TECNIMONT – COMPANY INTRODUCTION

AND OVERVIEW OF RISK MANAGEMENT PROCESSES

Fabrizio Bosia
Vice President
Quality, Health & Safety, Environment

ECRI MADRID SPONSORS MEETING
Madrid, 31 May, 1 & 2 June
AGENDA

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
AGENDA

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

Tecnimont – Company Introduction and Overview of Risk Management Processes 3
ECRI Madrid Sponsors Meeting – 2nd June, 2010
MAIRE TECNIMONT’S PROFILE

Maire Tecnimont is a leading
Engineering and Main Contracting
Group operating worldwide in the
Oil, Gas & Petrochemicals, Power,
Infrastructure and Civil Engineering
sectors. The Group also has key
competences in licensing and IP,
and specific focus in renewable
energy. With a presence in approx.
30 countries and 4 continents, the
Group currently controls about 40
operative companies, with main
Italian offices in Rome, Milan and
Turin.
The Group’s success and reputation
have been achieved because of its The Group combines high quality
strong technology orientation and its and planning standards with a
advanced skills in Project focus on multicultural and
Management, Engineering, environmental issues.
Procurement and Construction
With a workforce of over 4,500
services for the implementation of
employees, of which more than
complex projects worldwide. It has
half are located abroad, at 31
developed and demonstrated major
December 2009 Maire Tecnimont
expertise in managing large EPC
reported revenues of 2,164
projects on a turnkey basis in
million Euro and a backlog of
different countries and regions.
4,728 million Euro.

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STRUCTURE

Engineering & Licensing and Renewable Energies Corporate Initiatives
Main Contracting IP Group Center

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
EXTENSIVE INTERNATIONAL PRESENCE

Over 4,500 employees, more than half of whom are employed outside Italy
About 40 operating companies worldwide

MANPOWER*
ITALY 2,173
EUROPE 296
ASIA 1,942

SOUTH
AMERICA 127

TOTAL 4,538

Presence of Maire Tecnimont
* Figures as of 31.12.09

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
INTERNATIONAL ENGINEERING CENTRES

Milan (Italy):
C&P plants,
O&G plants,
renewables

Paris (France): EPC COORDINATION
natural gas Brindisi (Italy):
treatment plants and polyolefin plants
LNG regas. terminals

Mumbai (India): Global Engineering System Turin (Italy):
C&P and power, civil and
O&G plants,
electrical
assisted by a common IT industrial buildings,
infrastructures
instrumentation platform, able to support
different activities in many
sectors
Salzgitter Rome (Italy):
(Germany): underground/above
LDPE plants ground rail systems

Sittard Bergamo (Italy):
(The Netherlands): PET, nylon,
leadership acrylic fibres,
in urea-licensing renewables

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
AGENDA

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT OVERVIEW

The main operating company Tecnimont is an international E&C player

¾ Integrated system of services and
installations in Oil, Gas &
Petrochemicals, Power, and
Infrastructure & Civil Engineering.

¾ Leading role in managing complex
EPC project worldwide.

¾ World-class patrimony of engineering
and project management expertise with
high competences in technological and
process innovation.

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TECNIMONT BUSINESS UNITS

Oil, Gas & Infrastructure & Civil
Power
Petrochmicals Engineering

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
MAIN EPC ACHIEVEMENTS

¾ More than 120 polypropylene and
polyethylene plants delivered worldwide,
making Tecnimont the market leader with a share
of approximately 30% of global polyolefin
capacity installed in the last six years,
including a 40% share in LDPE

¾ Largest gas treatment plant ever awarded in
Middle East area on LSTK basis (US$4.7 billion)

¾ More than 230 power plant projects executed
or under execution in Italy and abroad with an
installed capacity exceeding 20,000 MW

¾ Designed approximately 40% of the Italian
high-speed railways lines currently in
operation

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OIL, GAS & PETROCHEMICALS BUSINESS UNIT

Business Description

‒ Oil & Gas: gas production and treatment, LNG
liquefaction and regasification, underground gas
storage, transmission and compression, distribution
and pumping stations, aromatics complexes, refinery
units, propane dehydrogenation (PDH)

‒ Historical leadership in chemicals & petrochemicals,
in particular: polymers (PE and PP), ethylene oxide
and ethylene glycol, PTA, ammonia and fertilizers,
including technology licensing, EPC projects and O&M

Main Clients

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
OIL , GAS & PETROCHEMICALS – recently completed projects

RABIGH POLYOLEFINS PROJECT
Location: Rabigh, Saudi Arabia
Value: € 1,200 mn (MT share: € 635 mn)
Client: Petro Rabigh
Capacity: ('50,000 t/y polymer-grade butene-1 (Axens technology)', '250,000 t/y EPPE
(Sumitomo technology)', '350,000 t/y LLDPE (Sumitomo technology)', '300,000 t/y HDPE
(Basell Hostalen technology)', '2x350,000

AROMATICS COMPLEX – SHUAIBA (KUWAIT)

768 KTY PX; 325 KTY BZ

Client: KUWAIT PARAXYLENE PRODUCTION COMPANY (KPPC)

Contract type: EPC

Value: US$1,228mn (MT share US$675mn - consortium SKEC)

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POWER BUSINESS UNIT

Business Description
The business unit, also thanks to the special know-how in state-of-
the-art gas turbines inherited from Fiat Avio, has developed
excellent capabilities in Italy and abroad in EPC projects for power
plants:
‒ simple-cycle and combined-cycle gas-fired power plants
‒ coal-fired power plants
‒ hydro, biomass and waste-to-energy plants
‒ cogeneration
‒ re-powering
‒ electrical and energy distribution systems for civil and
industrial use
‒ district heating systems

Main Clients

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POWER – recently completed projects

COMBINED CYCLE 840 MW – TURBIGO (ITALY)
Client: EDIPOWER
Contract Type: EPC
Value: €224mn (MT share 35%)

COMBINED CYCLE 800 MW – ALTOMONTE (ITALY)

Client: EDISON

Contact Type: EPC

Value: €181mn

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INFRASTRUCTURE & CIVIL ENGINEERING
BUSINESS UNIT

Business Description
The Infrastructure & Civil Engineering Business Unit designs and
builds complex infrastructure with the ability to combine
specialised competences.
Through partial or global services, it participates in the realisation
of:
‒railways including high speed/high capacity
‒highways and motorways
‒tunnels
‒metro systems
The Business Unit also offers highly specialized services in:
‒re-qualification of industrial sites, design and build of complex
works ( hospitals, universities, offices, facilities)

Main Clients

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INFRASTRUCTURE & CIVIL ENGINEERING – recently completed projects

HIGH SPEED RAILWAY TURIN-MILAN (ITALY)
Client: TAV (Italian State Railways)
Contract type: DB share + D
Value: €6.7bn (MT share €380mn)

HIGH SPEED RAILWAY FLORENCE-BOLOGNA (ITALY)
Client: TAV
Contract Type: DB share + D
Value: €4.8bn (MT share €490mn)

TURIN UNDERGROUND LINGOTTO – EXT. MARCONI–LINGOTTO

Client: GRUPPO TORINESE TRASPORTI

Contract Type: DB share + D

Value: ~ €100mn (MT share 51%)

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
AGENDA

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

Since November 2008 Tecnimont Group has been following a strict procedure as far as the
Project Risks Analysis is concerned.

Uncertainty itself is the unknown result of a variable or an event
and consists in following two main elements:

•Event with negative impact (Risk);

•Event with positive impact (Opportunity).

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

The scope of the Project Risks Analysis is:

•To identify Project risks and implement mitigation plans or actions to keep those risks

under control in order to minimize the negative impact connected with risks and, possibly,

increase the Project profitability;

•To protect the Project from the residual effects of events with negative impact that could

eventuate during the execution phase, by assigning –since the proposal phase – the

contingency amount for their coverage;

•To establish an important communication tool between the Project parties and the

Company Management;

•To contribute to the achievement of Project goals and targets.

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

Risk Analysis is broadly defined to include the following phases:

•Risk Assessment;

•Risk Communication;

•Risk Management.

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TECNIMONT’S RISK ANALYSIS

Risk Assessment involves:

•Identifying sources of potential harm;

•Assessing the probability that harm will occur;

•And the possible consequences;

•Calculating the magnitude of the event;

•Identifying mitigation plans.

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TECNIMONT’S RISK ANALYSIS

Risk Communication:

•Evaluates which risks require management;

•Selects and implements the plans or actions that are required to ensure that those risks

are controlled;

•Attributes each risk to a Risk Owner, who is in charge of the implementation of the plans

or actions that are required to ensure that the risk is controlled.

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

Risk management involves:

•An interactive dialogue between the Company Management and the Risk Analysis

Responsible, who actively inform the other processes, through Risk Owners, and verify the

effectiveness of the selected actions.

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

THE SOONER, THE BETTER.

•The sooner the risks are identified, the sooner the mitigation plans can be implemented.

•A prompt risk analysis has a positive impact on the effectiveness of the mitigation plans.

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TECNIMONT’S RISK ANALYSIS

The Project Risks are preliminarily assessed during the “Bid – No Bid” phase by a dedicated
committee from the Board of Tecnimont which decides whether to proceed with the project
or not. The Project Risk Analysis continues during the proposal phase and during the
execution phase.

During the proposal phase it is carried out before the final quotation in order to evaluate
and mitigate the negative events and to be very clear and careful when defining the
contingencies.

During the execution phase it is periodically carried out in order to update the identification
and mitigation actions, and to control how the contingency amount is managed during the
project development.

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

The responsible for the Risk Analysis is

•The Proposal Manager (during the proposal phase)

•The Project Manager (during the execution phase)

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TECNIMONT’S RISK ANALYSIS

The Proposal Manager:

• Calls the risk assessment meetings involving the team;

• Identifies the mitigation strategies and the Risk Owners;

• Evaluates the risks;

• Proposes the contingency sum for the coverage of the residual effects of the negative

events;

• Runs the Monte Carlo Simulation to calculate the coverage of risks offered by the

contingency amount for the life of the project;

• Reports the results to the Company Top Management;

• Transfers the Risk Analysis with relevant contingency plan to the Project Manager as

part of the commercial budget.

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TECNIMONT’S RISK ANALYSIS

The Project Manager:

• Acknowledges and reviews the Risk Analysis;

• Periodically calls the risk review meetings in order to update the identified risks and to assess

them at different stages of the Project execution lifecycle;

• Follows-up the implementation of the agreed mitigation actions and monitors their

effectiveness;

• Allocates at the proper level of the Cost Breakdown Structure the contingency sum for the

coverage of each Project risk as per their current status;

• Runs the Monte Carlo simulation to calculate the coverage of the residual effects of the negative

events offered by the contingency amount for the rest of the life of the project;

• Dialogues with the Company Top Management about the results of the overall Risk Analysis.

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

The Project Risks have been declined in the following 8 categories:

• Political and Local

• Physical and Site

• Cost Estimation

• Contractual

• Financial

• Client

• Execution

• HSE

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TECNIMONT’S RISK ANALYSIS

PROJECT EXECUTION RISKS

No

t
BASIC DETAIL ENGINEERING & CONSTRUCTION,
ENGINEERING PROCUREMENT COMMISSIONING & START-UP

The number of risks usually decreases with the progress of the project.

• If the risks occur, they become costs.

• If they don’t occur either the coverage of risks offered by the contingency amount

increases, or the contingency amount becomes part of the profit.

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TECNIMONT’S RISK ANALYSIS

The Risk, intended as an event with negative impact, is defined as:

R=M*P

Where:

• R Risk

• M Magnitude of the harm (e.g. extra costs)

• P Probability that harm will occur

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ECRI Madrid Sponsors Meeting – 2nd June, 2010
TECNIMONT’S RISK ANALYSIS

Both during the project proposal phase and the project execution phase the Risk Register is
the key element.
Data for Risk / Opportunity Management Data for Quantitative Analysis and Contingency Assessment

RISK MITIGATION ACTION
STATUS OWNER ESTIMATE BASIS
Done / To Do Actions / LOWEST IMPACT MEDIUM IMPACT HIGHEST IMPACT AVERAGE
ITEM RISK DESCRIPTION
Yes / Responsible RiskOpp starting & closing dates / Values used as reference / SCENARIO SCENARIO SCENARIO RISK VALUE
No for the Expected & Obtained Results or Explanations
Actions Comments
Magnitudo P% Magnitudo P% Magnitudo P% ($)
($) ($) ($)

Failure to meet minimum performance levels
4.3 0
in the Process Units (make good obligations)
Failure to meet minimum performance levels
4.4 in the Offsite and Utilities Units (make good
obligations)

For each risk, the risk exposure distribution curve
P
shall be defined by the following three points:

• Highest impact scenario;

• Medium impact scenario;

• Lowest impact scenario.
M
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TECNIMONT’S RISK ANALYSIS

Starting from risk exposure distribution, the Monte Carlo simulation produces the
distribution curve of the combined risks and the cumulative risk curve.

This makes it possible to understand which is the probability that the contingency amount
will be sufficient to cover the risks during the execution phase and up to the end of the
project.

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Rome
Via di Vannina, 88/94
00156 Rome
Ph. +39 06 4122 351
Fax +39 06 4122 35610

Milan
Viale Monte Grappa, 3
20124 Milan
Ph. +39 02 6313.1
Fax +39 02 6313.9052

Turin
Corso Ferrucci, 112/a
10138 Turin
Ph. +39 011 0056111
Fax +39 011 0056444

Florence
Viale L. Ariosto 24/b
50124 Florence
Ph. +39 055 2280609
Fax + 39 055 2335517

info@mairetecnimont.it – www.mairetecnimont.it