6 Construction projects

EUR 1,000 31 Dec 2014 31 Dec 2013
Percentage-of-completion method, continuing operations

Revenue recognised according to the percentage-of-completion method 1,654,052 1,705,601
Incurred costs and recognised net profits (less booked losses) of work in progress projects 1,467,033 1,150,364
Gross project-related receivables from clients 32,732 58,479
Gross project-related liabilities to clients 67,424 56,547

Service concession arrangements

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

Kuopio

Lemminkäinen PPP Oy (the service provider), signed a contract 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 renovates the properties and constructs new buildings as set out in the contract agreements made with the financier. City of Kuopio will gain possession of the buildings after handover. Lemmikäinen PPP Oy manages 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 tied to the construction cost index and reference rate. The financier pays 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.

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. 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 all other buildings except Pohjantie School have expired and the warranty period guarantees have been returned. The investment phase of the project has proceeded according schedule, as well as cost and quality objectives.

The building maintenance 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 a contract 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.

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. 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. City of Oulu itself will serve as the contract subscriber for the sites it also finances. The contracts are fixed-price and tied to the construction cost 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.

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 taking into consideration the interests of the service provider. 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 and the investment phase was completed in the summer of 2014. The service period begun on 1 June 2014 and will end in 2039. 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 budgeted profit margin for the investment phase had to be cut down. Services for the maintenance and upkeep period have been implemented according to plan and no service or usability deduction have been made.

Pudasjärvi

Lemminkäinen PPP Oy (the service provider), signed a contract agreement with the City of Pudasjärvi (the subscriber) on 13 March 2014. The project includes the design, construction and maintanance of Pudasjärvi school campus. The school will be built of timber. The service provider is responsible for building management and maintenance for a period of 25 years, that is until 2041. The total value of the project is EUR 41 million.

City of Pudasjärvi owns the land where the school is built. The service provider will construct the new buildings as set out in the contract agreement made with the subscriber. City of Pudasjärvi 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. City of Pudasjärvi itself will serve as the contract subscriber for the sites it also finances. The contracts are fixed-price and tied to the construction cost index. The subscriber will pay the contract prices in installments as set out in the contract agreements. The service provider doesn’t have the right to arrange supplementary use of the properties. The service contract is automatically terminated at the end of the contract period and neither party has the possibility to terminate the contract during the contract period unless there has been a breach of the contract.

The construction phase of the Pudasjärvi School Campus began in the late spring of 2014 and the investment phase ends in the summer of 2016. The project has mostly proceeded according to schedule, as well as quality and cost objectives.

 
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