6-K 1 a52369025.htm AENZA S.A.A. FORM 6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of January 2021

 Commission File Number 001-35991

AENZA S.A.A.
(Exact name of registrant as specified in its charter)
 
N/A
(b) (Translation of registrant’s name into English)
 
Republic of Peru
(Jurisdiction of incorporation or organization)
 
Avenida Paseo de la República 4667, Lima 34,
Surquillo, Lima
Peru
(Address of principal executive offices)
 


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
Form 20-F ___X____ Form 40-F _______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes _______ No ___X____
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.



January 29, 2021



Without any other particular, we remain yours.

Sincerely yours,


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AENZA S.A.A.

By: /s/ LUIS FRANCISCO DIAZ OLIVERO
Name: Luis Francisco Diaz Olivero
Title: Chief Executive Officer
Date: January 29, 2021



AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES




CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT
DECEMBER 31, 2019 AND DECEMBER 31, 2020 (UNAUDITED)






AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2019 AND DECEMBER 31, 2020 (UNAUDITED)





CONTENTS
 
Page
Consolidated Statement of Financial Position
1
Consolidated Statement of Income
2
Consolidated Statement of Comprehensive Income
3
Consolidated Statement of Changes in Equity
4
Consolidated Statement of Cash Flows
5
Notes to the Consolidated Financial Statements
6 - 40




S/                           =    Peruvian Sol
US$                    =    United States dollar



 
AENZA S.A.A (FORMERLYGRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
  
               
               
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
      
(All amounts are expressed in thousands of S/ unless otherwise stated)
  
               
ASSETS
              
       
As at
  
As at
  
         December 31,    December 31,  
   
Note
  
2019
  
2020
  
       
(as restated)
    
Current assets
              
Cash and cash equivalents
  
8
  
              950,701
  
              900,168
  
Trade accounts receivables, net
  
9
  
              914,204
  
              769,556
  
Work in progress, net
  
10
  
                49,457
  
              186,433
  
Accounts receivable from related parties
  
11
  
                36,658
  
                27,338
  
Other accounts receivable
  
12
  
              454,474
  
              435,818
  
Inventories, net
      
              555,401
  
              552,000
  
Prepaid expenses
      
                16,478
  
                22,972
  
       
           2,977,373
  
           2,894,285
  
               
Non-current assets as held for sale
      
                  2,398
  
                       -
  
               
Total current assets
      
           2,979,771
  
           2,894,285
  
               
Non-current assets
              
Trade accounts receivable, net
  
9
  
              779,609
  
              739,901
  
Work in progress, net
  
10
  
                23,117
  
                       -
  
Accounts receivable from related parties
  
11
  
              574,723
  
              638,434
  
Prepaid expenses
      
                27,934
  
                22,264
  
Other accounts receivable
  
12
  
              273,432
  
              370,314
  
Investments in associates and joint ventures
  
13
  
                37,035
  
                35,516
  
Investment property
      
                28,326
  
                26,073
  
Property, plant and equipment, net
  
14
  
              463,990
  
              405,469
  
Intangible assets, net
  
14
  
              854,227
  
              791,990
  
Right-of-use assets, net
  
14
  
                90,581
  
                64,518
  
Deferred income tax asset
      
              271,719
  
             262,655
  
Total non-current assets
      
           3,424,693
  
           3,357,134
  
               
               
               
               
               
               
               
Total assets
      
           6,404,464
  
           6,251,419
  
 
               
               
               
               
               
               
LIABILITIES AND EQUITY
              
       
As at
  
As at
  
         December 31,    December 31,  
   
Note
  
2019
  
2020
  
       
(as restated)
    
Current liabilities
              
Borrowings
  
15
  
              481,529
  
              452,884
  
Bonds
  
16
  
                44,737
  
                58,446
  
Trade accounts payable
  
17
  
           1,159,075
  
           1,099,442
  
Accounts payable to related parties
  
11
  
                38,916
  
                43,817
  
Current income tax
      
                51,169
  
                34,494
  
Other accounts payable
  
18
  
              669,674
  
              793,585
  
Provisions
  
19
  
              113,483
  
                138,780
  
Total current liabilities
      
           2,558,583
  
           2,621,448
  
               
Non-current liabilities
              
Borrowings
  
15
  
              409,066
  
              445,436
  
Bonds
  
16
  
              879,305
  
              874,313
  
Trade accounts payable
  
17
  
                34,814
  
                40,502
  
Other accounts payable
  
18
  
              296,290
  
              201,593
  
Accounts payable to related parties
  
11
  
                22,583
  
                36,298
  
Provisions
  
19
  
              214,952
  
              234,951
  
Derivative financial instruments
      
                       52
  
                       -
  
Deferred income tax liability
      
              112,734
  
              102,907
  
Total non-current liabilities
      
           1,969,796
  
           1,936,000
  
Total liabilities
      
           4,528,379
  
          4,557,448
  
               
Equity
              
Capital
  
20
  
              871,918
  
              871,918
  
Legal reserve
      
              132,011
  
              132,011
  
Voluntary reserve
      
                29,974
  
                29,974
  
Share Premium
      
           1,132,179
  
           1,131,574
  
Other reserves
      
(177,506)
  
(169,234
 )
Retained earnings
      
(510,766)
  
(630,391
 )
Equity attributable to controlling interest in the
Company
      
           1,477,810
  
           1,365,852
  
Non-controlling interest
      
              398,275
  
             328,119
  
Total equity
      
           1,876,085
  
           1,693,971
  
Total liabilities and equity
      
           6,404,464
  
           6,251,419
  


The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
 

1
 
 
AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
        
                   
                   
CONSOLIDATED STATEMENT OF INCOME
              
(All amounts are expressed in thousands of S/ unless otherwise stated)
  
                   
         
For the year
  
         
ended December 31,
  
   
Note
    
2019
    
2020
  
         
(as restated)
         
                   
Revenues from construction activities
          
2,411,880
      
1,815,671
  
Revenues from services provided
          
1,254,059
      
1,055,423
  
Revenue from real estate and sale of goods
           
671,922
      
442,935
  
           
4,337,861
      
3,314,029
  
                       
Cost of construction activities
          
(2,351,563
)
    
(1,716,311
)
Cost of services provided
          
(1,035,251
)
    
(929,206
)
Cost of real estate and  sale of goods
          
(500,610
)
    
(347,906
)
     
21
      
(3,887,424
)
    
(2,993,423
)
Gross profit
            
450,437
      
320,606
  
                         
Administrative expenses
    
21
      
(248,652
)
    
(152,443
)
Other income and expenses
    
22
      
(339,494
)
    
(96,715
)
Operating (loss) profit
            
(137,709
)
    
71,448
  
                         
Financial expenses
            
(253,134
)
    
(141,618
)
Financial income
            
74,346
      
35,688
  
Share of the profit or loss of associates and joint ventures accounted for using the equity method
    
13
      
(218,774
)
    
769
  
Loss before income tax
            
(535,271
)
    
(33,713
)
Income tax expense
            
(303,371
)
    
(57,957
)
Loss for the year
            
(838,642
)
    
(91,670
)
                         
(Loss) profit attributable to:
                        
Owners of the Company
            
(884,721
)
    
(119,625
)
Non-controlling interest
            
46,079
      
27,955
  
             
(838,642
)
    
(91,670
)
                         
                         
Loss per share attributable to owners of the
                        
Company during the year
    
26
      
(1.076
)
    
(0.137
)
                         
                         
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
  

2

AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
            
             
             
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
  
(All amounts are expressed in thousands of S/ unless otherwise stated)
  
             
   
For the year
  
   
ended December 31,
  
   
2019
    
2020
  
             
             
Loss for the year
    
(838,642
)
    
(91,670
)
Other comprehensive income:
                
                 
Items that may be subsequently reclassified to profit or loss
                
Cash flow hedge, net of tax
    
6
      
(626
)
Foreign currency translation adjustment, net of tax
    
(8,170
)
    
8,305
  
Exchange difference from net investment in a foreign operation, net of tax
    
(456
)
    
708
  
Other comprehensive income for the year, net of tax
    
(8,620
)
    
8,387
  
Total comprehensive income for the year
    
(847,262
)
    
(83,283
)
                 
Comprehensive income attributable to:
                
Owners of  the Company
    
(891,607
)
    
(111,353
)
Non-controlling interest
    
44,345
      
28,070
  
     
(847,262
)
    
(83,283
)
                 
                 
                 
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
  

3
AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
                                            
                                                             
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                            
FOR THE YEAR ENDED DECEMBER 31, 2019 AND 2020
                                            
(All amounts are expressed in thousands of S/ unless otherwise stated)
                                      
   
Attributable to the controlling interests of the Company
              
   
Number
                                                        
   
of shares
          
Legal
    
Voluntary
    
Share
    
Other
    
Retained
          
Non-controlling
         
   
In thousands
    
Capital
    
reserve
    
reserve
    
premium
    
reserves
    
earnings
    
Total
    
interest
    
Total
  
                                                             
                                                             
Balances as of January 1, 2019
    
729,434
      
729,434
      
132,011
      
29,974
      
992,144
      
(170,620
)
    
375,417
      
2,088,360
      
401,571
      
2,489,931
  
- IFRS adoption
    
-
      
-
      
-
      
-
      
-
      
-
      
(1,462
)
    
(1,462
)
    
-
      
(1,462
)
Initial balances restated
    
729,434
      
729,434
      
132,011
      
29,974
      
992,144
      
(170,620
)
    
373,955
      
2,086,898
      
401,571
      
2,488,469
  
(Loss) profit for the year
    
-
      
-
      
-
      
-
      
-
      
-
      
(884,721
)
    
(884,721
)
    
46,079
      
(838,642
)
Cash flow hedge
    
-
      
-
      
-
      
-
      
-
      
6
      
-
      
6
      
-
      
6
  
Foreign currency translation adjustment
    
-
      
-
      
-
      
-
      
-
      
(6,440
)
    
-
      
(6,440
)
    
(1,730
)
    
(8,170
)
Exchange difference from net investment in a foreign operation
    
-
      
-
      
-
      
-
      
-
      
(452
)
    
-
      
(452
)
    
(4
)
    
(456
)
Comprehensive income of the year
    
-
      
-
      
-
      
-
      
-
      
(6,886
)
    
(884,721
)
    
(891,607
)
    
44,345
      
(847,262
)
Transactions with shareholders:
                                                                                
- Dividend distribution
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(12,762
)
    
(12,762
)
- Contributions (devolution) of non-controlling shareholders, net
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(32,996
)
    
(32,996
)
- Additional acquisition of non-controlling
    
-
      
-
      
-
      
-
      
1,883
      
-
      
-
      
1,883
      
(1,883
)
    
-
  
- Capital Increase
    
142,484
      
142,484
      
-
      
-
      
138,152
      
-
      
-
      
280,636
      
-
      
280,636
  
Total transactions with shareholders
    
142,484
      
142,484
      
-
      
-
      
140,035
      
-
      
-
      
282,519
      
(47,641
)
    
234,878
  
Balances as of December 31, 2019
    
871,918
      
871,918
      
132,011
      
29,974
      
1,132,179
      
(177,506
)
    
(510,766
)
    
1,477,810
      
398,275
      
1,876,085
  
                                                                                 
Balances as of January 1, 2020
    
871,918
      
871,918
      
132,011
      
29,974
      
1,132,179
      
(177,506
)
    
(510,766
)
    
1,477,810
      
398,275
      
1,876,085
  
                                                                                 
(Loss) profit for the year    
-
      
-
      
-
      
-
      
-
      
-
      
(119,625
)
    
(119,625
)
    
27,955
      
(91,670
)
Cash flow hedge
    
-
      
-
      
-
      
-
      
-
      
(594
)
    
-
      
(594
)
    
(32
)
    
(626
)
Foreign currency translation adjustment
    
-
      
-
      
-
      
-
      
-
      
8,158
      
-
      
8,158
      
147
      
8,305
  
Exchange difference from net investment in a foreign operation
    
-
      
-
      
-
      
-
      
-
      
708
      
-
      
708
      
-
      
708
  
Comprehensive income of the year
    
-
      
-
      
-
      
-
      
-
      
8,272
      
(119,625
)
    
(111,353
)
    
28,070
      
(83,283
)
Transactions with shareholders:
                                                                                
- Dividend distribution
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(82,412
)
    
(82,412
)
- Contributions (devolution) of non-controlling shareholders, net
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(15,725
)
    
(15,725
)
- Additional acquisition of non-controlling
    
-
      
-
      
-
      
-
      
(605
)
    
-
      
-
      
(605
)
    
(89
)
    
(694
)
Total transactions with shareholders
    
-
      
-
      
-
      
-
      
(605
)
    
-
      
-
      
(605
)
    
(98,226
)
    
(98,831
)
Balances as of December 31, 2020
    
871,918
      
871,918
      
132,011
      
29,974
      
1,131,574
      
(169,234
)
    
(630,391
)
    
1,365,852
      
328,119
      
1,693,971
  
                                                                                 
                                                                                 
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
                          

4

AENZA S.A.A. (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
  
                   
                   
CONSOLIDATED STATEMENT OF CASH FLOWS
                  
(All amounts are expressed in thousands of S/ unless otherwise stated)
        
                   
         
For the year
  
         
ended December 31,
  
   
Note
    
2019
    
2020
  
                   
OPERATING ACTIVITIES
                  
Loss before income tax
          
(535,271
)
    
(33,713
)
Adjustments to  profit not affecting cash flows from
                      
operating activities:
                      
Depreciation
    
21
      
112,318
      
98,504
  
Amortization
    
21
      
107,499
      
98,621
  
Impairment of inventories
            
4,503
      
791
  
Impairment of accounts receivable and other accounts receivable
            
290,491
      
85,273
  
Reversal of impairment of inventories
            
(4,752
)
    
(821
)
Debt condonation
            
(18,186
)
    
(9,451
)
Impairment (reversal) of property, plant and equipment
            
20,018
      
-
  
Impairment of intangible assets
            
45,821
      
-
  
Reversal of impairment of accounts receivable
            
(19,448
)
    
-
  
Reversal of impairment of intangible assets
            
(20,676
)
    
-
  
Change in the fair value of the liability for put option
            
4,697
      
245
  
Other provisions
            
186,894
      
55,497
  
Financial expense,net
            
167,872
      
225,212
  
Impairment of investment
            
384
      
38
  
Incremental cost accrued
            
-
      
8,875
  
Share of the profit and loss of associates and joint ventures accounted for using the equity method
    
13
      
218,774
      
(769
)
Reversal of provisions
            
(7,471
)
    
(14,310
)
Disposal (reversal) of assets
            
349
      
8,895
  
Profit on sale of property, plant and equipment
            
(11,892
)
    
(2,322
)
Profit on remeasurement of accounts receivable
            
45,363
      
(27,486
)
Net variations in assets and liabilities:
                        
Trade accounts receivable and working in progress
            
457,709
      
61,975
  
Other accounts receivable
            
148,833
      
(48,403
)
Other accounts receivable from related parties
            
(11,178
)
    
(38,875
)
Inventories
            
(34,091
)
    
22,578
  
Pre-paid expenses and other assets
            
4,964
      
(823
)
Trade accounts payable
            
58,973
      
(39,787
)
Other accounts payable
            

          (286,110
)
    
35,480
  
Other accounts payable to related parties
            
(24,461
)
    
3,591
  
Other provisions
            
(1,134
)
    
(9,051
)
Interest payment
            
(172,377
)
    
(137,370
)
Payments for purchases of intangibles - Concessions
            
(25,917
)
    
(3,519
)
Payment of income tax
            
(94,669
)
    
(112,851
)
Net cash provided by operating activities
            
           607,829
      
226,024
  
                         
INVESTING ACTIVITIES
                        
Sale of property, plant and equipment
            
18,607
      
9,118
  
Interest received
            
6,552
      
4,292
  
Dividends received
            
1,517
      
2,318
  
Payment for purchase of investments properties
            
(88
)
    
(98
)
Payments for intangible purchase
            
(84,201
)
    
(46,767
)
Payments for property, plant and equipment purchase
            
(93,017
)
    
(33,596
)
Net cash applied to investing activities
            
(150,630
)
    
(64,733
)
                         
FINANCING ACTIVITIES
                        
Loans received
            
644,312
      
185,644
  
Amortization of loans received
            
(1,130,301
)
    
(275,163
)
Amortization of bonds issued
            
(31,335
)
    
(37,981
)
Payment for transaction costs for debt
            
(4,770
)
    
-
  
Dividends paid to non-controlling interest
            
(12,762
)
    
(82,412
)
Cash received (return of contributions) from non-controlling shareholders
            
(32,996
)
    
(15,725
)
Capital increase
            
280,636
      
-
  
Net cash applied to financing activities
            
(287,216
)
    
(225,637
)
Net increase (net decrease) in cash
            
           169,983
      
(64,346
)
Exchange difference
            
(20,303
)
    
13,813
  
Cash and cash equivalents at the beginning of the year
            
801,021
      
950,701
  
Cash and cash equivalents at the end of the year
    
8
      
           950,701
      
900,168
  
                         
NON-CASH TRANSACTIONS:
                        
Capitalization of interests
            
7,229
      
4,887
  
Acquisition of assets through finance leases
            
3,851
      
71
  
Dividends declared to non-controlling interest
            
-
      
-
  
Acquisition of right-of-use assets
            
101,745
      
12,075
  
Reclassification to other accounts receivable by Concesionaria Vía Expresa Sur
            
-
      
24,157
  
Acquisition of supplier bonds
            
-
      
25,871
  
                         
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.                        

5

AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2019 AND DECEMBER 31, 2020 (UNAUDITED)


1.    GENERAL INFORMATION

    a)  Incorporation and operations

AENZA S.A.A., previously named Graña y Montero S.A.A. (hereinafter the “Company”) is the parent Company of the AENZA S.A.A. Group (formerly Graña y Montero) that includes the Company and its subsidiaries (hereinafter, the “Group”) and is mainly engaged in holding investments in Group companies. Additionally, the Company provides services of strategic and functional advice and office leases space to the Group companies.

The General Shareholder’s Meeting on November 2, 2020 approved the modification of the Company’s corporate name from Graña y Montero S.A.A. to AENZA S.A.A.

The Group is a conglomerate of companies with operations including different business activities, the most significant are engineering and construction, infrastructure (public concession ownership and operation) and real estate businesses. See details of operating segments in Note 7.

    b)  Authorization for the issue of the financial statements

The condensed interim consolidated financial statements for the period ended Dectember 31, 2020 were authorized preliminary by Management and Board of Directors on January 29, 2021.

The consolidated financial statements for the year ended December 31, 2019 were approved on the Annual General Mandatory Shareholder’s Meeting on July 13, 2020.

    c)  The Impact of the Ongoing Novel Coronavirus (COVID-19)

The ongoing COVID-19 pandemic and government measures to contain the spread of the virus are disrupting economic activity, and consequently adversely affecting our business, results of operations and financial condition, mainly during second quarter.

Countries around the world—including Peru as well as Chile and Colombia—have adopted extraordinary measures to contain the spread of COVID-19, including imposing travel restrictions, requiring closures of non-essential businesses, establishing restrictions on public gatherings, instructing residents to practice social distancing, issuing stay-at-home orders, implementing quarantines and similar actions.

The COVID-19 pandemic and the related government measures have significantly increased economic uncertainty and caused a global recession. According to recent report from World Bank dated January 2021, during 2020, the global economy contracted by 4.3%, with Latin America contracted by 6.9% and Peru, Chile and Colombia, in particular, contracted 12%, 6.3% and 7.5%, respectively.

Since mid-March to June, substantially all of our engineering and construction and real estate projects were mandatorily shut down, mainly in Peru.  However, since July projects have resumed their operations to normal with COVID-19 protocols. Our infrastructure operations, which have for the most part been declared essential businesses, have continued to operate; however, certain of our infrastructure businesses have been adversely affected, by the sharp decline in traffic volumes and oil and gas prices between March and May.
6

Regarding the extent of the COVID-19 pandemic and its impact on the industries in which we operate, the full extent to which COVID-19 impact our business, results of operations and financial condition is currently under evaluation. We believe that the severity of the impact on the Company will depend, to a large extent, on how long the crisis continues, so we cannot predict to what extent the economies of the countries where we operate will be affected.

The Company has been taking significant measures to mitigate the impact of the crisis on the Group. Among other, we are prioritizing the health and safety of our employees, as well as the medium-term sustainability of their employment. Certain actions we are taking include: the design and implementation of protocols to return to project sites, the creation of new office layouts to be compliant with social distancing guidelines, the development of telecommuting schemes, and other major cost-saving initiatives in operation and in support offices.

    d)  Current situation of the Company

As a result of decisions of a previous administration, the Group is involved in a series of criminal investigations and administrative procedures conducted by the Public Ministry that are based on events that occurred between 2004 and 2015. Such situations led to organizational changes at Group´s corporate governance structure, the initiation of independent investigations and the adoption of measures to address and clarify such situations, as explained below:

●
On January 9, 2017, the Board of Directors approved the performance of an independent investigation related to six projects developed in association with companies of the Odebrecht Group.
●
On March 30, 2017, the Board of Directors created a Risk, Compliance and Sustainability Committee, who was in charge of the oversight of the investigation independently of Management. The external investigation was performed by the law firm Simpson Thacher & Bartlett LLP, with the assistance of forensic accountants, who reported exclusively to the Risk, Compliance and Sustainability Committee.
●
The external investigation concluded on November 2, 2017 and identified no evidence to conclude that any company personnel engaged in bribery in connection with any of our Company’s public projects in Peru with Odebrecht or its subsidiaries, or that any Company personnel was aware of, or knowingly participated in, any corrupt payments made in relation to such projects.
●
Subsequently, in August 2019, José Graña Miró Quesada, a shareholder and the former chairman of our Company, indicated in public statements to the media that he and Hernando Graña Acuña, a shareholder and former board member of our Company, had initiated a process of plea bargaining to cooperate with Peruvian prosecutors in respect of multiple projects in which our Company or our Subsidiaries participated in respect of the alleged “Lava Jato” or others. Due to the confidential nature of the plea bargain process, the reported information is limited and difficult to verify. Any admission or other evidence of wrongdoing would be inconsistent with information gathered during the internal investigation and would have a material impact on the findings of the prior internal investigation.
●
As new information about the various Peruvian criminal investigations of the Company emerged, and news that the Company’s former chairman and director were plea bargaining with Peruvian authorities, the Company's Board of Directors continued to investigate the allegations that were the subject of the investigations, including matters relating to the “Construction Club”, which was beyond the scope of the internal investigation conducted by Simpson Thacher & Bartlett LLP. After an extensive and detailed review process, the Company shared information relevant to the investigations with the Peruvian authorities within the framework of a plea bargain process.

7

●
As a result of its contribution to the investigations, on December 27, 2019, the Company signed a preliminary settlement and cooperation agreement whereby the Anti-Corruption Prosecutor and the Ad Hoc Prosecutor's Office promise to execute a final plea bargain agreement with the Company that would provide the Company with certainty regarding the contingencies it faces as a result of the above-mentioned processes. Additionally, in the aforementioned preliminary agreement, the Anti-Corruption Prosecutor and the Ad Hoc Attorney General's Office authorize the Company to disclose its existence but maintain its content confidential.
At the same time, over the last three years, the new administration together with the newboard initiated a transformation process based on the principles of Truth, Transparency and Integrity, making profound changes in the organization of the Company, such as the reconfiguration of the Board of Directors with an independent majority, as well as the creation of new governance practices, such as the Corporate Risk Management and autonomous Compliance function, with direct report to the Board of Directors, among other actions.

Criminal investigations derived from projects developed in partnership with companies of the Odebrecht group

In connection with the Lava Jato case, the Company participated directly or through its subsidiaries as minority partner in certain entities that developed six infrastructure projects in Peru with companies belonging to the Odebrecht group (hereinafter Odebrecht).

In 2016, Odebrecht entered into a Plea Agreement with the authorities of the United States Department of Justice and the Office of the District Attorney for the Eastern District of New York by which it admitted corruption acts in connection with some of these projects in which the Company participate as minority partner.

●
IIRSA Sur

In relation to investigations on IIRSA Sur, the former Chairman of the Board of Directors was included as a subject of an investigation for collusion, and a former director and a former executive was included as a subject of an investigation for money laundering. Subsequently, Graña y Montero S.A.A. and GyM S.A.  have been included as third-party civilians responsible in the process, which means that it will be assessed whether the obligation to indemnify Governement for damages resulting from the facts under investigation will be imposed on these entities.

●
Electric Train Construction Project

The first Preparatory Investigation Court of the Judiciary decided to incorporate GyM S.A. as civil third-party responsible in the process related to the construction of the Electric train construction Project, tranches 1 and 2. In this investigation the former Chairman of the Board, a former director and a former manager have been charged.

In 2019, the Company concluded that it may have exposure with respect to the preliminary investigation process conducted in relation to GSP (the South Peruvian Gas Pipeline project). As of the date hereof, the Company has not been indicted or incorporated as a civilly liable third-party.

Subsequently, in 2020, the Company and its legal advisors concluded that there is exposure to the preliminary investigation process conducted in relation to the IIRSA Norte project. To date, the Company has not been incorporated either as a responsible civil third party or as an investigated legal person.

8

Criminal investigations in conection to the Construction Club case

GyM S.A. has been incorporated, along with other construction companies, in the criminal investigation that the Public Ministry has been carrying out for the alleged crime of corruption of officials in relation to the so-called Construction Club. Similarly, at the end of February 2020, the Public Ministry has requested the incorporation of Concar S.A., the latter is pending judicial decision. Like officials of other construction companies, a former commercial manager of GyM S.A., the former president of the Board of Directors, a former director and the former Corporate General Manager of the Company have been included in the criminal investigation.

Anticorruption Law - effects on the Group

Law 30737 and its regulation issued by Supreme Decree 096-2018-EF have mitigated the Company and subsidiaries exposure to the corruption cases. These rules set clear guidelines to estimate the potential compensation reducing the uncertainty derived from the legal proceedings, by among other things, preventing the imposition of liens or attachments of assets that would impair its ability to operate.

In the case of the Company and its subsidiary GyM, the benefits of the mentioned rules are subject to the fulfillment of the following obligations as a consequence of the association with Odebrecht in the IRSA Sur and construction of the Electric train construction Project, tranches 1 and 2:


 a.
The obligation to set up a trust that will guarantee any eventual payment obligation of an eventual civil compensation in favor of the Peruvian Government;

b.
The obligation not to transfer funds abroad without the prior consent of the Ministry of Justice;

c.
The implementation of a compliance program; and

d.
The obligation to disclose information to the authorities and to collaborate in the investigation.

The Group has designed a compliance program which is currently under implementation, it fully cooperates with the authorities in its investigations and has executed a trust agreement with the Ministry of Justice, under which the Company has established for an approximate amount of S/72 million (equivalent to US$20 million).

In 2020, the Company was included in the framework of Law 30737 for the IIRSA Norte and Chavimochic.  However, the Company has been in contact with the Ministry of Justice in order to clarify this information, given that the incorporation of the Company in the Category 2 is not in accordance with the provisions set forth in the law.  Based on the standards indicated and their guidelines, Management has estimated that the value of the civil damages for the cases described above is S/330 million (US$91.1 million)  and has registered as of December 31, 2020 S/186 million (equivalent to US$51.3 million) as net present value.

On the other hand, in addition to the cases where a provision for civil reparation has been registered, there is a project carried out in partnership with Odebrecht that to date is not under investigation. If this is started and some evidence is found, the maximum possible exposure for civil reparation estimated according to Law 30737 for the project would be S/9.6 million (approximately US$2.6 million).

However, the Company, through its external legal advisors, continues to conduct an ongoing evaluation of the information related to the criminal investigations described in this note in order to keep its defense prepared in the event any new charges may arise during those investigations. In conducting the aforementioned evaluation, the Company does not rule out the possibility of finding new incriminating evidence that is not known to date.

Investigations and administrative process initiated by INDECOPI in conection to the Construction Club case

On July 11, 2017, the Peruvian National Institute for the Defense of Free Competition and the Protection of Intellectual Property (“INDECOPI”) initiated an investigation against several construction companies, including GyM S.A., about the existence of an alleged cartel called the Construction Club. Throughout the investigation, GyM S.A. has provided to INDECOPI with all the information requested and continues collaborating with the ongoing investigation.

9
On February 11, 2020, GyM S.A. was notified by the Technical Secretariat of the Commission for the Defense of Free Competition (“INDECOPI”) with the resolution that begins a sanctioning administrative procedure involving a total of 35 companies and 28 natural persons, for  alleged anticompetitive conduct in the market of Public Works. The resolution does not include the assignment of responsibilities or the result of the administrative disciplinary procedure, which will be determined at the end of the aforementioned procedure. The procedure is in a probatory stage, therefore, INDECOPI has not carried out actions in order to quantifying the possible penalties that could result.


 2.
IMPACT OF THE COVID-19 PANDEMIC

The outbreak of the Coronavirus 2019 (COVID-19) pandemic, which has been declared by the World Health Organization to be a “public health emergency of international concern”, has spread across the world since the end of 2019. Throughout 2020, countries around the world, including Perú, Chile and Colombia, implemented measures to contain the spread of COVID-19, including travel restrictions, temporary closure of non-essential businesses, restrictions on public meetings and others. In response to the decline in economic activity, the governments of Perú, Chile and Colombia have announced large stimulus programs to assist families and businesses.

As a result of the outbreak, the Group’s results of operations, financial positions and cash flows have been adversely affected during second quarter of 2020, however as of the date of this report and as a result of the gradual normalization of activities since July, the results of the following months show a significant recovery in activity.

From the analysis made the different business of the Group have been impacted during 2020 as follows:

1)
In the engineering and construction business the stoppage, specially form March to June, produce a reduction of 25% in revenues comparing to 2019.  However, the gradual normalization of activities and the result of negotiations with our clients regarding higher costs due to stoppages and new operating standards due to the COVID-19 situation prevented decrease in gross and operating margins from deteriorating substantially.  However, at the end of the third quarter, the backlog has increased with the award of the contract for the construction of the second runway at Jorge Chavez airport and the contract for the construction of the Piura gas pipeline.

2)
In the real estate business the shut down of projects has impacted the delivery of real estate units during the year, which impacts the revenues and results of the year. However, despite these adverse circumstances, a positive result was achieved for this business in 2020.

3)
The infrastructure businesses continue operating because they were declared esencial services.  However, there were some impacts on the different businesses:


a.
Line 1 of the Metro operated with less passengers but revenues were not impacted due to the fact that revenues don’t depend on traffic but on the amount of kms travelled by each train.

b.
Oil and gas business was impacted by the reduction of the oil Price to levels below the estimations considered for 2020.  During the sanitary crisis, the enforceability of further investment obligation on new wells in Lots III and IV was suspended and suppliers obligations were renegotiated.

c.
The sanitary emergency situation caused an impact on Norvial S.A. revenues and on the results of 2020 as a result of traffic reduction. However, the level of traffic carried has been gradually recovered.  In addition, in May the Republic Congress approved a law in order suspending the collection of toll, a measure that was in effect from May 9 to June 30, 2020. The Concession Contract clause 9.9, about operator contract guarantee, establishes Grantor’s obligation to recognize and pay the Concessionaire the corresponding rate difference in the event that any public entity does not allow the Concessionaire to collect the rate in accordance to the Concession Contract.  The estimate compensation in application of the aforementioned clause has been claimed to the Government.

d.
In the case of the other two road concessions, Survial S.A. and Concesion Canchaque S.A., the suspension in the collection of tolls did not impact the results of the year because the revenues do not depend on traffic.
10

In general terms, we have not been affected by interruptions in the supply chain of personnel, services or materials, and despite the shut down of some of our projects, we do not estimate penalties or breach of our agreements.

The most important goodwill of the Group are the result of acquisitions in Colombia and Chile. Considering that in both countries the impacts of the pandemic did not lead to major projects shut downs, our estimates of the value of the goodwill have not been affected. Based on our impairment assessment as of December 31, 2020, we have determined that our goodwill is not impaired.

On the liquidity side, the Group has implemented a plan that includes several measures to reduce expenses and preserve cash in response to the ongoing COVID-19 pandemic, including the following: (i) developing a twelve-week cash plan, project-by-project, to ensure that Group subsidiaries will continue to meet its critical obligations during that period, which plan is monitored and updated weekly; (ii) preparing a cash plan for the remainder of the 2020 fiscal year, to identify in advance key liquidity issues that may arise; (iii) renegotiating certain of the Group’s subsidiaries obligations with respect to suppliers, banks and other third parties; (iv) identifying and reducing non-essential general expenses across the Group; (v) reducing headcount, and temporarily reducing salaries of senior management and Directors’ allowances, across the Group’s three segments; and (vi) reducing capital expenditures across the Group’s subsidiaries. In addition, the Group is evaluating the selling of non-strategic assets to finance any cash flow deficit during the year. This plan was approved by the Board of Directors on April and May 2020. The Group will continue to closely monitor the impacts of COVID-19 through the course of the year 2020. Therefore, the accompanying financial statements have been prepared assuming that the Group and subsidiaries will continue as a going concern.


 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


3.1
Basis of preparation

The condensed interim consolidated financial statements for the year ended December 31, 2020 have been prepared in accordance with IAS 34 "Interim Financial Reporting". The condensed interim consolidated financial statements provide comparative information regarding prior periods; however, they do not include all the information and disclosures required in the annual consolidated financial statements, so they must be read together with the audited consolidated financial statements for the year ended December 31, 2019, which have been prepared in accordance with International Standards. of Financial Information (hereinafter "IFRS").

The condensed interim consolidated financial statements are presented in thousands of Peruvian Soles, unless otherwise stated.

3.1.1.  Account balance reclassified as of December 31, 2019


 a)
The receivable balance to Consorcio Constructor Ductos del Sur amounting to S/27.8 million as of December 31, 2019 was reclassified from “other accounts receivable” to “accounts receivable from related parties”.


b)
Information on the subsidiary Adexus S.A. is presented. (hereinafter “Adexus”), whose main activity is to provide information technology solutions mainly in Chile and Peru, as of December 31, 2019 the subsidiary was recognized as a non-current asset held for sale; However, as of September 30, 2020, it was reclassified as a continuing operation for the reasons set forth in note 27.


11

As a result of this process, the balances in the consolidated statement of financial position are reclassified as follows:

   
As at
                
As at
  
   
December 31,
                
December 31,
  
   
2019
    
Reclassified (a)
    
Adexus (b)
    
2019
  
ASSETS
  
Audited
                
As restated
  
Current assets
                        
Cash and cash equivalents
    
948,978
      
-
      
1,723
      
950,701
  
Trade accounts receivables, net
    
821,737
      
-
      
92,467
      
914,204
  
Work in progress, net
    
49,457
      
-
      
-
      
49,457
  
Accounts receivable from related parties
    
36,658
      
-
      
-
      
36,658
  
Other accounts receivable
    
444,500
      
-
      
9,974
      
454,474
  
Inventories, net
    
552,573
      
-
      
2,828
      
555,401
  
Prepaid expenses
    
11,348
      
-
      
5,130
      
16,478
  
     
2,865,251
      
-
      
112,122
      
2,977,373
  
                                 
Non-current assets as held for sale
    
205,418
      
-
      
(203,020
)
    
2,398
  
                                 
Total current assets
    
3,070,669
      
-
      
(90,898
)
    
2,979,771
  
                                 
Non-current assets
                                
Trade accounts receivable, net
    
753,202
      
-
      
26,407
      
779,609
  
Work in progress, net
    
23,117
      
-
      
-
      
23,117
  
Accounts receivable from related parties
    
546,941
      
27,782
      
-
      
574,723
  
Prepaid expenses
    
27,934
      
-
      
-
      
27,934
  
Other accounts receivable
    
300,323
      
(27,782
)
    
891
      
273,432
  
Investments in associates and joint ventures
    
37,035
      
-
      
-
      
37,035
  
Investment property
    
28,326
      
-
      
-
      
28,326
  
Property, plant and equipment, net
    
443,870
      
-
      
20,120
      
463,990
  
Intangible assets, net
    
853,315
      
-
      
912
      
854,227
  
Right-of-use assets, net
    
78,813
      
-
      
11,768
      
90,581
  
Deferred income tax asset
    
240,919
      
-
      
30,800
      
271,719
  
Total non-current assets
    
3,333,795
      
-
      
90,898
      
3,424,693
  
                                 
Total assets
    
6,404,464
      
-
      
-
      
6,404,464
  


12


   
As at
                
As at
  
   
December 31,
                
December 31,
  
   
2019
    
Reclassified (a)
    
Adexus (b)
    
2019
  
   
Audited
                
As restated
  
LIABILITIES AND EQUITY
                        
Current liabilities
                        
Borrowings
    
454,260
      
-
      
27,269
      
481,529
  
Bonds
    
44,737
      
-
      
-
      
44,737
  
Trade accounts payable
    
1,136,121
      
-
      
22,954
      
1,159,075
  
Accounts payable to related parties
    
38,916
      
-
      
-
      
38,916
  
Current income tax
    
47,999
      
-
      
3,170
      
51,169
  
Other accounts payable
    
635,305
      
-
      
34,369
      
669,674
  
Provisions
    
113,483
      
-
      
-
      
113,483
  
Total current liabilities
    
2,470,821
      
-
      
87,762
      
2,558,583
  
                                 
Non-current liabilities as held for sale
    
210,025
      
-
      
(210,025
)
    
-
  
                                 
Total current liabilities
    
2,680,846
      
-
      
(122,263
)
    
2,558,583
  
                                 
Non-current liabilities
                                
Borrowings
    
344,806
      
-
      
64,260
      
409,066
  
Bonds
    
879,305
      
-
      
-
      
879,305
  
Trade accounts payable
    
-
      
-
      
34,814
      
34,814
  
Other accounts payable
    
273,101
      
-
      
23,189
      
296,290
  
Accounts payable to related parties
    
22,583
      
-
      
-
      
22,583
  
Provisions
    
214,952
      
-
      
-
      
214,952
  
Derivative financial instruments
    
52
      
-
      
-
      
52
  
Deferred income tax liability
    
112,734
      
-
      
-
      
112,734
  
Total non-current liabilities
    
1,847,533
      
-
      
122,263
      
1,969,796
  
Total liabilities
    
4,528,379
      
-
      
-
      
4,528,379
  
                                 
Equity
                                
Capital
    
871,918
      
-
      
-
      
871,918
  
Legal reserve
    
132,011
      
-
      
-
      
132,011
  
Voluntary reserve
    
29,974
      
-
      
-
      
29,974
  
Share Premium
    
1,132,179
      
-
      
-
      
1,132,179
  
Other reserves
    
(177,506
)
    
-
      
-
      
(177,506
)
Retained earnings
    
(510,766
)
    
-
      
-
      
(510,766
)
Equity attributable to controlling interest in the Company
    
1,477,810
      
-
      
-
      
1,477,810
  
Non-controlling interest
    
398,275
      
-
      
-
      
398,275
  
Total equity
    
1,876,085
      
-
      
-
      
1,876,085
  
Total liabilities and equity
    
6,404,464
      
-
      
-
      
6,404,464
  


As a result of this process, the amounts in the consolidated statement of income are reclassified as follows:


13



   
For the year ended
  
   
December 31, 2019
  
   
Reported
    
Adexus
    
As restated
  
                   
                   
Revenues from construction activities
    
2,411,880
      
-
      
2,411,880
  
Revenues from services provided
    
1,089,465
      
164,594
      
1,254,059
  
Revenue from real estate and sale of goods
    
583,659
      
88,263
      
671,922
  
     
4,085,004
      
252,857
      
4,337,861
  
                         
Cost of construction activities
    
(2,351,563
)
    
-
      
(2,351,563
)
Cost of services provided
    
(866,326
)
    
(168,925
)
    
(1,035,251
)
Cost of real estate and  sale of goods
    
(425,352
)
    
(75,258
)
    
(500,610
)
     
(3,643,241
)
    
(244,183
)
    
(3,887,424
)
Gross profit
    
441,763
      
8,674
      
450,437
  
                         
Administrative expenses
    
(213,908
)
    
(34,744
)
    
(248,652
)
Other income and expenses
    
(326,754
)
    
(12,740
)
    
(339,494
)
Operating loss
    
(98,899
)
    
(38,810
)
    
(137,709
)
                         
Financial expenses
    
(231,709
)
    
(21,425
)
    
(253,134
)
Financial income
    
74,656
      
(310
)
    
74,346
  
Share of the profit or loss of associates and joint ventures accounted for using the equity method
    
(218,774
)
    
-
      
(218,774
)
Loss before income tax
    
(474,726
)
    
(60,545
)
    
(535,271
)
Income tax expense
    
(319,957
)
    
16,586
      
(303,371
)
Loss from continuing operations
    
(794,683
)
    
(43,959
)
    
(838,642
)
                         
(Loss) profit from discontinued operations
    
(43,959
)
    
43,959
      
-
  
Loss for the year
    
(838,642
)
    
-
      
(838,642
)
                         
(Loss) profit attributable to:
                        
Owners of the Company
    
(884,721
)
    
-
      
(884,721
)
Non-controlling interest
    
46,079
      
-
      
46,079
  
     
(838,642
)
    
-
      
(838,642
)



3.2
Significant accounting policies

The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements at December 31, 2019.


 3.3
Standards, amendments, and interpretation adopted by the Group

Standards, amendments and interpretation that have entered in force as of January 1, 2020, have not had impact on the condensed interim consolidated financial statements as of December 31, 2020, and fo this reason thay have not been disclosed.  The Group has not adopted in advance any amendment and modification that are not yet effective.


 4.
FINANCIAL RISK MANAGEMENT

Financial risk management is carried out by the Group’s Management. Management oversees the general management of risks in specific areas, such as foreign exchange rate risk, price risk, cash flow and fair value interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investment of excess liquidity, which are supervised and monitored periodically.


 4.1
Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures in one of its subsidiaries and considers the use of other derivatives in the event that it identifies risks that may generate an adverse effect for the Group in the short and medium-term.

14

a)
Market risks


i)
Foreign exchange risk

The Group is exposed to exchange rate risk as a result of the transactions carried out locally in foreign currency and due to its operations abroad.  As of December 31, 2019 and December 31, 2020, this exposure is mainly concentrated in fluctuations of U.S. dollar, the Chilean and Colombian Pesos.


 ii)
Price risk

Management considers that the exposure of the Group to the price risk of its investments in mutual funds, bonds, and equity securities is low since the invested amounts are not significant. Any fluctuation in their fair value will not have any significant impact on the balances reported in the consolidated financial statements.


 iii)
Cash flow and fair value interest rate risk

The Group’s interest rate risk mainly arises from its long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
b)
Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as customer credit counterparties, including the outstanding balance of accounts receivable and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.

Concerning to loans to related parties, the Group has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board of Directors.

Management does not expect the Group to incur any losses from the performance by these counterparties, except for the ones already recorded at the financial statements.

c)
Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate number of sources of committed credit facilities and the capacity to close out positions in the market. Historically, the Group cash flows enabled it to meet its obligations. However, since 2017, the Group experienced liquidity problems due to the early termination of the GSP concession agreement and the obligations assumed. As a consequence, the Group started a disinvestment plan to be able to meet the obligations resulting from this scenario. This plan was met and the GSP debt was terminated. Due to the COVID-19 pandemic (Note 2), the Group considered diverse measures to reduce its liquidity risk exposure and developed a financial plan with the objective to meet its obligations at the corporate as well as the subsidiary level.

The Group’s Corporate Finance Officemonitors rolling forecasts of the Group’s liquidity requirements to ensure it exists sufficient cash to meet operational needs so that the Group does not breach borrowing limits or covenants, where applicable, on any of its borrowing facilities.  Less significant financing transactions are controlled by the Finance Management of each subsidiary.

15

Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal ratio targets in the statement of financial position and, if applicable, external regulatory or legal requirements, for example, foreign currency restrictions.

Surplus cash held by the operating entities over the balance required for working capital management is invested in interest-bearing checking accounts or time deposits, selecting instruments with appropriate maturities and sufficient liquidity.

The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the date of the consolidated statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, which include interest to be applied according to the established schedule.

   
Less than
      
1-2
      
2-5
    
More than
        
At December 31, 2019
  
1 year
    
years
    
years
    
5 years
    
Total
  
 
                                  
Other financial liabilities (except
                                  
  for finance leases and lease
                                  
  liability for right-of-use asset)
    
501,864
      
147,473
      
235,222
      
-
      
884,559
  
Finance leases
    
11,438
      
3,531
      
13,346
      
-
      
28,315
  
Lease liability for right-of-use asset
    
31,036
      
40,808
      
32,562
      
11,551
      
115,957
  
Bonds
    
115,690
      
157,516
      
358,461
      
1,077,960
      
1,709,627
  
Trade accounts payables (except
                                        
  non-financial liabilities)
    
989,574
      
-
      
34,814
      
-
      
1,024,388
  
Accounts payables to related parties
    
38,916
      
21,747
      
-
      
836
      
61,499
  
Other accounts payables (except
                                        
  non-financial liabilities)
    
200,098
      
2,505
      
194,908
      
-
      
397,511
  
Other non-financial liabilities
    
-
      
52
      
-
      
-
      
52
  
 
    
1,888,616
      
373,632
      
869,313
      
1,090,347
      
4,221,908
  
 
                                        
 
                                        
 
                                        
 
  
Less than
      
1-2
      
2-5
    
More than
          
At December 31, 2020
  
1 year
    
years
    
years
    
5 years
    
Total
  
 
                                        
Other financial liabilities (except
                                        
  for finance leases and lease
                                        
  liability for right-of-use asset)
    
433,318
      
183,796
      
197,785
      
23,953
      
838,852
  
Finance leases
    
16,287
      
14,919
      
20,851
      
8,515
      
60,572
  
Lease liability for right-of-use asset
    
24,714
      
32,006
      
19,847
      
11,131
      
87,698
  
Bonds
    
137,090
      
168,673
      
385,919
      
971,543
      
1,663,225
  
Trade accounts payables (except
                                        
  non-financial liabilities)
    
1,003,745
      
40,502
      
-
      
-
      
1,044,247
  
Accounts payables to related parties
    
43,817
      
35,462
      
-
      
836
      
80,115
  
Other accounts payables (except
                                        
  non-financial liabilities)
    
273,278
      
2,185
      
133,684
      
-
      
409,147
  
      1,932,249
      477,543
      758,086
      1,015,978
      4,183,856
 


4.2    Capital management risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to minimize the cost of capital.  In 2017 the situation of the Group had lead Management to monitor deviations that might cause the non-compliance of covenants and may hinder the renegotiation of liabilities (Note15). In extraordinary events as explained in Note 2, the Group identifies the possible deviations and requirements and establishes a plan.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

16
The Group monitors capital based on the gearing ratio.  This ratio is calculated as net debt divided by total capital.  Net debt is calculated as total borrowings (including current and non-current borrowings), less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.

As of December 31, 2019 and December 31, 2020, the gearing ratio is presented below indicating the Group’s strategy to keep it in a range from 0.10 to 0.70.

         
At December 31,
  
   
2019
    
2020
  
Total financial liabilities and bonds (Note 15 and Note 16)
    
1,814,637
      
1,831,079
  
Less: Cash and cash equivalents (Note 8)
    
(950,701
)
    
(900,168
)
Net debt
    
863,936
      
930,911
  
Total equity
    
1,876,085
      
1,693,971
  
Total capital
    
2,740,021
      
2,624,882
  
                 
Gearing ratio
    
0.32
      
0.35
  


4.3   Fair value estimation

For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.

- Level 1:  Measurement based on quoted prices in active markets for identical assets or liabilities.
- Level 2:  Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
-
 Level 3:
Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group).

The table below shows the Group’s liabilities measured at fair value:

   
Level 2
At December 31, 2019
    
     
Financial liabilities
    
Derivatives used for hedging
  
                  52







As of December 31, 2020, this financial liability was settled.

17


 5.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of uncertainty were the same as those that applied to the consolidated financial statements for the year ended  December 31, 2019.


 6.
SEASONALITY OF OPERATIONS

The Group does not present seasonality in the operations of any of its subsidiaries; however, economic activities temporarily restricted during last seven months, due to COVID-19 pandemic and government measures implemented to contain the spread of the virus. As a result,  this situation affected negatively Group's revenues and financial position (Note 2).


 7.
OPERATING SEGMENTS

Operating segments are reported consistently with the internal reports that are reviewed by the Group’ chief decision-maker; that is, the Executive Committee, which is led by the Chief Executive Officer. This Committee acts as the highest authority in making operational decisions, responsible for allocating resources and evaluating the performance of each operating segment.

The Group's operating segments are assessed by the activities of the following business units: (i) engineering and construction, (ii) infrastructure, and (iii) real estate.

As set forth under IFRS 8, reportable segments by significance of income are: ‘engineering and construction’ and ‘infraestructure’. However, the Group has voluntarily decided to report on all its operating segments.

Inter-segmental sales transactions are entered into at prices that are similar to those that would have been agreed to with unrelated third parties. Revenues from external customers reported are measured in a manner consistent with the basis of preparation of the financial statements. Sales of goods are related to Real State segment. Revenues from services are related to other segments.

Group sales and receivables are not concentrated on a few customers. There is no external customer that represents 10% or more of the Goup’s revenue.

The table below shows the Group’s financial statements by operating segments:
18


Operating segments financial position
                                            
Segment reporting
                                            
         
Infrastructure
                          
As of December 31, 2019
  
Engineering and construction
    
Energy
    
Toll roads
    
Transportation
    
Water
treatment
    
Real estate
    
Parent
Company
operations
    
Eliminations
    
Consolidated
  
                                                       
Assets.-
                                                      
Cash and cash equivalent
    
372,991
      
53,118
      
123,020
      
300,896
      
6,388
      
60,718
      
33,570
      
-
      
950,701
  
Trade accounts receivables, net
    
531,591
      
63,402
      
44,513
      
97,059
      
1,168
      
83,019
      
93,452
      
-
      
914,204
  
Work in progress, net
    
49,457
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
49,457
  
Accounts receivable from related parties
    
202,181
      
369
      
43,852
      
1,853
      
-
      
1,144
      
99,794
      
(312,535
)
    
36,658
  
Other accounts receivable
    
327,977
      
30,853
      
30,228
      
18,548
      
109
      
9,509
      
37,248
      
2
      
454,474
  
Inventories, net
    
57,093
      
32,366
      
7,109
      
30,594
      
-
      
437,012
      
2,828
      
(11,601
)
    
555,401
  
Prepaid expenses
    
6,812
      
1,271
      
2,779
      
231
      
133
      
-
      
5,252
      
-
      
16,478
  
     
1,548,102
      
181,379
      
251,501
      
449,181
      
7,798
      
591,402
      
272,144
      
(324,134
)
    
2,977,373
  
Non-current assets classified as held for sale
    
2,398
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
2,398
  
Total current assets
    
1,550,500
      
181,379
      
251,501
      
449,181
      
7,798
      
591,402
      
272,144
      
(324,134
)
    
2,979,771
  
                                                                         
Long-term trade accounts receivable, net
    
97,256
      
-
      
36,273
      
619,086
      
-
      
587
      
26,407
      
-
      
779,609
  
Long-term work in progress, net
    
-
      
-
      
23,117
      
-
      
-
      
-
      
-
      
-
      
23,117
  
Long-term accounts receivable from related parties
    
318,748
      
-
      
836
      
-
      
10,475
      
-
      
552,687
      
(308,023
)
    
574,723
  
Prepaid expenses
    
-
      
887
      
24,462
      
2,307
      
788
      
-
      
-
      
(510
)
    
27,934
  
Other long-term accounts receivable
    
86,097
      
63,649
      
5,156
      
-
      
7,346
      
50,449
      
60,735
      
-
      
273,432
  
Investments in associates and joint ventures
    
109,839
      
8,006
      
-
      
-
      
-
      
6,062
      
1,495,422
      
(1,582,294
)
    
37,035
  
Investment property
    
1,450
      
-
      
-
      
-
      
-
      
26,876
      
-
      
-
      
28,326
  
Property, plant and equipment, net
    
186,589
      
184,819
      
11,106
      
841
      
153
      
11,742
      
69,899
      
(1,159
)
    
463,990
  
Intangible assets, net
    
136,547
      
244,901
      
443,420
      
794
      
-
      
1,029
      
20,402
      
7,134
      
854,227
  
Right-of-use assets, net
    
5,638
      
24,038
      
3,860
      
5
      
7
      
5,048
      
67,300
      
(15,315
)
    
90,581
  
Deferred income tax asset
    
176,740
      
4,741
      
13,054
      
-
      
720
      
19,736
      
51,552
      
5,176
      
271,719
  
Total non-current assets
    
1,118,904
      
531,041
      
561,284
      
623,033
      
19,489
      
121,529
      
2,344,404
      
(1,894,991
)
    
3,424,693
  
Total assets
    
2,669,404
      
712,420
      
812,785
      
1,072,214
      
27,287
      
712,931
      
2,616,548
      
(2,219,125
)
    
6,404,464
  
                                                                         
Liabilities.-
                                                                        
Borrowings
    
180,535
      
42,760
      
2,383
      
5
      
6
      
116,231
      
148,648
      
(9,039
)
    
481,529
  
Bonds
    
-
      
-
      
28,995
      
15,742
      
-
      
-
      
-
      
-
      
44,737
  
Trade accounts payable
    
932,142
      
67,444
      
34,762
      
28,508
      
132
      
39,645
      
56,442
      
-
      
1,159,075
  
Accounts payable to related parties
    
206,907
      
2,233
      
35,554
      
21,024
      
-
      
23,437
      
58,951
      
(309,190
)
    
38,916
  
Current income tax
    
18,451
      
961
      
3,710
      
23,887
      
-
      
704
      
3,456
      
-
      
51,169
  
Other accounts payable
    
441,271
      
16,721
      
53,987
      
4,713
      
835
      
83,345
      
68,802
      
-
      
669,674
  
Provisions
    
6,031
      
18,459
      
6,183
      
-
      
-
      
230
      
82,580
      
-
      
113,483
  
Total current liabilities
    
1,785,337
      
148,578
      
165,574
      
93,879
      
973
      
263,592
      
418,879
      
(318,229
)
    
2,558,583
  
                                                                         
Borrowings
    
32,620
      
116,218
      
2,070
      
-
      
-
      
11,010
      
254,931
      
(7,783
)
    
409,066
  
Long-term bonds
    
-
      
-
      
276,550
      
602,755
      
-
      
-
      
-
      
-
      
879,305
  
Long-term trade accounts payable
    
-
      
-
      
-
      
-
      
-
      
-
      
34,814
      
-
      
34,814
  
Other long-term accounts payable
    
222,887
      
-
      
15,989
      
2,176
      
2,106
      
26,841
      
26,291
      
-
      
296,290
  
Long-term accounts payable to related parties
    
120,255
      
-
      
836
      
22,583
      
23,784
      
-
      
165,286
      
(310,161
)
    
22,583
  
Provisions
    
80,125
      
40,268
      
24,691
      
1,394
      
-
      
-
      
68,474
      
-
      
214,952
  
Derivative financial instruments
    
-
      
52
      
-
      
-
      
-
      
-
      
-
      
-
      
52
  
Deferred income tax liability
    
31,037
      
36,476
      
5,806
      
39,172
      
-
      
-
      
243
      
-
      
112,734
  
Total non-current liabilities
    
486,924
      
193,014
      
325,942
      
668,080
      
25,890
      
37,851
      
550,039
      
(317,944
)
    
1,969,796
  
Total liabilities
    
2,272,261
      
341,592
      
491,516
      
761,959
      
26,863
      
301,443
      
968,918
      
(636,173
)
    
4,528,379
  
Equity attributable to controlling interest in the Company
    
330,992
      
346,415
      
258,223
      
232,692
      
424
      
137,542
      
1,644,707
      
(1,473,185
)
    
1,477,810
  
Non-controlling interest
    
66,151
      
24,413
      
63,046
      
77,563
      
-
      
273,946
      
2,923
      
(109,767
)
    
398,275
  
Total liabilities and equity
    
2,669,404
      
712,420
      
812,785
      
1,072,214
      
27,287
      
712,931
      
2,616,548
      
(2,219,125
)
    
6,404,464
  


19

Operating segments financial position
                                            
Segment reporting
                                            
                           
Infrastructure
                          
As of December 31, 2020
  
Engineering and construction
    
Energy
    
Toll roads
    
Transportation
    
Water
treatment
    
Real estate
    
Parent
Company
operations
    
Eliminations
    
Consolidated
  
                                                       
Assets.-
                                                      
Cash and cash equivalent
    
382,850
      
60,165
      
117,893
      
207,975
      
7,408
      
73,531
      
50,346
      
-
      
900,168
  
Trade accounts receivables, net
    
492,328
      
37,614
      
25,014
      
111,602
      
565
      
38,043
      
64,390
      
-
      
769,556
  
Work in progress, net
    
186,433
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
186,433
  
Accounts receivable from related parties
    
107,495
      
35
      
31,868
      
2,624
      
30
      
1,342
      
104,007
      
(220,063
)
    
27,338
  
Other accounts receivable
    
323,084
      
27,900
      
23,631
      
13,220
      
197
      
10,446
      
37,338
      
2
      
435,818
  
Inventories, net
    
58,653
      
36,016
      
8,496
      
31,861
      
-
      
418,341
      
360
      
(1,727
)
    
552,000
  
Prepaid expenses
    
7,798
      
1,964
      
6,485
      
328
      
116
      
-
      
6,281
      
-
      
22,972
  
Total current assets
    
1,558,641
      
163,694
      
213,387
      
367,610
      
8,316
      
541,703
      
262,722
      
(221,788
)
    
2,894,285
  
                                                                         
Long-term trade accounts receivable, net
    
62,271
      
-
      
15,740
      
632,214
      
-
      
2,181
      
27,495
      
-
      
739,901
  
Long-term accounts receivable from related parties
    
333,756
      
-
      
14,508
      
-
      
11,103
      
-
      
606,618
      
(327,551
)
    
638,434
  
Prepaid expenses
    
-
      
981
      
19,009
      
2,048
      
736
      
-
      
-
      
(510
)
    
22,264
  
Other long-term accounts receivable
    
134,719
      
70,694
      
44,165
      
-
      
7,346
      
54,237
      
59,153
      
-
      
370,314
  
Investments in associates and joint ventures
    
109,870
      
8,080
      
-
      
-
      
-
      
6,095
      
1,435,162
      
(1,523,691
)
    
35,516
  
Investment property
    
1,467
      
-
      
-
      
-
      
-
      
24,606
      
44,521
      
(44,521
)
    
26,073
  
Property, plant and equipment, net
    
169,091
      
166,382
      
9,186
      
794
      
146
      
9,592
      
16,718
      
33,560
      
405,469
  
Intangible assets, net
    
143,575
      
250,327
      
371,437
      
681
      
-
      
872
      
19,017
      
6,081
      
791,990
  
Right-of-use assets, net
    
8,179
      
9,872
      
4,626
      
99
      
-
      
3,936
      
51,401
      
(13,595
)
    
64,518
  
Deferred income tax asset
    
174,269
      
4,717
      
5,037
      
-
      
779
      
18,704
      
54,026
      
5,123
      
262,655
  
Total non-current assets
    
1,137,197
      
511,053
      
483,708
      
635,836
      
20,110
      
120,223
      
2,314,111
      
(1,865,104
)
    
3,357,134
  
Total assets
    
2,695,838
      
674,747
      
697,095
      
1,003,446
      
28,426
      
661,926
      
2,576,833
      
(2,086,892
)
    
6,251,419
  
                                                                         
Liabilities.-
                                                                        
Borrowings
    
230,682
      
32,550
      
2,405
      
42
      
-
      
95,709
      
102,469
      
(10,973
)
    
452,884
  
Bonds
    
4,546
      
-
      
32,819
      
21,081
      
-
      
-
      
-
      
-
      
58,446
  
Trade accounts payable
    
861,833
      
51,225
      
51,221
      
32,637
      
61
      
42,565
      
59,900
      
-
      
1,099,442
  
Accounts payable to related parties
    
185,104
      
1,083
      
19,642
      
21,531
      
-
      
19,074
      
15,708
      
(218,325
)
    
43,817
  
Current income tax
    
26,922
      
1,351
      
1,638
      
3,606
      
166
      
-
      
811
      
-
      
34,494
  
Other accounts payable
    
600,356
      
12,905
      
35,997
      
6,719
      
766
      
91,976
      
40,270
      
4,596
      
793,585
  
Provisions
    
16,635
      
18,943
      
6,694
      
-
      
-
      
492
      
96,016
      
-
      
138,780
  
Total current liabilities
    
1,926,078
      
118,057
      
150,416
      
85,616
      
993
      
249,816
      
315,174
      
(224,702
)
    
2,621,448
  
                                                                         
Borrowings
    
25,273
      
103,154
      
2,291
      
59
      
-
      
11,021
      
328,753
      
(25,115
)
    
445,436
  
Long-term bonds
    
22,911
      
-
      
248,029
      
603,373
      
-
      
-
      
-
      
-
      
874,313
  
Long-term trade accounts payable
    
-
      
-
      
-
      
-
      
-
      
-
      
40,502
      
-
      
40,502
  
Other long-term accounts payable
    
158,968
      
-
      
11,623
      
231
      
2,761
      
23,357
      
4,653
      
-
      
201,593
  
Long-term accounts payable to related parties
    
104,432
      
-
      
836
      
36,297
      
24,207
      
-
      
182,006
      
(311,480
)
    
36,298
  
Provisions
    
81,044
      
37,599
      
17,436
      
1,925
      
-
      
-
      
96,947
      
-
      
234,951
  
Deferred income tax liability
    
25,576
      
36,793
      
1,518
      
39,020
      
-
      
-
      
-
      
-
      
102,907
  
Total non-current liabilities
    
418,204
      
177,546
      
281,733
      
680,905
      
26,968
      
34,378
      
652,861
      
(336,595
)
    
1,936,000
  
Total liabilities
    
2,344,282
      
295,603
      
432,149
      
766,521
      
27,961
      
284,194
      
968,035
      
(561,297
)
    
4,557,448
  
Equity attributable to controlling interest in the Company
    
295,244
      
354,982
      
206,993
      
177,694
      
465
      
138,933
      
1,605,914
      
(1,414,373
)
    
1,365,852
  
Non-controlling interest
    
56,312
      
24,162
      
57,953
      
59,231
      
-
      
238,799
      
2,884
      
(111,222
)
    
328,119
  
Total liabilities and equity
    
2,695,838
      
674,747
      
697,095
      
1,003,446
      
28,426
      
661,926
      
2,576,833
      
(2,086,892
)
    
6,251,419
  

20

Operating segment performance
                                            
Segment Reporting
                                            
         
Infrastructure
                          
For the year ended December 31, 2019
  
Engineering
and
construction
    
Energy
    
Toll roads
    
Transportation
    
Water
treatment
    
Real estate
    
Parent
Company
operations
    
Elimination
    
Consolidated
  
                                                       
Revenue
    
2,797,326
      
552,584
      
633,301
      
397,853
      
3,555
      
264,401
      
342,608
      
(653,767
)
    
4,337,861
  
Gross profit (loss)
    
98,362
      
108,291
      
96,164
      
119,464
      
500
      
70,787
      
6,584
      
(49,715
)
    
450,437
  
Administrative expenses
    
(141,421
)
    
(24,230
)
    
(28,623
)
    
(17,991
)
    
(397
)
    
(22,045
)
    
(75,146
)
    
61,201
      
(248,652
)
Other income and expenses, net
    
9,937
      
606
      
(47,998
)
    
(2,661
)
    
12
      
20,020
      
(318,489
)
    
(921
)
    
(339,494
)
Operating (loss) profit
    
(33,122
)
    
84,667
      
19,543
      
98,812
      
115
      
68,762
      
(387,051
)
    
10,565
      
(137,709
)
Financial expenses
    
(74,171
)
    
(13,266
)
    
(27,297
)
    
(10,948
)
    
(12
)
    
(42,320
)
    
(123,339
)
    
38,219
      
(253,134
)
Financial income
    
5,644
      
2,033
      
2,245
      
33,214
      
826
      
3,829
      
74,546
      
(47,991
)
    
74,346
  
Dividends
    
-
      
-
      
-
      
-
      
-
      
-
      
12,688
      
(12,688
)
    
-
  
Share of profit or loss in associates
                                                                        
and joint ventures
    
(3,558
)
    
2,293
      
-
      
-
      
-
      
458
      
(711,962
)
    
493,995
      
(218,774
)
(Loss) profit before income tax
    
(105,207
)
    
75,727
      
(5,509
)
    
121,078
      
929
      
30,729
      
(1,135,118
)
    
482,100
      
(535,271
)
Income tax
    
(35,457
)
    
(22,911
)
    
(17,112
)
    
(39,634
)
    
(506
)
    
(7,000
)
    
(179,633
)
    
(1,118
)
    
(303,371
)
(Loss) profit for the year
    
(140,664
)
    
52,816
      
(22,621
)
    
81,444
      
423
      
23,729
      
(1,314,751
)
    
480,982
      
(838,642
)
                                                                         
(Loss) profit from attributable to:
                                                                        
Owners of the Company
    
(137,109
)
    
48,056
      
(28,270
)
    
61,084
      
423
      
(4,995
)
    
(1,304,676
)
    
480,766
      
(884,721
)
Non-controlling interest
    
(3,555
)
    
4,760
      
5,649
      
20,360
      
-
      
28,724
      
(10,075
)
    
216
      
46,079
  
     
(140,664
)
    
52,816
      
(22,621
)
    
81,444
      
423
      
23,729
      
(1,314,751
)
    
480,982
      
(838,642
)

21


Operating segment performance
                                            
Segment Reporting
                                            
         
Infrastructure
                          
For the year ended December 31, 2020
  
Engineering
and
construction
    
Energy
    
Toll roads
    
Transportation
    
Water
treatment
    
Real estate
    
Parent
Company
operations
    
Elimination
    
Consolidated
  
                                                       
Revenue
    
2,092,592
      
369,798
      
466,824
      
345,258
      
3,359
      
182,439
      
240,799
      
(387,040
)
    
3,314,029
  
Gross profit (loss)
    
115,993
      
53,251
      
40,858
      
107,918
      
366
      
40,345
      
8,134
      
(46,259
)
    
320,606
  
Administrative expenses
    
(102,519
)
    
(16,119
)
    
(16,584
)
    
(12,738
)
    
(289
)
    
(16,462
)
    
(42,543
)
    
54,811
      
(152,443
)
Other income and expenses, net
    
(7,684
)
    
(4,185
)
    
(34,283
)
    
72
      
42
      
1,962
      
(52,704
)
    
65
      
(96,715
)
Operating profit (loss)
    
5,790
      
32,947
      
(10,009
)
    
95,252
      
119
      
25,845
      
(87,113
)
    
8,617
      
71,448
  
Financial expenses
    
(54,174
)
    
(17,525
)
    
(32,376
)
    
(9,316
)
    
(275
)
    
(12,647
)
    
(58,090
)
    
42,785
      
(141,618
)
Financial income
    
6,603
      
2,239
      
4,326
      
1,586
      
897
      
4,584
      
60,303
      
(44,850
)
    
35,688
  
Dividends
    
-
      
-
      
-
      
-
      
-
      
-
      
7,222
      
(7,222
)
    
-
  
Share of profit or loss in associates
                                                                        
and joint ventures
    
-
      
2,391
      
-
      
-
      
-
      
34
      
(27,440
)
    
25,784
      
769
  
(Loss) profit before income tax
    
(41,781
)
    
20,052
      
(38,059
)
    
87,522
      
741
      
17,816
      
(105,118
)
    
25,114
      
(33,713
)
Income tax
    
(3,614
)
    
(7,500
)
    
(13,477
)
    
(26,681
)
    
(277
)
    
(2,854
)
    
(3,517
)
    
(37
)
    
(57,957
)
(Loss) profit for the year
    
(45,395
)
    
12,552
      
(51,536
)
    
60,841
      
464
      
14,962
      
(108,635
)
    
25,077
      
(91,670
)
                                                                         
(Loss) profit from attributable to:
                                                                        
Owners of the Company
    
(42,836
)
    
9,176
      
(43,581
)
    
45,631
      
464
      
1,391
      
(108,595
)
    
18,725
      
(119,625
)
Non-controlling interest
    
(2,559
)
    
3,376
      
(7,955
)
    
15,210
      
-
      
13,571
      
(40
)
    
6,352
      
27,955
  
     
(45,395
)
    
12,552
      
(51,536
)
    
60,841
      
464
      
14,962
      
(108,635
)
    
25,077
      
(91,670
)

22

There are no differences as compared to previous year-end consolidated financial statements based on segmentation or measurement of financial performance by segment.


 8.
CASH AND CASH EQUIVALENTS

At December 31, this account comprises:

   
2019
    
2020
  
Cash on hand
    
1,323
      
996
  
Remittances in-transit
  
5,664


2,340
  
Bank accounts
    
225,101
      
300,115
  
Escrow account (a)
    
552,439
      
501,015
  
Time deposits
    
166,174
      
95,702
  
     
950,701
      
900,168
  






 
(a)
The Group maintains various administration or guarantee trusts depending on the purposes for which they were created. The balance corresponding to Reserve Funds Issued Bonds includes operating reserve accounts, maintenance and debt service payments, among others, corresponding to the bond issuance of the subsidiaries.  The balance includes reserve funds for bond payments issued by the subsidiaries GyM Ferrovias S.A. and Norvial S.A. amounting to S/132 million and S/21 million, as of December 31, 2020, respectively (S/181 million and S/18 million, as of December 31, 2019, respectively), as shown as follows:
 
 
    At December 31,  
   
2019
    
2020
  
Reserve funds issued bonds
    
199,192
      
153,075
  
Real estate projects
    
31,794
      
35,273
  
Engineering and construction projects
    
236,526
      
263,631
  
Infrastructure projects
    
84,927
      
49,036
  
     
552,439
      
501,015
  
   
     


9.
TRADE ACCOUNTS RECEIVABLES, NET

At December 31, this account comprises:

         
Total
          
Current
          
Non-current
  
   
2019
    
2020
    
2019
    
2020
    
2019
    
2020
  
                                     
Receivables (net) (a)
    
959,151
      
753,690
      
415,970
      
248,807
      
543,181
      
504,883
  
Unbilled receivables (net) - Subsidiaries (b)
    
499,974
      
488,991
      
387,998
      
409,413
      
111,976
      
79,578
  
Unbilled receivables (net) - Concessions (c)
    
234,688
      
266,776
      
110,236
      
111,336
      
124,452
      
155,440
  
     
1,693,813
      
1,509,457
      
914,204
      
769,556
      
779,609
      
739,901
  

 
a)
Receivables are presented net of impairment and present value discount for S/47.2 million and S/0.9 million, respectively (S/4.9 million and S/10.1 million as of December 31, 2019). The ageing is detailed as follows:
     

23

    At December 31,  
   
2019
    
2020
  
             
Current
    
817,233
      
718,217
  
Past due up to 30 days
    
45,922
      
5,737
  
Past due from 31 days up to 90 days
    
27,364
      
6,801
  
Past due from 91 days up to 120 days
    
1,319
      
2,279
  
Past due from 121 days up to 360 days
    
10,502
      
4,185
  
Past due over 360 days
    
56,811
      
16,471
  
     
959,151
      
753,690
  

As of December 31, 2020, the amount overdue for more than 360 days mainly includes invoices receivable from subsidiaries: Concar S.A. for S/2.7 million and GyM S.A. for S/12.5 million (as of December 31, 2019 Concar S.A. for S/35.4 million and GyM S.A. for S/18.9 million).

b)            Unbilled receivables from subsidiaries correspond to documents related to the estimates for services rendered that were not billed, valuations in process or pending approval. The balance includes present value discount for S/12.5 million and impairment for S/5.9 million (S/20.6 million as of December 31, 2019 to present value), and detailed by subsidiary:
 
     
    At December 31,  
   
2019
    
2020
  
             
GyM S.A.
    
384,660
      
391,505
  
Concar S.A.
    
10,737
      
6,298
  
GMI S.A.
    
24,787
      
25,823
  
Graña y Montero Petrolera S.A.
    
1,657
      
1,512
  
Adexus S.A.
    
78,133
      
63,853
  
     
499,974
      
488,991
  



c)    Unbilled receivables from concessions correspond to future invoice according to Concession Contract terms. This amount is presented net of impairment of S/3.5 million as of December 31, 2020 and  2019, as detailed below:
 
    At December 31,  
   
2019
    
2020
  
             
GyM Ferrovias S.A.
    
208,205
      
235,763
  
Survial S.A.
    
16,466
      
10,611
  
Norvial S.A. (*)
    
2,149
      
15,436
  
Concesión Canchaque S.A.C.
    
6,700
      
4,401
  
Concesionaria La Chira S.A.
    
1,168
      
565
  
     
234,688
      
266,776
  

(*) The increase as of December 31, 2020, corresponds to the approximate present value of S/13.2 million (S/15.2 million at nominal value), due to the compensation estimate in application of the tariff guarantee calculated based on real traffic controlled during the period from May 10, 2020 to June 30, 2020 (stage of suspension of toll collection) ordered by the Peruvian Government.


 10.
WORK IN PROGRESS, NET

At December 31, this account comprises:
24

         
Total
          
Current
          
Non-current
  
   
2019
    
2020
    
2019
    
2020
    
2019
    
2020
  
                                     
Unbilled receivable concessions in progress (a)
    
23,117
      
-
      
-
      
-
      
23,117
      
-
  
Work in progress (b)
    
49,457
      
186,433
      
49,457
      
186,433
)
    
-
      
-
  
     
72,574
      
186,433
      
49,457
      
186,433
      
23,117
      
-
  

Work in progress costs include all those expenses incurred by the Group for construction contracts as detailed below:

 
a)
Corresponds to accounts receivable from the Municipality of Lima related to mandatory investments from the Concession Contract and to the income guaranteed by the Grantor from the start of exploitation. As of December 31, 2019, these accounts are presented as no current because they were expected to be collected once the operation stage began. To date, both the term of the Concession and most of the obligations under the respective Concession Contract are still suspended by agreement between the parties until December 31, 2020 in order to conclude agreement on the terms and conditions to approve the Early Termination of the Concession Contract by Mutual Agreement in accordance with the provisions of Clause 16.3 of the aforementioned Contract, as a consecuence, the balance has been reclassified to “Other accounts receivables – Claims to third parties”.

 
b)
Includes mainly S/170.7 million corresponding to GyM S.A. and its subsidiary Vial y Vives - DSD S.A. (S/29.6 million as of December 31, 2019); and S/15.4 million from GMI S.A. (S/19.9 million as of December 31, 2019).


11.
TRANSACTIONS WITH RELATED PARTIES

a) Transactions with related parties

Major transactions between the Company and its related parties are summarized as follows:

   
2019
    
2020
  
Revenue from sales of goods and services:
            
- Associates
    
108
      
-
  
- Joint operations
    
31,158
      
6,814
  
     
31,266
      
6,814
  

Inter-company services are agreed based on market terms and conditions as if they had been agreed with third parties.

25
b) Balances of transactions with related parties

         
At December 31,
          
At December 31,
  
         
2019
          
2020
  
   
Receivable
    
Payable
    
Receivable
    
Payable
  
Current portion:
                        
Joint operations
                        
Consorcio Rio Urubamba
    
9,042
      
-
      
9,357
      
-
  
Consorcio Peruano de Conservacion
    
3,592
      
-
      
3,156
      
-
  
Consorcio Italo Peruano
    
1,011
      
363
      
1,520
      
217
  
Consorcio Constructor Chavimochic
    
-
      
5,953
      
-
      
6,208
  
Consorcio GyM Conciviles
    
1,257
      
1,958
      
1,341
      
1,472
  
Consorcio La Gloria
    
1,750
      
1,017
      
69
      
113
  
Consorcio Ermitaño
    
831
      
440
      
890
      
474
  
Terminales del Peru
    
1,176
      
-
      
501
      
161
  
Consorcio TNT Vial y Vives - DSD Chile Ltda
    
-
      
1,088
      
-
      
1,015
  
Consorcio Rio Mantaro
    
-
      
5,869
      
-
      
7,655
  
Consorcio Vial Quinua
    
-
      
2,048
      
-
      
2,051
  
Consorcio Huacho Pativilca
    
1,419
      
5,895
      
4
      
85
  
Consorcio CDEM
    
638
      
-
      
1,111
      
-
  
Consorcio GyM-Stracon
    
2,230
      
-
      
-
      
644
  
Consorcio GyM-OSSA
    
7,202
      
-
      
-
      
-
  
Consorcio Chicama Ascope
    
2,471
      
-
      
2,922
      
-
  
Consorcio Inti Punku
    
-
      
-
      
-
      
6,556
  
Consorcio Manperan
    
1
      
88
      
1,057
      
656
  
Consorcio Norte Pachacutec
    
961
      
620
      
1,077
      
1,192
  
Other minors
    
445
      
1,394
      
2,373
      
1,502
  
     
34,026
      
26,733
      
25,378
      
30,001
  
Other related parties
                                
Ferrovias Argentina
    
-
      
12,183
      
-
      
11,139
  
Peru Piping Spools S.A.C.
    
2,632
      
-
      
1,960
      
2,677
  
     
2,632
      
12,183
      
1,960
      
13,816
  
Current portion
    
36,658
      
38,916
      
27,338
      
43,817
  
                                 
Non-current portion:
                                
Gasoducto Sur Peruano S.A.
    
572,624
      
-
      
638,434
      
-
  
Ferrovias Participaciones
    
-
      
22,583
      
-
      
36,298
  
Other minors
    
2,099
      
-
      
-
      
-
  
Non-current
    
574,723
      
22,583
      
638,434
      
36,298
  

Receivables and payables are mainly current and do not have specific guarantees.

Accounts receivable from related parties are mainly to sales of goods and services. These balances do not bear interest and as of December 2020 do not require a provision for impairment. The account receivable from GSP is presented net of impairment and present value discount .

Accounts payable to related parties mainly related to services of engineering, construction, maintenance and others. Such accounts are not interest bearing because they are short-term.


 12.
OTHER ACCOUNTS RECEIVABLE


26
At December 31, this account comprises:

         
Total
          
Current
          
Non-current
  
   
2019
    
2020
    
2019
    
2020
    
2019
    
2020
  
                                     
Advances to suppliers
    
135,481
      
76,200
      
135,481
      
76,200
      
-
      
-
  
Income tax on-account prepaid
    
71,541
      
48,047
      
71,541
      
48,045
      
-
      
2
  
VAT credit
    
47,167
      
54,076
      
32,903
      
37,276
      
14,264
      
16,800
  
Guarantee deposits
    
189,210
      
223,573
      
104,965
      
171,093
      
84,245
      
52,480
  
Claims to third parties
    
79,771
      
221,403
      
38,874
      
59,123
      
40,897
      
162,280
  
Petroleos del Peru S.A.- Petroperu S.A.
    
80,942
      
87,826
      
17,293
      
17,132
      
63,649
      
70,694
  
ITAN and other tax receivable
    
60,883
      
61,479
      
30,233
      
30,487
      
30,650
      
30,992
  
Restricted funds
    
16,523
      
29,121
      
1,522
      
2,092
      
15,001
      
27,029
  
Rental and sale of equipment - GyM S.A. projects
    
30,798
      
29,149
      
30,798
      
29,149
      
-
      
-
  
Accounts receivable from personnel
    
2,940
      
10,957
      
2,940
      
10,957
      
-
      
-
  
Consorcio Panorama
    
23,491
      
25,026
      
-
      
-
      
23,491
      
25,026
  
Other minors
    
16,574
      
10,386
      
15,339
      
9,738
      
1,235
      
648
  
     
755,321
      
877,243
      
481,889
      
491,292
      
273,432
      
385,951
  
Impairment
    
(27,415
)
    
(71,111
)
    
(27,415
)
    
(55,474
)
    
-
      
(15,637
)
     
727,906
      
806,132
      
454,474
      
435,818
      
273,432
      
370,314
  

The fair value of the other short-term accounts receivable is similar to their book value due to their short-term maturity. The non-current portion corresponds mainly to non-financial assets such as advances to suppliers and tax credits. Other non-current accounts receivable have maturities that vary between 2 and 5 years.

The maximum exposure to credit risk as of the reporting date is the carrying amount of each class of other accounts receivable mentioned.


 13.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

At December 31, this account comprises:

   
2019
    
2020
  
Associates
    
28,875
      
27,246
  
Joint ventures
    
8,160
      
8,270
  
     
37,035
      
35,516
  

The movement of our investments in associates for the years ended December 31, 2019 and 2020 is as follows:

   
2019
    
2020
  
             
Beginning balance
    
257,765
      
37,035
  
Dividends received
    
(1,517
)
    
(2,318
)
Share of the profit or loss in associates and joint
                
  ventures
    
(218,774
)
    
770
  
Impairment of investment
    
(384
)
    
(38
)
Translation adjustments
    
(55
)
    
67
  
Ending balance
    
37,035
      
35,516
  

Concesionaria Chavimochic S.A.C.

The entity was awarded the concesion of the Chavimochic irrigation project, including a) design and construction of the work required for the third-phase of the Chavimochic irrigation project in the province of La Libertad; b) operation and maintenance of works; and c) water supply to the Project users. Construction activities started in 2015; the effective concession period is 25 years, and the total investment amounts was estimated in US$647 million.

27
The civil works of the third stage of the Chavimochic Irrigation Project were structured in two phases. To date, the works of the first phase (Palo Redondo Dam) are 70% completed. However, at the beginning of 2017, the procedure for early termination of the Concession Contract was initiated due to the breach of contract by the Grantor, and all activities were suspended in December 2017. Due to the fact that no agreement was reached, the Concessionaire initiated an arbitration process at the UNCID. The arbitration proceedings are suspended, as a consequence of the of the National Emergency.

Moreover, from 2018 to date, the Peruvian Government (“the Grantor”) has been evaluating the modification of the Concession Contract, to determine a mechanism that allow the completion of the project, without resolution as of to date.

Finally, the Grantor and the Ministry of Agriculture and Irrigation (MINAGRI), and the Chavimochic Special Project, have signed an Agreement in order to allow MINAGRI to subrogate the ownership of the Project, within the framework of the provisions of the Emergency Decree N ° 021-2020.


 14.
PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND RIGHT-OF-USE ASSETS

The movement in property, plant and equipment, intangible assets and right-of-use assets accounts for the years ended December 31, 2019 and 2020, is as follows:

   
Property,
              
   
plant and
    
Intangibles
    
Right-of-use
  
   
equipment
    
assets
    
assets
  
                   
Net cost at January 1, 2019
    
503,584
      
856,178
      
-
  
                         
Additions
    
81,902
      
118,835
      
119,706
  
Reclassifications, disposals and adjustments
    
(34,215
)
    
(22,448
)
    
271
  
Deductions for sale of assets
    
(6,715
)
    
-
      
-
  
Depreciation, amortization
    
(80,566
)
    
(98,338
)
    
(29,396
)
                         
Net cost at December 31, 2019
    
463,990
      
854,227
      
90,581
  
                         
                         
Net cost at January 1, 2020
    
463,990
      
854,227
      
90,581
  
                         
Additions
    
36,065
      
50,405
      
12,075
  
Reclassifications, disposals and adjustments (*)
    
(9,230
)
    
(14,013
)
    
(20,607
)
Deductions for sale of assets
    
(6,796
)
    
(8
)
    
-
  
Depreciation, amortization
    
(78,560
)
    
(98,621
)
    
(17,531
)
                         
Net cost at December 31, 2020
    
405,469
      
791,990
      
64,518
  

(*) Includes translation adjustments in the subsidiary GyM S.A. in property plant and equipment and intangibles, amounted to S/2.2 million and S/3.7 million, respectively.

a) Property, plant and equipment and right-of-use assets

As of December 31, 2020, additions to property, plant and equipment mainly corresponds to S/17.1 million in machinery in the engineering and construction; and, in works in progress for S/8.5 and S/2.8 million in the infrastructure and engineering and construction segments, respectively (S/19.1 million in machinery of the engineering and construction and real estate segment; S/7.9 million in equipment of the engineering and construction segment; and S/44.6 million units to be received and works in progress in the segment infrastructure as of December 31, 2019).

28
As of December 31, 2020, additions to right-of-use assets comprise lease agreements signed by the Group.

Depreciation of property, plant and equipment, investment property and right-of-use assets is presented in the Statement of Income as follows:

    At December 31,  
   
2019
    
2020
  
             
Cost of goods and services (Note 21)
    
108,066
      
90,145
  
Administrative expenses (Note 21)
    
4,252
      
8,359
  
Total depreciation related to property, plant and equipment, investment property and right-of-use assets
    
112,318
      
98,504
  
(-) Depreciation of investment property
    
(2,356
)
    
(2,413
)
(-) Depreciation of right-of-use asset
    
(29,396
)
    
(17,531
)
Total depreciation of property, plant and equipment
    
80,566
      
78,560
  

b) Intangible assets

As of December 31, 2019 and 2020, additions registered in intangible assets mainly comprise of investments in preparation of wells located in Lots I, III, IV and V to provide oil explotation services.

Amortization of intangibles is broken down in the statement of income as follows:

    At December 31,  
   
2019
    
2020
  
             
Cost of goods and services (Note 21)
    
101,810
      
94,483
  
Administrative expenses (Note 21)
    
5,689
      
4,138
  
     
107,499
      
98,621
  

Goodwill

Management reviews businesses results based on the type of economic activity carried out.
Goodwill allocated to cash-generating units are:

    At December 31,  
   
2019
    
2020
  
             
Engineering and construction (*)
    
36,632
      
38,211
  
Electromechanical
    
20,735
      
20,735
  
     
57,367
      
58,946
  

(*) The variation reported in engineering and construction segment is due to translation adjustment of foreign business of the subsidiary GyM S.A.

29
As a result of the impairment testing on goodwill performed by Management on an annual basis the recoverable amount of the related cash-generating unit (CGU) is determined based on the higher of its value in use and fair value less cost of disposal.  Value in use is determined based on the future cash flows expected to be generated by the assessed CGU.


 15.
BORROWINGS

As of December 31, this item comprises:

         
Total
          
Current
          
Non-current
  
   
2019
    
2020
    
2019
    
2020
    
2019
    
2020
  
                                     
Bank loans (a)
    
631,863
      
571,659
      
445,289
      
409,272
      
186,574
      
162,387
  
Finance leases
    
23,650
      
52,391
      
10,357
      
13,635
      
13,293
      
38,756
  
Lease liability for right-of-use asset
    
92,870
      
72,726
      
23,980
      
19,950
      
68,890
      
52,776
  
Other financial entities (b)
    
142,212
      
201,544
      
1,903
      
10,027
      
140,309
      
191,517
  
     
890,595
      
898,320
      
481,529
      
452,884
      
409,066
      
445,436
  

a)  Bank loans

As of December 31, 2019 and 2020, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations accrue fixed interest rates that fluctuate between 1.0% and 12.0% in 2019 and between 0.5% and 11.0% in 2020.

                Current     Non-current  
   
Interest
    
Maturity
          
At December 31,
          
At December 31,
  
   
rate
    
date
    
2019
    
2020
    
2019
    
2020
  
                                     
GyM S.A. (i)
    
2.00% / 11.00
%
    
2023
      
170,798
      
222,924
      
26,401
      
19,977
  
GMP S.A. (ii)
    
3.25% / 6.04
%
    
2027
      
30,367
      
24,950
      
102,895
      
99,474
  
Aenza S.A.A. (formerly Graña y Montero S.A.A. (iii)
    
9.10% / 10.10
%
    
2022
      
112,854
      
51,977
      
-
      
39,618
  
Adexus S.A.
    
0.50% / 1.15
%
    
2026
      
20,927
      
19,224
      
57,278
      
-
  
Viva GyM S.A.
    
6.84% / 8.88
%
    
2021
      
110,343
      
90,197
      
-
      
3,318
  
                     
445,289
      
409,272
      
186,574
      
162,387
  

i) Financial Stability Framework Agreement

In July 2017, the Company and its subsidiaries (GyM S.A., Construyendo Pais S.A., Vial y Vives-DSD S.A. and Concesionaria Vía Expresa Sur S.A.) entered into a Financial Stability Framework Agreement with the following financial entities: Scotiabank Perú S.A., Banco Internacional del Perú S.A.A., BBVA Banco Continental, Banco de Crédito del Perú, Citibank del Peru SA and Citibank N.A. The Framework Agreement aims to: (i) grant GyM a syndicated revolving line of credit for working capital for up to US$1.6 million and S/143.9 million, which may be increased by an additional US$14 million subject to certain conditions; (ii) grant GyM S.A. a line of credit of up to US$51.6 million and S/33.6 million; (iii) grant the Company, GyM S.A., Construyendo Pais S.A., Vial y Vives - DSD S.A. and Concesionaria Vía Expresa Sur S.A. a non-revolving line of credit to finance repayment commitments subject to performance bonds; (iv) grant a syndicated line of credit in favor of Graña y Montero S.A.A. and GyM S.A. for the issuance of performance bonds up to an amount of US$100 million (which may be increased by an additional US$50 million subject to compliance with certain conditions); and (v) commit to maintain existing standby letters of credit issued at the request of GyM S.A. and the Company, as well as the request of Construyendo Pais S.A., Vial y Vives – DSD and Concesionaria Vía Expresa Sur S.A.

In July 2020, an addendum to the Framework Agreement, the Financing Agreement and the Syndicated Line of Guarantee Letter was signed, with the purpose of modifying certain provisions of the aforementioned documents and extending the term of their validity until September 30, 2020.

On October 6, 2020, the financial entities unanimously agreed to extend the term of the financing documents until October 31, 2020; as well as granting a waiver of the obligation to maintain the composition of invoices and provisions during the months of April to October 2020.

As of December 31, 2020, GyM has complied with the conditions of the addendum, cancelling US$10 million to Tranche A. The outstanding balance will be fully amortized until March 31, 2021.

30

As of December 31, 2020 the pending balance of the Financial Stability Framework Agreement is US$30.7 million (equivalent to S/111 million).

In accordance with the Financial Stability Framework Agreement, the Company must comply quarterly with two ratios, related to its invoices and sales provisions: (i) the calculated value of 90% of its bills receivable, and (ii) the calculated value of 80% of its income provisions must be greater than 50% of the amount of Tranche A pending payment.

As of December 31, 2020 due to the stoppage of activities generated by the COVID-19 pandemic, the account receivable rate and unbilled receivable rate reached 56% and 142%, respectively. In relation to account receivable rate, the Company does not comply with the requirement of the Financial Stability Framework Agreement.

ii) Terminales del Peru Loan

Terminales del Peru (hereinafter “TP”), a joint operation of the subsidiary GMP S.A., has a medium-term loan agreement with Banco de Credito del Peru (hereinafter BCP) up to US$30 million to finance the investments committed and up to US$70 million to finance the additional investments from the operation contract of the North and Center terminals for the period 2015 to 2019 with a maximum exposure limit of US$80 million. These facilities are repaid within 8 years. As of December 31, 2020, these loans amount to US$23.2 million (equivalent to S/84.1 million), this amount corresponds to the 50% interest held by the subsidiary GMP and due in 2027.

In addition, in November 2019, TP signed a loan agreement to finance the additional investments from 2019 to 2023, for a credit line amount to US$46 million with BCP. The contract confirmed the participation of an assignee, so BD Capital (BDC) acquired 50% of the BCP contractual position through the subscription of the accession contract and in November 2019 disbursed to TP US$23 million. As of December 31, 2020, the loan amounts to US$11 million (equivalent to S/40 million), this amount corresponds to the 50% interest held by the subsidiary GMP and is due in 2026.

As of December 31, 2020 and the date of this report, TP is in compliance with the ratios established in the contract loan.

iii) CS Peru Infrastructure Holdings LLC Loan

In July 2019, the Company entered into a medium term loan credit agreement for up to US$35 million with CS Peru Infrastructure Holdings LLC. The term of the loan is three years, with quarterly installments of principal starting on the 18th month. The loan accrued interest at the following rates per annum: (i) for the period from and including the July 31, 2019 (“Closing Date”) to but excluding the date that is 6 months after the Closing Date, 9.10%; (ii) for the period from and including the date that is 6 months after the Closing Date to but excluding the date that is 1 year after the Closing Date, 9.35%; (iii) for the period between the first annual anniversary of the Closing Date and the day before the thirtieth month of the Closing Date, 9.60%, and (iv) for the period from the thirtieth month of the Closing Date to the third annual anniversary of the Closing Date, 10.10%.

The loan was used for working capital in the Company, GyM S.A. and Adexus S.A. In February 2020, US$10 million was partially paid. As of the date of this report, the principal amount outstanding under this loan is US$25.7 million (equivalent to S/93.2 million).

On November 21, 2019, as a result of the initiation of a preventive insolvency process by the Chilean subsidiary, Adexus SA, the Company received a communication from CS Peru Infrastructure Holdings LLC reporting the occurrence of a default event under the loan contract, in accordance with the provisions of Section 7.02 (e) and 9.09 of the same contract. As a consequence, as of December 31, 2019, the loan was classified as current liabilities. On February 28, 2020, the waiver was obtained by the Company, so it was reclassified to non-current liabilities. As of December 31, 2020 and as of the date of this report, the Company is in compliance with the covenants established in the loan contract.

31
On November 13, 2020, as a consequence of the health crisis caused by COVID-19, the Company notified CS Peru Infrastructure Holdings LLC of the breach of the leverage ratio in accordance with Section 8.10 (b) for the period ended September 30. On December 23, 2020, the Company obtained a waiver from CS Infrastructure Holdings LLC for the non-applicability of the leverage ratio for the period ended September 30, 2020 and December 31, 2020.

b) Other financial entities

Monetization of Norvial dividends

At May 29, 2018 the Company subscribes an agreement between the Company and Inversiones Concesiones Vial S.A.C. ("BCI Peru") -whith the intervention of Fondo de Inversiones BCI NV (“Fondo BCI”) and BCI Management Administradora General de Fondos S.A. (“BCI” Asset Management”) -  to monetize future dividends from Norvial S.A. to the Company.  With the signing of this agreement, the Company obligated itself to indirectly transfer its economic rights over 48.8% of the share capital of Norvial S.A. by transferring its  class B shares (equivalent to 48.8% of the capital of Norvial S.A.) to a vehicle specially constituted for such purposes named Inversiones en Autopistas S.A. The amount of the transaction was US$42.3 millions (equivalent to S/138 million) and was completed on June 11, 2018.

Likewise, it has been agreed that the Company will have purchase options on 48.8% of Norvial's economic rights that BCI Peru will maintain through its participation in Inversiones en Autopistas S.A. These options will be subject to certain conditions such as the expiration of different terms, recovery of the investment made with the funds of the BCI Fund (according to different economic calculations) and / or that a change of control occurs. As of December 31, 2020, the loan principal remains at US$42.3 million, the balance of the loan payable amounts to S/153.3 million and S/142.2 million as of December 31, 2020 and December 31, 2019, respectively.

c) Fair value of borrowings

The carrying amount and fair value of borrowings are broken down as follows:

    Carrying amount     Fair value  
         
At December 31,
          
At December 31,
  
   
2019
    
2020
    
2019
    
2020
  
                         
Bank loans
    
631,863
      
571,659
      
650,224
      
589,781
  
Finance leases
    
23,650
      
52,391
      
23,697
      
38,792
  
Lease liability for right-of-use asset
    
92,870
      
72,726
      
109,453
      
88,779
  
Other financial entities
    
142,212
      
201,544
      
142,212
      
247,916
  
     
890,595
      
898,320
      
925,586
      
965,268
  

As of December 31, 2020, the fair value is based on cash flows discounted using a rate based on the borrowing rate of 0.7% and 11% (2.9% and 11%  as of December 31, 2019) and are included as Level 2 in the level of measurement.


 16.
BONDS

As of December 31, this item includes:

32
(Missing Graphic Reference)

     
Total
      
Current
      
Non-current
  
 
2019
  
2020
  
2019
  
2020
  
2019
  
2020
  
                         
GyM Ferrovias S.A. (a)
    
618,497
      
624,454
      
15,742
      
21,081
      
602,755
      
603,373
  
Norvial S.A. (b)
    
305,545
      
280,848
      
28,995
      
32,819
      
276,550
      
248,029
  
GyM S.A. (c)
    
-
      
27,457
      
-
      
4,546
      
-
      
22,911
  
     
924,042
      
932,759
      
44,737
      
58,446
      
879,305
      
874,313
  

a)  GyM Ferrovias S.A.

In February 2015, the subsidiary GyM Ferrovias S.A. made an international issue of corporate bonds under Regulation S of Unites States of America. The issue was made in soles VAC (adjusted for the Constant Update Value) for an amount of S/629 million. The bonds mature in November 2039 and earn interest at a rate of 4.75% (plus the VAC adjustment), present a risk rating of AA+ (local scale) granted by Apoyo & Asociados Internacionales Clasico de Riesgo. As of December 31, 2020, an amortization has been made up to S/90.6 million (S/79 million as of December 31, 2019).

As of December 31, 2020, the balance includes accrued interest payable and VAC adjustments for S/103.4 million (S/86.8 million as of December 31, 2019).

The account movement for the years ended December 31, 2019 and 2020 is as follows:

   
2019
    
2020
  
             
Balance at January, 1
    
611,660
      
618,497
  
Amortization
    
(11,330
)
    
(11,582
)
Accrued interest
    
48,253
      
47,615
  
Interest paid
    
(30,086
)
    
(30,076
)
Balance at December, 31
    
618,497
      
624,454
  

As part of the structuring process of the bond, GyM Ferrovias S.A. committed to report and verify compliance with the following, measured based on their individual financial statements (covenants):


 -
Debt service coverage ratio not less than 1.2 times.

-
Maintain a constant balance in the minimum trust equal to one month of operation and maintenance costs (including the IGV).

-
Maintain a constant balance in the minimum trust equal to the following two coupons according to the bond schedule.

As of December 31, 2019 and December 31, 2020, GyM Ferrrovias S.A. has complied with the covenants.

As of December 31, 2020, the fair value amounts to S/710 million (S/686.8 million as of December 31, 2019), is based on discounted cash flows using rate 3.6% (4.32% as of December 31, 2019) and is within level 2 of the fair value hierarchy.

b)  Norvial S.A.

Between 2015 and 2016, the subsidiary Norvial S.A. issued the First Corporate Bond Program on the Lima Stock Exchange for a total S/365 million. Risk rating agencies Equilibrium y Apoyo & Asociados Internacionales graded this debt instrument AA.

The capital raised was used to finance the construction of the second phase of Red Vial No.5 and the financing of VAT arising from a project-related expenses.

33
The account movement for the years ended at December 31, 2019 and 2020 is as follows:

   
2019
    
2020
  
             
Balance at January, 1
    
325,382
      
305,545
  
Amortization
    
(20,005
)
    
(24,820
)
Accrued interest
    
23,482
      
24,619
  
Capitalized interest
    
2,725
      
-
  
Interest paid
    
(26,039
)
    
(24,496
)
Balance at December, 31
    
305,545
      
280,848
  

As part of the process of bond structuring, Norvial S.A. engaged to adhere to the following covenants: 


 -
Debt service coverage ratio of not less than 1.3 times.

-
Proforma gearing ratio lower than 4 times.

As of December 31, 2019 and December 31, 2020, Norvial S.A. has complied with the covenants.

As of December 31, 2020, the fair value amounts to S/304.7 million (S/327.2 million as of December 31, 2019), is based on discounted cash flows using rate  between 6.73% and 8.07% (between 6.20% and 7.59% as of December 31, 2019) and is within level 2 of the fair value hierarchy.

c)  GyM S.A.

At the beginning of  2020, the subsidiary GyM S.A. prepared the First Private Bond Program, up to a maximum amount of US$8 million.

In the first quarter of the year,  bonds issued amounts to US$7.8 million (equivalent to S/25.9 million) under the debt swap modality, related to its outstanding trade accounts.

The bonds mature in December 2027 and bear interest at a rate of 8.5%, payment is semi-annual and have a risk rating of B-, granted by the rating company Moody’s Peru. As of December 31, 2020, the balance includes accrued interest payable for US$0.6 million (equivalent to S/2.2 million).

As of December 31, 2020, GyM S.A. has complied with the covenants.

As of December 31, 2020, the fair value amounts to S/28.6 million, is based on discounted cash flows using rate 7.14% and is within level 3 of the fair value hierarchy.


 17.
TRADE ACCOUNTS PAYABLE

As of December 31, this item includes:

   
2019
    
2020
  
             
Invoices payable
    
398,347
      
470,118
  
Provision of contract costs
    
758,116
      
661,574
  
Notes payable
    
37,426
      
8,252
  
     
1,193,889
      
1,139,944
  

34
As of December 31, 2020, the contract cost provisions include: i) estimate costs to come according to the the completion porcentage of projects amounting to S/95.7 million, for GyM S.A. and GMI S.A. (S/169.5 million as of December 31, 2019 for GyM S.A. and GMI S.A); and ii) services received not invoiced S/565.9 million (S/588.6 million as of December 31, 2019).


 18.
OTHER ACCOUNTS PAYABLE

As of December 31, this item includes:

   
     Total    
     Current    
   
Non-current
  
   
2019
    
2020
    
2019
    
2020
    
2019
    
2020
  
                                     
Advances received from customers (a)
    
307,839
      
385,217
      
270,714
      
354,117
      
37,125
      
31,100
  
Consorcio Ductos del Sur - payable (b)
    
148,076
      
77,733
      
-
      
-
      
148,076
      
77,733
  
Salaries and other payable
    
92,313
      
77,386
      
92,313
      
77,386
      
-
      
-
  
Other taxes payable
    
108,457
      
115,414
      
88,248
      
101,792
      
20,209
      
13,622
  
Put option liability on Morelco acquisition
    
106,444
      
118,622
      
71,341
      
79,096
      
35,103
      
39,526
  
Consorcio Rio Mantaro - payables
    
35,625
      
58,129
      
35,625
      
58,129
      
-
      
-
  
Acquisition of additional non-controlling interest
    
22,697
      
27,596
      
22,697
      
27,596
      
-
      
-
  
Guarantee deposits
    
16,445
      
23,744
      
16,445
      
23,744
      
-
      
-
  
Third-party loans
    
11,619
      
11,608
      
9,545
      
9,533
      
2,074
      
2,075
  
Other accounts payables
    
116,449
      
99,729
      
62,746
      
62,192
      
53,703
      
37,537
  
     
965,964
      
995,178
      
669,674
      
793,585
      
296,290
      
201,593
  

(a)  Advances received from customers relate mainly from construction projects, and are applied to progress billings, in accordance with contract terms.

         
Total
          
Current
          
Non-current
  
   
   
At December 31,
    
   
At December 31,
    
   
At December 31,
  
   
2019
    
2020
    
2019
    
2020
    
2019
    
2020
  
                                     
Advances - Consortiums
    
115,250
      
108,014
      
113,093
      
106,551
      
2,157
      
1,463
  
Advances - Real estate projects
    
66,258
      
105,347
      
66,258
      
105,347
      
-
      
-
  
Advances - Engineering and construction
    
64,118
      
118,820
      
44,932
      
93,502
      
19,186
      
25,318
  
Advances - Road concessions
    
42,030
      
47,433
      
26,534
      
35,855
      
15,496
      
11,578
  
Others
    
20,183
      
4,910
      
19,897
      
4,679
      
286
      
231
  
     
307,839
      
384,524
      
270,714
      
345,934
      
37,125
      
38,590
  

 
(b)
The balance of other accounts payable from Consorcio Constructor Ductos del Sur corresponds to payment obligations to vendors and main subcontractors for S/77.7 million (S/148 million as of December 31, 2019), assumed by the subsidiary GyM S.A; as a result of the termination of GSP operations.

The fair value of short-term accounts approximates their book value due to their short-term maturities. The non-current part mainly includes non-financial liabilities such as advances received from customers; the remaining balance is not significant in the financial statements for the periods shown.


 19.
PROVISIONS

35
The movement for the years ended at December 31, 2019 and 2020 is as follows:

         
Contingent
              
         
liabilities
    
Provision
        
   
Legal
    
resulting from
    
for well
        
   
contingencies
    
acquisitions
    
closure
    
Total
  
                         
At January 1, 2019
    
84,728
      
4,498
      
20,382
      
109,608
  
Additions
    
197,721
      
-
      
30,998
      
228,719
  
Reversals of provisions
    
(3,122
)
    
(4,349
)
    
-
      
(7,471
)
Payments
    
(914
)
    
-
      
(1,264
)
    
(2,178
)
Translation adjustments
    
(94
)
    
(149
)
    
-
      
(243
)
At december 31, 2019
    
278,319
      
-
      
50,116
      
328,435
  
                                 
                                 
At January 1, 2020
    
278,319
      
-
      
50,116
      
328,435
  
Additions
    
58,143
      
-
      
119
      
58,262
  
Reversals of provisions
    
(14,310
)
    
-
      
-
      
(14,310
)
Reclasification
    
1,079
      
-
      
-
      
1,079
  
Payments
    
(7,252
)
    
-
      
(1,799
)
    
(9,051
)
Translation adjustments
    
9,316
      
-
      
-
      
9,316
  
At december 31, 2020
    
325,295
      
-
      
48,436
      
373,731
  

Legal contingencies

    a)  Civil compensation

Corresponding to the legal contingency estimated by management for exposure of the Company and its subsidiaries to a probable compensation in relation to their participation as minority partners in certain entities that developed infrastructure projects in Peru with companies belonging to the Odebrecht group and projects related to “Club de la Construcción”. As of December 31, 2020, the present value of the estimated provision totals S/186 million (S/154 million as of December 31, 2019).

    b)  Securities Class actions NY SEC

During the first quarter of 2017 two securities class actions have been filed against the Company, and certain former employees in the Eastern District of New York.  Both complaints allege false and misleading statements during the class period.  In particular, they allege that the Company failed to disclose, among other things, that a) the Company knew that its partner Odebrecht was engaged in illegal activities, and b) the Company profited from such activities in violation of its own corporate governance standards.

As of the date of this report, the Company has signed the definitive settlement agreement with the plaintiffs' attorneys, by which the parties agree to terminate the class action, subject to the court approval and the payment of the transaction amount by the Company. The amount agreed for the termination of the class action is equivalent to US$20 million. As of December 31, 2020, the Company registered a provision of US$14.7 million (equivalent to S/53.1 million) the difference of US$ 5 million will be covered by the professional liability insurance policy in accordance with the agreement signed with the insurance company.


 20.
CAPITAL

As of December 31, 2020 and as of December 31, 2019, the capital of the Company is represented by 871,917,855 shares of a nominal value of S/1.00 each, all registered in the Public Registries.

As of December 31, 2020, a total of 190,863,050 shares were represented in ADS, equivalent to 38,172,610 ADSs at a rate of 5 shares per ADS.

As of December 31, 2019, a total of 218,043,480 shares were represented by ADS, equivalent to 43,608,696 ADSs at a rate of 5 shares per ADS.

36

 21.
EXPENSES BY NATURE

For the years ended December 31, 2019 and 2020, this item comprises:

   
Cost of
              
   
goods and
    
Administrative
        
   
services
    
expenses
    
Total
  
At December 31, 2019
                  
Services provided by third-parties
    
1,504,180
      
65,154
      
1,569,334
  
Salaries, wages and fringe benefits 
   
1,040,293
      
143,317
      
1,183,610
  
Purchase of goods
    
942,633
      
33
      
942,666
  
Other management costs
    
174,678
      
27,708
      
202,386
  
Depreciation (Note 14 a)
    
108,066
      
4,252
      
112,318
  
Amortization (Note 14 b)
    
101,810
      
5,689
      
107,499
  
Impairment of accounts receivable
    
4,900
      
-
      
4,900
  
Taxes
    
6,951
      
2,499
      
9,450
  
Impariment of property, plant and equipment
    
3,907
      
-
      
3,907
  
Impairment of investments
    
255
      
-
      
255
  
Inventory recovery
    
(249
)
    
-
      
(249
)
Total
    
3,887,424
      
248,652
      
4,136,076
  
                         
                         
At December 31, 2020
                        
Services provided by third-parties
    
926,048
      
38,999
      
965,047
  
Salaries, wages and fringe benefits
    
1,010,315
      
86,943
      
1,097,258
  
Purchase of goods
    
608,424
      
73
      
608,497
  
Other management costs
    
226,936
      
13,856
      
240,792
  
Depreciation (Note 14 a)
    
90,145
      
8,359
      
98,504
  
Amortization (Note 14 b)
    
94,483
      
4,138
      
98,621
  
Impairment of accounts receivable
    
26,158
      
4
      
26,162
  
Taxes
    
5,956
      
71
      
6,027
  
Property, plant and equipment recovery
    
4,950
      
-
      
4,950
  
Impairment of investments
    
38
      
-
      
38
  
Inventory recovery
    
(30
)
    
-
      
(30
)
Total
    
2,993,423
      
152,443
      
3,145,866
  

37

 22.
OTHER INCOME AND EXPENSES

For the years ended December 31, 2019 and 2020, this item comprises:

         

 
   
2019
    
2020
  
Other income:
            
Sale of assets
    
12,748
      
9,118
  
Penalty income
    
984
      
1,168
  
Supplier debt forgiveness
    
19,026
      
70
  
Recovery of provisions and impairments
    
23,279
      
6,501
  
Trademarks revaluation
    
20,676
      
-
  
Profit from Mizuho Bank Ltd. agreement (a)
    
89,688
      
-
  
Others
    
13,384
      
4,266
  
     
179,785
      
21,123
  
                 
Other expenses:
                
Civil repair to the Peruvian Government
    
69,150
      
43,250
  
Asset impairment (b)
    
339,774
      
59,440
  
Cost of assets disposal
    
23,697
      
8,682
  
Legal and tax litigation
    
49,754
      
7,673
  
Renegotiation of contract with suppliers
    
-
      
4,889
  
Present value of the call option
    
4,697
      
2,326
  
Provision for well closure
    
4,055
      
112
  
Administrative fine
    
1,423
      
1,897
  
Others
    
26,729
      
708
  
     
519,279
      
128,977
  
     
(339,494
)
    
(107,854
)

 
a)
Corresponds to: the profit from the refinancing operation executed by Mizuho, linked to the agreement signed between GyM Ferrovías S.A. and Mizuho Bank Ltd.  Pursuant to the terms of such agreement, the Company provided a stand-by letter of credit to guarantee a financial derivative required to execute the CPAOs purchase transaction related to the Expansion Project.  Furthermore, the agreement stated that in case Mizuho Bank refinanced the debt obtained for the purchase of the CPAOs, the Company would be entitled to receive 70% of the profit obtained from such refinancing.
     
  b)
Corresponds to: i) the impairment of intangibles at subsidiary Concesionaria Vía Expresa Sur S.A. for S/13.5 million, as a result of the Company's estimates on the recovery of the investment maintained in the project. The Concession Contract has been suspended by mutual agreement with the Municipality of Lima since June 2017 (Note 10),  ii) the impairment registered at CAM Holding S.P.A. for S/12.7 million due to claims against escrow account. iii) Impairment of accounts receivable at the subsidiary Concar S.A. for S/33.9 million to the Regional Government of Cusco.


23.
INCOME TAX

The condensed interim consolidated financial statements for the year ended December 31, 2020, income tax expense is recognized based on management’s estimate of the annual income tax rate expected for the full financial year. The estimated annual tax rate as of December 31, 2020 is 171.92% (56.68% for the  period ended in December 31, 2019).


 24.
CONTINGENCIES, COMMITTMENTS AND GUARANTEES

As of December 31, 2020, contingencies held by the Group are substantially the same as those existing as of December 31, 2019.

The Group maintains guarantees and letters of credit in force in various financial entities guaranteeing operations for US$427.5  million (US$390 million, as of December 31, 2019).

38

 25.
DIVIDENDS

As part of the covenants at the refinancing agreements mentioned in Note 15, the Company is unable to pay dividends as established in the Financial Stability Framework Agreement.

For the year ended December 31, 2020, the Group’s subsidiaries have paid dividends to its non-controlling interests in the amount of S/82.4 million (S/12.8 million for the year ended in December 31, 2019).


 26.
LOSS PER SHARE

The basic earnings (loss) per common share has been calculated by dividing the loss of the period attributable to the Group’s common shareholders by the weighted average of the number of common shares outstanding during that period. No diluted loss per common share has been calculated because there is no potential diluent common or investment shares (ie, financial instruments or agreements that entitle to obtain common or investment shares); therefore, it is the same as the earnings (loss) per basic share.

The basic loss per common share is as follows:

    At December 31,  
   
2019
    
2020
  
             
Loss attributable to owners of the Company
            
during the period
    
(884,721
)
    
(119,625
)
Weighted average number of shares in issue
                
at S/1.00 each, at December 31,
    
871,917,855
      
871,917,855
  
                 
Basic loss per share (in S/)
  (*)  
(1.076
)
    
(0.137
)

(*) The Group does not have common shares with dilutive effects at December 31, 2019 and December 31, 2020.


 27.
CONTINUING OPERATIONS

As of December 31, 2020, the financial information of the subsidiary Adexus S.A. (hereinafter Adexus) was reclassified as continuous operation. The subsidiary that have been reclassified as a non-current assets held for sale at December 31, 2018, has as main activity to provide information technology solutions mainly in Chile and Peru. Despite the fact that the Company has been committed to a pan to carry out the sale, the circumstances that arose in the subsidiary during this period, which are explained below, have forced us to change initial plan, focusing in negotiating with vendors liabilities terms sale resulting in a viable plan again.

On November 19, 2019, Adexus filed an application for reorganization under law 20720 with the Chilean courts of justice. The Company impaired the total investment value as of December 31, 2019.

On January 9, 2020, the Company communicated that the creditors committee of Adexus approved with the favorable vote of more than 80% of the pledge creditors and 85% of the unsecured creditors, respectively, the judicial reorganization agreement proposed by Adexus in the framework of the reorganization procedure. According to the terms of the judicial reorganization agreement, Adexus will restructure and pay the total of its reorganized liabilities within a maximum period of six years, according to the new agreed conditions, being authorized to continue with its commercial activities normally. As a result of the financial protection provided by the Chilean law and with the support of its creditors, Adexus has achieved the restructuring of its liabilities while continuing to serve all its customers. In 2020, Adexus S.A. has complied with the payment schedule agreed with the creditors. On December 28, the creditor’s committee signed a debt reorganization agreement with the pledge creditors and unsecured creditors.
The Group decided that Adexus will be subject to the patrimonial protection law; after achieving this restructuring, the Group will focus on honoring it in the terms agreed while finding the right shareholder for the future development of the subsidiary.
39

 		28.
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION


1.
Issuance of Convertible Bonds

On January 13, 2021, the Board of Directors approved terms and conditions for the issuance of convertible bonds to be placed by private offering, including the registration and delivery dates, for the exercise of the preemptive subscription right, both in the first and second subscription round. The convertible bonds to be issued have not been and will not be registered under the U.S. Securities Act, or under the securities laws of any state or jurisdiction outside Peru.

Additionally, on the same date, a contract was signed with Kallpa Securities Sociedad Agencia de Bolsa SA, who will act as Representative of the Bondholders for the issuance of the convertible bonds.
2.
New State of emergency due to COVID

On January 26, 2021, the Government of Peru established new measures in order to contain the spread of COVID 19 infections. This is in response to the substantial increase in cases registered between the months of December 2020 and January 2021, the identification of potential new virus and the saturation of hospital care capacity throughout the country.

These measures include restrictions on the mobilization of people, closure of certain economic activities and various limitations. Although the announced measures are temporary (15 days as of January 31, 2020) and establish that a relevant component of economic activities will continue to carry out their tasks normally, it is not possible to rule out that measures will be extended for an additional period or that restrictions become more acute, generating impacts that are difficult to quantify.


40