TECNIMONT – COMPANY INTRODUCTION AND OVERVIEW OF RISK MANAGEMENT PROCESSES

Fabrizio BosiaVice PresidentQuality, Health & Safety, Environment

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

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

AGENDA

2Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

AGENDA

3Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

MAIRE TECNIMONT’S PROFILE

The Group combines high quality and planning standards with a focus on multicultural and environmental issues.

With a workforce of over 4,500employees, of which more than half are located abroad, at 31 December 2009 Maire Tecnimontreported revenues of 2,164 million Euro and a backlog of 4,728 million Euro.

Maire Tecnimont is a leading Engineering and Main Contracting Group operating worldwide in the Oil, Gas & Petrochemicals, Power, Infrastructure and Civil Engineering sectors. The Group also has key competences in licensing and IP, and specific focus in renewable energy. With a presence in approx. 30 countries and 4 continents, the Group currently controls about 40operative companies, with main Italian offices in Rome, Milan and Turin.

The Group’s success and reputation have been achieved because of its strong technology orientation and its advanced skills in Project Management, Engineering, Procurement and Construction services for the implementation of complex projects worldwide. It has developed and demonstrated major expertise in managing large EPC projects on a turnkey basis in different countries and regions.

4Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

5

STRUCTURE

Engineering & Main Contracting

Licensing and IP Group Center

Renewable Energies Corporate Initiatives

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

EXTENSIVE INTERNATIONAL PRESENCE

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

Presence of Maire Tecnimont* Figures as of 31.12.09

6

MANPOWER*

ITALY

EUROPE

ASIA

SOUTHAMERICA

TOTAL

2,173

296

1,942

127

4,538

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

INTERNATIONAL ENGINEERING CENTRES

Paris (France):natural gas

treatment plants and LNG regas. terminals

Turin (Italy):power, civil and

industrial buildings, infrastructures

Brindisi (Italy): polyolefin plants

Rome (Italy): underground/above ground rail systems

Salzgitter(Germany): LDPE plants

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

EPC COORDINATION

Mumbai (India):C&P and

O&G plants, electrical

instrumentation

Bergamo (Italy): PET, nylon,

acrylic fibres,renewables

7

Sittard(The Netherlands):

leadership in urea-licensing

Global Engineering Systemassisted by a common IT platform, able to support different activities in many

sectors

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

AGENDA

8Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

9

TECNIMONT OVERVIEW

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

Integrated system of services and

installations in Oil, Gas &

Petrochemicals, Power, and

Infrastructure & Civil Engineering.

Leading role in managing complex

EPC project worldwide.

World-class patrimony of engineering

and project management expertise with

high competences in technological and

process innovation.

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

10

TECNIMONT BUSINESS UNITS

Oil, Gas & Petrochmicals

Infrastructure & Civil EngineeringPower

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

11

MAIN EPC ACHIEVEMENTS

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

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

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

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

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

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

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

Business Description

Main Clients

OIL, GAS & PETROCHEMICALS BUSINESS UNIT

12Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

13

RABIGH POLYOLEFINS PROJECT

Location: Rabigh, Saudi Arabia

Value: € 1,200 mn (MT share: € 635 mn)

Client: Petro Rabigh

Capacity: ('50,000 t/y polymer-grade butene-1 (Axens technology)', '250,000 t/y EPPE

(Sumitomo technology)', '350,000 t/y LLDPE (Sumitomo technology)', '300,000 t/y HDPE

(Basell Hostalen technology)', '2x350,000

AROMATICS COMPLEX – SHUAIBA (KUWAIT)

768 KTY PX; 325 KTY BZ

Client: KUWAIT PARAXYLENE PRODUCTION COMPANY (KPPC)

Contract type: EPC

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

OIL , GAS & PETROCHEMICALS – recently completed projects

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

POWER BUSINESS UNIT

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

industrial use‒ district heating systems

Business Description

Main Clients

14Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

15

COMBINED CYCLE 840 MW – TURBIGO (ITALY)

Client: EDIPOWER

Contract Type: EPC

Value: €224mn (MT share 35%)

COMBINED CYCLE 800 MW – ALTOMONTE (ITALY)

Client: EDISON

Contact Type: EPC

Value: €181mn

POWER – recently completed projects

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

The Infrastructure & Civil Engineering Business Unit designs andbuilds complex infrastructure with the ability to combine specialised competences.

Through partial or global services, it participates in the realisationof:

‒railways including high speed/high capacity

‒highways and motorways

‒tunnels

‒metro systems

Business Description

Main Clients

INFRASTRUCTURE & CIVIL ENGINEERING BUSINESS UNIT

16

The Business Unit also offers highly specialized services in:‒re-qualification of industrial sites, design and build of complex works ( hospitals, universities, offices, facilities)

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

17

INFRASTRUCTURE & CIVIL ENGINEERING – recently completed projects

HIGH SPEED RAILWAY TURIN-MILAN (ITALY)

Client: TAV (Italian State Railways)

Contract type: DB share + D

Value: €6.7bn (MT share €380mn)

HIGH SPEED RAILWAY FLORENCE-BOLOGNA (ITALY)

Client: TAV

Contract Type: DB share + D

Value: €4.8bn (MT share €490mn)

TURIN UNDERGROUND LINGOTTO – EXT. MARCONI–LINGOTTO

Client: GRUPPO TORINESE TRASPORTI

Contract Type: DB share + D

Value: ~ €100mn (MT share 51%)

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

1. Maire Tecnimont’s Profile

2. Tecnimont Overview

3. Tecnimont’s Risk Analysis

AGENDA

18Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

19

Since November 2008 Tecnimont Group has been following a strict procedure as far as the

Project Risks Analysis is concerned.

Uncertainty itself is the unknown result of a variable or an event

and consists in following two main elements:

•Event with negative impact (Risk);

•Event with positive impact (Opportunity).

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

20

The scope of the Project Risks Analysis is:

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

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

increase the Project profitability;

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

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

contingency amount for their coverage;

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

Company Management;

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

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

21

Risk Analysis is broadly defined to include the following phases:

•Risk Assessment;

•Risk Communication;

•Risk Management.

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

22

Risk Assessment involves:

•Identifying sources of potential harm;

•Assessing the probability that harm will occur;

•And the possible consequences;

•Calculating the magnitude of the event;

•Identifying mitigation plans.

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

23

Risk Communication:

•Evaluates which risks require management;

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

are controlled;

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

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

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

24

Risk management involves:

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

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

effectiveness of the selected actions.

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

25

THE SOONER, THE BETTER.

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

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

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

26

The Project Risks are preliminarily assessed during the “Bid – No Bid” phase by a dedicated

committee from the Board of Tecnimont which decides whether to proceed with the project

or not. The Project Risk Analysis continues during the proposal phase and during the

execution phase.

During the proposal phase it is carried out before the final quotation in order to evaluate

and mitigate the negative events and to be very clear and careful when defining the

contingencies.

During the execution phase it is periodically carried out in order to update the identification

and mitigation actions, and to control how the contingency amount is managed during the

project development.

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

27

The responsible for the Risk Analysis is

•The Proposal Manager (during the proposal phase)

•The Project Manager (during the execution phase)

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

28

The Proposal Manager:

• Calls the risk assessment meetings involving the team;

• Identifies the mitigation strategies and the Risk Owners;

• Evaluates the risks;

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

events;

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

contingency amount for the life of the project;

• Reports the results to the Company Top Management;

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

part of the commercial budget.

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

29

The Project Manager:

• Acknowledges and reviews the Risk Analysis;

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

them at different stages of the Project execution lifecycle;

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

effectiveness;

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

coverage of each Project risk as per their current status;

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

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

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

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

30

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

• Political and Local

• Physical and Site

• Cost Estimation

• Contractual

• Financial

• Client

• Execution

• HSE

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

31

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

• If the risks occur, they become costs.

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

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

BASICENGINEERING

DETAIL ENGINEERING &PROCUREMENT

CONSTRUCTION, COMMISSIONING & START-UP

PROJECT EXECUTION RISKS

No

t

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

32

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

R = M * P

Where:

• R Risk

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

• P Probability that harm will occur

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

33

Both during the project proposal phase and the project execution phase the Risk Register is

the key element.

P

M

TECNIMONT’S RISK ANALYSIS

For each risk, the risk exposure distribution curve

shall be defined by the following three points:

• Highest impact scenario;

• Medium impact scenario;

• Lowest impact scenario.

ITEM RISK DESCRIPTION

STATUS

Yes /No

RISK OWNER

Responsible for the Actions

MITIGATION ACTION

Done / To Do Actions / RiskOpp starting & closing dates / Expected & Obtained Results or

Comments

ESTIMATE BASIS

Values used as reference / Explanations

AVERAGE RISK VALUE

Magnitudo ($)

P % Magnitudo ($)

P % Magnitudo ($)

P % ($)

LOWEST IMPACT SCENARIO

MEDIUM IMPACT SCENARIO

HIGHEST IMPACT SCENARIO

Data for Risk / Opportunity Management Data for Quantitative Analysis and Contingency Assessment

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

4.4Failure to meet minimum performance levels in the Offsite and Utilities Units (make good

obligations)

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

34

Starting from risk exposure distribution, the Monte Carlo simulation produces the

distribution curve of the combined risks and the cumulative risk curve.

This makes it possible to understand which is the probability that the contingency amount

will be sufficient to cover the risks during the execution phase and up to the end of the

project.

TECNIMONT’S RISK ANALYSIS

Tecnimont – Company Introduction and Overview of Risk Management ProcessesECRI Madrid Sponsors Meeting – 2nd June, 2010

Rome Via di Vannina, 88/94

00156 RomePh. +39 06 4122 351

Fax +39 06 4122 35610

MilanViale Monte Grappa, 3

20124 MilanPh. +39 02 6313.1

Fax +39 02 6313.9052

TurinCorso Ferrucci, 112/a

10138 TurinPh. +39 011 0056111Fax +39 011 0056444

FlorenceViale L. Ariosto 24/b

50124 FlorencePh. +39 055 2280609Fax + 39 055 2335517

info@mairetecnimont.it – www.mairetecnimont.it