Minority interest 6.1
10.4
_ 14 TEI&C S.A. JUNE 30, 2005
TEI&C’s consolidated shareholder’s equity as of June 30, 2005 reaches USD
153.1 million. See below a summary structure:
(IN USD MILLIONS)
JUNE 30, 2005
Non Current Assets 226.8
Current Assets 290.6
517.4
Equity
Shareholders 153.1
Minority interest 69.9
Non Current liabilities 47.5
Current Liabilities 246.9
517.4
The main financial indicators are:
(IN USD MILLIONS)
INDICATOR JUNE 30, 2005
Financial solvency 1.76
Liquidity 1.18
Indebtedness 1.32
Gross yield 12%
Illiquid assets 0.44
AN OUTLOOK FOR TEI&C
During the 2005/06 fiscal year TEI&C expects to increase, directly or indi-
rectly, its participation on its main subsidiaries. To accomplish this, it will
incorporate shares of Techint Compañía Técnica Internacional S.AC.I.
(“TEARG”) and LOSA Ladrillos Olavarria S.A.I.C. (“LOSA”), both incor-
porated in Argentina.
Regarding steel services, the Company intends to create a specific sub-
holding company to hold the companies in charge of the steel services con-
tracts in Venezuela, Mexico and Argentina.
THE COMPANY _ 15
After such process, the Company’s structure will be as follows:
TEI&C and its subsidiaries will aim at maintaining their position in the
pipeline, industrial and petrochemical plants, and steel services.
At the same time, the company is reinforcing its process and procedures
policies -which have been redefined in order to promote continual
improvement and business predictability, concentrating its efforts and
activities in selected markets and products, thus minimizing risks and
enhancing its leadership in engineering and construction throughout Latin
America.
The short and medium term development perspectives are very good due
to the growing investment trend driven by current prices of energy com-
modities, competitive advantages, and the important expertise acquired.
In the oil and gas areas, there are important opportunities in sight for new
contracts in the pipelines and industrial facilities market, especially in
Venezuela, Peru and Brazil, apart from the projects and mega projects that
are starting to appear in Saudi Arabia.
The outlook for Argentina focuses primarily in infrastructure projects
related to the development of investments in the power field. Particularly
important will be the developments related to gas transportation, where
TEARG, a subsidiary of TEI&C, is a regional leader and will focus in
expanding trunk gas pipeline systems through new contracts and early par-
ticipation in new developments in thermal generation and power lines.
_ 16 TEI&C S.A. JUNE 30, 2005
TELECOMUNICATIONSTecnología Serv. Urb.
FREIGHT TRANSPORTATIONFerroexpreso Pampeano
OTHERCoincarSYUSACOSA
INDUSTRIAL AREALOSA - Lad. Olavarría
_
_
___
_
OTHER SERVICES ANDINDUSTRIAL AREA
ENGINEERING &CONSTRUCTION (1)
SOUTH AMERICANTechint ArgentinaTechint BrazilTechint UruguayTechint ChileTechint EcuadorTechint Peru
MIDDLE EASTSaudi Techint
______
_
TEI&CURUGUAY
STEELSERVICES
ARGENTINATecnomatterSidemet
MEXICOTecnomatterSidernetSICI
VENEZUELASersisaSidernet
__
___
__ 1. Engineering and construction of oil and gas pipelines, miner-
al pipelines, polyducts and industrial and chemical plants, petro-chemicals, dams, mining infrastructure, public works infrastruc-ture, etc.
_
In the field of petrochemical and chemical plants, the engineering and con-
struction portfolio may increase due to the oil companies’ new initiatives
to improve their own gasoline, an essential environmental requirement.
Regarding mining, we foresee an interesting share in the Chilean mining mar-
ket, as Techint International Construction Corporation-TENCO and Techint
Chile S.A. are leaders in the execution of mining ducts. Therefore, we are con-
sidering the possibility of widening such expertise to other mining develop-
ments in the Andean region.
Commercial initiatives in Latin America and the Middle East will be inten-
sified in order to obtain new business. The Company will make an effort to
achieve a satisfactory participation in transportation infrastructure projects
such as roads, railroads and undergrounds. It will also evaluate participat-
ing in other sanitation and drainage projects for urban conglomerates that
will improve both the environment and urban economic activities.
Moreover, Techint S.A., TEI&C’s Brazilian subsidiary, will maintain its par-
ticipation in new business, focusing on ongoing needs to increase and
improve Brazil’s infrastructure.
Steel industry services will sustain a substantial improvement during the
next fiscal year. We foresee new contracts for Sidor C.A., Tubos de Acero
de México S.A. and Hylsa S.A. de C.V., the most important steel companies
in Venezuela and Mexico. This business will be part of the structure reor-
ganization process described at the beginning of this annual report. Such
services are expected to expand throughout Latin America.
For more than 50 years, TEI&C’s subsidiaries have proved competent in
developing important multidisciplinary projects in areas such as engineer-
ing, purchasing, assembly, construction, commissioning and start-up,
always reaching the highest level of compliance. All these points are the
corner stones that make TEI&C such an attractive choice for both cus-
tomers and associates.
This Board wishes to express its gratitude to the staff of all TEI&C’s sub-
sidiaries for the cooperation and effort shown in the projects carried out
during the fiscal year. We would also like to acknowledge financial insti-
tutions, suppliers, customers and sub-contractors for their trust, assistance
and cooperation.
THE BOARD OF DIRECTORS
THE COMPANY _ 17
_ 18 TEI&C S.A. JUNE 30, 2005
BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT
Board President Carlos Eduardo Bacher
Vice President Eduardo Nicolas Rocca Couture
Directors Enrico Bonatti
Atilio Juan Del Vecchio
María Virginia Jubin Vértiz
Mario Osvaldo Lalla
Luis Pablo Solari Damonte
Subsidiaries’ Presidents Argentina Roberto Bonatti
or Legal Representatives Brazil Roberto Caiuby Vidigal
Chile Felizardo Figueroa Barrueco
Ecuador Rodrigo Salazar
Peru Rosa María Ludowieg Alvarez Calderón
Saudi Arabia Claudio Catroppa
Uruguay Eduardo Nicolás Rocca Couture
Venezuela Fulvio Italiani
Executive Management General Manager Carlos Eduardo Bacher
Operational Managers
Operational Mario Agustín Dell’Acqua
Budgeting and Quality Horacio Amartino
Engineering Daniel Fernández
Service Areas Carlos Daniel Baylac
Staff Managers
Financial Mario Osvaldo Lalla
Human Resources Guillermo Farall
Legal Affairs Adriana Graciela Batán
Project and Office Managers
Andean Region Gerardo Freire
Argentina Osvaldo Macías
Brazil Alejandro Jorge Aguado
Chile Alejandro Cardone
Saudi Arabia Claudio Catroppa
Pipelines Luis Ignacio Viboud
Steel Services Julio Risucci
ANNUAL REPORT _ 19
LEGAL INFORMATION
Denomination: TEI&C S.A.
Legal Address: Rincón 487 - Of. 403
Edificio Artigas
Montevideo (11000)
Company activity: Investments
Date of registration: February 16, 2005
Expiration of Company Charter: February 16, 2105
Number of register: RUC 21 5098860012
Capital Stock: Shares: 3,584,924,092
Face Value: $U 3,584,924,0928
Parent Company: Techint Limited
Legal address: Equity Trust House
28-30 The Parade, JE4 8XY
St. Helier, Jersey
Channel Islands
Parent Company activity: Investments
Parent Company: Shares: 100%
Votes: 100 %
8. $U = Uruguayan Pesos_
HUMAN RESOURCES.
At the end of June 2005, the headcount totalized 13,746 employees (including temporary) located in several
countries: Saudi Arabia, Argentina, Brazil, Chile, Ecuador, Mexico, Peru, Uruguay, Venezuela and others.
All levels of Techint employees participate in continuous training programs which enhance their skills to
improve productivity, quality and safety, which are key factors to assure client satisfaction.
CONSOLIDATED BALANCE SHEET at June 30, 2005
ALL AMOUNTS IN USD THOUSANDS
ASSETS NOTES JUNE 30, 2005
NON-CURRENT ASSETS
Property, plant and equipment 5 144,344
Intangible assets 6 3,935
Investments in associates 7 32
Other investments 8 15,108
Trade and other receivables 9 48,292
Deferred income tax assets 10 15,078 226,789
CURRENT ASSETS
Inventories 11 16,152
Trade and other receivables 9 189,491
Construction contracts - work in progress 23,047
Property, plant, and equipment 5 461
Other investments 8 10,445
Cash and cash equivalents 51,052 290,648
Total assets 517,437
EQUITY AND LIABILITIES
SHAREHOLDER’S EQUITY
Capital and reserves attributable to
the Company’s equity holder 153,123
Minority interest 69,929 223,052
NON-CURRENT LIABILITIES
Borrowings 13 5,949
Deferred income tax liabilities 10 6,035
Trade and other payables 14 16,540
Other liabilities 15 18,934 47,458
CURRENT LIABILITIES
Borrowings 13 53,399
Derivate financial instruments 18 641
Trade and other payables 14 145,491
Construction contracts - work in progress 13,074
Other liabilities 15 34,322 246,927
Total liabilities 294,385
Total equity and liabilities 517,437
The accompanying notes are an integral part of this consolidated balance sheet.
_ 24 TEI&C S.A. JUNE 30, 2005
INDEX TO THE NOTES TO THE CONSOLIDATED BALANCE SHEET
1_ GENERAL INFORMATION
2_ BASIS OF PREPARATION
3_ ACCOUNTING POLICIES
a_ FOREIGN CURRENCY TRANSLATION
b_ USE OF ESTIMATES
c_ PROPERTY, PLANT AND EQUIPMENT
d_ INTANGIBLE ASSETS
e_ IMPAIRMENT OF LONG-LIVED ASSETS
f_ LEASES
g_ INVESTMENTS
h_ OTHER INVESTMENTS
i_ TRADE AND OTHER RECEIVABLES AND PAYABLES
j_ INCOME TAXES-CURRENT AND DEFERRED
k_ INVENTORIES
l_ CONSTRUCTION CONTRACTS-WORK IN PROGRESS
m_ CASH AND CASH EQUIVALENTS
n_ SHAREHOLDER’S EQUITY
o_ BORROWINGS
p_ EMPLOYEE BENEFITS
q_ PROVISIONS
r_ DERIVATIVE FINANCIAL INSTRUMENTS
4_ CERTAIN RISK AND UNCERTAINTIES
5_ PROPERTY, PLANT AND EQUIPMENT
6_ INTANGIBLE ASSETS
7_ INVESTMENTS IN ASSOCIATES
8_ OTHER INVESTMENTS
9_ TRADE AND OTHER RECEIVABLES
10_ DEFERRED INCOME TAXES
11_ INVENTORIES
12_ SHARE CAPITAL
13_ BORROWINGS
14_ TRADE AND OTHER PAYABLES
15_ OTHER LIABILITIES
16_ EMPLOYEE BENEFITS
17_ PROVISIONS
18_ FINANCIAL INSTRUMENTS
19_ PARTICIPATION IN JOINT VENTURES
20_ CONTINGENCIES AND COMMITMENTS
21_ RESTRICTED ASSETS
22_ RELATED PARTY TRANSACTIONS
23_ SUBSIDIARIES
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 25
1_ GENERAL INFORMATION
TEI&C S.A. (“TEI&C”), a company wholly-owned by Techint Limited, has been organized in Uruguay
in February 2005 and is a part of the Techint Group (“TG”). TEI&C’s purpose is to engage in invest-
ments by holding equity interests in companies or organizations whose corporate purpose includes
engineering, construction and services.
During the fiscal year, TEI&C acquired several participations in companies within the field of engi-
neering, construction and others, as explained below:
The assets and liabilities of TEARG, TENCO y LOSA (and their respective subsidiaries) have been
accounted for at the relevant predecessor’s cost, reflecting the carrying amount of such assets and lia-
bilities contributed to the Company. Accordingly, the consolidated balance sheet includes the bal-
ance sheets of the above-mentioned companies at historical book values and no adjustment has been
made to reflect fair values at the time of the contribution. The difference between the price paid and
the historical cost was charged to equity.
COMPANY
Techint Compañía Técnica Internacional S.A.I.C.-(“TEARG”)-Argentina and Subsidiaries
Techint International Construction Corporation (TENCO)-(“TENCO”)-Bahamas and Subsidiaries
Techint Compañía Técnica Internacional S.A.I.C.-Argentina and Subsidiaries
L.O.S.A. Ladrillos Olavarria S.A.-(“LOSA”)
NOTES TO THE CONSOLIDATED BALANCE SHEET
All amounts are shown in USD thousands, unless otherwise stated
_ 26 TEI&C S.A. JUNE 30_ 2005
ACQUISITION DATE
02.23.05
05.11.05
05.11.05
06.28.05
%
21.75
100.00
29.46
52.05
BUSINESS
Engineering, construction and services
Engineering and construction
Engineering, construction and services
Manufacture and sales of ceramic tiles
2_ BASIS OF PREPARATION
This consolidated balance sheet is prepared in accordance with International Financial Reporting
Standards (hereinafter “IFRS”) and is presented in thousands of U.S. dollars (“USD”) which is the
functional currency of TEI&C.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgments in the process of apply-
ing the Company’s accounting policies. The areas involving a higher degree of judgment of com-
plexity, or the areas where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in note 3.b.
The consolidated balance sheet as of June 30, 2005 includes the assets and liabilities of the sub-
sidiary companies.
The Company defines:
Subsidiary companies as those in which the Company has an interest of more than 50% of the vot-
ing rights or otherwise has the power to exercise control over the operating decisions. See note 23 of
the consolidated balance sheet for the list of subsidiaries.
Associated companies as those in which the Company owns between 20% and 50% of the voting
power. See note 7 of the consolidated balance sheet for the list of associates.
Related companies as those that have direct or indirect participation in the capital stock of the
Company, as well as the companies in which they participate. Additionally, related companies are
those in which the Company owns less than twenty percent of the voting power. See note 22 of the
consolidated balance sheet for related party transactions.
Joint Ventures as a jointly controlled entity, which involves the establishment of a corporation, part-
nership or other entity in wich each venturer has an interest.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 27
_
_
_
_
TEI&C’s interest in jointly controlled entities is accounted for by the proportionate consolidation
method. TEI&C combines its share of the joint ventures’ individual assets and liabilities on a line-by-
line basis with similar items in TEI&C’s consolidated balance sheet. See note 19 of the consolidated
balance sheet.
Subsidiaries are consolidated from the date on which control is transferred to the Company and are
no longer consolidated from the date that the Company ceases to have control. The purchase method
of accounting is used to account for the acquisition of subsidiaries.
All material intercompany transactions and balances among TEI&C’s subsidiaries have been elimi-
nated in consolidation.
3_ ACCOUNTING POLICIES
Early adoption of standards
In the current period the Company early adopted the IFRS which are relevant to its operation, as fol-
lows:
IAS 1, Presentation of Financial Statements
IAS 2, Inventories
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10, Events after the Balance Sheet Date
IAS 16, Property, Plant and Equipment
IAS 17, Leases
IAS 21, The Effects of Changes in Foreign Exchange Rates
IAS 24, Related Party Disclosures
IAS 27, Consolidated and Separate Financial Statements
IAS 28, Investments in Associates
IAS 32, Financial Instruments: Disclosure and Presentation
IAS 36, Impairment of Assets
IAS 38, Intangible Assets
IAS 39, Financial Instruments: Recognition and Measurement
IAS 40, Investment Property
IFRS 2, Share-based Payments
IFRS 3, Business Combinations
_ 28 TEI&C S.A. JUNE 30_ 2005
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
The early adoption of IAS 1, 2, 8, 10, 16, 17, 21, 24, 27, 28, 32, 36, 38, 39, 40, and of IFRS 2 and 3
did not result in substantial changes to TEI&C’s subsidiaries accounting policies.
The following is a summary of the principal accounting policies followed in the preparation of this
consolidated balance sheet:
a_ Foreign currency translation
I_ Functional and presentation currency
Items included in the balance sheet of each entity in which TEI&C participates are measured using
the currency that best reflects the economic substance of the underlying events and circumstances
relevant to that entity (“the functional currency”). The consolidated balance sheet is presented in
thousands of U.S. dollars, which is the measurement currency of TEI&C. The subsidiary companies
first record transactions using the functional currency and their balance sheets are then translated to
U.S. dollars with the only purpose of being consolidated by TEI&C.
II_ Translation of balances and transactions in currencies other than the functional currency
Transactions in currencies other than the functional currency are accounted at the exchange rates
prevailing at the date of the transactions, and the corresponding exchange gains and losses are
recorded within financial results.
Monetary assets and liabilities in currencies other than the functional currency are translated at the
year-end exchange rate.
III_ Translation of balances and results of consolidated companies
The results and financial position of all the consolidated companies that have a functional currency
different from the Company’s presentation currency are translated into the presentation currency as
follows:
assets and liabilities of each balance sheet are translated at the closing rate at the date of that balance
sheet;
income and expenses for each income statement are translated at average exchange rate;
all resulting exchange differences are recognized as separate component of equity.
In the case of sale or other disposition of any such subsidiary, any accumulated translation difference
would be recognized in the income statement as part of the gain or loss on sales.
b_ Use of estimates
The preparation of consolidated financial statements requires management to make estimations and
evaluations on both recorded and contingent assets and liabilities as of a certain date. Company’s
management makes estimations to calculate, at a certain moment, works in progress, allowance for
doubtful accounts, depreciation and amortization, the recoverable value of assets, and income tax
and provisions for costs and contingencies. The future actual results may differ from estimates made
as of the date of preparation of this consolidated balance sheet.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 29
_
_
_
c_ Property, plant and equipment
Machinery, equipment, vehicle, and others
As a general rule, TEI&C has adopted historical acquisition or construction cost less accumulated
depreciation for its fixed assets.
However, in the case of machinery, equipment and vehicles used in the construction business, TEI&C
has adopted fair value as the measurement criterion. Accordingly, the wholly-owned subsidiary
Techint International Construction Corp. (TENCO) revalued its machinery, construction equipment
and vehicles at June 30, 2003 based on a technical appraisal performed by a qualified professional
valuation specialist. The management believes that the resulting value approximates fair value. As
per International Accounting Standard No. 16 “Property, plant and equipment” (“IAS 16”), when an
item of property and equipment is revalued, the entire class of property and equipment to which that
asset belongs should be revalued. Nevertheless, machinery, construction equipment and vehicles
held by the subsidiary Techint Compañía Técnica Internacional S.A.C.I. (“TEARG”) were valued at
historical acquisition or construction cost restated to reflect the effects of inflation up to the transi-
tion date for IFRS (June 30, 2002) less accumulated depreciation. In view of the restatement per-
formed, the Company has deemed prudent not to revalue such assets.
The “sales comparison” method was used to obtain the fair value of TENCO’s assets for which there
is a wide and transparent secondary market. This approach consists in obtaining information from
recent sales or offers of assets bearing similar characteristics, age, and condition. Correction factors
that take into account the status of the markets offer and demand prevailing as of the date of the
appraisal, the relative age, probable residual useful life, state of conservation, and asset obsolescence
are applied to the sales price. The “cost less depreciation” method was used to obtain the fair value
of assets with a restricted sales market.
Depreciation was computed based on generally used and accepted engineering criteria which lead to
establishing the reasonable value of fixed assets. Said criteria takes into account factors such as the
age of each asset, probable residual or expected life, state of conservation and degree of obsolescence.
Market value was obtained by applying the depreciation ratio to the value of a new asset.
TENCO intends to perform this appraisal with the frequency required by IAS 16 in order to keep fair
values of appraised assets updated.
The increase in value of fixed assets resulting from the technical appraisal described above has been
recorded under “Reserve for fixed assets revaluation surplus” within Shareholders’ Equity of
TENCO, and amounted to USD 28,342 thousand at June 30, 2003.
The “Reserve for fixed assets revaluation surplus” is reversed through (i) the retirement of the equip-
ment appraised or (ii) depreciation charges. The difference between depreciation of appraised assets
and depreciation of the historical values of such assets shall be charged against accumulated results.
_ 30 TEI&C S.A. JUNE 30_ 2005
If TENCO’S machinery, equipment and vehicles had been valued at historical cost, the values would
have been the following:
(IN USD MILLIONS)
JUNE 30, 2005
Historical cost 71,956
Accumulated depreciation (58,276)
Residual value 13,680
The straight-line method has been used to calculate depreciation, by applying annual ratios suffi-
cient to terminate the value of each item as to the end of their estimated useful life.
Land and buildings
Land and buildings are stated at historical cost. Buildings are depreciated using the straight-line
method, by applying annual ratios sufficient to terminate the value of each item as of the end of their
estimated useful life.
The subsidiary company Saneamiento y Urbanización S.A. (SYUSA) holds land shown at historical
cost, minus the provision necessary to take it to net realizable value as of the fiscal year end. Assets
for which the purchase offer exists have been shown as current.
FEPSA fixed assets
These assets represent improvements on the assets received under concession by Ferroexpreso
Pampeano S.A.C. (“FEPSA”), as well as those devoted to service rendering, which will be transferred
to the assignee upon termination of the concession. Such assets are valued at their acquisition or con-
struction cost minus accumulated depreciation.
The straight-line method has been used to calculate depreciation, by applying annual ratios suffi-
cient to terminate the value of each item as of the end of their estimated useful life or upon termi-
nation of concession, whichever occurs first.
Useful lives used to calculate depreciation charges are as follows:
Buildings and improvements _ 30-50 years
Production equipment _ 10-20 years
Vehicles, furniture and fixtures, and other equipment _ 4-10 years
Land _ Not depreciated
Where the carrying amount of an asset is higher than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 31
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. When
revalued assets are sold, the amounts included in fair value and other reserves are transferred to
retained earnings.
Repairs and maintenance expenses are charged to the statement of income during the financial period
in which they are incurred. Whenever it is likely that future economic benefits in excess of the original-
ly assessed standard of performance of the existing asset will flow to TEI&C, the cost of major renova-
tions is included in the carrying amount of the asset. Major renovations are depreciated over the remain-
ing useful life of the related asset or to the date of the next major renovation, whichever occurs earlier.
d_ Intangible assets
Computer Software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and
bring to use the specific software. These costs are amortized over their estimated useful lives (three
to five years).
Costs associated with developing or maintaining computer software programs are charged to expens-
es as incurred. Costs that are directly associated with the production of identifiable and unique soft-
ware products controlled by TEI&C and that will probably generate economic benefits exceeding
costs beyond one year, are recognized as intangible assets. Direct costs include the software devel-
opment employee costs and an appropriate portion of relevant overheads.
e_ Impairment of long-lived assets
Property and equipment and other non-current assets subjet to amortization, including intangible
assets, are reviewed for impairment losses whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an
asset’s net selling price and its value in use. For the purposes of assessing impairment, assets are
grouped at the lowest level for which there are separately identifiable cash flows.
f_ Leases
Leases in which a significant portion of the risks and rewards of ownership are transferred from the
lessor to TEI&C are classified as finance leases. At the commencement of the lease term, TEI&C rec-
ognizes finance leases as assets and liabilities in the consolidated balance sheet at amounts equal to
their value of the leased property or, if lower, the present value of the minimum lease payments, each
determined at the inception of the lease. The discount rate used in calculating the present value of
the minimum lease payments is the interest rate implicit in the lease should this be practicable to
determine; otherwise, the lessee’s incremental borrowing cost is used. Any initial direct costs of the
lessee are added to the amount recognized as an asset.
_ 32 TEI&C S.A. JUNE 30_ 2005
See amounts of assets and liabilities held under finance leases in note 21.
g_ Investments
Investments in shares and participation in associated companies:
subsidiary companies have been consolidated as explained in note 2 “Basis of presentation” (see list
of subsidiaries in note 23), and
associated companies on which significant control influence is exercised have been valued on the
equity basis of accounting (see note 7)
All purchases and sales of investments are recognized on the trade date, not significantly different
from the settlement date, which is the date that the Company commits to purchase or sell the invest-
ment. Costs include transaction costs.
h_ Other investments
All of TEI&C investments, which include primarily deposits in trust funds, are currently classified
as available-for-sale as defined by IAS, despite the fact that some of them are not technically avail-
able for disposition according to the terms of the underlying contracts.
Other investment funds comprise mainly financial resources within offshore trusts, the objective of
which is exclusively to ensure that the financial needs for the normal development of their opera-
tions are met.
Investments in companies for which fair values can not be reliably measured are reported at cost.
i_ Trade and other receivables and payables
Trade and other receivables and payables are carried at face value less an allowance for doubtful
accounts, if applicable. This amount does not differ significantly from fair value.
An allowance for doubtful accounts is established when there is objective evidence that TEI&C will
not be able to collect all amounts due according to the original terms of receivables.
At June 30, 2005 the allowance for doubtful accounts that was deducted from the corresponding
gross accounts receivable totaled USD 8.4 million.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 33
_
_
j_ Income taxes - current and deferred
The current income tax charge is calculated on the basis of the tax laws in force in the countries in
which each TEI&C subsidiary operates.
Deferred income tax is recorded in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Currently enacted tax rates are used in the determination of deferred income tax.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be
available to offset temporary differences.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries,
associates and joint ventures, except where the timing of the reversal of the temporary difference can
be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
k_ Inventories
Inventories are stated at the lower of cost or net realizable value less the corresponding allowance for
obsolescence. Net realizable value is the estimated selling price in the ordinary course of business,
less the costs of completion and direct selling expenses. The cost of finished goods and work in
progress comprises raw materials, direct labor, other direct costs and related production overheads
(based on normal operating capacity) but excludes borrowing costs.
l_ Construction contracts-work in progress
A construction contract is a contract specifically negotiated for the construction of an asset or a com-
bination of assets that are closely interrelated or interdependent in terms of their design, technology
and functions or their ultimate purpose or use.
When the outcome of a construction contract cannot be reliably estimated, contract revenue is rec-
ognized to the extent of contract costs incurred where it is probable those costs will be recoverable.
Contract costs are recognized when incurred.
When the outcome of a construction contract can be reliably estimated, contract revenue and con-
tract costs are acknowledged by the percentage of completion method. The stage of completion is
measured by reference to the relationship contract costs incurred for work performed to date bear to
the estimated total costs for the contract. When it is probable that total contract costs will exceed total
contract revenue, the expected loss is immediately recognized as an expense.
Costs incurred in the year in connection with future activity on a contract are excluded from con-
tract costs in determining the stage of completion. They are presented as inventories, prepayments
or other assets, depending on their nature.
_ 34 TEI&C S.A. JUNE 30_ 2005
TEI&C shows as an asset the gross amount due from customers for construction contracts for all con-
tracts in progress for which costs incurred plus recognized profits (less recognized losses) exceed
progress billings. Progress billings not yet paid by customers and retentions are included as
Construction contracts-work in progress.
TEI&C presents as a liability (within Construction contracts-work in progress) the gross amount due
to customers for construction contract for all contracts in progress for which progress billings exceed
costs incurred plus recognized profits (less recognized losses).
m_ Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents com-
prise cash on hand, deposits held at call with banks and other short-term highly liquid investments
with original maturities of three months or less. Bank overdrafts are included within borrowings in
current liabilities in the consolidated balance sheet.
n_ Shareholder’s equity
Ordinary shares are classified as equity. The shareholder’s equity at June 30, 2005 includes:
The value of share capital, legal reserves, other distributable reserves, and accumulated results in
accordance with IFRS.
The currency translation adjustments and retained earnings of TEI&C’s subsidiaries under IFRS.
Minority interest in subsidiaries.
o_ Borrowings
Borrowings are initially recorded based on the fair value of the net proceeds. Borrowings are subse-
quently stated at amortized cost using the effective yield method; any difference between proceeds
(net of transaction costs) and the redemption value is recognized in the income statement over the
life of the borrowings. This amount does not differ significantly from fair value.
Borrowings are classified as current liabilities unless TEI&C has an unconditional right to defer set-
tlement of the liability for at least twelve months after the balance sheet date.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 35
_
_
_
p_ Employee benefits
Pension plans and other post-retirement benefits
Certain Argentine TEI&C officers are covered by a specific employee retirement plan designed to pro-
vide retirement, termination, and other benefits to those officers.
TEI&C is accumulating assets for the ultimate payment of those benefits in the form of investments
that carry time limitations for their redemption. The investments are not part of a particular plan, nor
are they segregated from TEI&C’s other assets. Due to these conditions, the plan is classified as
“unfunded” under IFRS.
Retirement costs are assessed using the projected unit credit method: the cost of providing retirement
benefits is charged to the statement of income over the service lives of employees based on actuari-
al calculations. This provision is measured at the present value of the estimated future cash outflows,
using applicable interest rates. Actuarial gains and losses are recognized over the average remaining
service lives of employees.
Benefits provided by the plan are calculated on a three-year or seven-year salary average (whichev-
er is more favorable to the beneficiary) for those executives who have retired or were terminated
before December 31, 2003. After this date, the benefits of the plan are calculated based on a seven-
year salary average.
The laws in the different countries in which TEI&C carries out its operations provide for pension
benefits to be paid to retired employees from government pension plans and/or private funds man-
aged plans. Amounts payable to such plans are generally calculated based on a percentage of employ-
ee salaries and are accounted for on an accrual basis.
Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated before the nor-
mal retirement date or whenever an employee accepts voluntary redundancy in exchange for these
benefits.
TEI&C recognizes termination benefits when it is demonstrably committed to either terminate the
employment of current employees according to a detailed formal plan without possibility of with-
drawal, or to provide termination benefits as a result of an offer made to encourage voluntary redun-
dancy. Benefits falling due more than twelve months after balance sheet date are discounted to pres-
ent value.
_ 36 TEI&C S.A. JUNE 30_ 2005
Profit-sharing and bonus plans
A liability for employee benefits in the form of profit-sharing and bonus plans is recognized in other
provisions when there is no realistic alternative but to settle the liability and at least one of the fol-
lowing conditions is met:
there is a formal plan and the amounts to be paid are determined before the time of issuing the finan-
cial statements; or
past practice has created a valid expectation in employees that they will receive a bonus/profit-shar-
ing and the amount can be determined before the financial statements are issued.
Liabilities for profit-sharing and bonus plans are expected to be settled within twelve months and are
measured at the amounts expected to be paid when they are settled.
q_ Provisions
Provisions are recognized when TEI&C has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation, and a
reliable estimate of the amount can be made. Where TEI&C expects a provision to be reimbursed, for
example under an insurance contract, the reimbursement is recognized as a separate asset but only
when the reimbursement is virtually certain.
r_ Derivative financial instruments
Forward foreign exchange contracts are carried at fair value, which is determined using forward
exchange market rates at the balance sheet date. The changes in fair value of the derivative financial
instruments are recognized as gains or losses.
4_ CERTAIN RISK AND UNCERTAINTIES
Financial instruments comprised of cash, short-term investments, accounts receivable, and accounts
payable could be subject to credit risk. The Company places its cash and cash equivalents in high
quality financial institutions. The Company's policy is designed to limit exposure to any one insti-
tution. The Company has not experienced any losses in such accounts.
The Company’s receivables are concentrated on a limited number of customers for whom work is
executed. The management evaluates on a periodic basis the financial condition of its customers to
minimize the risk of not recovering of its accounts receivable.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 37
_
_
Many of the Company's projects are billed on a fixed-fee basis and, therefore, the Company bears the
risk of cost overruns. Client project margins and personnel utilization are critical components of the
Company's financial performance. The Company regularly reviews staff compensation and overhead
costs to ensure that its services are properly priced. In addition, the management monitors the work
in progress on a monthly basis.
The Company conducts its operations in different locations that expose the Company to adverse
effects arising from a devaluation of local currency. To reduce its exposure the Company bills most
of its customers in U.S. dollars. The Group Treasury is responsible for managing the net position in
each foreign currency by using external forward currency contracts. Furthermore, the management
believes the Company is not exposed to any liquidity risk since if generates enough cash from nor-
mal business to fulfill its operations and financial commitments.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities,
the availability of funding through an adequate amount of committed credit facilities, and the abili-
ty to close out market positions. Due to the dynamic nature of the underlying businesses, the Group
Treasury aims to maintain flexibility in funding by keeping committed credit lines available.
As the Company has no significant interest-bearing assets, the Company’s income and operating cash
flows are substantially independent of changes in market interest rates. The Company’s interest rate
risk arises from long-term borrowings, which are not significant for the Company. Borrowings issued
at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates
expose the Company to fair value interest rate risk.
5_ PROPERTY, PLANT AND EQUIPMENT
ORIGINAL ACCUMULATED NETVALUE DEPRECIATION VALUE
Land and buildings 59,929 (34,439) 25,490
Equipment and machinery 212,189 (174,364) 37,825
Spare parts, vehicles, and others 53,908 (33,918) 19,990
Other assets 111,925 (50,886) 61,039
Subtotal non-current 437,951 (293,607) 144,344
Current property, plant, and equipment 461 - 461
Total June 30, 2005 438,412 (293,607) 144,805
_ 38 TEI&C S.A. JUNE 30_ 2005
6_ INTANGIBLE ASSETS
ORIGINAL ACCUMULATED NETVALUE DEPRECIATION VALUE
Systems development 9,347 (5,412) 3,935
Total June 30, 2005 9,347 (5,412) 3,935
7_ INVESTMENTS IN ASSOCIATES
BOOK VALUE % OWNERSHIP
Comintrac S.A. - Ecuador 30 23.78
Sindtec S.A - Argentina 2 20.00
Total June 30, 2005 32
8_ OTHER INVESTMENTS
NON-CURRENT
Government Bonds 791
Other investment fund 4,449
La Nacion´s Trust fund 9,152
Terminal Bahia Blanca S.A. 407
Others 309
Total non-current 15,108
CURRENT
Government Bonds 9,867
Temporary placements 28
Terminal Bahia Blanca S.A. 494
Others 56
Total current 10,445
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 39
9_ TRADE AND OTHER RECEIVABLES
NON-CURRENT
Trade receivables - net 17,712
Tax credit 12,030
Trade and other receivables from related parties 14,601
Others 3,949
Total trade and other receivables - non-current 48,292
CURRENT
Trade receivables - net 121,306
Receivables from related parties 9,094
Other receivables from related parties 17,410
Other receivables 30,149
Prepayments 1,052
Tax credit 10,480
Total trade and other receivables - current 189,491
10_ DEFERRED INCOME TAXES
As further explained in Note 3.j., most of the Company’s subsidiaries are located abroad and thus
subject to income taxes. At June 30, 2005 the Company discloses under the caption “deferred income
tax assets” the net balance recognized by those subsidiaries that recorded a net deferred income tax
asset, while the net balance recognized by those subsidiaries that recorded a net deferred income tax
liability has been disclosed under “deferred income tax liability” in the consolidated balance sheet.
Net deferred income tax assets totaled USD 15,078 thousand at June 30, 2005 and arise mainly from
tax loss carryforwards and the different criteria applied to record provisions under tax and account-
ing rules. These deferred income tax assets have been partially offset by deferred income tax liabili-
ties arising from differences existing between the book value and the tax value of property, plant, and
equipment and differences in valuation criteria for current and non-current investments.
Net deferred income tax liabilities accounted for USD 6,035 thousand at June 30, 2005 and arise
mainly from differences between the book and the tax value of property, plant, and equipment and
work in progress.
_ 40 TEI&C S.A. JUNE 30_ 2005
The main subsidiaries generating deferred income tax balances are detailed below:
DEFERRED ASSETS
TEARG 2,460
TEBRA 12,230
TENCO and Subsidiaries 328
Other 60 15,078
DEFERRED LIABILITIES
FEPSA (5,337)
LOSA (655)
Other (43) (6,035)
The recoverable value of deferred tax assets depends on the existence of future income subject to
income tax, sufficient to be used before their legal prescription period. In this regard, the manage-
ment estimates that TEI&C’s subsidiaries will generate sufficient taxable income in future periods so
as to offset the net balance of deferred income tax assets recorded at June 30, 2005.
11_ INVENTORIES
The item consists in the following :
Materials and spare parts 12,236
Raw materials 1,334
Advances to suppliers and subcontractors 1,512
Finished goods 3,824
Others 88
Valuation allowance (2,842)
Total Inventories 16,152
12_ SHARE CAPITAL
(IN THOUSANDS OF SHARES)
NUMBER OF SHARES ORDINARY SHARES
At 30 June 2005 3,584,924 3,584,924
The ordinary shares have a value of $U (Uruguayan peso) 1 per share. All issued shares are fully paid.
The authorized capital stock amounts to $U* 3,800,000 thousand
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 41
* Uruguayan peso
13_ BORROWINGS
COMPANY LENDER JUNE 30, 2005 INTEREST RATE
NON-CURRENT
Compañía Inv.Ferroviaria S.A.I.F. (Coinfer) Related parties 3,066 6.90%
Techint S.A. (TEBRA) Bco. Sudameris y Safra L.S.A. 809 7.50%
Techint Cía.Técnica Internacional S.A.C.I. Banco Comafi S.A. 1,100 9.50%
Techint Cía.Técnica Internacional S.A.C.I. Caterpillar Financial Services Corp. 895 5.61%
Other 79
5,949
CURRENT
Techint Cía.Técnica Internacional S.A.C.I. Bank overdrafts 10,188 5.70%
Techint Cía.Técnica Internacional S.A.C.I. Banco Comafi S.A. 369 9.50%
Techint Cía.Técnica Internacional S.A.C.I. Caterpillar Financial Services Corp. 755 5.61%
Techint Cía.Técnica Internacional S.A.C.I. Agrupación Fdo.Copartic.Financ. ACE 2,480 6.25%
Techint Cía.Técnica Internacional S.A.C.I. Santa María Financial S.A. 172 6.75%
Techint Cía.Técnica Internacional S.A.C.I. Sealse Invest.Holdings GMBH 4,573 3.56%
Techint Cía.Técnica Internacional S.A.C.I. Santa María S.A.I.y F. 143 5.50%
Techint S.A. (TEBRA) Bco.Sudameris y Safra L.S.A. 600 7.50%
Sidernet S.A. Banco Hipotecario S.A. 2,078 11.66%
Coincar S.A. Banco Río S.A. y Galicia S.A. 1,686 8.00%
Techint International Const. Corp. (Tenco) Banco BBA 3,760 6.40%
Techint International Const. Corp. (Tenco) Banco HSBC Chile 6,290 2.96%
Techint International Const. Corp. (Tenco) Banco BBVA Chile 350 4.68%
Techint International Const. Corp. (Tenco) Banco HSBC Abu - Dhabi 8,550 4.15%
Techint International Const. Corp. (Tenco) Samba Bank - Sautec 6,000 0.40%
Techint International Const. Corp. (Tenco) Santa María Financial S.A. 2,840 6.00%
Techint International Const. Corp. (Tenco) Techint Limited 356 4.50%
Other 2,209
53,399
_ 42 TEI&C S.A. JUNE 30_ 2005
14_ TRADE AND OTHER PAYABLES
NON-CURRENT
Trade payables 1,892
Social security and other taxes 7,225
Payables and provisions 7,417
Amounts due to associates 6
Total non-current Trade and other payables 16,540
CURRENT
Trade payables 101,395
Social security and other taxes 41,505
Amounts due to associates 2,591
Total current Trade and other payables 145,491
15_ OTHER LIABILITIES
NON-CURRENT
Provisions (Note 17) 11,075
Advances received on construction contracts 687
Other liabilities 7,172
Total non-current Other liabilities 18,934
CURRENT
Provisions (Note 17) 4,611
Advances received on construction contracts 22,605
Other liabilities and provisions 7,106
Total current Other liabilities 34,322
16_ EMPLOYEE BENEFITS
The amounts recognized in the balance sheet are determined as follows:
Present value of unfunded obligations 6,104
Unrecognized actuarial gains (losses) (3,361)
Liability in the balance sheet 2,743
The principal actuarial assumptions used were as follows:
Discount rate 7%
Rate of compensation increase 2%
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 43
17_ PROVISIONS
LABOR TAXES CIVILS MAINTENANCE* OTHER TOTAL
NON-CURRENT 2,800 2,006 4,264 - 2,005 11,075
CURRENT 100 - 1,211 1,905 1,395 4,611
June 30, 2005 2,900 2,006 5,475 1,905 3,400 15,686
(*) OF FIXED ASSETS
18_ FINANCIAL INSTRUMENTS
The Company’s short-term investments, derivative financial instruments, receivables, trade, bank,
and financial liabilities qualify as financial instruments under the terms of IAS 32.
Bank and financial liabilities were incurred at market rates in effect in those countries in which the
Company operates through its branches, joint ventures or subsidiary, affiliated and associated com-
panies.
The geographic distribution of accounts receivable at June 30, 2005 is determined by the projects in
progress in the following countries:
COUNTRIES JUNE 30, 2005
Argentina 45.4%
Brazil 8.2%
Chile 3.7%
Ecuador 4.5%
Peru 2.9%
Saudi Arabia 32.7%
Uruguay 2.1%
Other 0.5%
Furthermore, the Company’s foreign exchange exposure to currencies other than the U.S. dollar is
not material. The management policies devised to mitigate the currency risk is explained in Note 4.
The net fair values of derivate financial instruments at the balance sheet date were:
NET FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS JUNE 30, 2005
ASSETS LIABILITIES
Forward foreign exchange contracts - 641
Total - 641
The maturity of these forward foreign exchange contracts range between one to five months from the
balance sheet date.
_ 44 TEI&C S.A. JUNE 30_ 2005
19_ PARTICIPATION IN JOINT VENTURES
At June 30, 2005 the Company was part of different Joint Ventures, which also perform engineering
and construction activities. The Company’s participation in those Joint Ventures was recorded
through proportional consolidation of assets, liabilities, and results. The following balances repre-
sent the Company’s participation at June 30, 2005:
20_ CONTINGENCIES AND COMMITMENTS
Guarantees and bonds granted
TEI&C and its subsidiaries have entered into a series of guarantee contracts with third parties through
which they undertake the unconditional and irrevocable obligation to guarantee the prompt and
complete payment and performance of certain liabilities incurred by related parties. In addition, cer-
tain of the Company’s subsidiaries issued a number of guarantees to provide for the obligations
assumed in the normal course of business.
As of June 30, 2005, TEARG granted in favor of the International Finance Corporation (IFC), a World
Bank agency, a guarantee for 33% of the disbursement of the loan granted on August 1, 1996 in favor
of Transportadora de Gas del Norte (TGN) in an amount of USD 69.7 million for the purpose of afford-
ing TGN’s Investment Plan in the period 1995-1997. In turn, TEARG holds a counter-guarantee for
the value of the main guarantee, issued by Tecgas N.V. (shareholders of TGN's holding company).
MAIN JOINT VENTURES
Techint Cia Técnica Internacional S.A.C.e I. -Panedile Argentina S.A. - Unión Transitoria de Empresas - Complejos “Los Caracoles” y “Punta Negra”
Techint Cia Técnica Internacional S.A.C.e I.- Hochtief A.V.G.H. - Impregilo S.p.A - Iglys S.A. - Unión Transitoria de Empresas- Complejo Penitenciario Ezeiza
Techint Cia Técnica Internacional S.A.C.e I.- Luis M. Pagliara S.A. - Unión Transitoria de Empresas - C. Re. Ma. Malla 332
Techint Cia Técnica Internacional S.A.C.e I.- Skanska S.A. - Unión Transitoria de Empresas - Acueducto Río Colorado
Techint Cia Técnica Internacional S.A.C.e I.- B.Roggio e Hijos S.A. - Unión Transitoriade Empresas - Subte Linea A
(1) CONTROLLING INTEREST THOUGH TECHINT COMPAÑÍA TÉCNICA INTERNACIONAL S.A.C.I. (ARGENTINA)
TOTAL ASSETS
23,826
26,467
2,013
6,745
4,295
TOTAL LIABILITIES
19,809
2,125
528
10,946
1,605
% OF OWNERSHIP (1)
38.41%
30.73%
30.73%
25.61%
25.61%
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 45
As of June 30, 2005, TENCO granted a guaranty in favor of ARAMCO in an amount of USD 43.8 mil-
lion and in favor of Sidor C.A. in an amount of USD 0.03 million.
Situation of the subsidiary FERROEXPRESO PAMPEANO SOCIEDAD ANÓNIMA CONCESIONARIA
(“FERROEXPRESO PAMPEANO S.A.C.”)
Ferroexpreso Pampeano S.A.C. (FEPSA) is the railroad freight company that transports grains,
byproducts of the agro industry, petrochemical products, iron and steel products and containers
towards the ports of Bahía Blanca, Rosario, San Lorenzo and San Martín.
As of June 30, 2005, TEARG maintains receivables from financings granted to FEPSA for USD 23.6
million. Such balance has been eliminated in the process of preparing this consolidated balance
sheet. In turn, TEARG’s equity value in FEPSA, calculated through Compañía Inversora Ferroviaria
S.A.I.F. (COINFER) amounts to USD 3.6 million. Such equity value is not reflected in this consoli-
dated balance sheet because COINFER and FEPSA have been consolidated. The recoverability of the
referred assets is subject to FEPSA’s capacity to meet its obligations. This depends on the agreement
currently being discussed with the Argentine Government. Management understands that this agree-
ment will be approved and ratified.
Works executed under a trust, construction, and leasing agreement
TEARG, as a member of the UTE Techint Compañía Técnica Internacional S.A.C.I.-Hochtief
A.V.G.H.-Impregilo S.p.A.-Iglys S.A., signed an agreement with the Argentine Government to con-
struct a penitentiary complex under “turn-key” conditions located in Ezeiza, Province of Buenos
Aires, payable in 60 quarterly installments as license fees.
As of the issuance date of this consolidated balance sheet, the Argentine Ministry of Justice, Security
and Human Rights has fulfilled the commitments assumed and has paid the UTE the due license fees
17, 18 and 19 and paid license fee 20 in due term, as well as license fees 21 and 22, which became
due during 2005, thus restoring the UTE’s cash flows. License fees 10 through 16 are still due and
unpaid and the negotiations with the Ministry of Economy continue to obtain the budgetary lines for
their repayment. To value these seven license fees due and unpaid, their current value was calculat-
ed and the UTE’s management estimated August 2006 as probable collection date. TEARG’s propor-
tional interest in their discounted value amounts to USD 10.6 million. The recoverability of this bal-
ance is subject to the Argentine Government’s fulfillment of its commitments with the UTE.
In addition, on December 7, 2004, the UTE was notified of Resolution No. 656/04 of the Tax Bureau
of the Province of Buenos Aires, whereby alleged differences are assessed in the payment of the
Stamp Tax related to the Agreement signed on May 28, 1998 with the Argentine Government and Río
Trust S.A., as that provincial agency considers that the obligation to pay such tax would have been
partially breached. TEARG’s interest in the amount of the alleged difference, plus default interest and
fines, is USD 5.3 million as of March 31, 2005. On December 30, 2004, the UTE filed an appeal in
order to have such Resolution revoked. As the Company’s management and its legal counsel believe
that there are high possibilities of sustaining the referred appeal, the Company has not set up any
provisions.
_ 46 TEI&C S.A. JUNE 30_ 2005
21_ RESTRICTED ASSETS
Techint Compañía Técnica Internacional S.A.C.I.
There is a time deposit for USD 28 thousand disclosed in current “Other Investments”, which is not
available for the time being because it is attached to a guarantee in favor of Puentes del Litoral S.A.
There are fixed assets whose residual book value amounts to USD 3,845 thousand, pledged as guar-
antee of liabilities resulting from the purchase of such assets, which are disclosed in the accounts
“Borrowings” under current (USD 755 thousand) and non-current (USD 896 thousand), and “Trade
and other payables” current (USD 117 thousand).
In addition, there are fixed assets with a residual book value of USD 1,336 thousand which are
pledged as guarantee for liabilities under leasing agreements for USD 406 thousand and USD 1,130
thousand, included in the account "Borrowings" (current and non-current, respectively).
Coincar S.A.
Under the Credit Facility Agreement entered into by Coincar S.A. with Banco Río de la Plata S.A.
and Banco de Galicia y Buenos Aires, Coincar S.A. agrees not to sell nor cause to be sold, assign in
ownership and/or use and/or usufruct, mortgage, pledge, loan and/or loan for use, levy in any man-
ner whatsoever, lease and/or enter into a leasing, grant a security and/or personal interest with
respect to, not to transfer and/or in any manner dispose of, either in a transaction or a series of trans-
actions, all or a substantial portion of any of its assets, goods and/or rights and/or of its assets, goods
and/or rights to be acquired in the future, nor to distribute dividends, pay fees to the company’s
directors or consultants, without the prior consent of the majority of the Banks.
Compañía Inversora Ferroviaria S.A.I.F.
Licensed assets:
In conformity with the regulations established in the bid specifications and the License Agreement,
its subsidiary Ferroexpreso Pampeano S.A.C. received from Ferrocarriles Argentinos assets of its own
to be used in the operation. They primarily comprise infrastructure (main and secondary railway net-
work), real property (warehouses and buildings), transportation material (locomotives and coaches),
fixed facilities and other. Upon expiration of the license, the assets will be returned to Ferrocarriles
Argentinos, at no additional cost, in their normal condition of maintenance, except for the wear and
tear over time and the normal use.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 47
Techint S.A. Brazil
As of June 30, 2005, the company had USD 5,594 thousand in assets granted as guarantee for differ-
ent proceedings, in addition to the court deposits made, which amounted to USD 2,365 thousand and
are included in the account "Trade and other receivables" non-current in this consolidated balance
sheet.
In addition, this company is judicially challenging the unconstitutionality of certain taxes.
Techint International Construction Corp. (TENCO)
At June 30, 2005 the net carrying amounts of the fixed assets held under finance lease amount to USD
216 thousand and the liability for finance leases amount to USD 97 thousand.
Sidernet S.A.
The company has fixed assets (machinery) whose residual book value amounts to USD 278 thousand
and are pledged by virtue of the financing conditions agreed with their supplier. The pledge secures
a short-term debt of USD 127 thousand.
22_ RELATED PARTY TRANSACTIONS
NOTES AT JUNE 30, 2005
NON-CURRENT ASSETS
Trade and other receivables 9 14,601
CURRENT ASSETS
Trade and other receivables 9 9,094
Other receivables from related parties 9 17,410
NON-CURRENT LIABILITIES
Amount due to associates 14 6
Borrowings 13 3,066
CURRENT LIABILITIES
Amount due to associates 14 2,591
Borrowings 13 10,564
_ 48 TEI&C S.A. JUNE 30_ 2005
23_ SUBSIDIARIES
COMPANY COUNTRY % OF OWNERSHIPJUNE 30, 2005
Caminos del Oeste S.A. Argentina (1)(2)
Cimimontubi LLC USA 100.00
Cimimontubi S.A. Venezuela 100.00
Coincar S.A. Argentina (1) 33.29
Compañía Inversora Ferroviaria S.A.I.F. Argentina (1) 39.38
Ferroexpreso Pampeano S.A.C. Argentina (3)
Fidelis Management S.A. Panama 95.30
Flinwok S.A. Uruguay 100.00
Inversora Santa Catalina de Siena S.A. Argentina 97.50
L.O.S.A. Ladrillos Olavarría S.A.I.C. Argentina 52.05
Saneamiento y Urbanización S.A. Argentina (1) 51.25
Saudi Techint Ltd. Saudi Arabia 60.00
Sidermex LLC USA 76.09
Sidernet S.A. Argentina (4) 52.55
Servicios y Prestaciones Techint Funchal - Serviços, Madeira 76.09Comércio e Gestão de Projectos Lda.
Socominter Sociedade Comercial Internacional Ltda. Brazil 75.13
Tebra Empreendimentos Ltda. Brazil 99.95
Techint Chile S.A. Chile 88.72
Techint Compañía Técnica Internacional S.A.C.I. Argentina 51.21
Techint Compañía Técnica Internacional S.A.C.I. Uruguay 100.00
Techint International Construction Corp. (TENCO) Bahamas 100.00
Techint Nigeria Limited Nigeria 100.00
Techint S.A. Brazil 75.12
Techint S.A.C. Peru 100.00
Tecnología en Servicios Urbanos - Tesur S.A. Argentina (1)(5) 33.53
Tecnomatter Instalaciones y Construcciones S.A. Argentina (1) 52.62
Wiltse Corporation S.A. Uruguay 100.00
(1) Controlling interest through Techint Compañía Técnica Internacional S.A.C.I. (Argentina).
(2) The assets, liabilities, and results are not included in the consolidated financial statements because the Company decided to set up an allowance for the full investment value.
(3) Controlling interest through Compañía Inversora Ferroviaria S.A.I.F.
(4) Controlling interest through Tecnomatter Instalaciones y Construcciones S.A.
(5) Such percentage was calculated not considering preferred shares.
NOTES TO THE CONSOLIDATED BALANCE SHEET _ 49
_
_
_
_
_
HARADH PROJECT, SAUDI ARABIA.
Techint is working in the Haradh Arabian Light Crude Increment” also known as GOSP III (Gas and Oil Separation
Plant), in the Eastern Province of the Kingdom of Saudi Arabia. The project consists in carrying out detail engi-
neering, purchasing of equipment and material, and construction of installations necessary for the new plant.
TEI&C AND SUBSIDIARIES’ ACTIVITIES FOR THE PERIOD JULY 1, 2004 - JUNE 30, 2005
In order to offer a thorough view of the activities of TEI&C’s subsidiaries (although such subsidiaries have not been in the hold-
ing company’s portfolio for all of the fiscal year), and considering that TEI&C is continuing businesses that TG has developed for
more than 50 years and applying the same values, policies and procedures as TG, we offer below comments for the whole
twelve month fiscal year started on July 1, 2004 and ended on June 30, 2005.
ACTIVITIES FOR THE PERIOD JULY 1, 2004 - JUNE 30, 2005 _ 53
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SAUDI ARABIA
Saudi Techint Ltd. obtained in June 2005 the
ISO 9001:2000 Quality System Certificate, a cer-
tification that exceeds the customers’ and main
competitors’ expectations for this market.
1_ Project Haradh Arabian Light
crude increment facilities-GOSP III
The previous fiscal year a contract was signed
with Saudi Arabian Oil Company (“ARAMCO”)
for the execution of the “Haradh Arabian Light
Crude Increment” also known as GOSP III (Gas
and Oil Separation Plant), in the Eastern
Province of the Kingdom of Saudi Arabia, 350
kilometers southeast of its capital, Riyadh.
This project consists in carrying out detail engi-
neering, purchase of equipment and material,
and construction of installations necessary for
the new GOSP III plant, including the installa-
tions necessary for the primary separation of gas
and oil, with a production capacity of 300 thou-
sand barrels per day. In addition to the GOSP III,
modifications are required for two nearby
plants: GOSP II, and the Hawiyah Water
Injection Plant (HAWIP), for which a third salt
water booster pump will be supplied and
installed, to increase existing installed capacity.
TECHINT INTERNATIONAL CONSTRUCTION CORP. (TENCO)
AND ITS SUBSIDIARIES
The term for completion is 24 months, with
interim periods for the delivery of works at the
GOSP II and HAWIP plants.
At June 2005 the rate of advancement was 73%,
with a commitment to deliver the facilities before
contractual dates.
2_ Hot strip mill enhancement project
Saudi Techint Ltd. is providing performance serv-
ices and assistance for the installation of the new
furnace (number 2), together with the civil works,
assembly and installation in Saudi Iron & Steel
Company (HADEED) with the experience and
logistic support of Techint Technologies and
Italimpianti. The rate of advancement as of June
2005 was 61%.
3_ Rabigh development Project -
utilities & offsites
In June 2005 a contract was signed with Aramco
and Sumitomo Chemical Japan JV for Utilities &
Offsites engineering in the mega “Rabigh
Refinery Expansion & Development Project".
Such contract is related to the upgrade of the $ =
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_ 54 TEI&C S.A. JUNE 30_ 2005
diameter, gas pipeline that connects the Camisea
camp to Lima, Peru; a LGP (liquid gas propane)
duct, approximately 561 kilometers long, 12”
diameter, pipes. Such works implied significant
logistics, topography, and weather-related chal-
lenges, in addition to the difficulties presented by
the transportation of personnel, supplies, camp-
ing equipment and machinery right into the rain-
forest. Provision of a pumping and reduction sta-
tion and a SCADA system through optical fiber
and a satellite network were part of the project.
By the end of 2004, a pipeline maintenance con-
tract was signed with Compañía Operadora de Gas
del Amazonas S.A.C. (operator of the polyduct) for
the term of one year (renewable) and an approxi-
mate amount of USD 14 millions per year.
Rabigh refinery and petrochemical integration,
140 kilometers north of the city of Yeddah.
Investment in this mega project will reach several
USD millions for the production of ecological gaso-
line, ethanol, and propylene. It includes: Refinery
A package (Ethane Cracker, Gas Recovery Unit,
High Olefin Fluidized Catalytic Cracker,
Unsaturated Gas Plant and Butane-1 Extraction
Unit); Refinery B package: (Vacuum Distillation
Unit, Vacuum Hydro Gas Oil, Hydrogen Plant, Flue
Gas Desulphurisation Unit, Alkylation’s Unit,
Isomerism, Sulphuric Acid Plant, Amine
Regeneration Units, Sour Water Strippers and
Sulphur Recovery Unit); Three Petrochemical
packages comprising Polyethylene, Polypropylene,
Propylene Oxide Unit, Mono Ethylene Glycol;
Tanks package; Utilities and Off Sites package.
TENCO and Saudi Techint Ltd., TEI&C’s sub-
sidiaries, have been retained for the develop-
ment of the Utilities and Off Sites package,
which will require approximately 1,500,000 pro-
fessional man-hours (engineering, purchasing,
construction, management, inspection, and
administration) and will start running upon esti-
mating the actual work needs.
Potential construction activities where Saudi
Techint Ltd. will participate include: Seawater
Intake System, Cooling Water Pumps, Towers
and Manifolds, Compressed Air System (Plant
and Instrument Air), Air Separation Unit,
Sulphur Forming Unit and Handling System,
Liquid Berth Jetties (including Topsides),
Western Conventional/RO-RO Berth Eastern RO-RO
Berth (for the construction period of the whole
complex), Chemical Pumps, Metering,
Interconnecting Piping and associated Pipe
racks, Chemical Tank Flare.
PERU
_ Camisea Project
In August 2004, Transportadora de Gas del Peru
S.A., owned by Tecgas N.V., Tecgas Camisea S.A.,
Hunt Pipeline Company of Peru Ltd., Sonatrach
International Pipelines Corporation B.V.I, SK
Corporation, Suez Tractebel S.A., Carmen
Corporaton, and Graña y Montero S.A., received
delivery of the gas pipeline laid by our controlled
companies TENCO and Techint SAC (Peru). Thus
commenced the twelve-month guaranty period
during which several works were performed,
such as cathodic protection, and avoidance of ero-
sion land movements (particularly in the Toccate
area), and valves installation and adjustment.
The works consisted in a 730 kilometers long, 22”
CAMISEA
PROJECT, PERU.
In August 1994, the con-
sortium in charge of the
Camisea transportation
system received delivery
of the gas pipeline laid
by Techint’s controlled
Companies, and the
twelve-month guaranty
period began. Techint
constructed the 760 km
long gas pipeline and
the 560 km long NGL
pipeline.
ACTIVITIES FOR THE PERIOD JULY 1, 2004 - JUNE 30, 2005 _ 55
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CHILE
_ Desalinized Water Pipeline Coloso Escondida
In October 2004, Minera Escondida Limitada
awarded Techint Chile S.A. (a subsidiary com-
pany of TENCO) an agreement for the installa-
tion of 167 kilometers, 24" diameter pipes, 127
kilometers of which will be made on the ground
and the remaining 40 kilometers of pipes will be
buried. The works are to be performed along the
route joining Puerto Coloso and premises of the
Mine, in Antofagasta. The total amount of the
contract is approximately USD 19 million.
As of June 2005, the rate of advancement was of
62%. Termination is scheduled for November 2005.
URUGUAY
1_ Administradora Nacional de
Combustibles, Alcohol y Portland (“ANCAP”)
On December 22, 2004 the Uruguayan branch of
TEARG –together with Techint Compañía
Técnica Internacional SA.C.I. (“TEURU”) and
ABB Lummus Global– obtained Final Receipt of
the expansion of La Teja Refinery for the ANCAP
in Montevideo, Uruguay.
This was the most important project among
those carried out over the last few years in
Uruguay, considering the total lump sum con-
tract amount was USD 126 million.
The works involved engineering, supplies, con-
struction, and pre-commissioning with ABB-
Lummus technical assistance, as well as the plant
start-up and the one-year maintenance guarantee
period. All contractual obligations toward the
customer have therefore been fulfilled.
_ 56 TEI&C S.A. JUNE 30_ 2005
2_ Cleaning up of Maldonado
and Punta del Este
During the fiscal year TEURU, a TENCO sub-
sidiary, continued the sanitation works called
for under the contract signed in November 2000
with Uragua S.A. for USD 22,8 million.
The excavations necessary to lay 9,000 meters of
varied diameter pipes in Maldonado city made it
necessary to use 100,000 cubic meters of fill.
Thus, the works included repaving streets and
repairing sidewalks.
Due to agreements with the clients in the city of
San Carlos, 3,000 meters of impulsion lines were
built, together with the respective pumping sta-
tions. In the city of Piriápolis 4,500 meters of
pipelines for sanitization were built through
rocky terrain.
In October 2005, Uragua transferred to “Obras
Sanitarias del Estado-OSE” the Public Works
Award for execution of the works under this con-
tract. This state entity undertook execution of
works up to a USD 5 million amount and the par-
ties undertook to commit their best efforts to com-
plete the remaining jobs under the original contract.
3_ Integration of the Maldonado
Nuevo settlement
In June 2004, the Maldonado Municipality
awarded TEURU the bid number 29/03 for a
total amount of USD 3 million.
The works included in such bid are comprised
in the Integration Program for Irregular
Settlements, the object of which is to build 88
housing units, a community center; roads works;
hydraulic, electrical, and sanitation infrastruc-
ture, as well as conditioning of public spaces.
By the end of the fiscal year, 60 (one, two, and
three bedroom) homes have been built, most of
which have already been delivered to the client.
Termination is scheduled for January 2006.
4_ Route 14
In November 2004, the Ministry of Transportation
and Public Works awarded TEURU the bid num-
ber 15/04 for pavement reinforcement with
asphaltic mixture in Route 14. There are two sec-
tions; the first one located between kilometers
157.3 and 176.2, and the second one between
kilometers 173.4 and 178.2. The total amount of
the contract is approximately USD 4 million.
The works began in January 2005, with a rate of
advancement of 34% as of the year-end, and the
works finalization is scheduled for July 2006.
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VENEZUELA
_ Steel Services
During the fiscal year, the steel services sector in
Venezuela continued the execution of diverse
works and services for SIDOR through Servicios
Siderúrgicos Sersisa S.A. (“SERSISA”), a sub-
sidiary of TENCO.
After the year-end, in July 2005, a new company
was incorporated under the name of Sidernet de
Venezuela C.A., controlled by Servicios y
Prestaciones Techint Funchal Servicos, Comércio
e Gestao de Proyectos Lda. (Madeira), that will
perform heavy duty cleaning services in SIDOR’s
plant.
STEEL SERVICES.
Techint Engineering & Construction provides several services for the steel industry, and is currently working in Argentina,
México and Venezuela. Services include electromechanical assembly, maintenance, structural repairs, industrial cleaning, and
furnace and smokestack maintenance.
_ 58 TEI&C S.A. JUNE 30_ 2005
MACAÉ PROJECT, BRAZIL.
Petrobras awarded TEBRA the Activo Nordeste and the Campo de Marlim contracts. Both agreements call for maintenance
and improvement services of offshore platforms in Bacía de Campos, Macaé.
1_ Alumina Do Norte do Brasil S.A.
Boiler Works I
The consortium TEBRA / Usiminas Mecánicas
S.A., in equal shares, entered into a contract
with Alumina Do Norte do Brasil S.A. for R$ 51
million. Termination date is scheduled for
October 2005. The works are located 90 kilome-
ters from the city of Belém in the State of Pará.
The main tasks to be carried out are the follow-
ing: project management (including supplies,
manufacturing and transportation), assembly of
precipitators, classifiers, hydrate thickeners,
tanks and metallic structures for a total of 13,721
tons. As of June 30, 2005 the contract was at 92%
of completion.
2_ PRA 1 - Autonomous Re-Pumping Platform
In May 2004 a contract was signed with PDET
Offshore S/A for R$ 162 million; in April 2005 an
additional contract was signed for R$ 8.7 million.
The original and additional contracts comprise
the construction of a fixed oil pumping platform,
which consists in the assembly of a 7,500 t metal-
lic structure, a generation module with a capaci-
ty of 75 megawatt, two re-pumping modules, a
utilities module, an accommodation module for
90 people and a helideck.
The platform, which will be installed in Bacía de
Campos, will have a processing capacity of
750,000 barrels/day and will pump for exporta-
tion all the crude oil received from six stationary
production units located in camps Roncador,
Marlin Sul, and Marlin Leste. The scope of the
hired services includes detail engineering, mate-
rial supplies, manufacturing, construction,
assembly, loading, and mooring of the semi-sub-
mersible platform.
Planave S.A and Confab Industrial S/A were,
respectively, the subcontractors that carried out
the detail engineering and manufacturing servic-
es and are currently in the final stage: they are
scheduled for termination by September and
December 2005.
As of June 30, 2005 the rate of advancement was
56%.
TECHINT S.A. (BRAZIL) AND SUBSIDIARIES (“TEBRA”)
ACTIVITIES FOR THE PERIOD JULY 1, 2004 - JUNE 30, 2005 _ 59
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THE MAIN SERVICES TO BE PROVIDED ARE PLANNING, ENGINEERING, INDUSTRIAL MAINTENANCE, AND ELECTROMECHANICAL ASSEMBLIES-
3_ MACAÉ - Platforms Maintenance
Petrobras awarded TEBRA the Activo Nordeste
and the Campo de Marlim contracts. Both agree-
ments call for maintenance and improvement
services of offshore platforms in Bacía de
Campos, Macaé.
The Nordeste contract was entered into in March
2004 and is scheduled for termination on March
2009 (with the possibility of a 5 year extension),
for a total amount of R$ 181 million. The main
services to be provided are planning, engineer-
ing, industrial maintenance, and electromechan-
ical assemblies in the sea oil productions plat-
forms Garoupa-1, Vermelho-1, Vermelho-2, and
Vermelho-3.
The Campo de Marlim contract was entered into
in September 2004 and is scheduled for termi-
nation on October 2009 (with the possibility of a
5 year extension) for a total amount of R$ 333
million, to perform the same services as were
previously mentioned, for the fluctuating plat-
forms P-18, P-20, P-26, P-27, and P-47.
4_ SAN SEBASTIAN - Almirante
Barroso Maritime Terminal
In October 2004, Petrobras Transporte S.A.
retained TEBRA services to substitute the ducts
for derivatives, for an amount of R$ 32 million
and in a 480-day term.
Such works include manufacturing, assembly, and
testing of the oil unloading lines from the dock to
the terminal (approximate weight: 65 tons).
As of June 2005, the rate of advancement was
approximately 69%.
5_ SABESP-Spheres
The works are developed in site in the
Guarapiranga-São Paulo Raw Water Lifting Station.
The works are being carried out in consortium
with Partner Engenharia & Gerenciamento Ltda.,
for a total amount of R$ 12 million, R$ 800 thou-
sand of which are the partner’s share.
The contract calls for detail engineering, supplies,
electromechanical assembly, and assisted pre-
operation of the adductor protection system,
which consists of 2 metallic spheres of 10.5 meters
diameter and the interconnection piping.
The contract started in August 2004 and it has a
term of 12 months; it is currently in the testing
stage.
6_ Compañía Petroquímica do Sul -
Ethylene furnace
In November 2004 a contract was signed with
Compañía Petroquímica do Sul for R$ 24 million
for the execution of the electromechanical assem-
bly, pre-operation, ethylene furnace tests, and
interconnections with Plant II in the petrochemi-
cal node Triunfo, state of Rio Grande do Sul.
The works comprise the assembly of 800 tons
equipment, 500 tons structure, and 500 tons pipes,
including the insulation, painting, electric wiring,
and instrument assembly works.
As of June 2005 the rate of advancement was 40%.
Termination is scheduled for December 2005.
_ 60 TEI&C S.A. JUNE 30_ 2005
ESSO PROJECT, ARGENTINA.
Several works were developed in Esso’s
Refinery in Campana, including detail
engineering, cost estimation, program-
ming, supplies and sub-contracts of sev-
eral units. On May 19, 2005 all units
began start-up. On July 12, 2005
Provisional Receipt was obtained.
1_ PETROBRAS ENERGIA S.A.
Elicabe Refinery - Bahía Blanca
The contract involves a Sulphur Recovery Unit
(SRU) and conformation of current installations
that generate acidic gas (which will be treated in
such SRU).
The contract amounts to local $ 14.8 million
(domestic currency) plus USD 8,8 million. The
works started on May 2, 2005 and include dif-
ferent services ranging from basic engineering to
start-up and performance test.
The basic engineering has been subcontracted to
Parsons E&C, one of the two companies set up by
Petrobras Energia S.A. for this project. TEARG
will provide basic and detail engineering for serv-
ices and modification of current installations.
As of June 30, 2005 the initial basic engineering
works were started. Termination is scheduled for
October 2006.
2_ ESSO Petrolera Argentina S.R.L.
Campana Refinery
During the fiscal year several works were con-
tinued in the Campana Refinery, under the open-
ended contract signed in June 30, 2003.
In March 2004 a new Assignment was added for
the development of detail engineering, cost esti-
mation, programming, supplies and sub-con-
tracts for and by order of ESSO for maintenance
work expected to be carried out during the shut-
down in April 2005 for the following refinery
units: Atmospheric Distiller, Vacuum Distiller,
Retarded Coke, Power Reformer, Intermediate
Distillate Unit, Coke Naphtha Hydro-cooler
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TECHINT COMPAÑÍA TÉCNICA INTERNACIONAL S.A.C.I.
(ARGENTINA AND SUBSIDIARIES)
Hexane Ratio Hydrogen Unit, Naphtha Stabilizer,
Boilers and Power Generator Station.
Considering equipment and materials installation
and sub-contracts, all of it TEARG’s responsibili-
ty, total investment reached USD 26 million.
On May 19, 2005 all units began start-up. On
July 12, 2005 Provisional Receipt was obtained
and we are now under the twelve-month guar-
anty period started on such date.
3_ Caracoles power station and dam
On September 3, 2004, the TEARG-Panedile
Argentina S.A. Joint Venture signed an agree-
ment with Energía Provincial Sociedad del
Estado (“EPSE”) in the province of San Juan that
allows for the continuity of the construction of
the Caracoles Power Station and Dam. TEARG’s
participation in this Joint Venture is 75%.
The project amounts to USD 152 million and its
purpose is to expand the energy sector to 705
GwH/year and to increase the irrigation area by
15,000 hectares.
This project consists in the constructon of a dam
of loosematerials with a concrete face, with a
volume of compacted filling of about 10 million
cubic meters, height of 137 meters above the bed
of the San Juan river, and 620 meters at the crest.
The dam will attain a capacity of 565 cubic
meters and a dam area of 1,300 hectares.
The work will have a spillway in two tunnels with
an average length of 420 meters, and a disposal
capacity of 3,200 cubic meters/second. The hydro-
electric power station, with two Francis turbines
of 62.6 Megawatt rated power each, as well as the
generators, are of Russian origin. The sation will
be fed from the reservoir through a 1,426 meters
long adduction gallery hollowed out in the rock
block, and will be connected with the turbines
through a steel full pipe with a surge shaft.
From the hydroelectric power station a high
voltage 132 kilowatt power line will transport
the power produced to the city of San Juan (50
kilometers away). It will also have a sluiceway
with a regulating valve chamber and a capacity
of 301.2 cubic meters/second.
The project also includes 1,700,000 cubic meters
of excavation through rocks, 5,600,000 cubic
meters of excavation through alluvial sediments,
184,000 cubic meters of concrete, 12,000 tons of
steel, 254,000 tons of dislodged earth.
The headcount totalized, as of June 2005, 849
employees (788 JV’s employees and 61 subcon-
tractors). The rate of advancement is 12% (32%
of which correspond to engineering, 11% to sup-
plies and 11% to construction). The works are
scheduled for termination in September 2007.
4_ Province of La Pampa - Río Colorado
Aqueduct
TEARG, in a consortium together with Sade
Skanska S.A., as equal partners in a Joint
Venture (JV), signed a contract with the
Government of the province of La Pampa
through the Public Works Secretariat and the Río
Colorado Technical Aqueduct Commission
(CoTARC), for the continuation of work on the
Río Colorado Aqueduct.
The works included engineering, construction,
assembly, pre-comissioning, and system start-
up. On June 30, 2005 Provisional Receipt was
obtained.
In July 1, 2005 the client awarded the JV the
operation and maintenance of the works for a
twelve-month period.
The aqueduct, with a maximum flow of 2 cubic
meters/sec and which purpose is to carry drinking
water to 16 living areas as well as water for irriga-
tion and cattle, involved the construction of 267
_ 62 TEI&C S.A. JUNE 30_ 2005
kilometers of a trunk aqueduct from Pichi Mahuida
to Santa Rosa, 260 kilometers of secondary
pipeline, 2 pumping stations, 1 drinking water
plant, 1 central chlorination building, 1 main con-
trol building, 2 gas chlorination stations in the
trunk pipeline, industrial installations and facili-
ties, 7 liquid chlorination stations in secondary
pipelines, 2 pumping stations in the secondary
aqueducts, 4 pressure control stations, 1 electric
transformer substation (132 kilowatt), 2 tanks
(2,550 cubic meters and 7,500 cubic meters) a
SCADA control system, IP communication through
stations, 595 kilometers of optic fiber, a 13.2 kilo-
watt line, and a VHF communication system.
The amount of the contract will reach $ 266.4
million. During the guarantee year, another $ 3.6
million will be certified. The additional opera-
tion and maintenance contract amounts to $ 5.1
million.
Water delivery has already started in some areas.
In August 2005 the official inauguration took
place and drinking water delivery to Santa Rosa
began.
5_ Torre Bouchard Plaza-La Nación Building
Final Completion was awarded in March 2005
for the first stage of Torre Bouchard Plaza build-
ing, which was constructed on La Nación news-
paper building opposite Puerto Madero, Ciudad
Autónoma de Buenos Aires. The total works
amounted to USD 25 million.
This tower office block is a Triple “A” category
building of 23 floors. It has a total area of 62,000
square meters including office space, centralized
services and six-level parking spaces for 460
vehicles.
The job performed enabled the recycling of the 3
basement floors and 7 aboveground floors of the
existing building, and the construction of 16
floors of offices above it. The office design is
flexible, based on modules, and was the work of
the architect Beppe Carusso. The building fea-
tures state of the art connectivity and telephone
services, ergonomic equipment and excellent
natural lighting.
During August and September 2005, TEARG
itself moved to this building, taking 6 floors or
8,000 square meters.
6_ Hollywood I and II Towers
The contract signed with Design Developer
Group for $ 14.2 million calls for the building of
two towers, Hollywood I and II, located in
Humboldt street, between Nicaragua and Costa
Rica, in Palermo Hollywood, Ciudad Autónoma
de Buenos Aires. Works start-up is scheduled for
September 2005 and termination for July 2007.
Hollywood I Tower will feature nine double
height floors, each of them with an internal mez-
zanine. There will be two additional floors,
accommodating a health club and multi-purpose
room respectively. Hollywood II tower will have
15 floors and two additional floors for health
club and multi-purpose room.
The works awarded to TEARG involve manage-
ment of the construction until termination of the
functional units, including external works, and
mechanical set-up of all devices needed for the
project.
7_ Córdoba 320 Remodeling
The $ 8.2 million contract started in November
2004, termination being scheduled within 12
months of such date.
The project involves the remodeling and value
improvement of the building located at Av.
Córdoba 320, Ciudad Autónoma de Buenos
Aires, consisting of basements, an auditorium,
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ground floor, eight office floors, a medium volt-
age substation and an additional ninth floor for
services and terrace.
8_ KAS S.A. - Residential buildings
In October 2004 provisional delivery was
obtained for Torre Ugarte 2393, corner with
Cabildo, Ciudad Autónoma de Buenos Aires. The
tower has 54 living quarters (one and two bed-
rooms) and a total area of 3,500 square meters.
During the works, 1,500 cubic meters of concrete
and 100,000 man-hours were used. Final
Completion was obtained in July 2005.
9_ Trenes de Buenos Aires S.A. -
Renewal of railroad tracks
Trenes de Buenos Aires S.A., lessee of the pas-
senger railroads Mitre and Sarmiento, awarded
TEARG several renovation and revamping works
under an open-ended contract amounting to $ 168
million. Such contract involves six sectors, five of
which belong to the Mitre tracks (M6, M7, M8,
M35, M36) and one to the Sarmiento tracks (S10).
The works are located in the Ciudad Autónoma
de Buenos Aires and the Northern and Western
suburban areas.
In December 2004 the works for sector M6 (Mitre
tracks) were started. Such works amount to $
21.8 million, termination being scheduled for
July 2006. In February 2005 the works for sector
S10 (Sarmiento tracks) were started. Such works
amount to $ 47.5 million, termination being
scheduled for June 2007.
10_ Gobierno de la Ciudad Autónoma de
Buenos Aires - City underground “A” line
On May 5, 2004 the Transport Secretariat at the
Ministry of Federal Planning, Public Investment
and Services signed a Contract Modification
Amendment with the JV that TEARG has formed
together with Benito Roggio e Hijos S.A. (in
equal shares) for the completion of the work on
the complete renewal of all tracks and track
equipment on the “A” line of the Buenos Aires
Underground, work that had been halted at the
end of 2000 because the necessary financing
from the federal government was not available.
The total amount of the works reaches $ 70.7
million and must be completed in 21 months
after May 10, 2004. It also included a guarantee
twelve-month period after termination.
The JV is responsible for the performance of
engineering, supply of all materials for installa-
tion, the removal of the existing material and the
assembly of new material.
Work mainly involves the renewal of 8.3 kilome-
ters of tracks and all the existing track equip-
ment, replacing it with modern elements of a size
compatible with the spaces available in the tun-
nels, joining rails by means of aluminothermic
welding to form long bars (long welded rails). It
also involves construction of a 90 kilometers
underground gallery parallel to the tunnel.
During this fiscal year, track renovation works
were performed reaching a 78% rate of advance-
ment. In February 2005 the track equipment
assembly was started, reaching a 35% rate of
advancement as of the year-end.
11_ National Highway No. 3-Kosovo (kilometer
2959) - La Herradura Section
TEARG, holding a 55% share in a JV with Dos
Arroyos S.C.A., has signed a contract with the
National Highway Bureau for the construction of
a section of National Highway No. 3 in the
province of Tierra del Fuego, Antártida e Islas
del Altántico Sur, for a total amount of approxi-
mately $ 26 million.
_ 64 TEI&C S.A. JUNE 30_ 2005
The job, which has a length of 31.4 kilometers,
consists in the construction of an embankment,
drainage, gabions and concrete walls in the side
hill sector, continuing with a draining sub-base
with a thickness of 0.2 meters, an anti-freeze
base with a thickness of 0.2 meters and an
asphaltic concrete carpet with a thickness of
0.09 m. The work is to be completed with the
construction of gravel hard shoulder and wire
fencing, and the installation of metallic barriers
and snow height indicators.
Works were done from October 2004 to mid May
2005, since the location of the works precludes
any kind of works from the end of May until
September.
Material rate of advancement is 37%, termina-
tion being scheduled for May-June 2006 (should
the weather conditions be normal in the area).
12_ National Highway Bureau:
CREMA 332-San Juan
The TEARG-Luis María Pagliara S.A. JV signed
in March 2005 a contract with the National
Highway Bureau for roads recuperation and
maintenance in the province of San Juan. The
total amount of the contract is $ 46 million.
TEARG’s share in the JV is 60%.
The works are to be done in National Routes
number 40, 20, and A014 (Av. de Circunvalación
de San Juan). The contractual term for the recu-
peration works is 18 months, plus a routine
maintenance period for 60 months.
Works started on May 23, 2005 with the cleaning
up and straightening of slopes in A014 for the
subsequent placement of the irrigation system
and vegetation.
In June 2005 TEARG continued transportation of
equipment, started the coating of slopes on the
bridge stirrups on A014, the patching with
asphalt concrete in Route 40 and the jobsite
installation.
13_ Transportadora de Gas del Norte S.A. Loops-
2004 Network expansion
The lump sum turnkey contract with Transpor-
tadora de Gas del Norte S.A. for $ 24 million
ended on September 30, 2004, upon obtaining of
a Provisory Receipt. The contract consisted in
the construction of a 56 kilometers, 30” diameter
loop.
The loop, running across the provinces of Río
Negro, La Pampa, and Mendoza, was performed
in three segments: Loma de la Lata-Puelén (19
kilometers), Puelén-Cochico (22 kilometers) and
Cochico-La Mora (15 kilometers). The project
also included the building of scraper traps on
the first two segments.
14_ Transportadora de Gas del Sur S.A. Loops -
2005 Network expansion
In 2005, Transportadora de Gas del Sur S.A.
awarded Constructora Norberto Odebrecht S.A.
the expansion works for the gas pipeline net-
works San Martín and Neuba II. The system used
called for bidders to obtain financing for the
works. To that end, the trust “Fideicomiso de
Gas-Ampliación Gasoductos Sur” was created to
act as the client.
TEARG was subcontracted to carry out the
expansion works for three segments of Neuba II
in the province of Buenos Aires, for a total of $
94.4 million.
The works consist in detail engineering, con-
struction and assembly of a 160 kilometers 35”
diameter pipeline, procurement of minor materi-
als and start-up assistance for the segments
Tramo Cerri (continuation of 52 kilometers exist-
ing loop), Tramo Saturno (continuation of 31
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kilometers existing loop), and Tramo Ordoqui
(continuation of 77 kilometers existing loop).
The works, that as of June 30, 2004 were at 68% of
completion, have been finished in August 2005.
15_ Transportadora de Gas del Norte S.A.
Loops - 2005 Network expansion
TEARG signed an agreement for USD 34.4 mil-
lion with Sociedad Nación Fideicomiso S.A.
(trustee of the trust Fideicomiso Financiero
“Ampliación Gasoducto Norte"), managed by the
Energy Secretariat and Transportardora de Gas
del Norte, the Project Manager.
The works started in April 2005 and consist in
the construction of 7 segments parallel to the
northern pipeline, with the purpose of enhanc-
ing the capacity of such pipeline. In total, the
works involve 176.9 kilometers, 30" diameter
pipelines (6 segments) and 14.7 kilometers, 24"
diameter (1 segment) that run across the
provinces of Salta, Jujuy, Tucumán, Catamarca,
and Córdoba.
Material advancement as of June 30, 2005 was
30%. Termination is scheduled for October
2005.
16_ Barrick Gold Inc. - Camino y Mina Veladero
Under the terms of an open-ended agreement
signed by TEARG and Minera Argentina Gold
S.A., a subsidiary of the Canadian company
Barrick Gold Inc., various jobs have been per-
formed in relation to the Veladero mining project.
This is a gold field located in the province of San
Juan, 360 kilometers to the northwest of the capi-
tal city, in the Andes, 4,500 meters above sea level.
During this fiscal year the following works were
finished: a fully equipped camp site for 1,260
construction employees, including service infra-
structure, detail engineering, supply and assem-
bly of mining equipment maintenance work-
shops. The works required 700 tons of metallic
structures.
Civil engineering, electromechanical assembly
of all process areas, and procurement and assem-
bly of metallic structures and tanks are being
carried out.
As of June 2005 the rate of advancement on the
mine works is 90%, for an amount of USD 63
million. As of that same date, the total amount
for the mine and road is USD 95 million.
Termination date is scheduled for October 2005,
reaching a total amount for both contracts equal
to USD 104 million.
17_ Potasio Río Colorado S.A.
The contract for a total of USD 582 thousand
ended on December 12, 2004 consisted in the
maintenance and modernization of the installa-
tions at the Pilot Plant that Potasio Río Colorado
S.A. operates at Cañadón Amarillo in the
province of Mendoza.
The following jobs are being carried out for this
project: a) remodeling and maintenance of the
well pumping and water injection systems,
including the building of a 10-ton steam boiler,
maintenance of the aqueduct, installation of
three gas generators and a 6 kilometers high ten-
sion line; b) the construction of a 10 kilometers
gas pipeline; c) the reconstruction of a cooling
basin and an evaporation basin over a total area
of 13.5 hectares, and a reservoir for industrial
water with a capacity of 1,000 cubic meters; d)
the construction of an oil pipeline, an aqueduct
and a brine conduit for the new caves.
_ 66 TEI&C S.A. JUNE 30_ 2005
18_ Steel services
During the year the Steel Services sector in Argentina
continued to carry out of various projects and servic-
es for Siderar S.A.I.C. (“SIDERAR”), Siderca S.A.I.C.
(“SIDERCA”) and Siat S.A. (“SIAT”).
As a result of the high level of specialization of
this sector, many important civil and industrial
jobs have been carried out for those companies,
including electromechanical assembly, mainte-
nance, structural repairs, industrial cleaning,
and furnace and smokestack maintenance.
One of the most important jobs carried out was
the repair of the No.1 Blast Furnace at the
Siderar plant in San Nicolás in August 2004.
This work called for approximately 200,000
man-hours.
The group of companies carrying out such works
were TEARG, Tecnomatter Instalaciones y Cons-
trucciones S.A. and Sidernet S.A. During the
2005 fiscal year, such companies’ income was
approximately USD 34.5 million.
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TGN AND TGS LOOPS, ARGENTINA
Techint carried out the construction of a 56 kilometers, 30” diameter loop for Transportadora de Gas del Norte, as well as the
expansion works for three segments of Transportadota de Gas del Sur Neuba II gas pipeline, a 160 kilometers 35” diameter
pipeline, both in Argentina.
THESE LOOPS WILL HELP ENLARGE THE GAS TRANSPORTATION SYSTEM IN THE COUNTRY.
19_ Engineering services
During the fiscal year several basic engineering
services were carried out for refinery projects,
sulphur projects, fertilizing plants or expansion
projects for gas fields. The most important
clients and projects were:
Pluspetrol: conceptual and basic engineering for
the expansion of Camisea facilities for the pro-
cessing of gas and condensed products coming
from block 56 Pagoreni, located in the Amazonas
rainforest.
Minera Silver Standard: pre-feasibility study for
the gas pipeline connecting to the power genera-
tion central for the mine Pirquitas in the
province of Jujuy.
Potasio Rio Colorado: pre-feasibility study and
investment for the gas pipeline and aqueduct
that would serve the potassium chloride extrac-
tion plant located in the province of Mendoza.
Shell Capsa: detail engineering together with
Black & Veatch USA for the Enhanced Sulfur
Recovery and Clean Fuels project for Shell’s
refinery in Dock Sud.
Minera Agua Rica: pre-feasibility study for the
concentrated copper mine in Andalgala,
province of Catamarca. Development study
together with Hatch Consulting, Canada.
Saudi Aramco: detail engineering for the gas and
oil separation plant (GOSP), with a 300,000 mil-
lion barrels/day capacity in the Eastern
Province, Saudi Arabia.
Barrick/Snc Lavalin: integration of basic and
detail engineering for the construction of the
Veladero San Juan gold mine.
In the oil and gas, mining, and infrastructure
markets, the most important clients and projects
were:
EPSE: detail engineering for the loose material
and hydraulic central Los Caracoles, in the
province of San Juan. It includes procurement
and assembly of two Francis turbines of 63
megawatt each.
Transportadora de Gas del Norte S.A.: detail
engineering, provision of minor materials, con-
struction, assembly, and testing until mechani-
cal completion for the extension of the existing
ducts. It includes 176,900 meters of 30” diame-
ter pipeline and 14,700 meters of 24" diameter
pipeline in the provinces of Salta, Jujuy,
Tucumán, Catamarca, and Córdoba.
Transportadora Gas del Sur S.A.: extension of
the transportation capacity of gas pipelines San
Martín and the final sections of Neuba II.
Petrobras: basic engineering (subcontracted to
Parsons E&C), detail engineering, procurement,
assembly, pre-commissioning, commissioning,
operators training, start-up, and performance
testing for the sulphur recuperation plant in the
Petrobras Energía S.A.’s R. Elicabe refinery in
Bahía Blanca. The project involves a sulphur
recovery unit, residual gas treatment unit, efflu-
ent gas incinerator, and a sulphur storing and
dispatch unit, with a 10 ton/day capacity.
In the steel market, we have consolidated basic
and detail engineering for projects in tubes and
flat steel plants, such as:
Siderar-Florencio Varela Plant: Electrozincado
line, steady productivity increase.
Siderar-Ensenada Plant: Heurtey and Ebner
bases. First stage of the expansion of anneal
basis.
Siderar-San Nicolás Plant: blast furnace 2 and
Coque Unit 2.
Tenaris-Confab: revamping of the welded pipes
production line.
Tenaris-Siat: welding cage, Etna line for seamed
pipes up to 14" diameter; 1 x 12 line for seamed
pipes up to 48" diameter.
Tenaris-Siderca: increase in screwing capacity,
TCR2- transfer of Cridan Heid turning lathes,
new swaging for TCR2 and TCR3, and thermal 4
treatment.
In addition to the above, we have provided engi-
neering services for steel plants in Canada,
Mexico, and Venezuela.
In this fiscal year, the level of activity has
reached approximately 1,700,000 man-hours.
_ 68 TEI&C S.A. JUNE 30_ 2005
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20_ Telecommunications
Tecnología en Servicios Urbanos-Tesur S.A.
(“TESUR”) is a company involved in construc-
tion, assembling, and exploiting all types of proj-
ects in the telecommunications and information
technology business. TEARG holds 65.66% of
TESUR (disregarding preferred shares).
TESUR’s main activity is based in the manage-
ment and execution of infrasctructure projects
requiring a considerable interaction with users.
The main job carried out by TESUR was the
search and construction of approximately 150
cell sites, modification and reinforcement of
other sites, supported by a substantial increase
of the company’s customer base and a strong
investment in the telecommunications market,
particularly in GSM (Global System for Mobile)
technology.
The main client during the fiscal year was CTI
PCS S.A. (CTI). However, other works were per-
formed for the cell phone companies Nortel and
Telefónica Móviles S.A. (“MOVISTAR”).
The works along the Río Colorado Aqueduct in
the province of La Pampa for the TEARG-
Skanska S.A. consortium continued, with the
provision of optic fiber cable, support and instal-
lation infrastructure works, as well as equip-
ment configuration.
In addition to this, services were provided for
Techtel-LMDS Comunicaciones Interactivas S.A.
(“TECHTEL”), Lucent Technologies Inc.,
MOVISTAR, Furukawa and SIDERAR for the
connection of customers, channeling, laying and
of splicing fiber optics
Basic and external plant telephone networks
were installed for the cooperatives in the dis-
tricts of San Miguel del Monte, San Cayetano,
Pedro Luro and Ranchos in the province of
Buenos Aires, and Huinca Renancó in the
province of Cordoba.
As to information technology, a vault room was
carried out for the Administración Federal de
Ingresos Públicos, consisting in the building of
high-security rooms for the protection of data
centers and data processing equipment.
21_ Freight railroad
Ferroexpreso Pampeano S.A. (“FEPSA”) is the
privatized freight railroad concession that pro-
vides transport services to the ports of Bahía
Blanca and Rosario-San Martín to exporters,
grain storers and large producers in a vast region
of the humid Pampas. TEARG holds control of
this company through Compañía Inversora
Ferroviaria S.A.I.F.
During the fiscal year, 3.7 million tons of freight
were carried, an increase of 37% compared to
the level reached in the previous period. On
August 2004 transportation of steel coils from
Retiro to Ensenada was started. This resulted in
354 thousand tons being transported during the
fiscal year.
Due to the floods occurred in 1997, FEPSA has
initiated a long renegotiation process regarding
the concession terms, aiming at reestablishing
proper economic-financial conditions for the
company. This process has been marked by
strong recessive periods that caused a substan-
tial deficit for the company and which further
damaged the conditions already mentioned.
This situation has been suffered by the share-
holders and has led to a series of meetings with
government after 1997.
The meetings held with the Contract
Renegotiation and Analysis Unit (UNIREN)
resulted in an Understanding Letter signed in
July 2004 and a modification addendum in May
2005. The amendments introduced in the con-
tract relate to the investment plan, the fee, and
the lease. According to the modifications, the
State assumes the cost of a work plan for the
ACTIVITIES FOR THE PERIOD JULY 1, 2004 - JUNE 30, 2005 _ 69
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repair of tracks damaged by the flood. On
September 26, 2005 UNIREN and FEPSA signed
a Final Agreement Act “ad referendum” of the
Executive’s approval. Such Act includes the
main points of the Understanding Letter and
Addendum, except for the date of calculation of
the fee and lease, which is January 1, 2005.
As to this date, such understanding is still pend-
ing approval, since it is following the procedures
established by Laws 25.561 and 25.790, and
complementary Decree Law 311/03. The process
should end with approval from the Government.
In April 2005 the Ministry of Federal Planning,
Private Investing and Utilities issued Resolution
350 whereby FEPSA is assigned a budget for
works for $ 22.4 million.
22_ Ezeiza Penitentiary Complex
TEARG, in a joint venture with Hochtief
Aktiengesellschaft Vorm. Germ. Helfmann,
Impregilo S.p.A., and Iglys S.A. entered into a
15-year leasing contract for the design, construc-
tion and financing of this project.
The work was handed over in June 2001 and
involved a built-over area of 80,000 square
meters to hold a population of 1,750 high and
maximum-security inmates. The State -through
the Ministry of Justice, Security and Human
Rights- has awarded Final Completion certifi-
cates for all Functional Units.
On September 9, 2004 an agreement was signed
with the Under-Secretariat for Coordination and
Innovation of the already mentioned Ministry,
whereby such office undertook to pay within 60
days the three fee installments that fell due in
the current year and to make timely payment of
the fees falling due in the future.
To this date, the State has fulfilled its commit-
ments and the company has collected in due
time the fees falling due during the fiscal year
and after the subscription of the aforementioned
Act, seven fees remaining unpaid and corre-
sponding to the fiscal years 10 to 16, plus
Reference Stabilizaton Index (CER) and interests
for a total amount of approximately $ 60 million.
23_ Puente Rosario-Victoria
TEARG is a minority shareholder, together with
Impregilo S.p.A., Iglys S.A., Hochtief
Aktiengesellschaft Vorm. Germ. Helfmann,
Benito Roggio e Hijos S.A., Sideco Americana
S.A., and Iecsa S.A. in Puentes del Litoral S.A.,
which holds the concession for the construction
and operation of the highway link between the
cities of Rosario (Santa Fe) and Victoria (Entre
Ríos).
Through the current traffic volume is adequate,
other reasons do not allow to restore the com-
promised financial situation of the project. A
renegotiation proposal has been submitted to the
Dirección Nacional de Vialidad, including sever-
al claims to accomplish the update of the com-
pany’s financial conditions, as well as the reduc-
tion of the execution guarantee and the waive of
penalties that are due to situations raised by the
economic crisis. No specific answers have been
obtained at this date.
_ 70 TEI&C S.A. JUNE 30_ 2005
CARACOLES
HYDROELECTRIC
POWER PLANT,
ARGENTINA
The headcount totalized,
as of June 2005, 849
employees (788 JV’s
employees and 61
subcontractors). The
rate of advancement
is 12% (32% of which
correspond to engineer-
ing, 11% to supplies
and 11% to construction).
LOSA LADRILLOS OLAVARRÍA S.A.I.C. (“LOSA”)
This company, devoted to the manufacture of
ceramic products for the Argentine market,
accomplished sales for $ 425 million.
Tiles and flooring shipments grew by 11% when
compared to last fiscal year’s sales, and absolute
sales levels for tiles are still below the years
prior the 2001-2002 crisis. Cost increments sus-
tained during the fiscal year were only partially
translated into sales prices, since the diminished
demand forced the company to assume an
important cost of distribution increase in order
to maintain its market share, mostly in the tiles
sector.
In general, no great changes are expected in
demand. Ceramic tiles, the company’s main
products is still suffering from competition from
different products, in accordance to newer archi-
tectural trends.
ACTIVITIES FOR THE PERIOD JULY 1, 2004 - JUNE 30, 2005 _ 71
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_ 72 TEI&C S.A. JUNE 30_ 2005
CONTENTS
PRO FORMA-CONSOLIDATED INCOME STATEMENT
NOTES TO THE PRO FORMA-CONSOLIDATED INCOME STATEMENT
1_ GENERAL INFORMATION
2_ BASIS OF PREPARATION
3_ REASONABLE ASSURANCE REPORT ON PRO FORMA CONSOLIDATED INCOME STATEMENT
PRO FORMA-CONSOLIDATED INCOME STATEMENT
For the twelve-month period ended June 30, 2005
PRO FORMA-CONSOLIDATED INCOME STATEMENT
For the twelve-month period ended June 30, 2005
(ALL AMOUNTS IN USD MILLIONS)
JUNE 30, 2005
Net sales 592,068
Cost of sales (523,009)
Gross profit 69,059
Administrative expenses (51,041)
Sales expenses (4,926)
Other operating expenses (448)
Operating income 12,644
Financial results, net 6,383
Other income and expenses, net 8,652
Loss from investments in associates (2,398)
Income before income tax 25,281
Income tax expense (14,829)
Income for the period (1) 10,452
Attributable to (1):
Equity holders of the Company 4,323
Minority interest 6,129
10,452
PRO FORMA-CONSOLIDATED INCOME STATEMENT _ 73
NOTES TO THE PRO FORMA-CONSOLIDATED INCOME STATEMENT
For the twelve-month period ended June 30, 2005
1_ GENERAL INFORMATION
TEI&C S.A. (“TEI&C”), a company wholly owned by Techint Limited (Jersey), has been organized in
Uruguay in February 2005, and is part of the Techint Group (“TG”). TEI&C’s purpose is to engage in
investments by holding equity interests in companies or organizations whose corporate purpose
includes engineering, construction, and services.
Techint Limited established TEI&C in order to concentrate in a Uruguayan holding company the con-
trol of TG subsidiaries which are doing business in South America, Central America, and the Middle
East.
During the fiscal year, TEI&C has adquired several participations in companies within the field of
engineering, construction, and others, as explained below:
The assets and liabilities of TEARG, TENCO y LOSA (and their respective subsidiaries) have been
accounted for at the relevant predecessor’s cost, reflecting the carrying amount of such assets and lia-
bilities contributed to the Company. Accordingly, the consolidated balance sheet includes the balance
sheets of the above-mentioned companies at historical book values and no adjustment has been made
to reflect fair values at the time of the contribution. The difference between the price paid and the his-
torical cost was charged to equity.
Since these subsidiaries were not officially included in TEI&C’s portfolio during the twelve-month
period ended June 30, 2005, a consolidated financial statement would not include the subsidiaries’
results for such period, and would only show results from the acquisition date of each subsidiary,
until the end of the fiscal year.
Regardless of this, and considering the controlled companies have been operating during the twelve-
month period ended June 30, 2005, this pro forma consolidated income statement has been prepared
for such period, exclusively for reference and to illustrate the pro forma consolidated position of
TEI&C as if the adquisition date of these subsidiaries had been at 1 July 2004.
_ 74 TEI&C S.A. JUNE 30_ 2005
COMPANY
Techint Compañía Técnica Internacional S.A.I.C.-(“TEARG”)-Argentina and Subsidiaries
Techint International Construction Corporation (TENCO)-(“TENCO”)-Bahamas and Subsidiaries
Techint Compañía Técnica Internacional S.A.I.C.-Argentina and Subsidiaries
L.O.S.A. Ladrillos Olavarria S.A.-(“LOSA”)
ACQUISITION DATE
02.23.05
05.11.05
05.11.05
06.28.05
%
21.75
100.00
29.46
52.05
BUSINESS
Engineering, construction and services
Engineering and construction
Engineering, construction and services
Manufacture and sales of ceramic tiles
NOTES TO PRO FORMA-CONSOLIDATED INCOME STATEMENT _ 75
2_ BASIS OF PREPARATION
This pro forma consolidated income statement is prepared under the same accounting policies as the
Company’s Consolidated Balance Sheet at June 30, 2005 and it should be read in conjunction with
it. Amounts are presented in USD thousands.
The pro forma consolidated income statement twelve-month period ended June 30, 2005 includes
the income statements for the corresponding twelve months of the subsidiaries companies.
All material intercompany transactions between TEI&C’s subsidiaries have been eliminated in con-
solidation.
The subsidiary companies are as follow:
COMPANY COUNTRY % OF OWNERSHIPJUNE 30, 2005
Caminos del Oeste S.A. Argentina (1)(2)
Cimimontubi LLC USA 100.00
Cimimontubi S.A. Venezuela 100.00
Coincar S.A. Argentina (1) 33.29
Compañía Inversora Ferroviaria S.A.I.F. Argentina (1) 39.38
Ferroexpreso Pampeano S.A.C. Argentina (3)
Fidelis Management S.A. Panama 95.30
Flinwok S.A. Uruguay 100.00
Inversora Santa Catalina de Siena S.A. Argentina 97.50
L.O.S.A. Ladrillos Olavarría S.A.I.C. Argentina 52.05
Saneamiento y Urbanización S.A. Argentina (1) 51.25
Saudi Techint Ltd. Saudi Arabia 60.00
Sidermex LLC USA 76.09
Sidernet S.A. Argentina (4) 52.55
Servicios y Prestaciones Techint Funchal - Serviços, Madeira 76.09Comércio e Gestão de Projectos Lda.
Socominter Sociedade Comercial Internacional Ltda. Brazil 75.13
Tebra Empreendimentos Ltda. Brazil 99.95
Techint Chile S.A. Chile 88.72
Techint Compañía Técnica Internacional S.A.C.I. Argentina 51.21
Techint Compañía Técnica Internacional S.A.C.I. Uruguay 100.00
Techint International Construction Corp. (TENCO) Bahamas 100.00
Techint Nigeria Limited Nigeria 100.00
Techint S.A. Brazil 75.12
Techint S.A.C. Peru 100.00
Tecnología en Servicios Urbanos - Tesur S.A. Argentina (1)(5) 33.53
Tecnomatter Instalaciones y Construcciones S.A. Argentina (1) 52.62
Wiltse Corporation S.A. Uruguay 100.00
_1. Controlling interest through Techint Compañía Técnica Internacional S.A.C.I. (Argentina). _2. The assets, liabilities, and results are not included in the consolidated finan-cial statements because the Company decided to set up an allowance for the full investment value. _3. Controlling interest through Compañía Inversora Ferroviaria S.A.I.F._4. Controlling interest through Tecnomatter Instalaciones y Construcciones S.A. _5. Such percentage was calculated not considering preferred shares.
_ 77
PERU
Avenida Canaval y Moreyra 340-Piso 6º
Lima (27)
Phone number: (51-1) 442-7272
SAUDI ARABIA
National Panasonic-2nd, Floor Dahlawi
Building
Olaya-Riyadh (11444)
Phone number: (966-1) 464-0643
VENEZUELA
Torre Continental - Piso 9°, Dpto, 2
Calle Cuchilleros, Alta Vista
Puerto Ordaz, Bolivar, 8050
Phone number:
WEBSITE
www.techint.com
PRINCIPAL EXECUTIVE OFFICES
ARGENTINA
Hipólito Bouchard 557
Buenos Aires
Phone number: (54 11) - 4018 4100
BRAZIL
Rua Tabapuã 41-14 andar
Itaim Bibi-São Paulo (04533-010)
Phone number: (55-11) 3040-6000
CHILE
Avenida del Valle 937-Oficina 351
Santiago de Chile
Phone number: (56-2) 738-4892
ECUADOR
Avenida Reina Victoria 1539 y Av, Colón-
Edificio Banco de Guayaquil
Pichincha-Quito
Phone number: (593-22) 555-324
_
_
_
_
_
_
_
_
REGISTERED OFFICE:
Rincón 487-Of,403
Edificio Artigas
Montevideo (11000) Uruguay
Phone number: (598-2) 915-7669
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