Técnicas Reunidas will strengthen its financial profile with the support of SEPI

• With this support, it will offset the effects caused by the long duration of the pandemic and will strengthen its financial profile for facing the new growth stage which has already begun with important awards in the current recovery of the markets.
• SEPI’s contribution consists of a participative loan amounting to EUR 150 million and an ordinary loan of EUR 140 million from the fund created by the Government to support strategic companies.
• This operation confirms the strategic role of Técnicas Reunidas for the Spanish economy, positions the company in a better situation to manage the development of its current and short-term projects, and provides it with the public support that some of its main international competitors already have.
• The first half results presented by the company reflect the extraordinary negative impact of the persistence and depth of the crisis generated by the COVID on the execution of the company’s ongoing projects, especially in the Middle East, where the Delta variant has had a large impact.
• Nevertheless, the evolution of Técnicas Reunidas’ project portfolio confirms that the company has entered a new phase of growth: so far this year, it has won new projects for a total amount of nearly 3 billion euros and has already submitted firm bids for other projects totaling a further 6 billion euros.

The long duration and depth of the pandemic, and especially the latest wave, continue to affect the Técnicas Reunidas Group, so in the second quarter of this year the company began the process to access the Solvency Support Fund for Strategic Companies, which is managed by SEPI. With this support, the company will drive the new stage of growth with major awards of almost 3,000 M€ in the context of the markets’ recovery.

Indeed, the persistence of the pandemic is affecting the execution of the company’s ongoing projects, especially in the Middle East, causing changes in schedules that slow down the recognition of revenues, but which does not prevent the company from incurring most of its fixed costs.

This extraordinary impact was reflected in the company’s first half results reported today. Net sales were EUR 1,422 million, 33% lower than in the same period last year, while operating income was minus EUR 148 million. This result includes costs and provisions caused by the pandemic.

Adjusted EBIT, on the other hand, was EUR 44 million, resulting in an adjusted margin of 3.1%. This margin reflects the health of the portfolio after deducting the impact of the COVID effects. Net cash improved significantly from the end of the previous quarter to EUR 94 million, EUR 31 million more than reported on 31 March.

Regarding the evolution of the backlog, year to date Técnicas Reunidas has been awarded new major contracts totaling almost 3 billion euros, including Sasa in Turkey, Orlen in Poland, AMA in the Netherlands and Gazpromneft in Russia. On top of that, it has already bid for projects for an additional 6 billion euros, where the company considers to be well positioned.

“The pandemic has been longer than expected a year and a half ago; and the impact much deeper,” said Juan Lladó, the company’s CEO. “We have had major obstacles in the management of our operations that have made it very difficult and costly to move forward with the projects we have in execution; and we have had to reschedule large projects that represent a high percentage of our backlog. However,” he stressed, “there are already reasons to be more optimistic. Clients are accelerating their final investment decisions and are starting to award projects. This trend change confirms that there will be significant investment activity in the medium term, in which energy transition projects, where we are very well positioned, will play an increasingly important role. We cannot let this opportunity pass us by. With the support of the EU-driven support funds managed by the Spanish government, we will strengthen our financial profile to tackle a future that is unquestionably promising”.

Financial support from SEPI

The financial support amounts to a total of 290 million euros, which is structured in two tranches: a participative loan for 150 million euros to compensate for the impact of the pandemic on the company’s equity; and an ordinary loan of 140 million euros to improve working capital to compensate for the extension of the execution periods of the projects the company has underway.

The two loans would have a four-year term, with the possibility of an early repayment, and their disbursement is expected to take place in the fourth quarter of this year.

SEPI’s support guarantees Técnicas Reunidas’ capacity to manage under better conditions both its current portfolio of projects, substantially increased with the recent awards, and those expected from its participation in the new investments foreseen in its sector.

It also reinforces the development of its strategic lines, promoting areas of work that are key to its growth: continue focusing on energy transition, decarbonization and circular economy projects; diversification and positioning in less mature markets; the reduction of project execution risk; increasing efficiency through standardization and digitalization; and strengthening Madrid as a center of excellence in engineering and innovation.

In short, the contribution of the SEPI fund confirms the strategic nature of Técnicas Reunidas for the national economy, maintains its status as one of the largest Spanish technology exporting companies, helps it to continue playing an important traction role on the country’s business network and places it in the same competitive conditions enjoyed by other large international competitors which have already obtained financial support from their respective public administrations.