Salini Impregilo has been a very successful Italian international construction and civil engineering firm. The Milan-based company came into being in 2014 after the family-owned Salini construction company started acquiring shares in another company, Impregilo, in 2011. Salini gradually increased its stake in Impregilo until it won a proxy shareholder fight for control of the company. The combined business has been winning global contracts in everything from hydro dams and rail projects to bridges and highways.
Salini Impregilo could be about to get even more successful, thanks Progetto Italia - a modus operandi among commercial rivals, investors and the government. Progetto Italia – Project Italy - is a blueprint to save Italy’s moribund domestic construction sector from self-destructing.
Salini is working on building a new Genoa bridge – PerGenova - after the tragic collapse of the cable-stayed Morandi Bridge during a storm in August 2018. By early March this year, Salini and its joint-venture partner Fincantieri reported that they had completed the last pier and installed a 100m section of the deck that stretches above the Polcevera River. This milestone meant the joint venture had finished 650m of the deck across 11 of 19 spans.
The Genoa bridge, with up to 1,000 people, including suppliers’ personnel onsite, is on schedule for completion.
But a lot more is riding on the Genoa bridge project than it being simply a successful infrastructure contract. It is a showcase for what can be done in a country which has been wracked by closed – blocked - construction sites with thousands of workers laid off, all thanks to legal, political and financial problems.
For more than a year Salini has been working on Project Italy in order to help Italy’s construction sector that is in crisis with many companies – especially smaller ones – going to the wall over delayed projects and debts. Five of the 10 biggest builders are restructuring their debt: Astaldi, Società Italiana Condotte d’Acqua, C.M.C., Grandi Lavori Fincosit and Trevi. Hundreds of projects, large and small, are stalled – blocked as a result.
Salini, however, is in rude financial health and is seen as “last man standing”, according one observer. It has the financial resources, the engineering expertise and the political clout to turn the national situation around.
According to an end-of-year financial statement, as of December 2019, Salini’s revenues were in line with expectations at €5.33 billion. EBITDA was €422.6 million with an EBITDA margin of 7.9%. Salini also completed a financial turnaround of Lane, a leading heavy civil construction company in the US that it bought in 2016. Lane specialises in highways, bridges, tunnels, mass transit and airport systems, many through design-build and public-private partnerships.
The future looks assured for Salini. The company’s order backlog is €36.2 billion, of which €29.5 billion relates to construction and €6.5 billion to concessions. New orders acquired in 2019 amounted to about €8.1 billion. Importantly, around 75% of new orders in 2019 were in Australia, the US and Europe, “confirming the group’s commercial strategy of expanding the order book in markets with a low-risk profile”, notes the financial statement.
For Project Italy, the Genoa bridge project is "a model" of what can, and should, happen in Italy, according to a spokesperson. “With the help of the government, since all of the projects are overseen by the public sector, the hope is that the fast-track procedure given to the construction of the bridge in Genoa will be applied on other projects in Italy, as suggested by members of the coalition government,” he said. “It shows that things can get done in this country when we put our minds to it.”
Part of Project Italy is Salini’s soon-to-be-completed majority-stake takeover of Astaldi, a financially stressed global Rome-based construction and concessions group. Astaldi is now under a creditor protection scheme and is in the process of selling its 33.3% stake in the Third Bosphorus Bridge north of Istanbul. Salini has hammered out a deal whereby it won’t take on Astaldi’s debt but will keep the company going and create a new name for the Salini Group – Webuild.
In Salini’s own words, Progetto Italia is a long-term vision to create “a national construction hub and bring together in a new company some of the biggest sector players in Italy…[that] will focus on large infrastructure projects exceeding €250 million."
The larger group will be more competitive internationally, “reaching a scale that is aligned with those of its competitors in order to seize the best opportunities on the markets.". It will create “specialisations in Italy, creating more employment for Italian citizens both at home and abroad."
For the Genoa bridge project there is a government-appointed “commissionaire” to oversee progress and who has the power to quickly and efficiently remove obstacles. It remains to be seen if the model will be applied on other projects, according to Salini.
For its part, Salini has set up a “Strategic Committee” for the duration of Progetto Italia and with an advisory role to the company’s board of directors. On the committee are independent directors Francesca Balzani, Nicola Greco and Marina Natale along with Salini director Pierpaolo Di Stefano and chief executive Pietro Salini.
The Genoa bridge is a test case for Pogetto Italia, according to the company. PerGenova is a joint venture established by Fincantieri and Salini Impregilo to design and build the Polcevera Viaduct (Genoa bridge) on Italy's A10 motorway. “The joint venture represents an example of collaboration between two large companies that complement each other and put to the service of Genoa and Italy their unique expertise, acquired through many years of global experience." Construction site activities take place with three eight-hour shifts, “a rhythm necessary for the work to be completed in record time," explains the project’s website.
According to the website dedicated to Project Italy, the scheme will contribute to GDP (gross domestic product) growth – construction already accounts for around 8% of Italian GDP. It will support employment, save between 300,000-400,000 jobs and be a driving force for the entire sector through more than 30 related economic sectors. It will guarantee the construction of ongoing and future infrastructure projects in Italy. Productivity levels will be increased and there will be support for innovation, sustainability and safety within the construction sector.
Corporate expansion is rarely driven by altruism. As was noted in this article, Salini is very successful globally. Salini Impregilo generates more than 90% of its revenue outside its domestic market, Italy, according to Webuildvalue.com, the digital magazine for Saline Impregilo. The group to be created by Progetto Italia would have the scale and resources to compete better against big rivals on the global market.
Salini’s international success has been at the expense of securing a large domestic market share. The company gets only 10% of its revenues in Italy, a situation unlike that for its rival global construction companies. “About 60% of the top 250 groups in the world generate 75% of their revenues in their respective home markets. Such is the case for Vinci in France, ACS in Spain, Skanska in Sweden and Strabag in Austria.”
In Italy, more than 27% of projects in terms of value have gone to foreign builders in the past 15 years. “It is a significant risk for as sector that is considered strategic every else in the world, much like energy and telecommunications. Changing this trend would be the first challenge to be faced by the new group.”
Salini and its backers could be forgiven for playing perhaps a national card in an increasingly international sector. However, as the Webuildvalue website points out, “the [construction] sector is in this country [Italy] is highly fragmented, where about 60% of some 500,000 businesses employ a single person. Just five of the businesses have revenues of more than €1 billion – and four of them are in crisis.”
As the website says, “local businesses keep disappearing, more opportunities are presenting themselves to foreign builders, which often favour bringing their own suppliers from abroad to work on projects to the detriment of local businesses. Foreign builders have also conducted their form of sector consolidation in Italy. Strabag acquired Adanti, while Sacyr works with Consorzio SIS along with other companies.”
What is good for the goose, is good for the gander. Progetto Italia would do exactly as its rivals do, again according to the Webuildvalue website: “In the last three years, Salini Impregilo and Astaldi have had about €4 billion worth of contracts with domestic suppliers, which is equal to 90% of business, generating an average of 20,000 jobs a year. This often leads to either company bringing suppliers overseas with them. Such was the case with the construction of the new Panama Canal where Salini Impregilo had Cimolai built the locks. It is a winning formula in an international market where projects require the highest technical expertise and greatest organisational skills.”
According to a quote from Pietro Salini, “the new [Genoa] bridge will represent Genoa's economic recovery and a new beginning for the whole of Italy. Rebuilding the bridge can become an opportunity for a new Italian Renaissance.”
Italy knows a few things about renaissances. However, will the philosophy of Project Italy be embraced by the rest of the Italian construction sector and if so, how long will it take to see results? When the dust has settled over the current pandemic of COVID-19, the real test for Progetto Italia begins.