6 INFORMATION ON CONSTRUCTION PROJECTS

EUR 1,000 31 Dec 2013 31 Dec 2012
Percentage-of-completion method

Revenue recognised by the percentage-of-completion method 1,903,636 1,940,288
Incurred costs and recognised net profits (less booked losses) of work in progress projects 1,250,393 924,809
Gross project-related receivables from clients 67,165 62,851
Gross project-related liabilities to clients 61,192 46,503



Service concession arrangements

Lemminkäinen currently has two major ongoing life-cycle projects, which are located in Kuopio and Oulu.

Kuopio

Lemminkäinen PPP Oy (the service provider), signed the agreement with Kiinteistö Oy Kuopion koulutilat (the financier) on 14 December 2009. The project comprises of new construction and renovation works for four schools and one day-care center. The service provider is responsible for building management and maintenance for a period of 25 years. The total value of the project is EUR 93.5 million.

The financier owns the current buildings and land. The service provider will renovate the properties and construct new buildings as set out in the contract agreements made with the financier. The City of Kuopio will gain possession of the buildings after handover. Lemmikäinen PPP Oy will manage the buildings for a period of around 25 years pursuant to the service agreement. Kuopio will serve as the contract agreement client for the sites it financed and as the representative of the financier. The contracts are fixed-price and are tied to the cost of construction index and reference rate. The financier will pay the contract prices in installments as set out in the contract agreements. The service provider shall not have the right to use any of the properties or to organise supplementary use.

The City of Kuopio shall have the right to terminate the agreement with a six-month period of notice, subject to certain additional terms and conditions concerning the service provider. The City of Kuopio shall have the right to terminate the agreement after the 10th and 20th years of the agreement, that is, in 2021 and 2031. The service provider shall have the right to terminate the agreement with a six-month period of notice, if the financier or the City of Kuopio neglect their payment obligations for 90 days.

The construction phase is ready for all of the buildings belonging to the project. The investment phase warranty periods for the two first sites to be completed (Martti Ahtisaari school and Puijonsarvi School) have already expired and the warranty period guarantees have been returned. The warranty periods for Rajala school and Puijonlaakso day-care center will continue until 2014 and for Pohjantie school until 2015. The investment phase of the project has proceeded according schedule, as well as cost and quality objectives.

The building maintanance and upkeep period (the service period) is in progress for all of the sites. The services have been provided according to plan and no service or usability deductions have been made.

Oulu

Lemminkäinen PPP Oy (the service provider), signed the agreement with the City of Oulu (the subscriber) on 1 June 2012. The project includes the new construction of Oulun Kastelli community center, dismantling of the Tenavalinna day care center and arranging temporary spaces. The service provider is responsible for building management and maintenance for a period of 25 years. The total value of the project is EUR 86 million.

The City of Oulu owns the current buildings and land. The service provider will construct the new buildings as set out in the contract agreement made with the subscriber. The City of Oulu will gain possession of the buildings after handover. Lemmikäinen PPP Oy will manage the buildings for a period of around 25 years pursuant to the service agreement. The city of Oulu itself will serve as the contract subscriber for the sites it also finances. The contracts are fixed-price and are tied to the cost of construction index and reference rate. The subscriber will pay the contract prices in installments as set out in the contract agreements. The service provider has the right to arrange supplementary use of the properties according to terms pre-agreed terms as well as the right to charge fees for the supplementary use. The company has not recognised an intangible asset for the right for supplementary use because of the uncertainty related to its usability.

The City of Oulu shall have the right to terminate the agreement with a six-month period of notice, subject to certain additional terms and conditions. The service provider shall have the right to terminate the agreement with a six-month period of notice, if the City of Oulu neglect their payment obligations for 90 days

The construction phase of the Kastelli community center began in the late spring of 2012. All construction work must be completed by the autumn of 2014, when the service period begins. The project has mostly proceeded according to schedule, as well as quality and cost objectives. However, the accumulated costs for the construction work have exceeded the target level and the calculated profit margin for the investment phase must have been cut down.