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GSP Will Not Meet the Deadline for the Financial Closing

Friday, January 20, 2017 7:34 pm EST

Dateline:

LIMA, Peru

Public Company Information:

NYSE:
GRAM
PE:
GRAMONC1
"Our interest when joining the Southern Gas Pipeline project was for the project to materialize, since it is very important for the development of the country's energy system and it is a strategic business commitment for the Group"

LIMA, Peru--(BUSINESS WIRE)--As it is known, the concessionaire in charge of the Peruvian Southern Gas Pipeline project has been working for months to make the financial closing feasible and allow the project to continue its course. The deadline to reach this is January 23rd. However, as a matter of public knowledge, one requirement to achieve the financial closing was that Odebrecht had to sell its shares in the project, which has not yet occurred.

Today we can confirm that the financial closing will not occur before January 23rd, which is the deadline that had been stipulated in the contract, therefore the Peruvian Government is entitled to terminate the concession contract, whose shareholders are Odebrecht (55%), Enagás (25%) and Graña y Montero (20%).

The next step will be to carry out a bidding process for the concession, with GSP having the right to receive the amount obtained from the auction, being 72.25% of the Net Book Value (total amount invested in the project) the minimum to receive.

Likewise, the concession contract states that the termination of the contract entails the execution of a Performance Guarantee, which amounts to US$ 262,500,000, of which our subsidiary Negocios de Gas S.A. is responsible for 20%. This amount is equivalent to US$ 52,500,000.

Graña y Montero (NYSE: GRAM) (BVL: GRAMONC1) estimates that it could recover a significant percentage of the investment made in the Southern Gas Pipeline project, in an estimated maximum term of 3 years.

As it is known, Graña y Montero entered the project 15 months after the awarding took place. This was achieved through an increase in capital which allowed it to acquire a 20% stake in the project, with the objective of reducing Odebrecht's participation due to the problems it faced in Brazil.

"Our interest when joining the Southern Gas Pipeline project was for the project to materialize, since it is very important for the development of the country's energy system and it is a strategic business commitment for the Group," said Mario Alvarado Pflucker.

He also added that Graña y Montero will continue betting on energy projects in Peru and the region, as it is one of the resources that are most needed to boost development.

Facts about Graña y Montero’s participation in GSP

  • In September 2015, Graña y Montero agreed to enter GSP with a 20% stake, making a capital increase. This was requested by Enagás and the banks that would finance the project, with the objective to reduce Odebrecht’s participation due to the problems that it faced in Brazil.
  • After the allegations in Brazil since March 2016, both Enagás and Graña y Montero took on a more active role in seeking alternatives to carry out the project without Odebrecht (while they were selling their shares).
  • Graña y Montero has been interested in GSP since the beginning of the project as it considers it vital for the development of the country. In addition, it was the most important project to be developed in the Oil & Gas sector where the Group has a strategic commitment for which it has been preparing for a long time, with the acquisition of COGA in 2014, which is a component of it.

About Graña y Montero S.A.A.

Founded in 1933, Graña y Montero is the only Peruvian engineering and construction company listed on the Lima Stock Exchange since 1997 and in the NYSE since 2013. The Company has participated in the development of major engineering and construction projects in Peru, including large-scale, complex projects in the energy, mining, construction and real estate sectors.

It currently has subsidiaries in Chile and Colombia, and has been executing major projects in Panama, Bolivia, Jamaica and Ecuador. By the end of 2015, the Group’s international revenues amounted to approximately US$ 600 million.

With 83 years of operations, the Company has leveraged its engineering and construction expertise into complementary lines of business, such as the development, ownership, operation and maintenance of infrastructure assets, real estate developments, and the provision of technical services. The Company has significant investments in infrastructure concessions, such as three toll roads and Line 1 of the Lima Metro.

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