Annual Report 2008 - HOCHTIEF · 2008 the Building division together with the companies under it...

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Annual Report 2008

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Cover photo

From summer 2009, the Sky Office

will add a new architectural accent to

the Düsseldorf skyline. The 23-story

building sets itself apart by its trans-

lucent facade and wing-shaped roof.

As an additional highlight, all offices

can be naturally lit and ventilated.

HOCHTIEF Construction began con-

struction work in October 2007.

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Contents

Report of the Executive Board .......................................................................4

Executive Board ...............................................................................................5

Report of the Supervisory Board ...................................................................6

Management Report ........................................................................................9

Business activities ................................................................................................9

Organization .......................................................................................................10

Markets ..............................................................................................................13

Orders and work done ....................................................................................... 17

Strategy .............................................................................................................19

Research and development ...............................................................................23

Employees .........................................................................................................24

Procurement ......................................................................................................25

Financial review ..................................................................................................26

Risk report .........................................................................................................27

Projects of HOCHTIEF Construction AG, its subsidiaries and

business units ....................................................................................................29

Looking ahead ...................................................................................................39

Financial Statements and Notes ..................................................................41

Financial statements of HOCHTIEF Construction AG for the fiscal year

January 1 – December 1, 2008 .......................................................................... 41

Balance sheet .................................................................................................... 41

Statements of earnings ......................................................................................42

Notes to the 2008 financial statements of HOCHTIEF Construction AG ............43

Movements in fixed assets .................................................................................43

Explanatory notes on the balance sheet ............................................................47

Explanatory notes on the statement of earnings ................................................50

Boards ...............................................................................................................53

List of holdings ...................................................................................................54

Auditor’s Report .............................................................................................55

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Report of the Executive Board

HOCHTIEF Construction AG is an internationally active,

service-oriented construction company embodying the

traditional core business of the HOCHTIEF Group. As a

modern service provider, we develop innovative business

models and forward-looking service offerings for our

clients. In Germany, for example, this enabled us to secure

the first contract where the company is solely responsible

for construction management.

Construction activity in Germany remained on a slightly

upward trend in 2008. Projects that were initiated in 2007

will start to turn in a better result. The international busi-

ness enjoyed higher-than-average rates of growth—gener-

ated by projects in Chile, Eastern Europe and South Africa,

for example. Although the costs incurred on loss-making

projects initiated in previous years led to another negative

result for HOCHTIEF Construction, it was able to sharply

reduce that loss year on year through its systematically im-

plemented restructuring measures. Earnings were also

driven by the improvement in the building construction

business outside Europe and the healthy state of the Euro-

pean civil engineering and infrastructure construction sector.

As a company focused on sustained growth, we introduced

further measures in fiscal year 2008 aimed at cementing

and expanding HOCHTIEF Construction’s strong position.

For instance, we increased the minimum return on invest-

ment for new projects and are concentrating on market

segments that harbor enormous potential, such as renew-

able energies and sustainable building. Our clear aim is to

attain a leading position in these segments.

Our determination to operate profitably and provide premium

services for our clients is also reflected in a new and more

efficient management structure. The Executive Board is

now solely responsible for strategic management. Three

divisional heads working in close harness with the teams

and business units are responsible for the operational

business. A fundamental reorganization of the risk manage-

ment system is also contributing to a sustained increase in

earnings.

In addition, HOCHTIEF Construction is benefiting from ever

closer cooperation with its sister companies. In the year

under review, it once again secured contracts in the ex-

panding market for public-private partnership projects to-

gether with HOCHTIEF PPP Solutions. In cooperation with

HOCHTIEF Energy Management and HOCHTIEF Facility

Management, our company is tapping into the fast-grow-

ing field of building refurbishment to improve energy effi-

ciency with ever increasing success.

There is also good news to report on the real estate devel-

opment business. HOCHTIEF Construction is now one of

Germany’s leading developers of high-quality residential real

estate. In the year under review, it once again completed

numerous buildings in attractive locations and sold them at

a healthy margin. Our company also started work on other

projects. HOCHTIEF Construction is well placed to main-

tain this upward trend.

Despite the difficult economic environment, we are there-

fore looking to the future with optimism. The fundamental

reorganization initiated in 2007 and further implemented

during the year under review has started to bear fruit, show-

ing that our company is indeed on the right track.

We would like to thank our clients and business partners

most sincerely for the working relationship and construc-

tive dialog we continued to share during the past fiscal year

in a spirit of partnership. An equally big thank-you must go

to HOCHTIEF Construction’s employees, who once again

demonstrated considerable expertise, exceptional com-

mitment and loyalty to the company in 2008.

Essen, February 2, 2009

Dipl.-Ing. Henner Mahlstedt

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Executive Board

Dipl.-Ing. Henner Mahlstedt (born 1953), Essen,

Chairman of the Executive Board

studied civil engineering and joined HOCHTIEF Construc-

tion AG in 2003 as Management Chairman of the East divi-

sion. Since October 2005, he has been a member of the

Executive Board of HOCHTIEF Construction AG. Since

April 2007, he has been Chairman of the Executive Board

and Human Resources Director of HOCHTIEF Construc-

tion AG. His scope of responsibility includes the Civil Europe

and Construction International divisions and from April 1,

2008 the Building division together with the companies under

it and, at the service level, the strategy and risk manage-

ment departments. He is also responsible for personnel

and communications. Mahlstedt additionally assumed

responsibility in fiscal 2008 for HOCHTIEF Consult.

Dipl.-Ing. Achmed Kadded (born 1961), Mettmann

(until March 31, 2008)

studied civil engineering and began his career as a

HOCHTIEF site manager in 1989. Positions held by Achmed

Kadded include business unit manager in Münster and

Berlin and managing director of Streif Baulogistik GmbH.

Kadded held various responsibilities as Management Chair-

man of the East, Northwest and Southwest divisions from

2002 to 2006. Effective September 1, 2006, he was ap-

pointed alternate member of the Executive Board. From

December 2006, he was a regular member of the Execu-

tive Board. Until he stepped down from office in March 31,

2008, Kadded was responsible on the Executive Board for

the Building division, HOCHTIEF Consult and subsidiary

Streif Baulogistik GmbH.

Dipl.-Kfm. Heiner Helbig (born 1957), Hilden

holds a degree in business administration and joined

HOCHTIEF in 1998, initially assuming management re-

sponsibilities at HOCHTIEF Construction AG’s Northwest

division. He went on to serve as member of the Manage-

ment Board of HOCHTIEF Development, Managing Direc-

tor of HOCHTIEF Projektentwicklung GmbH and HOCHTIEF

PPP Solutions GmbH, and member of the Supervisory

Board of HOCHTIEF Construction AG. Heiner Helbig joined

the Executive Board of HOCHTIEF Construction AG in

October 2005 and is responsible for the following functions:

procurement, project financing, finance and accounting,

controlling, IT strategy, legal affairs, auditing, tax and insur-

ance. He is additionally responsible for subsidiary HOCHTIEF

Global Trade GmbH and the FormArt business.

Executive Board of

HOCHTIEF Construction AG:

Henner Mahlstedt and

Heiner Helbig

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Throughout fiscal year 2008, the Supervisory Board per-

formed the tasks required of it by law and the Company’s

Articles of Association and consistently oversaw and ad-

vised the Executive Board in its management of the Com-

pany. The Executive Board provided the Supervisory

Board with regular written and verbal reports containing

full and timely information on the financial situation and

development of both the Company and its subsidiaries,

their business policy plans, corporate planning, risk man-

agement and specific material transactions. The Super-

visory Board covered these reports in depth at its meetings,

discussed them with the Executive Board and made the

necessary decisions. There was no cause to initiate meas-

ures, such as inspection of the Company’s books or docu-

ments, under the first sentence of Section 111 (2) of the

German Stock Corporations Act (AktG).

The Chairman of the Supervisory Board also maintained

regular contact with the Executive Board outside of meet-

ings and kept himself informed of the current status of the

business and key transactions.

At four meetings, the Supervisory Board held extensive

discussions on fundamental aspects of business policy,

risk management, trends in orders and earnings, the Com-

pany’s financial position and the employment situation in

the individual corporate units. The Executive Board explained

to the Supervisory Board in detail any variance between

the actual course of business and the business plans and

targets.

At all four meetings, the Supervisory Board devoted close

attention to the reorganization of the Building division and

the completion of selected legacy or loss-making projects.

Discussions on the latter focused on the project results

and an analysis of the causes of the losses. In dealing with

the reorganization of the Building division, the Supervisory

Board looked at the division’s restructuring and the new

focus of its business activities. It also examined and dis-

cussed in detail the Executive Board’s reports on the

restructuring.

Other topics of discussion included the new structure of

HOCHTIEF Consult, the new setup in the risk management

department, the Company’s new management and organi-

zational structure as well as the further development of the

Civil Europe division.

In addition, the Supervisory Board concerned itself with

the amended price models and new costing guidelines,

the revised targets for operating earnings and the planning

for the period 2009 to 2011.

As in previous years, the Supervisory Board also discussed

the development of the European construction markets

and the European competitive environment. In doing so, it

looked at business opportunities in European growth mar-

kets, especially in Eastern Europe, and in selected countries

outside Europe that offer an advantageous competitive

climate.

With regard to human resources, the Supervisory Board

devoted special attention to the situation of the workforce

and measures to provide them with training and continuing

education.

The Supervisory Board Human Resources Committee did

not meet in fiscal year 2008, but took decisions by circular

resolution. It was not necessary to convene a meeting of

the Mediation Committee pursuant to Section 27 (3) of the

Codetermination Act (MitbestG).

Report of the Supervisory Board

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The annual Financial Statements and Management Report

of HOCHTIEF Construction AG prepared by the Executive

Board for fiscal year 2008, together with the bookkeeping

system, were audited by and received an unqualified audi-

tors’ report from the Essen branch of Pricewaterhouse-

Coopers Aktiengesellschaft Wirtschaftsprüfungsgesell-

schaft, Frankfurt am Main, the auditors appointed by the

General Shareholders’ Meeting on April 29, 2008 and in-

structed by the Supervisory Board to perform the audit of

the annual Financial Statements.

The annual Financial Statements, the Management Report

and the auditor’s report were submitted to all members of

the Supervisory Board in good time prior to the financial

statements meeting on March 10, 2009. The Executive Board

also provided verbal explanations at the financial statements

meeting. The auditors who signed the audit report took

part in the Supervisory Board discussions on the above

documents, during which they reported on the main re-

sults of the audit and were available to provide further in-

formation. Following its own appraisal, the Supervisory

Board approved the results of the auditor’s audit of the

annual Financial Statements.

The Supervisory Board examined the annual Financial

Statements and the Management Report and concluded

on completion of its examination that there were no objec-

tions to be raised. The Supervisory Board has approved

the annual Financial Statements, which are thus adopted.

Dr. Wolfgang Kässer and Mr. Hans Dietmar Sauer retired

from the Supervisory Board effective June 30, 2008. Mr.

Achmed Kadded stepped down from the Executive Board

at the end of March 2008. The Supervisory Board thanks

these gentlemen for their dedicated service and expert

advice.

At an Extraordinary Shareholders’ Meeting, Dr.-Ing. Martin

Rohr and Mr. Georg Kürfgen were elected members of the

Supervisory Board effective July 1, 2008.

The Supervisory Board expresses its thanks and apprecia-

tion to the Executive Board, the company management

teams and all employees for their work in 2008.

Essen, March 10, 2009

Dr.-Ing. Herbert Lütkestratkötter

– Chairman –

On behalf of the Supervisory Board

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In Bremerhaven, a joint

venture led by HOCHTIEF

Construction is carry-

ing out Europe’s largest

lock construction proj-

ect. The Kaiserschleuse

lock will be 305 meters

long, 55 meters wide

and 13 meters deep. The

fi rst ships are to pass

through the new lock

in summer 2010. The

contract is worth just

under EUR 185 million,

HOCHTIEF Construction

was able to convince

the client in a “competi-

tive dialog” procedure.

9

Main subsidiaries of HOCHTIEF Construction AG

HOCHTIEF Construction AG, Essen, Germany

4,860

2,020

Entreprise Générale de ConstructionHOCHTIEF-Luxembourg S.A.

107

2299.96 %

Durst-Bau GmbH,Vienna, Austria

156

4599.90 %

HOCHTIEF (UK) Construction Ltd.,Swindon, UK

274

57100 %

Streif Baulogistik GmbH,Essen, Germany

414

96100 %

99.83 % HOCHTIEF Polska Sp. z o.o.,Warsaw, Poland

901

332

100 % HOCHTIEF CZ a.s.,Prague, Czech Republic

1,697

327

49.00 % HOCHTIEF ConstructionQatar W.L.L., Qatar

11

104

100 % HOCHTIEF Global Trade GmbH,Essen, Germany

15

10

99.90 %OOO HOCHTIEF, Russia*

335

137*including operating loca-

tion HOCHTIEF Russia

As a service-driven construction company, HOCHTIEF

Construction AG pools the traditional core business

of the HOCHTIEF Group, thereby creating living space

in many places and in many different ways. A sub-

sidiary of HOCHTIEF Aktiengesellschaft, we have

for many years made a name for ourselves at inter-

national level as an expert in complex infrastructure

projects. The extremely high quality of our services

is upheld by our highly innovative and motivated

staff, enabling us to generate added value for our

clients.

We create something unique with every project, and every

day brings new challenges in the engineering and con-

struction process. Because each project is one of a kind,

the production process is tailored to its specifi c require-

ments. Our goal is to support clients from early on in the

planning phase, for example, with our partnership-based

PreFair business model. This enables us to optimize not

only the construction processes but also, where desired,

the entire life cycle of a property or infrastructure project.

With our subsidiaries, business units and offi ces, we have

a presence in both Western Europe and the emerging re-

gions of Eastern Europe. This proximity to clients gives our

partners competitive advantages locally.

Outside of Europe, we have established ourselves as ex-

perts in complex infrastructure and building construction

projects. We offer a full range of services at every link in

the construction value chain. We can do this thanks to our

close cooperation and networking with companies in other

HOCHTIEF divisions as well as with our subsidiary Streif

Baulogistik.

Management Report

Business Activities

Consolidated, with profi t/loss

transfer agreement

Consolidated

Work done (EUR million)

Employees (average over the

year)

Figures relating to work done and

employees in our reporting include

only fully consolidated companies

belonging to the HOCHTIEF

Group, and refer to the 2008 fi scal

year.

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Organization

HOCHTIEF Construction further streamlined its or-

ganizational structure in 2008. The new structure is

geared toward sustained growth in value creation,

enhanced process efficiency and minimization of

accepted risk. Following the changes, we are well

placed to master the challenges that lie ahead.

New management structure

HOCHTIEF Construction adopted a new management struc-

ture in the year under review. The new structure aims to

further simplify decision-making procedures and create

clear lines of responsibility. The Company is now headed

by a two-member Executive Board comprising the Chief

Executive Officer and Chief Financial Officer.

Management of the three divisions Building, Civil Europe

and Construction International is now looked after by Chief

Operating Officers who report directly to the Executive Board.

HOCHTIEF Construction benefits from the resulting short

decision lines between the Executive Board, heads of divi-

sion and business units, and project managers.

Building

We systematically pressed ahead during the year under

review with the strategic realignment initiated in 2007. No

more significant organizational changes were required in

2008 following the radical restructuring of the previous year.

There is no change in the number of business units in the

building segment.

The Building International unit created in 2007 has been

integrated into the Construction International division. The

decision to set up a separate unit in 2007 for the real estate

development business which we market under the FormArt

brand also advanced us toward our targets.

Civil Europe and Construction International

Our international activities, like our Infrastructure segment,

grew particularly strongly through the year under review

and delivered good results. HOCHTIEF Construction expects

that this trend will be maintained. We have consequently

converted the formerly combined unit into the two divisions

Civil Europe and Construction International. Civil Europe is

primarily responsible for the Company’s competence cen-

ters—for example, tunneling, port construction and power

plants—and our infrastructure companies in the UK and

Austria. Among the units in the Construction International

division is Major International Projects, which is in charge

of major projects both in Europe and elsewhere. The Con-

struction International division also heads our units in coun-

tries such as South Africa, Chile and Qatar. It additionally

presides over HOCHTIEF Construction’s subsidiaries in the

Czech Republic, Poland and Russia.

HOCHTIEF Consult

HOCHTIEF Consult is one of the largest engineering con-

sultants in Germany. Its staff can boast exceptional exper-

tise and many years’ experience in key construction seg-

ments, including turnkey building construction, civil and

structural engineering, transportation infrastructure and

construction management services. HOCHTIEF Consult

supports our sister companies first and foremost in bid

preparation. HOCHTIEF AirPort, for example, has brought in

its consultants on airport privatization bids.

To further enhance efficiency, the two competence centers

previously responsible for building construction have now

been combined to form HOCHTIEF Consult Building.

HOCHTIEF Consult has also realigned its structure in con-

struction management services, establishing an in-house

competence center in response to the growing importance

of this discipline to the commercial success of a project.

Streif Baulogistik

Our subsidiary Streif Baulogistik is one of the leading service

providers in the construction site infrastructure and logistics

segment. Streif Baulogistik serves both internal and exter-

nal clients with its integrated capability portfolio. The com-

pany forged ahead with its aggressive growth strategy in

Europe during the year under review.

Efficiency boost for service and control

departments

Fiscal 2008 saw HOCHTIEF Construction make further sys-

tematic progress with the Overhead project begun in the

prior year. Aims of the project include streamlining organi-

zational structures, boosting efficiency as well as identify-

ing and exploiting potential savings. Project activities also

involve the service and control departments—with visible

success. These departments have adopted measures de-

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HOCHTIEF Construction AG

Building Civil Europe Construction

International

Streif

Baulogistik

HOCHTIEF

Consult

Turnkey

Construction

Berlin

Frankfurt

Hamburg

Leipzig

Munich

North Rhine-

Westphalia

PPP

Shell Construc-

tion/Industrial

Construction

Berlin

Frankfurt

Hanover

North Rhine-

Westphalia

Residential

Construction

… North

… South

… West

After Sales

Service

FormArt

… Baden-

Württemberg

… Bavaria

… Berlin/

Brandenburg

… Hamburg

… Hanover

… Leipzig

… North Rhine-

Westphalia

… Rhine-Main

HOCHTIEF

Luxembourg

Holdings

Civil Engineering and

Marine Works


Tunneling

Energy Europe

Infrastructure Alps Region


Environmental

Transportation Projects

and Tunneling


Austria

HOCHTIEF (UK)

Construction

Holdings

Major International

Projects

HOCHTIEF CZ

HOCHTIEF Polska

HOCHTIEF Russia


Bulgaria


Romania

Durst-Bau

Holdings

Construction Machi-

nery and Equipment

Scaffolding and

Formwork

Technology and

Services

Holdings and Interna-

tional Business in:

Bulgaria, Denmark,

Austria, Poland,

Romania, Russia,

Ukraine

Construction

Management

Services

Building

IKS Energy

Infrastructure

Marine Works

Materials

CEO Communications, personnel, risk management, strategy

CFO Controlling, procurement, finance and accounting, IT strategy, project financing, legal affairs, auditing, tax, insurance

CEO Chief Executive Officer

CFO Chief Financial Officer

livering numerous improvements and savings. A few exam-

ples:

-

ment, lean construction and contract administration de-

partments have been brought together to create a new

risk management function. This makes it possible to

standardize processes and reap synergies.

former Market Development & Relations department.

-

curement function is now aligned to the strategic focus

of HOCHTIEF Construction and the streamlined organi-

zational lineup. At the same time, we have systematically

advanced the development of our lead buyer force*.

payable has been transferred from the business units to

the finance and accounting function at corporate head-

quarters.

in the past mostly looked after real estate development

projects. We have now integrated these activities into the

Controlling department. Finance consulting has been

integrated into the FormArt unit for improved customer

focus.

*For further information,

please see page 25.

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In June 2008, after 19

months of construc-

tion, we completed the

“SuperC” for the stu-

dents at RWTH Aachen

University. The new

service center, right

next to the venerable

main building, is im-

pressive in more than

just its architecture. Its

power supply is also

remarkable. The energy

concept, which uses a

2,510-meter-deep geo-

thermal well, was named

one of the Best LIFE

Environment Projects

2007/2008 by the EU

Directorate General

for the Environment.

The project was also

awarded a bronze cer-

tifi cate by the German

Sustainable Building

Council (DGNB).

13

Markets

Global economic environment and trends

The global financial crisis that was essentially triggered by

the collapsing US real estate market was the key factor

driving global economic trends in 2008. Banks’ confidence

in one another was severely damaged, resulting among

other things in a shortage of capital. A number of govern-

ments have now launched rescue packages comprising

guarantees and loans with the aim of stabilizing the inter-

national financial and economic system. In addition, eco-

nomic stimulus programs have been announced world-

wide. The financial crisis has now spread to the real

economy as well.

For construction and other industries, this means changes

affecting general refinancing requirements. In addition,

capital market conditions pose a particular challenge for

project development activities. It remains to be seen what

changes will occur, both in financing development projects

and on the investors market. The economic stimulus pro-

grams that have been announced are expected to benefit

the construction industry in particular. These programs

provide for much higher investment in infrastructure.

The global economy grew by 3.9 percent last year, around

one percentage point less than originally forecast for 2008.

Despite the government measures, it cannot be assumed

that the financial crisis is definitely coming to an end, mak-

ing any forecast for 2009 highly uncertain.

The market served by HOCHTIEF Construction

According to current forecasts from industry experts at Euro-

construct, European construction output declined by 2.5

percent during the year under review. This means that Eu-

rope’s construction industry did not perform as well as in

2007. However, most markets in Eastern Europe continued

to deliver strong rates of growth.

Western Europe

The upward trend in the European construction sector

slackened during the past fiscal year. Euroconstruct is

even forecasting a decline in construction output in 2009.

It believes that, after expanding by 2.2 percent in fiscal

year 2007, construction output in the Western European

countries covered by the market research institute* fell by

2.9 percent in the year under review. It is set to remain on a

downward trajectory in 2009, falling by 4.8 percent.

The trend varies from segment to segment. Building con-

struction, a segment served by HOCHTIEF Construction,

grew by 1.1 percent in 2008. However, Euroconstruct ex-

pects it to contract by four percent in the current fiscal

year and then by 0.8 percent in 2010, mainly because of

the lack of residential construction activity. Civil engineering

grew by 1.5 percent during the year under review. It is

expected to contract by 0.6 percent in 2009 and then grow

by 1.9 percent the year after.

In Austria, the stable upward trend seen in previous years

weakened in fiscal 2008. Growth reached 2.0 percent,

driven mainly by civil engineering which increased by 5.5

percent, and housing renovation which expanded by 2.0

percent. Non-residential construction, on the other hand,

stagnated. We have a firm foothold here through our sub-

sidiary Durst-Bau and through HOCHTIEF Construction

Austria.

*The Euroconstruct area

consists of Austria, Belgium,

Denmark, Finland, France,

Germany, Ireland, Italy, the

Netherlands, Norway, Por-

tugal, Spain, Sweden, Swit-

zerland and the United

Kingdom.

14

After increasing slightly in 2006 and 2007, construction

activity in the United Kingdom slowed down in 2008 with

the market shrinking by 1.1 percent during the period under

review. Euroconstruct is expecting an even sharper contrac-

tion of 3.2 percent in 2009, but a slight increase of 0.3 per-

cent the year after. However, non-residential construction

and civil engineering, the markets of particular relevance to

HOCHTIEF Construction, grew by 2.6 percent and 9.3 per-

cent respectively during the year under review. In 2010,

non-residential construction is expected to decline by 2.8

percent and civil engineering to advance by 5.8 percent.

In Germany, construction activity remained on an upward

trend, advancing by 3.1 percent year on year. Market re-

searchers are expecting a slight decline of 0.5 percent in

2009 and growth of 1.1 percent in 2010. Residential con-

struction expanded by 1.5 percent during the period under

review, while non-residential construction showed particu-

larly encouraging growth of 5.4 percent overall and espe-

cially in the segments for industrial, education, healthcare

and logistics properties. Civil engineering saw a sharp rise

of 4.2 percent due to increased investment in transporta-

tion infrastructure. In 2009, residential construction is set

to fall by one percent and non-residential construction is

expected to contract by 0.3 percent. Civil engineering, on

the other hand, is set to grow by 0.5 percent.

Eastern Europe

The countries of Eastern Europe were once again the drivers

of growth in the European construction industry, expand-

ing by 6.2 percent. HOCHTIEF Construction continued to

benefit greatly from this dynamic trend. Euroconstruct ex-

pects the stable upward trend to continue with growth of

4.8 percent in 2009 and 9.6 percent in 2010. Eastern Europe

is therefore decoupling from the more sluggish European

construction market as a whole.

The boom continues in Russia’s construction industry

and above all in the residential construction, infrastructure

and industrial construction segments. The strong upward

trend also boosted new orders at HOCHTIEF Russia. Resi-

dential construction expanded by 9.5 percent during the

year under review. As strong demand pushed up real estate

prices, however, the growth in residential construction slowed

slightly in 2008. Although market researchers are forecast-

ing a similar picture for 2009, the segment will nevertheless

continue to expand at a rapid pace. Civil engineering proved

to be a growth driver during the past fiscal year, expanding

by 12.3 percent. Non-residential construction showed dy-

namic growth of seven percent. In 2010, the construction

market as a whole is expected to expand by 8.5 percent.

Civil engineering is set to advance by 10.6 percent and

non-residential construction by 6.5 percent.

The construction industry in Poland expanded by 12.4

percent in 2008, thereby achieving the highest growth rate

in Europe again. The forecasts are for an increase of eight

percent in 2009 and 15.3 percent in 2010. This growth is

being driven primarily by civil engineering. The European

soccer championship due to take place in Poland in 2012

is also having a positive impact. In the major cities, real es-

tate prices continued to climb rapidly during the year under

review due to strong demand in the residential construc-

tion segment. Non-residential construction showed par-

ticularly healthy growth of 10.3 percent. HOCHTIEF Con-

struction made use of the favorable market conditions and

secured numerous attractive projects in 2008. Eurocon-

struct expects growth of 5.2 percent in the current fiscal

year and 3.9 percent in 2010.

Source: Euroconstruct

Germany

Europe

(excluding Germany)

The European construction market:

Regional percentage growth 2007 to 2009

4

3

2

1

0

–1

– 2

– 3

– 4

– 5

– 6

2008 2009E2007

1.8

2.63.1

0.5

–3.6

–5.1

15

In the Czech Republic, construction output increased by

2.2 percent in 2008. HOCHTIEF CZ also benefited from

this. Last year’s relatively slow pace of growth is set to

accelerate starting in 2009. For civil engineering, which

expanded by 4.9 percent in 2008, market researchers are

predicting an increase of 5.5 percent. In non-residential

construction, which contracted by 1.1 percent in 2008,

there will also be a sharper increase of two percent.

Segments

The year under review saw the continuation of the extremely

strong trend in the energy sector, with growth in renew-

ables especially strong. This segment is being buoyed by

EU directives prompting almost all European countries to

continuously increase the proportion of electricity they gen-

erate from environmentally sustainable and resource-sav-

ing energy sources. Natural gas is becoming increasingly

attractive, fueling interest in gas turbine, steam turbine and

biomass power plants. For the period to 2020, planned in-

vestment in new power plants across Europe totals up to

EUR 500 billion. These primarily include gas-fired facilities,

followed by coal, nuclear and lignite plants. Demand is also

expected to increase for hydro-geothermal power systems.

HOCHTIEF is well placed to cater to this trend. In the year

under review, we started construction of the second privately

financed geothermal plant.*

Investment in the transport segment increased across Ger-

many in 2008. This included a 4.6 percent rise in spending

on the expansion of the rail network, which for years has

been at a low level. Germany’s federal transport infrastruc-

ture master plan provides for EUR 12.5 billion in expendi-

ture on rail network maintenance between 2006 and 2010,

making this a potential source of attractive contracts for

HOCHTIEF Construction. Funds for roadbuilding increased

by 5.3 percent in the year under review due to the takings

from the country’s truck toll. Some transportation projects

are being financed, built and operated on a public-private

partnership (PPP) basis. Together with other HOCHTIEF

companies, HOCHTIEF Construction has been operating

successfully in these segments for years. The chances of

securing further projects are good, as the German govern-

ment intends to sharply increase the proportion of projects

performed on a PPP basis.

Globalization and the associated ongoing rise in goods

traffic continued to be the main forces driving port con-

struction in fiscal year 2008. Ports also need to be ex-

panded due to shifting logistics flows and increasingly

massive container ships. The EU’s eastern enlargement

unlocked further growth potential which our company is

already exploiting. Examples include the Gdansk container

terminal, the first turnkey port project in Poland.

The refurbishment and upgrading segment grew by a

marginal 0.5 percent in the period under review. EUR 662

billion was invested in revitalizing or refurbishing properties

in Europe. Although Euroconstruct anticipates a decline of

1.2 percent in the current fiscal year, the segment is then

expected to start growing again in 2010, by 0.6 percent.


please see page 23.

16

“alpha ventus” north of

the island of Borkum is

the fi rst German wind

farm to be set up off-

shore. The work out at

sea is done with the

help of our “Odin” jack-

up platform. The plat-

form holds cranes and

other equipment used

to erect the construc-

tion units for the trans-

former station.

17

Orders and Work Done

New orders

As anticipated, new orders increased in the year under

review. As of December 31, 2008, they totaled EUR 1,993

million compared with EUR 1,820 million a year earlier. The

change is due firstly to the reorganization of the building

construction business in Germany and the systematic se-

lection of orders following that reorganization. Secondly,

new orders were positively impacted by HOCHTIEF Con-

struction’s increasingly international focus.

As a result, new orders in Germany fell by 18.6 percent to

EUR 1,207 million. In the international business, however,

new orders more than doubled year on year, rising from

EUR 338 million to EUR 786 million.

The negotiations conducted together with our sister com-

pany HOCHTIEF PPP Solutions on the acquisition of high-

volume toll highway projects in Greece resulted in a posi-

tive outcome and contributed to the improvement in new

orders.

Our subsidiaries and associates, which are mainly active

outside Germany, generated new orders of around EUR

1.3 billion in the year under review. The strategy aimed at

tapping selected international projects and markets started

to bear fruit in 2008. In the Qatari capital Doha, for exam-

ple, we won the contract to start the development of an

8.6-kilometer commercial avenue.

Work done

At EUR 2,020 million, work done in fiscal 2008 was slightly

up on the prior-year figure of EUR 1,946 million.

At EUR 1,499 million, work done in Germany was on a par

with 2007. This was due mainly to building construction

projects that we had secured in previous years and carried

out in 2008. Work done on civil infrastructure projects also

rose.

The dynamic growth in international projects running for

periods of more than one year pushed up the international

share of work done from EUR 447 million to EUR 521 mil-

lion.

Order backlog

The flow of new orders and work done resulted in an order

backlog on a par with fiscal year 2007 at EUR 2,423 million.

Like new orders, the order backlog also reflects the suc-

cess of the strategic measures that have been introduced.

The order backlog on international projects increased by

EUR 265 million to EUR 1,178 million, while in Germany it

fell by EUR 292 million.

The forward order book contains around 15 months’ work,

providing a nice cushion for the coming year.

International

Germany

Orders and work done (EUR million)

New orders + 9.5% Order backlog – 1.1%

1,820

2,450

338

1,482

913

1,537

2008 2007 2008 2007

Work done + 3.8%

1,946

447

1,499

2008 2007

1,993

786

1,207

2,020

521

1,499

2,423

1,178

1,245

18Photo: Vägverket

In February 2008,


signed planning con-

tracts and subcontracts

in Qatar for the con-

struction of an 8.6-kilo-

meter long shopping,

offi ce and residential

complex. We began ad-

vising the client, Barwa

Real Estate Company,

on the planning of this

major project at a very

early stage under the

PreFair business model.

The main contract for

Barwa Commercial

Avenue in Doha is set

to be signed in spring

2009.

19

Strategy

In the reporting year, HOCHTIEF Construction contin-

ued with the measures implemented in fiscal 2007

to strategically realign the company with market

requirements. The main aim was to make building

construction in Germany profitable again for the

long term. The first results of the initiatives have

been positive. enbedigen

Complex market conditions

The moderate growth trend on the German building con-

struction market continued in fiscal 2008. The prices of

many materials and numerous subcontractors also contin-

ued to rise. We reacted to these difficulties with more or-

ganizational changes to purchasing activities, among other

things.* The tough situation on the home market was offset

for HOCHTIEF Construction by very high growth in non-

European building construction and European civil engi-

neering/infrastructure construction.

New management structure implemented

HOCHTIEF Construction implemented a number of meas-

ures in response to the economic situation in Germany

and the positive international development. For example, the

company split up the former Civil Europe division into the

Civil Europe and Construction International divisions. At the

same time, HOCHTIEF Construction restructured its man-

agement. When Achmed Kadded left the Executive Board,

his position was not refilled. Instead, there are now three

division heads who manage the operating business of the

Building, Civil Europe and Construction International divi-

sions—close to the Executive Board, the teams and the

business units. They report directly to the Executive Board.

The two Executive Board members Henner Mahlstedt and

Heiner Helbig concentrate on controlling, strategically man-

aging and developing the company, as well as forging

ahead with networking in the HOCHTIEF Group.

Strategic pricing introduced

The national and international construction market remains

highly competitive. HOCHTIEF Construction therefore only

gets involved in market segments where there is a good

balance between opportunities and risks. Furthermore, the

company aims to achieve a preference position in these

segments, which include, for example, renewable energies

and sustainable construction.

With exceptional expertise, innovative technologies and

tailored service, HOCHTIEF Construction creates quantifi-

able added value for its clients. And clients pay in line with

the additional benefits they receive. For this reason, service

and solution packages of varying scope are now offered at

different prices—as in other comparable industries, like

plant engineering.

The minimum return on new projects was raised substan-

tially. The final amount depends on the competitive environ-

ment. For non-European projects, HOCHTIEF Construction

is aiming for even higher margins. The company expects

this more active market and client-focused pricing policy to

generate noticeably higher returns on all projects in the

medium term.

Risk management realigned

The strict focus of business policy on returns is also re-

flected in risk management, which has been reorganized.

Changes include the following:

-

ing lean construction, contract and insurance manage-

ment are pooled together in the risk management depart-

ment. This creates synergies and harmonizes processes.


please see page 25.

20

-

ect teams in the operational units.

-

est category, independent risk auditors assist the project

team from tender preparation, contract award and site

installation through to handover to the client. Smaller, less

complex projects are managed by the business units or

the relevant division.

-

ects. They provide for uniform project organization and

make sure that the risk tools are used.

insurance has already proven itself at our US sister com-

pany Turner. HOCHTIEF Insurance offers it to all Group

units.

Building division realigned

In the reporting year, HOCHTIEF Construction continued

to rigorously pursue the measures launched in fiscal 2007

to make the building construction segment in Germany

profitable in the long term. The first successes confirm the

efficiency of these initiatives.

Earnings quality in turnkey construction

substantially improved

The strategy of concentrating on the partnership-based

PreFair business model, stepping up risk management and

increasing return-on-investment targets is bearing fruit.

The selective tendering policy, which significantly reduced

the order intake in German building construction in the

reporting year as planned, had a positive impact on earn-

ings. For this reason, we believe HOCHTIEF Construction’s

turnkey construction has a secure future.

Shell and Residential Construction very well

positioned

The strategy adopted in fiscal 2007 of operating independ-

ent shell construction and residential construction units

with flat hierarchies and structures modeled on those of

mid-size enterprises is paying off. These effective units can

manage external shell construction companies better, bundle

procurement volumes more efficiently, and thus offer lower

prices. The new structure also means that Shell Construc-

tion is well prepared for a new market trend. Namely, that

more and more clients are beginning to award major con-

tracts on a lot-by-lot basis.

Real estate development activities increased further

With the FormArt brand, HOCHTIEF Construction is one of

the leading residential real estate developers in Germany.

The independent segment focuses on high-quality residen-

tial real estate in a challenging environment. The real estate

development arms of foreign subsidiaries, such as HOCHTIEF

CZ and HOCHTIEF Polska, are developing positively.

Internal services restructured

In fiscal 2008, HOCHTIEF Construction substantially reduced

costs in its service and control departments and created

more streamlined structures. As part of these measures,

we combined several departments and put a stop on all

projects not directly necessary for business success. Ad-

ditionally, processes were optimized and capacities adjusted

to the lower building construction revenues. The benefit for

HOCHTIEF Construction is twofold: The restructuring of

service and control departments not only influenced earn-

ings for the 2008 fiscal year, it will also have a positive

effect over the coming years.

HOCHTIEF Consult aligned more efficiently

HOCHTIEF Consult is one of the largest, best known engi-

neering consultants in Germany. In excess of 500 employ-

ees focus mainly on planning and optimizing HOCHTIEF’s

own building construction and infrastructure projects. In

addition, HOCHTIEF Consult supports external clients. The

power plant planners, for example, enjoy an excellent repu-

tation internationally. Consequently, their skills are in high

demand.

21

In fiscal 2008, HOCHTIEF Construction also systematically

streamlined the structures of HOCHTIEF Consult. For

instance, the company placed the building construction

competence centers in Essen and Frankfurt under single

management. In addition, indirect costs were significantly

reduced.

HOCHTIEF Construction believes that demand is contin u-

ously growing for construction management services. In

response to this, the company established an in-house

competence center for these tasks in the reporting year.

HOCHTIEF Consult is also extremely well positioned to

continue its dynamic growth in the future.

Quality is highest priority

Despite its focus on cost efficiency, HOCHTIEF Construc-

tion considers itself to be a quality provider. Tailored con-

sultancy services in the planning phase and the close part-

nership with highly qualified subcontractors ensure clients

superior quality and exceptional service.

Attractive growth potential

Demand for renewable energies will increase by leaps and

bounds in the coming years. At the same time, demand for

sustainable construction is on the rise. HOCHTIEF identi-

fied these trends at an early stage and is responding with a

wide range of services. Three examples:

Success in the market for offshore wind farms

HOCHTIEF Construction has been established in the market

for offshore wind farms for several years with the CEM

(Civil Engineering and Marine Works) business unit. Exper-

tise in hydro construction and HOCHTIEF’s own Odin jack-up

platform create a basis for building foundations for major

offshore wind farms. A second jack-up platform is currently

under construction and will be available for use from 2010.

It will then be possible to anchor foundations at even greater

depths. There are very few platforms in Europe with similar

potential. Experts reckon there is a potential contract vol-

ume going into the billions over the coming years.

Now that energy providers are focusing increasingly on

their core business, HOCHTIEF Construction is joining with

other HOCHTIEF entities to develop concepts and explore

ways of extending the value chain for offshore wind farms

to HOCHTIEF’s advantage.

Shared activities in the geothermal energy segment

Together with other Group companies, HOCHTIEF Construc-

tion is moving into another emerging market: geothermal

energy. The investor HOCHTIEF PPP Solutions secured

numerous exploration licenses in a joint venture. Our En-

ergy Europe business unit erects the power plants. The sub-

sidiary Streif Baulogistik performs the drilling work with its

own equipment. This kind of equipment is highly sought

after on the European market. The company will therefore

also offer the technology to external clients and expects to

generate high margins from the business.

Market leader in sustainable construction

The industry considers HOCHTIEF to be a trendsetter in

grow rapidly over the coming years, due among other things

to increased legal regulation, greater state support, rising

energy costs and an increasing ecological awareness among

investors and real estate users. HOCHTIEF is therefore ac-

tively involved in the German Sustainable Building Council

(DGNB) and has already won a whole host of prizes for

Award 2008 for the construction of the WestendDuo in

Frankfurt.

The declared goal is to further consolidate and extend

-

ment. With its expertise and many years’ experience, the

company is well positioned to attract new target groups in

this segment.

22Photo: S’pace Architects

Construction work

began on the Newhaven

energy recovery facility

in January 2008. Not

only does this facility

meet the highest eco-

logical standards and

use innovative con-

struction technology,

its architecture is also

remarkable. What’s

more, the entire con-

struction planning was

done using a 3D com-

puter model.

23

Research and Development

Continuous research and development (R&D) is a

key factor in HOCHTIEF Construction’s success. We

aim to craft compelling, trailblazing innovations with

the power to inspire our clients. We developed and

deployed a range of innovative new technologies and

process improvements in 2008, both independently

and in joint endeavors with other HOCHTIEF com-

panies. In doing so, we secured ourselves an early

bridgehead in new growth markets.

HOCHTIEF Construction’s R&D activities in 2008 centered

on the areas highlighted below.

inHaus2*

November 2008 saw the opening of inHaus2. This is a

research project in which HOCHTIEF companies and vari-

ous partners are working to develop smart technologies

for deployment in buildings—for example, a self-compact-

ing concrete trialed by HOCHTIEF Construction. With the

building now complete, attention has shifted to testing new

ways of improving and simplifying facility management,

among other things with innovative building information

and management systems.

Green energy recovery facility

HOCHTIEF Construction and a partner are building an

energy recovery facility at Newhaven in the south of Eng-

land that shows the way forward both in technology and

architectural design. The incinerator features a steam tur-

bine generator and a fl ue gas scrubbing system. The two

incinerator lines have a combined capacity of 210,000 metric

tons of waste a year. Part of the facility projecting up to

some 16 meters into the ground was put into place by

HOCHTIEF Construction using a special engineering tech-

nique. Benefi ts included a six-month shorter construction

period and minimum impact on groundwater hydrology.

Smart tunneling technology

We are well placed to capitalize on the positive trend in

tunnel building. HOCHTIEF Construction made use of a

further technique from in-house R&D during 2008 in work

on the Neuer Schlüchterner Tunnel. The hydraulic TBM

launching rig removes the need for a steel structure to guide

a tunnel-boring machine into the ground. Instead, the TBM

jacks itself in under its own power. This yields considerable

cost and time savings. HOCHTIEF Construction has since

deployed the launching rig on a number of further projects.

Geothermal energy

Together with other companies in our Group, HOCHTIEF

Construction also serves the growing market for geothermal

energy. Work began in 2008 on building a new geothermal

power plant in Kirchstockach—the second HOCHTIEF proj-

ect of this kind in Bavaria. We are able to draw on experi-

ence gained on building our fi rst geothermal energy plant

in Dürrnhaar. The team is supplemented by subsidiary Streif

Baulogistik, which provides the equipment for the drilling

operations.

Offshore wind energy**

We further stepped up our involvement in the expanding

offshore wind energy market in 2008. Contracts in this

segment relate to designing, building and anchoring the

concrete components for wind turbines. Performing this

work at offshore depths calls for great technological ex-

pertise. At Sweden’s Lillgrund offshore wind farm in 2008,

for example, we produced and anchored to the sea fl oor

49 bases each weighing some 1,450 metric tons.

Also in 2008, HOCHTIEF Construction and a number of

partners launched a pilot project for construction of our fi rst

open-sea wind farm fully exposed to offshore conditions.

kilometers from the island of Borkum aim to gather basic

experience in building and operating an offshore wind farm.

The project includes an offshore transformer station and a

total of twelve wind turbines. Research and development

outcomes are to be used in the design, construction and

operation of future offshore facilities.


please see www.inhaus-

zentrum.de/site_en.

**For further information,

please see www.hochtief.

com/sustainability.

24

Employees

Highly motivated and exceptionally well qualified

staff are the very foundation of a growth-oriented

company. They are the basis for extremely high

qual ity and satisfied clients. For this reason, we

continued to enhance our personnel activities in

the reporting period.

Steady rise in number of employees

The number of employees at HOCHTIEF Construction in-

cluding its foreign and project companies increased from

9,011 to almost 10,000 in 2008. This is due to the expan-

sion of international business, which more than offset the

effects of the restructuring program in the building segment.

In the reporting year, 291 young people underwent profes-

sional training in our company, making it the largest train-

ing enterprise in the Group once again in 2008.

Finding and retaining the best

In fiscal 2008, we rigorously continued our search for tal-

ented skilled and managerial staff. We expanded, for in-

stance, the HOCHTIEF Academy program. Eleven students

-

programs offered by the Group’s in-house Academy are

also available to external students.

in 2007 proved successful again in the reporting year and

resulted in new appointments of qualified, committed em-

ployees.

-

know the full range of areas in which HOCHTIEF Construc-

tion works and get an idea of where our company might

take them. Through participation in university fairs, a pro-

gram to promote PhDs and an intern retention program,

we are growing increasingly successful in establishing early

ties with young talent.

Continuous personnel development

The commitment, expertise and interpersonal skills of em-

ployees are crucial to the company’s success. For this rea-

son, we work to constantly improve our personnel devel-

opment. HOCHTIEF Construction is not the only beneficiary.

Our employees have the opportunity to continuously hone

their skills and take on challenging new tasks. We have

also enhanced the service we offer our employees on inter-

national assignments.

Ideas management system implemented

In the 2008 fiscal year, we introduced Ideas Management

to help us harness the creativity and innovative power of

our employees more efficiently. We received a flood of sug-

gestions in the reporting year, many of which will lead to

considerable sustained cost savings. For example, the modi-

fied agitator control on a separation facility at the Jenbach

tunnel will enable annual energy costs to be cut by more

than EUR 100,000.

Numerous employee motivation activities

For HOCHTIEF Construction, employee motivation means

more than offering individual development programs and

creating a positive corporate culture. We believe that a family-

friendly HR policy also encourages employees to perform

especially well. In addition, the safety and environmental

management regime developed by HOCHTIEF further re-

duced the work accident rate in the fiscal year. At the 2008

healthcare market in Essen, we gave employees the oppor-

tunity for the third time to learn about what they can do to

prevent illness.

A word of thanks to employees and staff

representatives

We know that we can only sustain our business success

with a team of employees who are totally committed to the

company—in good times and times of economic difficulty.

Our employees have proven once again that they are loyal

to HOCHTIEF Construction and that they are willing to go

that extra mile. It is thanks to this that we can look to the

future with optimism.

The Executive Board would like to extend its warmest

thanks to all employees and staff representatives for their

dedication and exemplary conduct.

25

Procurement

In the year under review, HOCHTIEF Construction

AG’s expenditure on materials and subcontractor

services accounted for more than 80 percent of total

operating performance. This high percentage illus-

trates the close link between business success and

efficient procurement.

In the year under review, we pushed successfully on with

the reorganization of our purchasing activities initiated

back in 2006.

Lead buyer organization and supplier park

expanded

Lead buyers are responsible for business-critical and

usually high-volume product categories, such as facades,

technical building installations, elevators, concrete and

steel. They coordinate their product category and combine

orders so as to obtain better terms. They also negotiate

prices, conclude framework agreements and monitor mar-

ket and price trends. Their in-depth market knowledge

makes an important contribution to HOCHTIEF Construc-

-

ables us to promptly spot and therefore quickly respond to

changes in the price of materials and trade services.

We continued to extend the lead buyer organization during

fiscal year 2008 and now have buyers in place for all mate-

rials procurement. In addition, the lead buyers expanded

the supplier park during the period under review, as a result

of which suitable subcontractors can be promptly incorpo-

rated into procurement processes. The long-term strategic

partnerships improve risk management and reduce costs.

Global direct sourcing unlocks additional potential

for savings

Through the two trading companies HOCHTIEF Global

Trade and HOCHTIEF Procurement Asia, we are increas-

ing our procurement of favorably priced yet high-quality

materials direct from the manufacturers. We make these

supplies available to subcontractors. Direct sourcing elimi-

nates the price mark-ups charged by wholesalers and

subcontractors and also reduces the risk of bottlenecks in

the supply of materials because we are able to order larger

quantities early on. Two examples from fiscal year 2008:

By purchasing natural stone for a building construction

project in Hamburg directly in China, HOCHTIEF Procure-

ment Asia made a saving of 30 percent. By working closely

together with our sister company Turner Logistics, which

specializes in the procurement of medical and research

equipment, we were able to purchase highly specialized

equipment for a project in northern Germany directly in the

USA—from the world’s only manufacturer of the neces-

sary, highly innovative technology. This yielded a saving of

around 15 percent and a substantial improvement in con-

tract terms over traditional procurement.

Further processes launched with the aim of making

procurement more efficient

In the year under review, we launched additional initiatives

aimed at making HOCHTIEF Construction procurement

even more cost-effective. For example, we are making in-

tensive use of an Internet-based tendering platform. New

suppliers and subcontractors prequalify via a similarly Web-

based supplier portal. By assessing suppliers in a mean-

ingful way, we are able to integrate their expertise and

capabilities into our processes to optimum effect. These

activities were already starting to bear fruit in the year

under review.

Effective contract management

Since the year under review, framework agreements with

suppliers and subcontractors have been rigorously expanded

and held centrally. Agreements are always negotiated by

the relevant lead buyer, meaning we enable local purchasers

throughout the company to obtain the best terms. Our

suppliers benefit from easy access to HOCHTIEF Construc-

tion’s procurement organization. During the period under

review, the use of framework agreements averaged more

than 65 percent, resulting in a sharp rise in sales-based

reimbursements.

26

Financial Review

HOCHTIEF Construction AG recorded a loss of EUR 102

million in fiscal 2008. The Company’s parent, HOCHTIEF

Aktiengesellschaft, made good the loss under the existing

profit/loss transfer agreement.

This marks a substantial improvement on the prior-year

loss of EUR 197 million. Earnings performance nonethe-

less fell short of our expectations.

New orders show a positive trend in earnings quality. Due

to their duration and application of the prudence principle,

however, these contracts have not yet fed through to

stronger earnings growth.

Unbudgeted follow-up costs were incurred on ongoing

contracts in the order backlog from past years. These

costs arose due to scheduling problems and subcontrac-

tors working close to capacity.

In the building construction business especially, our adopted

strategic and operational realignment has paved the way

for a further improvement and stabilization of earnings.

The measures once again led to restructuring expenses

that impacted on earnings.

The Company’s balance sheet total is down on the prior

year, mainly due to the settlement of receivables and a

reduction in provisions.

With available funds* of EUR 704 million as of December

31, 2008 (2007: EUR 678 million), HOCHTIEF Construction

continues to have ample liquidity. This is once again re-

flected in a strong figure for net interest income.

While a drop in value brought about by the financial crisis

necessitated a writedown on holdings of marketable secu-

rities, income from participating interests contributed posi-

tively to earnings.

*Available funds: HOCHTIEF

Aktiengesellschaft cash

pooling account, other mar-

ketable securities and cash

and cash equivalents less

amounts due to banks

27

Risk Report

HOCHTIEF Construction has a comprehensive risk man-

agement system. We refined and improved this system on

an ongoing basis during 2008. Our company is also inte-

grated into the risk management system of the HOCHTIEF

Group. Risk inventories and forecasts are compiled locally

three times a year and the resulting information is aggre-

gated to Group level. This approach involves managers at

all tiers of the corporate hierarchy.

Under the reorganization, networking of the expertise

available in the company was further improved. Technical

control, contract and insurance management as well as

lean construction were brought together under joint man-

agement. In combination with the operational units, they

ensure a uniform, integrated risk philosophy.

Project support and control are based on classification

according to risk aspects. The Group’s internal audit func-

tion regularly reviews national and international projects for

technical, commercial and legal risks.

The Contract Review Committee remains a key element of

our risk management system. The Committee consists of

the HOCHTIEF Construction Executive Board and experi-

enced HOCHTIEF Construction managers.

We address warranty risks from the construction business

by requiring subcontractors to post surety or guarantees

and, where applicable, by entering into service contracts

and setting up regular monitoring. In 2008, we also launched

liability risks and claims arising from the insolvency risk of

subcontractors. Where HOCHTIEF is required to cover a

certain contingent of risk itself—in other words, where use

is made of captive insurance arrangements—the Group’s

exposure is kept in check by enforcing appropriately scaled

liability limits.

The risk minimization and risk control systems further im-

proved in 2008 are taking effect. The main measures include:

times when pursuing new business;

documents. The aim is to ensure a fair spread of risks

and opportunities between HOCHTIEF Construction and

clients;

risk profile;

-

ously obtaining binding offers for key trades from sub-

contractors;

-

pany to react to market influences on long-term projects;

performance

Thanks to the networked organization of the operational

units, project-based expertise is combined with local

requirements.

The realignment of individual operational units and the

reorganization of overheads also produced clear improve-

ments from a risk management perspective.

28

In Heidelberg’s former

Schlosshotel, where

Empress “Sissi” used

to stay, we are design-

ing, fi nancing and build-

ing exclusive luxury

condominiums. Two

new buildings are being

carefully integrated into

the project. Buyers will

get a unique view out

over the city into the

bargain.

29

Projects of HOCHTIEF Construction AG, its

Subsidiaries and Business Units

HOCHTIEF Construction AG focuses HOCHTIEF’s

130-plus years’ experience in the traditional core

business of construction. As a service-oriented

construction company, we are mainly engaged in

building construction, civil engineering, structural

engineering and airport construction. The Construc-

tion International division concentrates on con struc-

tion management for major international proj ects.

At the same time, HOCHTIEF Construction further

expanded the product market segments of real es-

tate development and residential properties in fiscal

year 2008.

Cross-business cooperation creates synergies and

makes it possible for us to realize unique projects

which set us apart from the competition. Partnership

and cooperation between the competence centers—

focused on the market segments—and the business

units and subsidiaries ensure quality, efficiency and

innovation. This tight-knit network enables HOCHTIEF

Construction to offer clients a full range of services

at every link in the construction value chain.

The following project highlights document the broad

capabilities of HOCHTIEF Construction.


Major project

Elbe Philharmonic Hall, Hamburg

Construction work on the Elbe Philharmonic Hall continued

in the hanseatic city’s new Hafencity urban development

zone. HOCHTIEF Construction is building the future city land-

mark on top of a 37-meter-tall former quay warehouse. This

poses an exceptional challenge for HOCHTIEF Construc-

tion’s engineers due to the extraordinarily high architectural

requirements of the project. Alongside the three concert

halls, the largest of which will be among the ten best in the

world, the complex includes an approximately 250-room

luxury hotel and a parking garage with space for more than

500 vehicles. In addition, HOCHTIEF Construction is build-

ing more than 40 exclusive freehold apartments as a real

estate developer and will also market them. The project

valued at EUR 394 million is scheduled to be completed in

fall 2011. HOCHTIEF Facility Management will handle the

building’s management and operate the complex.

In the year under review, this major project became a topic

of discussion at times due to the costs involved. A proposal

we prepared ultimately led to an agreement. The terms in-

clude a longer construction period and a significant increase

in the contract value. Moreover, the contractual project speci-

fications were defined precisely with all participants and an

exact schedule for planning and construction was approved.

The planning for this project is under the purview of a gen-

eral planner commissioned by the client. Similarly to our

partnership-based PreFair business model, joint precon-

struction teams will coordinate the project and all interfaces

in the future. Thanks to this approach, HOCHTIEF Con-

struction’s contract and risk management policies led to a

successful conclusion to these negotiations.

Real estate development/FormArt

Luxury apartments, Starnberg

exclusive multi-unit residential buildings with 41 apartments

and an underground parking garage by September 2010.

Our company is planning the residential complex which

involves a total investment of EUR 16.3 million, to be envi-

ronmentally sustainable. For example, heating will be pro-

vided to the buildings by a central wood pellet heating

system fueled exclusively with renewable materials. More-

over, we will also renaturalize a stream channel on the

property as part of our construction activities.

Deluxe freehold apartments, Heidelberg

HOCHTIEF Construction is building a total of 37 freehold

apartments and an underground parking garage in and

around the former Schlosshotel in Heidelberg. Twenty-three

of the residential units are being constructed in the former

Schlosshotel building, and 14 of the apartments will be lo-

cated in two new buildings. The interiors will have features

such as solid wood parquet flooring, natural stone tiles and

designer bathroom fixtures. The residential facility valued

at EUR 26.4 million is expected to be ready for occupancy

in summer 2010.

30

High-quality freehold apartments, Essen-Kettwig

60 and 255 square meters each in a former textile factory

that is a designated heritage building. The apartments are

slated for completion in spring 2010, and the project is

worth around EUR 16 million.

Townhouses, Hanover

HOCHTIEF Construction is developing a total of 16 high-end

townhouses in Hanover’s Kirchrode district. The first con-

-

ing nine townhouses has already been completed. The

second phase of construction will begin soon. The build-

ings, energy-generating houses, are a further develop-

ment of the low-energy house and consume approximately

60 percent less heating energy than conventional houses.

The investment in the project totals EUR 5.4 million.

City living, Freising

In the year under review, our company built the Esplanade

residential complex in this Bavarian university town, includ-

ing 38 residential units, four multi-level apartments and ten

penthouses − each with top-quality facilities and exclusive

design elements. The project is worth EUR 14.4 million.

Innovative office building, Cologne

We developed, planned and built the new office for soft-

ware giant Microsoft in the Rheinauhafen former port dis-

The utilization concept and forward-looking architecture

make the property another highlight on the former port

grounds.

Office and commercial buildings

Weser Tower, Bremen

By the end of 2009, the Weser Tower will be Bremen’s high-

est office building. The hanseatic city’s new landmark was

designed by star architect Helmut Jahn and will be 82

meters high with 22 stories. The project is worth around

EUR 24.7 million. After completion, 800 people will work

in the Weser Tower.

Looper, Duisburg

In the redesigned Duisburg Inner Harbor, we are con-

structing the Looper building complex for a regular client.

Construction work on the five-story office building is ex-

pected to be finished in April 2009. The oval building com-

plex has a gross floor area of nearly 16,000 square meters.

HOCHTIEF Consult is responsible for coordinating plan-

ning for this project.

Q-Cells, Leipzig

HOCHTIEF Construction has been building a new corpo-

rate headquarters for Q-Cells, one of the top producers of

solar cells, since December 2006. The completion of the

third module meant that the construction work was fin-

ished at the end of the year under review. The project was

valued at a total of EUR 13.2 million. Both the client and

HOCHTIEF Construction benefited equally from the savings

achieved due to the fact that they had agreed on a GMP

model, which stipulates a guaranteed maximum price.

Hafenspitze, Düsseldorf

The Hafenspitze complex will provide the Media Harbor

district in Düsseldorf, North Rhine-Westphalia’s capital, with

a new architectural highlight. The project comprises two

high-rise towers with 19 and 17 stories respectively, along

with a low-rise building. HOCHTIEF Construction will com-

plete the shell construction by February 2010. Our compa-

ny’s share of the contract is worth around EUR 37 million.

The Hyatt Group will open a five-star hotel in one of the

high-rises.

Commercial real estate

Airport Plaza, Hamburg

Airport Plaza, which opened its doors in December 2008,

is the heart of Hamburg Airport operated by HOCHTIEF

AirPort. Once through the main security area, passengers

can enjoy an extensive range of retail and food outlets cover-

ing approximately 7,000 square meters. These include 40

high-end stores. As a member of a joint venture, HOCHTIEF

Construction completed the core and shell work, which

was valued at roughly EUR 18 million. The technologies to

cut CO2 emissions used in the project combine ecology

and economy. For example, Airport Plaza takes advantage

of geothermal energy: The airport’s own combined heat

and power station generates 40 percent of its electricity

and 70 percent of its heating energy. Rainwater storage

tanks provide the sanitary facilities with filtered water via a

pump system.

Industrial buildings

Chemical plant, Frankfurt am Main

In the year under review, we were awarded the first purely

construction management contract for HOCHTIEF’s Ger-

man building construction operations—the construction of

a new plant for plastics manufacturer Ticona. As construc-

tion manager, we manage the construction budget, among

other things. In the planning phase, HOCHTIEF Consult

was also involved in the project. In addition, Streif Bau-

logistik, for instance, is providing complete electrical

equipment for the site along with ten cranes. The new

chemical plant is scheduled to be completed in 2011.

31

Wastewater treatment plants:

Rousse, Bulgaria

As general contractor, we began construction of a waste-

water treatment plant for this city on the Danube River in

early August 2008. Scheduled for completion in early 2010,

the plant is expected to process wastewater from the

entire region with 240,000 inhabitants. It is valued at nearly

EUR 23 million.

Ports:

Port expansion, Hamburg

In the year under review, HOCHTIEF Construction worked

on numerous projects to expand the capacity of the port

of Hamburg. These include the expansion of Burchard Quay

container terminal and Predöhl Quay.

Roads:

Northern bypass in Stockholm (Sweden)

We will work with a partner to construct two sections of

Stockholm’s northern bypass Norra Länken by 2012.**

HOCHTIEF Construction will build two double-lane

1.2- kilometer tunnels and a 2.5-kilometer road section.

The contract is valued at EUR 132 million.

Special-purpose properties

Research facility, Hamburg

At the end of 2008, we were awarded the largest sub-

contract for construction of the European X-ray laser facility

XFEL. As the leader of a joint venture, HOCHTIEF Construc-

tion will build almost all of the tunnel and shaft structures

for the research facility along with a partner. The value of

the contract is EUR 206 million, and HOCHTIEF’s share

amounts to 50 percent.

Eppendorf university hospital, Hamburg

Between fall 2005 and the end of 2008, the hanseatic city

saw the construction of Europe’s most modern hospital,

the new Eppendorf university hospital. The hospital com-

plex offers 86,000 square meters of usable space with

3,500 rooms and 746 beds as well as 18 operating rooms.

HOCHTIEF Construction completed the contract worth

EUR 140 million as the general contractor. Up to 1,500

construction workers were at the site each day, ensuring

handover of the project 19 days before the planned deadline.

Animal research institute, Riems Island near

Greifswald

As a member of a joint venture, we are involved in the ex-

pansion of the Friedrich Loeffler Institute on the island of

Riems, currently the German federal government’s largest

building construction project in eastern Germany. The

animal research institute is receiving new high-security labo-

ratories and stables. The total value of the contract is

** For further information,

please see page 40.

Public-private partnerships (PPP)

Public buildings: Fürst Wrede barracks, Munich

In March 2008, HOCHTIEF PPP Solutions was awarded

the contract for the first PPP building construction project

involving the German federal government. The company

will plan, finance, renovate, build and operate the Fürst

Wrede barracks for a contract term of 20 years. HOCHTIEF

Construction is responsible for the construction work. Our

company’s share of the project is worth EUR 45 million.

HOCHTIEF Facility Management is responsible for aspects

including maintenance of the buildings, technical systems

and grounds.

Toll roads: Maliakos-Kleidi, Greece

On behalf of an operator consortium led by HOCHTIEF

PPP Solutions, HOCHTIEF Construction is participating in

a joint venture and building a 25-kilometer-long toll road

with three double-tube tunnels, 26 bridges and ten rest

stops. A further 205 kilometers of road will be widened

and refurbished. Construction work started in March 2008

and is scheduled to end in 2012. The concession com-

pany will operate the highway and collect tolls for 30 years.

Infrastructure projects

Energy:

Offshore wind farm, North Sea

Several major energy suppliers are building the first off-

on the open sea north of the island of Borkum. As a mem-

ber of a joint venture, HOCHTIEF Construction is involved

up platform is making the construction work in the North

Sea significantly easier.

Hydroelectric power plant, Santiago (Chile)

A 160-megawatt hydroelectric power plant will be com-

pleted by 2010 south of the Chilean metropolis of Santiago.

HOCHTIEF Construction is the leader of a joint venture

designing and building a turnkey powerhouse that will com-

prise two turbines, two river diversions and tunnels with a

total length of 19 kilometers.

Energy recovery facility, Newhaven (UK)

This new incinerator will process 210,000 metric tons of

waste from the end of 2011 onward. The forward-looking

design of the plant is being developed by HOCHTIEF Con-

sult.* As a member of a consortium, we are responsible for

the building pit, earthwork, shell construction and build-

out, the facade as well as the heating, air conditioning and

ventilation systems, among other things. Our contract value

is EUR 84 million.

* For further information,

please see page 23.

32

By the end of 2009,

HOCHTIEF Construc-

tion will complete a

750-megawatt coal-

fi red power plant in

Duisburg-Walsum for

Hitachi Power Europe.

So far, the 181-meter-

tall natural draft cool-

ing tower with integrated

fl ue gas discharge and

several process build-

ings have been built.

The 190-meter-tall con-

struction crane was

provided by our subsidi-

ary Streif Baulogistik.

33

approximately EUR 260 million, and HOCHTIEF Construc-

tion’s share amounts to around EUR 42 million. In the bid

phase, our Berlin business unit worked intensively with

HOCHTIEF Consult and our Civil Engineering and Environ-

mental business unit. When the project ends in July 2011,

the institute will be one of the world’s leading infectious

disease research facilities.

For this construction project, we require special equipment

that is suitable for use under the strictest biosafety stand-

ards. This is manufactured exclusively by a US company.

Our fellow Group company Turner Logistics, which spe-

cializes in the purchasing of medical and research equip-

ment, has worked with this manufacturer for a long time

and procured the products for us. This enabled us to cut

costs by approximately 15 percent.

New university building, Aachen

In 2008, we gave the city of Aachen a new urban develop-

RWTH technical university. The building is unique not only

because of its architecture but also due to its energy con-

cept: The SuperC building is heated using geothermal en-

ergy. Extensive drilling to a depth of 2.5 kilometers was

required to accomplish this. The project is worth EUR 15.6

million for HOCHTIEF Construction. In early 2009, the build-

ing received a certificate in bronze, awarded for the first time

by the German Sustainable Building Council (DGNB). The

DGNB uses this new quality seal to recognize buildings which

are particularly sustainable.

Main subsidiaries of HOCHTIEF Construction AG

Streif Baulogistik GmbH

Streif Baulogistik is a construction services provider focused

on construction as well as construction-related infrastruc-

ture and logistics. The company is mainly engaged in provid-

ing project-specific combinations of services for construction

site installation, administration and optimization of con-

struction site operations.

In fiscal 2008, Streif Baulogistik GmbH continued to per-

form well. In Germany, work done and earnings were on

target. In the other European countries, the company was

able to improve work done as expected. The international

share of total sales increased for this reason in 2008 to

36.7 percent, up 2.9 percentage points over the prior-year

figure.

Growth outside of Germany was mainly the result of the

continued systematic expansion into additional European

markets. For example, the company opened sales offices

in Bulgaria and Romania and established the subsidiary Streif

Baulogistik Russland. Streif Baulogistik Polska performed

slightly better than anticipated in the past fiscal year and

further strengthened its position as market leader. The strat-

egy of serving the international project market through the

central Energy and International Project Services (EIPS)

business unit and thereby focusing on preparing for entry

into new markets in other countries was successful.

In fiscal 2008, Streif Baulogistik systematically leveraged

the opportunities provided by the invigorated German con-

struction market. Thanks to new units in growth markets

and a drive to expand international project activities, the

company succeeded in further pursuing its internationali-

zation strategy in a focused way. The order backlog grew

by approximately 30 percent compared with 2007. In 2009,

the company again aims to benefit from the development

of the German construction market. Moreover, Streif

Baulogistik plans to further expand and reinforce its exist-

ing European companies. Entry into additional European

markets and the Arab world will be accomplished on a

project-by-project basis.

Project highlights

Airport expansion, Frankfurt

In November 2008, Streif Baulogistik assumed responsibil-

ity for overall construction site installation and logistics for

the expansion of Terminal 1. The new A-West concourse is

to be created there which, once completed by 2012, can

also be used for the new A380 super jumbo. The subsidiary

of HOCHTIEF Construction will handle duties including site

security and supervision of the access roads to the site. In

addition, the company will provide the site with water and

electricity as well as cleaning services. Streif Baulogistik will

also supply and manage 80 office and daytime accommo-

dation containers.

Tunnel refurbishment, The Netherlands

Metro Amsterdam requires high-performance dust extrac-

tion and ventilation equipment during construction work to

modernize tunnel sections as well as track and switching

systems. Streif Baulogistik is setting up the complete elec-

tricity supply for the ventilation equipment and retrofitting

the client’s existing energy distribution systems.

First major contract, Romania

The Bucharest sales office, which was set up in 2008, re-

ceived its first major contract. The company is renting six

rotary tower cranes to a construction site in Campulung in

the northern Wallachia.

34

Cement factory, Bulgaria

Streif Baulogistik is supplying two large-scale cranes for

the new structure to be built in the city of Beli Izvor. The

sales office opened in February 2008 acquired four major

projects in its first year.

Office building, Poland

The Sky Tower in Wrocław will be the tallest building in Po-

land. Streif Baulogistik is supporting the construction work

on the 258-meter building scheduled for completion by the

end of 2012 by supplying three rotary tower cranes.

HOCHTIEF Polska Sp. z o.o.

HOCHTIEF Construction’s Polish subsidiary is one of the

leading construction companies in Poland, specializing in

building construction and infrastructure projects. Founded

in 1996, HOCHTIEF Polska’s portfolio includes building of-

fices, factories, shopping centers, bridges, ports and tun-

nels and participating in environmental protection projects.

At the beginning of the past fiscal year, HOCHTIEF Polska

expanded its range of products and services and now also

develops residential and commercial real estate under

HOCHTIEF’s FormArt brand.

In 2008, the HOCHTIEF company was able to continue the

growth trend it has experienced for years and increase work

done to a greater degree than expected. The increasingly

close cooperation with the entire HOCHTIEF network and

the resulting synergies are successfully leveraged by

HOCHTIEF Polska.

Numerous prestigious awards underscore the caliber of the

company’s work, which is far above average, as well as its

high quality standards. In the year under review, the Polish

Association of Employers in the Construction Industry

recognized HOCHTIEF Polska’s management, credibility

and reliability. Based on the forecasts issued for the Polish

construction market, the company believes that its perform-

ance will stay the same in the current fiscal year.

Project highlights

Office complexes, Warsaw

In July 2008, our Polish subsidiary won the contract to

construct the second building in the Adgar Plaza complex.

The construction work on the first office building was com-

pleted by HOCHTIEF Polska in October of the year under

review. After the entire project is finished, Adgar Plaza will

be among the most modern office properties in Poland.

In August of the reporting year, we completed construction

work on the Tulipan House. This four-story office building

in the Mokotów district of Warsaw also stands out due to

its unusual architecture.

Factory building, Ujazd

The contract for the construction of a new production facil-

ity for glass manufacturer Euroglas Polska is worth more

than EUR 59 million. The work on this project began in 2008

and is expected to be completed in summer 2009.

Office building, Krakow

HOCHTIEF Polska has been building the Diamante Plaza

office building in the Polish city since June of the year

under review. The top-quality building is expected to be

handed over to the client in July 2009. The contract is

worth nearly EUR 16 million.

Other projects in Poland

At the end of the year under review, HOCHTIEF Polska’s

contract portfolio included the Galeria Malta in Poznań, the

Zagłębie Lubin soccer stadium, Sitkówka sewage plant in

Kielce, the Platinum Towers residential complex in Warsaw

and the Francuska office center in Katowice.

HOCHTIEF CZ a.s.

HOCHTIEF’s Czech subsidiary is one of the six largest build-

ing contractors in the Czech Republic. Fiscal 2008 saw the

company reinforce its already strong position in the Czech

construction market. Work done again reached the high

level of the previous year. Thanks to a steady high level of

income, HOCHTIEF CZ was able to fulfill expectations.

HOCHTIEF CZ’s products and services cover the entire

real estate cycle and range from property development,

planning and construction to facility management. In terms

of infrastructure, the company builds tunnels, bridges and

sewage plants, while its building construction services in-

clude office and residential buildings, shopping centers,

industrial plants and building renovation.

Among the most outstanding projects completed in 2008

were a stadium for the Slavia Prague soccer team along

with an adjacent hotel and conference center, the Kavčí

-

structure project in Pilsen. Moreover, HOCHTIEF CZ is a key

participant in the building of a section of the Prague ex-

pressway ring road, a project including tunnel and bridge

construction.

35

HOCHTIEF CZ also received the Czech Republic’s Senate

Prize for Building of the Year 2008 for the Hagibor nursing

home commissioned by the Jewish community of Prague.

The broad diversification of services and the large share of

long-term public infrastructure contracts ensure that the

company’s development will be stable in the coming years.

We therefore continue to expect income to remain at a

high level. The share of business accounted for by services

will be stepped up further in the future in cooperation with

other HOCHTIEF companies.

Project highlights

Expressway ring road, Prague

In the reporting year, the work begun in 2006 on a section

of the new ring road continued. HOCHTIEF CZ is working

closely with HOCHTIEF Construction on the project, which

is valued at EUR 100.4 million.

Residential real estate, Prague

As a project developer, HOCHTIEF CZ began building

twelve luxury loft apartments in the elegant Prague district

of Bubeneč. In consultation with the architect, the buyers

can individually tailor the spacious apartments as desired.

The project outlay is EUR 10.8 million.

Nursing home, Prague

In 2008, our company finished building a nursing home

commissioned by Prague’s Jewish community. The con-

tract was worth approximately EUR 4 million. The work on

the project included renovating the existing structure and

constructing a new building wing.

OOO HOCHTIEF, Russia/HOCHTIEF Russia

HOCHTIEF Construction benefited once again in 2008

from the upturn in the Russian construction market, which

has been gaining pace for years, thanks to the national

company and the business unit in Moscow. HOCHTIEF

Russia operates country-wide primarily in the infrastructure

segment.

The Russian construction market grew by 7.3 percent in

2008, once again an above-average rate. The estimated

value of this sector of the economy is around USD 57 bil-

lion. This market continues to be concentrated in the coun-

try’s large economic centers, principally Moscow and St.

Petersburg. HOCHTIEF Russia focuses on the infrastruc-

ture market segment, specializing in airports and sea ports,

industrial buildings, sports facilities and prestigious stand-

alone projects in both of these large cities. Moreover,

HOCHTIEF Russia is a successful construction manager in

the industrial construction sector. In 2008, the business

unit significantly increased its workforce and now has

more than 380 employees across Russia. The order volume

climbed sharply, particularly in the infrastructure segment.

With a new business office, the company also extended its

operations beyond its focus on Moscow and St. Peters-

burg to date to include other regions of Russia, especially

in terms of industrial construction projects. In the year under

review, the business unit by far exceeded the EUR 100 mil-

lion mark in sales for the first time. Earnings were also

higher than expected.

Project highlights

Container terminal, St. Petersburg

A joint venture led by HOCHTIEF Construction is building

the Lomonosov container terminal near St. Petersburg.

The project with a total contract value of EUR 244.5 million

will be completed in 2010. The terminal will have a quay

length of 1,000 meters and an annual transshipment volume

of one million containers. The joint venture is additionally

building a berth designed to handle 300,000 passenger cars

per year.

Flood protection, St. Petersburg

By 2012, HOCHTIEF Construction along with a partner will

build a dam to close the gap in a barrage structure intended

to protect the greater St. Petersburg area from the effects

of a storm surge. The aggregate contract value for the

project is EUR 307.9 million and includes the construction

of a 730-meter tunnel for road traffic through the dam.

Sheremetyevo airport and train station, Moscow

At the end of 2007, HOCHTIEF Russia was awarded the

contract to extend Terminal 2 of Sheremetyevo Airport in

the Russian metropolis. In the reporting year, the HOCHTIEF

business unit was also commissioned to handle general

planning and turnkey construction of the new airport train

station. The station began operating in June 2008, con-

necting Sheremetyevo Airport with Moscow’s city center.

The approximately EUR 207.5 million project included a

four-track platform, parking deck, five-story office building

as well as a gallery linking the train station to the airport.

Candy factory, Vladimir

A new production facility and air-conditioned warehouse are

being built for confectionery manufacturer Ferrero in this

city located some 160 kilometers east of Moscow. Construc-

tion is slated to be completed by the end of 2009. Together,

the two buildings up to 22 meters high are approximately

the size of four soccer fields. HOCHTIEF Russia is working

closely with HOCHTIEF Construction in Frankfurt and

HOCHTIEF Polska on the project worth roughly EUR 100

36

million. These companies have already done business with

Ferrero, a regular client, in Canada and Poland.

HOCHTIEF Qatar W.L.L.

HOCHTIEF Construction responded to the high level of de-

mand in the Arab world by establishing the HOCHTIEF

Construction Qatar W.L.L. subsidiary. Supported by one of

the largest gas reserves in the world, the rapidly growing

emirate of Qatar in particular aims to realize massive build-

ing construction and infrastructure projects in the coming

years despite the global financial crisis.

From the very beginning of its operation, our subsidiary

was able to acquire orders for planning services or sub-

contracts for larger-scale projects.

Project highlights

Barwa Commercial Avenue

In the reporting year, HOCHTIEF Construction was awarded

contracts for planning services and subcontracts for the

construction of an 8.6-kilometer retail, residential and com-

mercial center totaling more than EUR 54 million. The main

contract for construction of Barwa Commercial Avenue in

Doha is expected to be signed in spring 2009. The project

will be valued at well over one billion euros.

Around 600 new stores and restaurants along with 1,300

residential units and offices will be constructed along an

urban expressway on the southern edge of the capital Doha

by the end of 2011. The gross floor area of all of these build-

ings will amount to 94,000 square meters, equivalent to the

area covered by 120 soccer fields.

Qatar-Bahrain Causeway

In 2008, HOCHTIEF Construction also provided planning

and consulting services in line with the PreFair model for

another large-scale project, the Qatar-Bahrain Causeway.

What will be the longest bridge link in the world when it is

completed will connect the emirate with the Kingdom of

Bahrain. This new road and rail connection represents the

logical expansion of infrastructure in the rapidly growing

Arab countries. HOCHTIEF Construction is participating in

this project worth billions as part of a joint venture with

major international partners and expects to be awarded

the first subcontracts in 2009.

Furthermore, HOCHTIEF Construction Qatar has provided

consulting services, particularly in the area of urban devel-

opment.

HOCHTIEF (UK) Construction Ltd.

HOCHTIEF (UK) Construction has been a subsidiary of

HOCHTIEF Construction AG since 2002. Based on its ex-

pertise and superior problem-solving skills, the company is

considered one of the top contractors above all in the road

and railway construction, industrial construction and en-

ergy sectors. In close cooperation with HOCHTIEF Construc-

tion AG, HOCHTIEF (UK) Construction handles complex

tunnel and port projects.

In 2008, the company launched a reorganization program

aimed at boosting order acquisitions in the company’s core

business. Close cooperation with the infrastructure units of

HOCHTIEF Construction provide the company with excel-

lent market opportunities in lucrative business segments.

Project highlights

Energy recovery facility, Newhaven

In the year under review, construction work began on a

new incinerator* that is expected to process more than

200,000 metric tons of garbage per year on completion

scheduled for 2011. The heat generated during this pro-

cess will be converted to electricity using a steam turbine.

HOCHTIEF (UK) Construction is realizing this project valued

at EUR 170 million in conjunction with HOCHTIEF Con-

struction and another partner.

Bridge 12, London

HOCHTIEF (UK) Construction was awarded the contract to

build this bridge in 2008. Bridge 12 is among the infrastruc-

ture projects to be completed in preparation for the Summer

Olympics in the UK capital in 2012. The structure extends

over the large rail network on the Olympic grounds and

therefore requires the particular expertise of the HOCHTIEF

subsidiary in building complex projects. The construction

work is slated to be finished at the end of 2009. HOCHTIEF

(UK) Construction is optimistic about acquiring additional

large-volume contracts for the Olympic Games.

Durst-Bau GmbH

The Austrian subsidiary has been part of HOCHTIEF Aktien-

gesellschaft since 1987 and celebrated its 60th anniversary

in the year under review. Durst-Bau has been a subsidiary

of HOCHTIEF Construction AG since 2002. Headquartered

in Vienna, the company also has a business unit in Inns-

bruck.

Durst-Bau’s activities are focused on residential con-

struction, refurbishing and upgrading as well as the fast-

* For further information,

please see page 23.

37

growing real estate development business. In addition,

the HOCHTIEF subsidiary has established itself as a key

player in civil engineering, sewerage and alpine construc-

tion projects in the Tyrol region.

In 2008, the planning and sale of FormArt projects in the

portfolio were a priority, which contributed materially to the

company’s business success and positive earnings figure

for the year. In the current fiscal year, the FormArt segment

is being systematically expanded further.

Project highlights

Marriott Hotel, Vienna

The refurbishment and upgrading unit is completing an ex-

tensive redevelopment of the luxury hotel in the city center.

This project, which has a contract value of EUR 2.6 million,

involves additional apartments being built without closing

the building and all of the building technology being replaced.

Favoritenstrasse, Vienna

In early 2008, construction began on a residential and

commercial building with 43 apartments, 41 garage park-

ing spaces, one store and five offices. The project worth

EUR 5.2 million covers a gross floor area of 8,226 square

meters.

Anningerstrasse, Mödling near Vienna

Durst-Bau constructed a residential facility with 22 apart-

ments and 44 garage parking spaces on a piece of land at

the edge of the Vienna Woods located a few kilometers

from the Austrian capital. Future occupants were able to

participate in designing their apartments. The EUR 8.9 mil-

lion FormArt project was finished in December 2008.

Schönbrunner Allee, Vienna

By summer of the current fiscal year, 30 apartments along

with parking spaces in an underground garage will be built

near Schloss Hetzendorf. Most of the apartments in the

FormArt project with a contract value of EUR 9.7 million are

planned as multi-level apartments.

Entreprise Générale de Construction

HOCHTIEF-Luxembourg S.A.

A subsidiary of HOCHTIEF Construction, HOCHTIEF-

Luxembourg has been a fixture on the Luxembourg con-

struction services market since 1981. The company is fo-

cused on the development, financing and marketing of

residential and office real estate development projects.

Despite the strained global economic situation, Luxembourg

boasts the lowest vacancy rates for office space in Europe.

The company therefore continued to pursue development

of such properties in the year under review. The same is

true for residential buildings. HOCHTIEF-Luxembourg takes

an end-to-end approach to its real estate development

projects in order to guarantee a constant high level of qual-

ity. The company acquires the parcels of land, and builds

and markets the projects.

HOCHTIEF-Luxembourg expects business to be stable in

2009 despite the difficult market conditions. The current

modest market demand is forecast to improve in the sec-

ond six months of the year.

Project highlights

Luxembourg Office Park, Luxembourg-Hamm

In the reporting year, the company purchased a piece of

land in Luxembourg-Hamm. The Luxembourg Office Park

featuring roughly 15,000 square meters of office space will

be built there starting in mid-2009. The HOCHTIEF subsidi-

ary is involved in this real estate project from the planning

phase to leasing.

HOCHTIEF Construction Austria GmbH & Co. KG/

HOCHTIEF Construction Austria

In addition to Durst-Bau, HOCHTIEF Construction has re-

inforced its commitment in Austria with a business unit in

the country since 2005, and also expanded its activities to

include civil and structural engineering as well as infrastruc-

ture construction. As a result of the successful acquisition

of several major projects by the Austria business unit,

HOCHTIEF Construction Austria was established as an in-

dependent national company in fiscal 2007. The company

is a wholly owned subsidiary of HOCHTIEF Construction.

HOCHTIEF Construction Austria’s range of products and

services includes the construction of bridges, train stations,

power plants, sewage plants and other infrastructure proj-

ects that require expertise with complex solutions. The

company provides this portfolio of products and services

throughout the entire southeastern European region.

In addition, HOCHTIEF Construction Austria has been

HOCHTIEF Construction AG’s competence center for

earthwork and road construction since the year under

review. The company thus offers its expertise not only to

external clients but also to other HOCHTIEF corporate units.

One focus of its operations once again in the reporting

year was the construction of the A5 North Highway on be-

half of a consortium with the involvement of HOCHTIEF

38

PPP Solutions. The project is expected to be completed in

2009.

Project highlights

Lainzer Tunnel, Vienna

The projects finished in the past fiscal year included an ap-

proximately three-kilometer-long twin-track tunnel for the

Lainzer Tunnel. In the year under review, HOCHTIEF Con-

struction Austria was awarded an additional contract for a

further 545 meters of tunnel driving. The now 3,595-meter

tunnel will be completed by the end of 2010 using a mining

construction method. A highly complex project: The train

track runs in groundwater under the city center of Vienna.

HOCHTIEF’s contract value for the stretch of the European

high-speed route from Paris to Budapest amounts to EUR

53 million.

Tullner Westschleife, Lower Austria

As the technical leader of a bidding group, the Austrian

company won the Tullner Westschleife construction proj-

ect 3.3 in 2008. The contract, to be completed within 15

months, was awarded by Österreichische Bundesbahnen

and includes extensive demolition work in the city center

as well as the construction of a new stop including street

routing. In addition, three prestressed triple span bridges

are to be built without halting railway operations. The value

of the contract which comprises a variety of other work is

EUR 14.3 million.

HOCHTIEF Construction Romania

Since its founding in 2006, the HOCHTIEF business unit in

Bucharest has developed a focus on industrial buildings

and supermarkets, as well as environmental projects.

In the medium term, the range of products and services

will be expanded to include the high-growth transportation

infrastructure segment. Romania is planning to build 1,000

kilometers of roads over the next five years which the Euro-

pean Union will partly co-finance.

At the end of 2008, HOCHTIEF Construction completed a

factory building in the Romanian city of Brasov for a Ger-

man investor with a contract value of EUR 5 million.

Moreover, the unit was commissioned to build a super-

market.

HOCHTIEF Construction Bulgaria

Since the end of 2005, HOCHTIEF Construction has had a

Bulgarian business unit based in Sofia, thereby participating

in an attractive growth market.

The first projects were successfully acquired in 2006. Two

turnkey factory buildings for German clients in the elec-

tronics industry were built in the northern Bulgarian city of

Vidin. In southern Bulgaria, existing military barracks were

converted into a business park.

A sewage plant is currently under construction for the

northern Bulgarian city of Rousse on the Danube. The

contract is worth approximately EUR 23 million.

The business unit focuses on turnkey residential and com-

mercial construction along with logistics properties. An-

other specialization is environmental construction in the form

of sewage plants as well as water and wastewater projects.

The unit’s activities will shortly be expanded to include infra-

structure. Bulgaria plans to further expand its transpor tation

network including highways and railways on a large scale,

and the business unit aims to be involved in this process.

The majority of these projects are EU financed.

39

Looking Ahead

The thorough restructuring launched in fiscal 2007

to restore the German building construction busi-

ness to profitability was rigorously continued in

2008. The measures introduced are taking effect.

We are optimistic that this encouraging develop-

ment will continue throughout the current fiscal

year.

Overall economic situation

Recognized economic researchers assume that the global

economy will slow down in 2009 due to the financial crisis.

Industry situation

The Central Federation of the German Construction Indus-

try predicts that revenues in the German construction in-

dustry will stagnate in 2009 at around the same level as in

2008. Construction activity in Eastern European growth

countries is expected to remain robust. In the Gulf region,

demand for construction services will slacken, but never-

theless we consider our prospects there to be good.

New orders

The progressively international focus means that major proj-

ects are increasingly carried out in local project companies

or joint ventures. These projects are not taken into account

in HOCHTIEF Construction AG’s new orders but rather in

the HOCHTIEF Europe division, over which HOCHTIEF

Construction presides.

In 2009, this will primarily affect several international proj-

ects that we are expecting. For spring 2009, for instance,

we are anticipating a major project for the construction of

an exclusive commercial avenue in Doha, the capital of the

emirate of Qatar.

In Germany, we plan to maintain our strategy of rigorous

selectivity primarily in pursuing new business in turnkey

construction.

Overall, the order volume at HOCHTIEF Construction AG is

expected to reach the prior-year level in 2009.

Work done

The factors that will influence new orders in 2009 will also

affect construction work. Work done by HOCHTIEF Con-

struction AG will therefore also remain at the same level as

in 2008. The current order backlog means we are already

largely certain of achieving our work done target. Thus the

company’s level of capacity utilization will be satisfactory

well into the current fiscal year.

Earnings and financial performance

All of the measures taken by HOCHTIEF Construction aim

to substantially improve the bottom line in 2009.

Our structural changes and the further improved risk mini-

mization and risk control systems will help to achieve this

goal. Market-based adjustments cannot be ruled out for the

fiscal year. We do not see any additional risks for the com-

pany beyond those that are usual for the industry.

HOCHTIEF Construction continues to be part of the

HOCHTIEF Group’s cash pooling system. We do not

expect any significant change in the liquidity position for

2009.

Effects of the financial crisis

As things currently stand, it cannot be ruled out that the

financial crisis will impact on our building construction

activities. It may also affect our FormArt business if mar-

keting is slowed down.

However, we see opportunities in the economic stimulus

programs designed for the civil engineering and infrastruc-

ture sectors that lead us to expect stable development

overall.

40

HOCHTIEF Construc-

tion is building two

sections of the north

Stockholm bypass to-

gether with a partner,

to be completed by

2012. The “Norra Länken”

project, which is worth

some EUR 132 million

overall, includes a pair

of two-lane tunnels,

each 1.2 kilometers

long. There is also a

section of road about

one kilometer long,

including ramps and

junctions.

41

Financial Statements

of HOCHTIEF Construction AG, Essen,

for the Fiscal Year January 1 – December 31,

2008

The 2008 Financial Statements and Management Report

of HOCHTIEF Construction AG are submitted to the opera-

tor of and published in the electronic Bundesanzeiger

(Federal Official Gazette) in accordance with Section 325

of the German Commercial Code (HGB).

Balance Sheet(EUR thousand) See

note

Dec. 31,

2008

Dec. 31,

2007

Assets

Fixed assets (1)

Property, plant and equipment 3,450 3,191

Financial assets 136,440 136,565

139,890 139,756

Current assets

Inventories

Construction work in progress 1,082,792 978,579

Less: Progress payments received (904,633) (825,223)

178,159 153,356

Other inventories (2) 14,702 15,439

192,861 168,795

Receivables and other current assets (3) 639,356 687,091

Other marketable securities (4) 303,447 350,241

Cash and cash equivalents (5) 91,063 55,613

1,226,727 1,261,740

1,366,617 1,401,496

Liabilities and Shareholders’ Equity

Shareholders’ equity (6)

Subscribed capital 100,050 100,050

Capital reserve 103,615 103,615

203,665 203,665

Provisions (7) 443,121 460,152

Liabilities (8) 719,814 737,679

Deferred income 17 0

1,366,617 1,401,496

42

Statement of Earnings

(EUR thousand) See

note

Jan. 1 – Dec. 31,

2008

Jan. 1 – Dec. 31,

2007

Sales (10) 1,333,039 1,085,087

Change in the balance of construction work in progress 104,213 336,481

Other operating income (11) 39,182 53,538

Materials (12) (1,181,104) (1,262,794)

Personnel costs (13) (285,210) (288,172)

Depreciation of property, plant and equipment (14) (2,115) (4,280)

Other operating expenses (15) (126,888) (124,327)

Net income from participating interests (16) 8,565 (47)

Net income from financial assets (16) 0 0

Net interest income (17) 28,159 12,834

Writedowns on financial assets and

marketable securities (18)

(19,732)

(5,609)

Loss from ordinary activities (101,891) (197,289)

Transfer under profit/loss pooling agreement 101,891 197,289

Net profit before changes in

reserves/unappropriated net profit

0

0

43

Notes to the 2008 Financial Statements of HOCHTIEF Construction AGMovements in Fixed Assets

Cost of purchase or production

(EUR thousand)

Jan. 1, 2008 Additions Disposals Cumula-

tive depre-

ciation

and amor-

tization

Deprecia-

tion and

amortization

in 2008

Carrying

amount at

Dec. 31,

2008

Carrying

amount at

Dec. 31,

2007

Property, plant and equipment

Technical equipment and machinery, and

transportation equipment

3,822

30

2,141

1,512

392

199

561

Other equipment, office furniture and equipment,

and small equipment

22,330

2,442

7,574

13,947

1,723

3,251

2,630

26,152 2,472 9,715 15,459 2,115 3,450 3,191

Financial assets

Shares in affiliated companies 154,490 413 0 19,092 0 135,811 135,405

Other participating interests 1,160 67 31 596 596 600 1,160

Other long-term loans 0 30 1 – – 29 0

155,650 510 32 19,688 596 136,440 136,565

Total fixed assets 181,802 2,982 9,747 35,147 2,711 139,890 139,756

Notes on the changes in financial assets:

Additions to shares in affiliated companies primarily involved the

establishment of Uferpalais Projektgesellschaft mbH & Co. KG,

Deutsche Baumanagement GmbH, NX.Forum Verwaltungs GmbH

and NX. Forum GmbH & Co. KG.

The figure for financial assets in the depreciation and amortization

column relates to a EUR 596,000 writedown on RMZ HOCHTIEF

Construction (India) Pvt. Ltd., Bangalore.

44Archive: Consolis Polska Sp. z o.o.

The striking architec-

tural design of Tulipan

House adds further

prestige to Warsaw’s

up-market Mokotów

district. Completed in

April 2008, the four-

story offi ce building

was erected for an in-

vestor by our Polish

subsidiary.

45

General information

These annual financial statements are prepared in accord-

ance with the German Commercial Code (HGB) and

Stock Corporations Act (AktG). HOCHTIEF Construction

AG has made use of the option provided by Section 265 (7)

of the Commercial Code to combine a number of items in

the balance sheet and the statement of earnings for pur-

poses of clarity. Also in the interest of clarity and in line

with established practice, the statutory balance sheet dis-

closures are supplemented by two additional items stated

in these Notes: receivables from joint ventures and amounts

due to joint ventures. These record the net amounts re-

ceivable from or payable to joint ventures after accounting

for products and services supplied, construction work done,

administration fees, cash advances paid, and HOCHTIEF

Construction AG’s share of joint venture profits or losses.

The Statement of Earnings is presented in vertical format

using the nature of expense method of analysis.

Monetary amounts in the text of these Notes are rounded

to the nearest thousand euros unless specifically stated

otherwise.

The Company is a wholly owned subsidiary of HOCHTIEF

Aktiengesellschaft, with which it has a Control and Profit/

Loss Transfer Agreement.

Accounting policies

Property, plant and equipment are stated at cost of purchase

or production (at the amount required to be capitalized

under tax law), less depreciation and writedowns due to

impairment. Borrowing costs are not included in purchase

or production cost.

Depreciation is charged on property, plant and equipment

to the full extent permissible under tax law. Minor assets

with a cost of up to EUR 150 are expensed in the year of

purchase or production and are not recognized as assets.

Independently usable minor assets with a cost of more

than EUR 150 but less than EUR 1,000 are grouped and

depreciated as a group over five years. In view of its limited

significance, acquired software is included in office furniture

and equipment. All permissible special tax depreciation

allowances are used.

Shares in affiliated companies and participating interests

are measured at acquisition cost less writedowns for im-

pairment. Non-interest-bearing loans and low-interest loans

to third-party entities are reported at present value. Other

loans are reported at their nominal amount.

Inventories are stated at cost of purchase or production, or

at fair value if lower. The production cost of construction

work in progress includes direct costs of material and pro-

duction plus apportioned indirect costs.

Expected losses on work in progress are taken into account

by recognizing a writedown on the cost of production. If

the expected losses exceed the capitalized cost of produc-

tion, the difference is accounted for by recognizing provi-

sions. These are estimated on the basis of the prospective

future performance of each contract until construction is

completed, assessing future income solely on the basis of

figures confirmed in writing by the client and future costs

on the basis of the estimated full cost up to completion.

46

Major additional expenditure was incurred in 2008 for six

long-term infrastructure projects due to unexpected geo-

logical conditions. To present a true and fair view in the

2008 financial statements, the submitted claims amount-

ing to EUR 32.3 million have been recognized for account-

ing purposes at their realistic contract value.

Progress payments received from clients are deducted

from inventories up to the amount of the cost of produc-

tion for each project. Advance payments in excess of

these amounts are reported on the liabilities side.

The valuation of receivables and other current assets, which

are initially recognized at their nominal amount, includes

appropriate provision for specific doubtful accounts. A global

allowance is also deducted to cover general credit risk.

Receivables from clients in other countries are largely—to

the extent possible—secured against political and eco-

nomic risks by Hermes guarantees.

Other marketable securities are reported at acquisition cost.

If the cost of purchase of any asset is higher than its fair

value on the balance sheet date, a writedown is recognized

on its carrying amount.

Cash and cash equivalents are measured at their nominal

amount.

Subscribed capital is measured at its nominal amount.

Provisions for pensions, long-service bonuses, and semi-

retirement programs for older employees are determined

using actuarial tables. The discount factor applied is 3.5

percent. Pension provisions are determined using the Pro-

fessor Klaus Heubeck 2005 G tables. These are genera-

tional tables that state probabilities for pension factors

such as mortality, loss of earning capacity and marriage

rates classified by birth year as well as by age and sex.

Other provisions are recognized in accordance with pru-

dent commercial judgment; with regard to a limited num-

ber of project-related risks, provisions are recognized

based on legal appraisals, reflecting the level of risk that

can realistically be anticipated.

Liabilities are normally recognized at the settlement

amount.

Sales figures include HOCHTIEF Construction AG’s share

in the net profits and losses of joint ventures.

Expenses for severance allowances to employees and

other taxes are reported as other operating expenses.

Currency translation

Foreign currency receivables are measured at the lower of

the central rate at initial recognition and the exchange rate

at the balance sheet date. Foreign currency payables are

measured at the higher of the spot rate at initial recognition

and the exchange rate at the balance sheet date. Losses

due to changes in exchange rates are recognized as ex-

pense.

47

Explanatory Notes on the Balance Sheet

1. Fixed assets

The combined fixed assets categories reported in the bal-

ance sheet are shown broken down into their component

items and with year-on-year changes on page 43. Shares

in affiliated companies and participating interests included

in financial assets are shown in the List of Holdings ap-

pended to these Notes.

2. Other inventories

(EUR thousand) Dec. 31,

2008

Dec. 31,

2007

Raw materials and

supplies, spare parts

128

559

Advance payments 14,574 14,880

14,702 15,439

3. Receivables and other assets

(EUR thousand)Dec. 31,

2008

Of which:

residual term

above 1 year

Dec. 31,

2007

Of which:

residual term

above 1 year

Trade receivables 73,840 1,439 126,627 1,895

Receivables from joint ventures 84,320 – 106,629 –

Receivables from affiliated companies 466,813 3,008 434,455 3,908

Receivables from companies in which the

Company has participating interests

1,153

–

2,873

–

Other receivables 13,230 4,235 16,507 3,911

639,356 8,682 687,091 9,714

Amounts due from affiliated companies mostly comprise

cash pool receivables, trade receivables, and loans.

Other receivables include receivables under pension liabil-

ity insurance, interest receivables from securities, promis-

sory note loans (Schuldscheindarlehen), damage claims,

short and medium-term loan receivables from third-party

entities, advance contributions made to funds set up to

compensate construction employees during reduced work-

ing hours or bad weather, foreign value-added tax receiv-

ables, amounts receivable from project companies, amounts

receivable from employees for advances and short-term

loans, as well as other non-trade receivables and other

assets.

48

4. Other marketable securities

The securities portfolio mostly consists of shares in bond

and equity funds and fixed-interest investments denomi-

nated in euros. Marketable securities with a carrying amount

of EUR 149,417,000 are legally owned by HOCHTIEF Pen-

sion-Trust e.V.

Under a contractual trust arrangement (CTA) and by con-

tractual agreement, HOCHTIEF Construction AG is party

to a legally separate pension fund set up to hold assets

used to fund pension benefit payments for HOCHTIEF

Construction AG. The Company retains beneficial owner-

ship of the trust assets.

EUR 27,785,000 in marketable securities are pledged to

safeguard amounts accumulated in semi-retirement plans

against insolvency in accordance with Section 8a of the

German Semi-Retirement Act, and to secure credit bal-

ances on working time accounts.

5. Cash and cash equivalents

These consist mostly of euro bank balances. Cash and

cash equivalents to the value of EUR 33,274,000 are le-

gally owned by the pension fund.

6. Shareholders’ equity

(EUR thousand) Amount as of

Dec. 31,

2008

Amount as of

Dec. 31,

2007

Subscribed capital

(nominal capital stock)

100,050

100,050

Capital reserve 103,615 103,615

203,665 203,665

HOCHTIEF Construction AG’s nominal capital is divided

into 100,050,000 bearer shares of common stock with no

par value. The sole shareholder is HOCHTIEF Aktien-

gesellschaft, Essen, Germany.

7. Provisions


2008

Dec. 31,

2007

Provisions for pensions 225,844 219,726

Other provisions 217,277 240,426

443,121 460,152

Provisions for pensions are recognized for current and fu-

ture benefit payments to active and former employees and

their surviving dependants.

Pension payments totaled EUR 6,227,000 in 2008 (2007:

EUR 5,367,000).

Other provisions cover items such as warranty obligations,

obligations for work pending completion, costs of order

processing and follow-up costs on contracts already in-

voiced, provisions for onerous contracts, payments for

damages, costs of semi-retirement programs for older

employees, obligations under stock option plans for man-

agement, outstanding employee leave, obligations for

long-service bonus payments, costs of organizational de-

velopment, contributions to mutual indemnity associations,

costs of preparing the annual financial statements, and

other uncertain liabilities.

Information on obligations secured by liens and similar

charges is provided in Note 4.

49

Amounts due to banks are secured to the value of EUR

28.9 million (2007: EUR 23.1 million) by charges on real

property and assignment of purchase price receivables.

Other liabilities include payroll liabilities, tax liabilities, so-

cial insurance liabilities, other non-trade payables and

other obligations.

9. Contingencies, commitments and other financial

obligations


2008

Dec. 31,

2007

Liabilities under

guarantees and letters

of comfort

54,211

50,286

Of which: for affiliated

companies

[54,211]

[50,286]

These guarantees and letters of comfort primarily serve as

security for bank loans, contract performance, warranty

obligations and advance payments. Most guarantees as of

the reporting date related to participating interests.

HOCHTIEF Construction AG is also jointly and severally

liable for all joint ventures in which it has an interest.

Under the centralized cash management system operated

by the parent company HOCHTIEF Aktiengesellschaft, the

Company bears secondary liability for the use of funds by

HOCHTIEF Aktiengesellschaft, provided that meeting the

assumed payment obligation does not affect the asset

base needed for capital maintenance at the time the pay-

ment obligation is entered into.

Other financial obligations arise in connection with long-

term tenancy agreements in the amount of EUR

73,787,000 of which EUR 29,616,000 are obligations to af-

filiated companies. Expenditure on rentals and lease pay-

ments totaled EUR 22,946,000 in 2008 (2007: EUR

20,149,000).

8. Liabilities


2008

Of which:

residual

term up to

1 year*

Dec. 31,

2007

Of which:

residual

term up to

1 year*

Amounts due to banks 28,874 22,889 34,318 26,540

Advance payments for orders 131,762 131,762 244,862 244,862

Trade payables 336,725 336,725 303,512 303,504

Amounts due to joint ventures 116,729 116,729 78,236 78,236

Amounts due to affiliated companies 47,435 6,872 7,827 7,827

Amounts due to companies in which the Company has

participating interests

1,608

1,608

1,014

1,014

Other liabilities 56,681 56,681 67,910 67,910

Of which: from taxes [4,382] [4,382] [4,605] [4,605]

Of which: from social insurance contributions [1,046] [1,046] [1,045] [1,045]

719,814 673,265 737,679 729,893

* As in the prior year, there are

no liabilities with a residual

term of more than five years.

50

10. Sales

HOCHTIEF Construction AG’s sales totaling EUR

1,333,039,000 (2007: EUR 1,085,087,000) primarily con-

sist of contract amounts invoiced directly to clients, prod-

ucts and services supplied to joint ventures, and the

Company’s share of joint venture profits and losses. The

total sales figure comprises EUR 1,233,609,000 generated

domestically and EUR 99,430,000 abroad. Because of the

long-term nature of construction contracts, the sales fig-

ures provide only an incomplete picture of work done dur-

ing the fiscal year (including the Company’s share of work

done in joint ventures). Work done is therefore broken

down separately for domestic and international operations

below.

Work done

(EUR thousand) Jan. 1 – Dec.

31, 2008

Jan. 1 – Dec.

31, 2007

Domestic:

Subdivided by

sector

Commercial/

industrial

878,303

999,988

Public sector 443,867 334,825

Residential 176,813 163,718

1,498,983 1,498,531

International:

Subdivided by

region

Europe 475,261 395,375

Asia 15,681 3,150

Africa 14,658 4,164

Americas 9,815 20,683

Australia 5,227 23,944

520,642 447,316

Total 2,019,625 1,945,847

11. Other operating income

This item primarily includes income from reversals of provi-

sions, indirect utilization of provisions, insurance payments

received for damages, sales of securities, reimbursement

of administrative expenses, renting and leasing out, and

foreign exchange gains.

12. Materials


31, 2008

Jan. 1 – Dec.

31, 2007

Raw materials, sup-

plies and purchased

goods

108,534

81,295

Purchased services 1,072,570 1,181,499

1,181,104 1,262,794

Explanatory Notes on the Statement of Earnings

51

13. Personnel costs


31, 2008

Jan. 1 – Dec.

31, 2007

Wages and salaries 230,198 231,688

Social insurance and

support

42,086

43,058

Pensions 12,926 13,426

285,210 288,172

Employees (average for the year)

2008 2007

Waged/industrial

employees

1,483

1,487

Salaried/office

employees

3,377

3,429

Total 4,860 4,916

14. Depreciation of property, plant and equipment

All depreciation relates to property, plant and equipment,

which is depreciated to the full extent permitted by tax

law.

15. Other operating expenses

Other operating expenses primarily include rentals and

lease payments, insurance premiums, including the cost

of Hermes insurance against foreign risks, court, attor-

neys’ and notaries’ fees, legal costs, marketing and travel

expenses, losses on disposal of financial assets, costs of

organizational development, costs of materials for admin-

istrative purposes, foreign exchange losses, transfers to

other provisions, and other social benefits payable that are

not reported elsewhere. Other taxes included here come

to EUR 1,383,000 (2007: EUR 2,045,000).

16. Net income from participating interests and net

income from financial assets

(EUR thousand) Jan. 1 –

Dec. 31,

2008

Jan. 1 –

Dec. 31,

2007

Net income from partici-

pating interests

8,565

(47)

Income from profit/loss

transfer agreements

10,485

848

Expenses from transfer of

losses

(1,936)

(428)

Income from participating

interests

1,563

9

Of which: affiliated

companies

[1,563]

[0]

Loss from participating in-

terests

(1,547)

(476)


companies

[(403)]

[(16)]

Net income from

financial assets

0

0

17. Net interest income

(EUR thousand) Jan. 1 –

Dec. 31,

2008

Jan. 1 –

Dec. 31,

2007

Other interest and similar

income

39,033

27,407


companies

[23,854]

[16,874]

Other interest and similar

expenses

(10,874)

(14,573)


companies

[(7,807)]

[(11,770)]

28,159 12,834

52

18. Writedowns on financial assets and marketable

securities

This expense mostly comprises EUR 19,136,000 in write-

downs on marketable securities. It also includes a EUR

596,000 writedown on RMZ HOCHTIEF Construction

(India) Pvt. Ltd., Bangalore.

19. Total compensation for the Executive Board and

Supervisory Board

Total compensation for fiscal 2008 came to EUR 1,612,000

for the Executive Board. Total benefit payments to former

members of the Boards amounted to EUR 682,000 for fis-

cal 2008. Provisions for pensions include EUR 6,352,000

for current and future benefit payments to former mem-

bers of the Boards as of December 31, 2008. Total Super-

visory Board compensation for fiscal 2008 was EUR

332,000.

Group affiliation

HOCHTIEF Aktiengesellschaft (Essen, Germany) is the

sole shareholder in HOCHTIEF Construction AG and is the

parent of both the largest and the smallest group of com-

panies for which consolidated financial statements are

drawn up and of which HOCHTIEF Construction AG is a

member. Consolidated financial statements have not been

prepared for HOCHTIEF Construction AG because it and

its subsidiaries are included in the consolidated financial

statements of HOCHTIEF Aktiengesellschaft, which are

submitted to the operator of and are published in the elec-

tronic Bundesanzeiger (Federal Official Gazette).


The Executive Board


53

Supervisory Board

Dr.-Ing. Herbert Lütkestratkötter

Essen, Chairman, Chairman of the Executive Board,

HOCHTIEF Aktiengesellschaft

Gerhard Peters*

Butzbach, Deputy Chairman, Administrative Officer,


Matthias Doneker*

Backnang, Member of the Federal Executive Com-

mittee, German Construction, Agricultural and Envi-

ronmental Employees’ Union

Rainer Eichholz

Unna, Chairman of the Management Board,

HOCHTIEF Development

Günter Haardt*

Frankfurt, Executive Manager, Vermögensverwal-

tungs- und Treuhandgesellschaft mbH, (a trust fund

of the German Construction, Agricultural and Envi-

ronmental Employees’ Union)

Olaf Hasselmann*

Hanover, Chairman of the Management, Shell Con-

struction business unit, HOCHTIEF Construction AG

Dr. jur. Wolfgang Kässer

Pullach, Attorney-at-law (until June 30, 2008)

Georg Kürfgen

Essen, Chairman of the Management Board,

HOCHTIEF Services (since July 1, 2008)

Slawomir Lachowski

Warsaw, former President of BRE Bank SA

Dr. Burkhard Lohr

Haltern am See, Member of the Executive Board,

HOCHTIEF Aktiengesellschaft

Dr. Martin Rohr

Düsseldorf, Member of the Executive Board,

HOCHTIEF Aktiengesellschaft (since July 1, 2008)

Hans Dietmar Sauer

Karlsruhe, former Chairman of the Board of Direc-

tors, Landesbank Baden-Württemberg (until June

30, 2008)

Pietro Spano*

Sprockhövel, Foreman, HOCHTIEF Construction AG

Olaf Wendler*

Osterweddingen, Technician, HOCHTIEF Construc-

tion AG

Executive Board

Dipl.-Ing. Henner Mahlstedt

Essen, Chairman of the Executive Board

Dipl.-Kfm. Heiner Helbig

Hilden, Member of the Executive Board

Dipl.-Ing. Achmed Kadded

Mettmann, Member of the Executive Board (until

March 31, 2008)

Boards

*Employee representative

54

List of Holdings

Name and registered location Percentage

stock held

Shareholders’ equity

(thousand)

Local currency EUR

Profit/(loss) for the year

(thousand)

Local currency EUR

Affiliated companies

Entreprise Générale de Construction

Hochtief-Luxembourg S.A., Luxembourg 99.96 % (279) 2,271

DURST-BAU GmbH, Vienna, Austria 99.90 % (1,526) 535

HOCHTIEF (UK) CONSTRUCTION Ltd.,

Swindon, UK 100 % GBP 7,403 7,772 GBP 105 131

Streif Baulogistik GmbH, Essen1 100 % 31,659 0

HOCHTIEF Construction Chilena Ltda.,

Las Condes, Santiago, Chile

99.99 %

CLP 3,176,818

3,526

CLP 458,868

592

HOCHTIEF Global Trade GmbH2 100 % 635 0

RheinauArtOffice GmbH & Co. KG, Essen 50 % 25 6,802

ArtOffice GmbH, Essen 50 % 18 (2)

OOO HOCHTIEF, Moscow, Russia 99.90 % RUB 83,043 2,011 RUB 44,818 1,220

HOCHTIEF Construction Austria GmbH & Co. KG,

Vienna, Austria

100 %

1,000

(2)

HOCHTIEF Construction Austria Verwaltungsges. mbH,

Vienna, Austria

100 %

39

4

HOCHTIEF Construction Qatar W.L.L., Doha, Qatar 49 % QAR 44,646 8,700 QAR 44,466 8,272

Area of Sports GmbH & Co. KG, Mönchengladbach 50 % 10 2,215

Projektverwaltungsgesellschaft Mönchengladbach Area of Sports

mbH, Mönchengladbach 50 % 25 0

Uferpalais Projektgesellschaft mbH & Co. KG, Essen 50 % 5 (694)

Uferpalais Verwaltungsgesellschaft mbH, Essen 50 % 23 (2)

Bau und Grund GmbH & Co. KG, Freiburg3 6 65 % 25 107

Bau und Grund Verwaltungsgesellschaft mbH, Freiburg 4 6 65 % 23 0

Deutsche Baumanagement GmbH, Essen5 100 % 50

NX.Forum GmbH & Co. KG, Essen5 100 % 2

NX.Forum.Verwaltungs GmbH, Essen5 100 % 25

HOCHTIEF CZ a.s., Prague, Czech Republic 100 % CZK 1,071,049 39,854 CZK 109,775 4,384

HOCHTIEF Polska Sp. z o.o., Warsaw, Poland 99.83 % PLN 120,167 28,931 PLN 52,030 14,749

Other participating interests

HOCHTIEF CANADA INC., Ontario, Canada 100 % CAD 8,202 4,825 CAD (190) (121)

LLC HOCHTIEF Ukraine, Dnipropetrovsk, Ukraine6 100 % UAH (62,372) (8,383) UAH (58,950) (8,488)

HOCHTIEF Construction AG Infrastructure

Polska sp.j., Warsaw, Poland6 70 % PLN 10,609 2,952 PLN 10,109 2,678

Bau und Grund AG, Metzingen6 90 % (1,723) (1,418)

Projektentwicklungsgesellschaft acht bis elf mbH, Cologne6 51 % 21 (1)

HOCHTIEF Construction Chiloe Ltda.,

Santiago, Chile6 50 % CLP 551 1 CLP (289) 0

CONTUR Wohnbauentwicklung und Projektsteuerung GmbH &

Co. KG, Düsseldorf6 49.50 % 25 (1,198)

CONTUR Wohnbauentwicklung GmbH, Düsseldorf6 50 % 17 (1)

SEVERINS WOHNEN GmbH & Co. KG, Cologne6 50 % 25 (685)

Projektverwaltungsgesellschaft SEVERINS WOHNEN mbH,

Cologne6

50 %

23

(2)

1. WohnArt Projektentwicklung GmbH & Co. KG, Hamburg6 50 % 25 (173)

WohnArtVerwaltungsgesellschaft mbH, Hamburg6 50 % 27 1

E. Pihl & Son A.S.-HOCHTIEF Construction AG sp. j.,

Warsaw, Poland6 50 %

PLN 3,258

850 PLN (2,428)

(623)

Skyliving GmbH & Co. KG, Hamburg6 50 % 10 (24)

Skyliving VerwaltungsGmbH, Hamburg6 50 % 26 1

Verwaltungsgesellschaft Lister Gracht GmbH, Hanover6 100 % 25 0

Stadion Magdeburg GmbH & Co. KG, Magdeburg6 49.50 % 10 (732)

Stadion Magdeburg Verwaltungsgesellschaft mbH, Magdeburg6 49.40 % 26 (1)

Mélyépítő Budapest Kft., Budapest, Hungary7 29.60 %

RMZ HOCHTIEF Construction (India) Pvt. Ltd., Bangalore,

India8

50 %

INR 80,000

1,267

INR (34,454)

(580)

Südwestdeutsche Rohrleitungsbau GmbH, Frankfurt am Main6 45 % 3,394 56

1 Income totaling EUR

1,292,000 was transferred to


under the existing profit/loss

transfer agreement.

2 Losses totaling EUR

1,936,000 were transferred to


under the existing profit/loss

transfer agreement.

3 Formerly “Projektgesell-

schaft für Grundstücksent-

wicklung in der Wiehre Frei-

burg GmbH & Co. KG,

Freiburg”

4 Formerly “Projektverwal-

tungsgesellschaft in der

Wiehre mbH, Freiburg”

5 No current annual financial

statements available (estab-

lished 2008)

6 Annual financial statements

as of December 31, 2007

7 No current annual financial

statements available

8 Annual financial statements

as of March 31, 2008

55

Auditor’s Report

We have audited the annual financial statements, compris-

ing the balance sheet, the income statement and the

notes to the financial statements, together with the book-

keeping system, and the management report of the

HOCHTIEF Construction AG, Essen, for the business year

from January 1, 2008 to December 31, 2008. The mainte-

nance of the books and records and the preparation of

the annual financial statements and management report in

accordance with German commercial law are the respon-

sibility of the Company’s Executive Board. Our respon-

sibility is to express an opinion on the annual financial

statements, together with the bookkeeping system, and

the management report based on our audit.

We conducted our audit of the annual financial statements

in accordance with § (Article) 317 HGB („Handelsgesetz-

buch“: „German Commercial Code“) and German general-

ly accepted standards for the audit of financial statements

promulgated by the Institut der Wirtschaftsprüfer (Institute

of Public Auditors in Germany) (IDW). Those standards

require that we plan and perform the audit such that mis-

statements materially affecting the presentation of the net

assets, financial position and results of operations in the

annual financial statements in accordance with (German)

principles of proper accounting and in the management

report are detected with reasonable assurance. Knowl-

edge of the business activities and the economic and

legal environment of the Company and expectations as

to possible misstatements are taken into account in the

determination of audit procedures. The effectiveness of

the accounting-related internal control system and the

evidence supporting the disclosures in the books and re-

cords, the annual financial statements and the manage-

ment report are examined primarily on a test basis within

the framework of the audit. The audit includes assessing

the accounting principles used and significant estimates

made by the Company’s Executive Board, as well as evalu-

ating the overall presentation of the annual financial state-

ments and management report. We believe that our audit

provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit, the an-

nual financial statements comply with the legal require-

ments and give a true and fair view of the net assets, finan-

cial position and results of operations of the Company in

accordance with (German) principles of proper accounting.

The management report is consistent with the annual finan-

cial statements and as a whole provides a suitable view of

the Company‘s position and suitably presents the oppor-

tunities and risks of future development.


PricewaterhouseCoopers

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

Dr. Martin Nicklis ppa. Bernhard Klinke

(German Public Auditor) (German Public Auditor)

Published by:


Opernplatz 2, 45128 Essen, Germany

Telephone: +49 201 824-0,

Fax: +49 201 824-2777

[email protected]

www.hochtief-construction.com

Photo credits:

Christoph Schroll

Archive: Consolis Polska Sp. z o.o.

Thomas Ernsting

This annual report is a translation of

the original German version, which

remains definitive.

As of: February 16, 2009

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