Aktuální report č. 63 / 2019

Amendment to the Agreement on the provision of strategic investor’s support to Budimex SA

With reference to current report No 70/2012 of 29 October 2012, current report No 45/2013 of 8 July 2013 and current report No 23/2017 of 28 March 2017, the Management Board of Budimex S.A. informs that on 24 September 2019 Budimex S.A. concluded a Memorandum terminating the Licence Agreement concluded with Ferrovial Agroman S.A. (a construction company belonging to the Ferrovial Group – a direct strategic investor of Budimex S.A.) and determining the rules of settlement of a licence fee paid to Ferrovial Agroman S.A for the period from 1 January 2012 to the date of conclusion of the Memorandum. At the same time, on 24 September 2019 Budimex S.A. concluded a new Licence Agreement with Ferrovial Agroman S.A. (“Agreement”), effective as of 1 January 2018, to which this Memorandum is attached. as an appendix. Under the Agreement, Ferrovial Agroman grants Budimex a licence for industrial intangible assets that support the core activity of Budimex in the scope of all construction works and infrastructure management. Ferrovial Agroman also provides Budimex S.A. with intangible assets it currently holds and those developed in future and will continue to improve and enhance the intangible assets by developing best practices and know-how of Ferrovial Agroman.

Essential terms and conditions of the Memorandum: 

• The Parties have agreed to terminate the Licence Agreement of 28 March 2017. 

• Due to divergent opinions on the market value of the service, raised in the BAPA process by the authorities competent for the process on behalf of Poland and Spain and, in connection with the range of the divergence estimated by the Parties on the basis of the information available to them, the Parties have agreed that the difference between the licence fee paid in the period from 1 January 2012 to 24 September 2019 in the amount of 0.5% of the annual turnover of Budimex S.A. and the estimated level of the licence fee of 0.33% of the annual turnover of Budimex S.A. will be returned to Budimex by Ferrovial Agroman S.A., on the terms and conditions set forth in the Memorandum, in the amount of 50% of said difference, no later than until 31 December 2020.

• The Parties have agreed that the Memorandum exhausts any mutual claims of the Parties as regards settlement of the licence fee,  

• In connection with the conclusion of the Memorandum, Ferrovial Agroman S.A. will return to Budimex S.A.: (i) by 31 December 2019 – the appropriate part of the licence fee in the amount of PLN 17,045,548 (for the period from 1 January 2012 to 31 December 2017); (ii) by 30 November 2019 – the appropriate part of the licence fee in the amount of PLN 15,995,630.70 (for the period from 1 January 2018 to 24 September 2019); (iii) no later than until 31 December 2020 – the remaining part of the licence fee in the amount of PLN 1,777,292.30 (for the period from 1 January 2018 to 24 September 2019).

Essential provisions of the Agreement:

• The remuneration for the Agreement shall be 0.33% of annual revenues from sales earned by the Budimex Group less revenues pertaining to sales earned by Budimex Nieruchomości Sp. z o.o. (a real estate development company wholly owned by Budimex S.A.) and FB Serwis S.A. (a maintenance company operating in the waste sector and wholly owned by Budimex S.A.).

• The Agreement covers the period from 1 January 2018 and was concluded for an indefinite period, with a possibility of termination by either Party subject to a 6-month notice period

• The Agreement entered into force on the date of its signing with effect from 1 January 2018.

• If the Budimex Group suffers a financial gross loss in any quarter of a year during the term of the Agreement, the payment of contractual remuneration will be suspended until the Budimex Group registers a gross profit for a period of at least 3 months.

• The receivables under the Agreement shall be settled in Polish zloty (PLN).

• Payments shall be made on the basis of invoices issued by Ferrovial Agroman S.A. for monthly periods and payable within 30 days from the date of their receipt by Budimex S.A.

• In the event of a delay in payment of an invoice, Ferrovial Agroman S.A. may charge interest calculated at WIBOR for an annual deposit +2% starting the first day of delay.

• During the term of the Agreement, Budimex S.A. may withhold the payment of the licence fee if Ferrovial Agroman S.A. is late with the delivery of transfer price documents to Budimex S.A.

As a result of the conclusion of the Memorandum and the Agreement, the operating profit reported in both the consolidated financial statements of the Budimex Group in the separate financial statements of Budimex SA for the 3rd quarter of 2019 will be increased on a one-off basis by the amount of PLN 34,818,471, resulting from the adjustment of the historical cost of the licence fee.