UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15b-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of February 2024

 

Commission File Number 001-35991

 

AENZA S.A.A.

(Exact name of registrant as specified in its charter)

 

N/A

(Translation of registrant’s name into English)

 

Av. Petit Thouars 4957

Miraflores

Lima 34, Peru

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F ☒           Form 40-F ☐

 

 

 

 

 

 

February 29, 2024

 

SIGNATURES

 

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AENZA S.A.A.  
     
By: /s/ CRISTIAN RESTREPO HERNANDEZ  
Name:  Cristian Restrepo Hernandez  
Title: VP of Corporate Finance  
Date: February 29, 2024  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AENZA S.A.A. AND SUBSIDIARIES

 

Consolidated Financial Statements

 

As of December 31, 2022 and 2023

 

(Including Independent Auditors’ Report)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Independent Auditors’ Report

 

To the Shareholders and Board of Directors of AENZA S.A.A.

 

Opinion

 

We have audited the consolidated financial statements of AENZA S.A.A. and its subsidiaries (the Company), which comprise the consolidated statements of financial position as of December 31, 2023 and 2022, the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising material accounting policies and other explanatory information.

 

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).

 

Basis for Opinion

 

We conducted our audits in accordance with International Standards on Auditing (ISAs) approved for their application in Peru by the Dean’s Council of the Peruvian Professional Association of Public Accountants. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audits of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants of the (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Peru, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Emphasis of Matter

 

We draw attention to the following matter. Our opinion is not modified in respect of this matter. As described in notes 5(a)(v), 11(b) and 14(a)(i) of the consolidated financial statements, as of December 31, 2023 the Company maintains an account receivable, net of impairment from Gasoducto Sur Peruano S.A. (GSP) for S/ 527.7 million. In December 2017, GSP started bankruptcy proceedings for its liquidation before the Instituto Nacional de Defensa del Consumidor y Propiedad Intelectual (INDECOPI). In addition, during January 2024 the Liquidator was appointed and the Liquidation agreement of GSP was approved by the Board of Creditors after INDECOPI ordered the ex officio liquidation, in order to continue the actions permitted by law and the corresponding legal mechanisms, by which GSP believes it can recover the net book value (NBV) of the concession assets from the Peruvian Government. The recoverability of this account receivable from GSP will depend on the successful of the liquidation process to be executed by the Liquidator appointed by the Board of Creditors.

 

Key Audit Matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

 

 

 

Valuation of the account receivable from Gaseoducto Sur Peruano S.A. (GSP)

 

As of December 31, 2023, the consolidated financial statements includes an account receivable, net of impairment from GSP for S/ 527.7 million. See notes 5(a)( v), 11(b) and 14(a)(i) to the consolidated financial statements. The Company has a 21.49% investment in GSP, which entered into a concession agreement with the Peruvian Government in 2014. In January 2017, the Peruvian Ministry of Energy and Mines early terminated the concession agreement due to the fact that GSP did not accredit the financial closure within the contractual term. In December 2017, GSP started bankruptcy proceedings, in which the Company was part of the GSP’s creditors. In addition, in January 2024, the Liquidator was appointed and the Liquidation agreement of GSP was approved by the Board of Creditors after INDECOPI ordered the ex officio liquidation, in order to continue the actions permitted by law and the corresponding legal mechanisms, by which GSP believes it can recover the net book value (NBV) of the concession assets from the Peruvian Government and, as a consequence, the Company expects to recover this account receivable from GSP.

 

We identified the valuation of the trade account receivable from GSP as a key audit matter due to the significant carrying amount in the consolidated financial statements and the subjective auditor judgment required to evaluate the Company’s assessment of the recoverable amount of this account receivable due to approval of the Liquidation agreement to be executed by the Liquidator appointed. In addition, the assessment of the discount rate used in the determination of the account receivable from GSP required specialized skills and knowledge. In this type of complex and long-term proceedings, the Company´s key assumptions, such as, the recoverability of the NBV of the concession assets and the term of recovery, may vary in the future.

 

Our audit procedures in this area included, among others: Evaluating the Company’s and its external legal advisors’ assessment of the early termination of the concession agreement, and the corresponding conclusions that impacted the assessed recoverable amount of the trade account receivable. Evaluating the report from the Company’s external legal advisors with respect to the recovery process executed by the Board of Creditors. Involving legal professionals with specialized skills and knowledge, who assisted in the evaluation of the expected term of recovery used by the Company. Involving valuation professionals with specialized skills and knowledge, who assisted in the assessment of the discount rate used by the Company as of December 31, 2023 by developing an independent range of discount rates and comparing those to the discount rate used by the Company. Evaluating the adequacy of the consolidated financial statement disclosures.

 

Revenue recognition from construction contracts with customers

 

The Company recorded S/ 2,443.9 million of revenue from construction activities for the year ended December 31, 2023. As discussed in Note 2.W.i to the consolidated financial statements, the Company recognizes revenue from engineering and construction contracts with customers over time using the output method to measure the physical percentage-of-completion, which is based on surveys of performance by the Company’s specialists.

 

We identified the revenue recognition for these engineering and construction contracts with customers as a key audit matter due to the amount of revenue for the year ended December 31, 2023 and the high degree of subjective auditor judgment required to evaluate the Company’s determination of the physical percentage-of-completion based on surveys of performance by the Company’s specialist. Specialized skills and knowledge were also required to evaluate the Company’s determination of the physical percentage of completion.

 

Our audit procedures in this area included, among others: Evaluating the professional qualifications and the knowledge, skills, and ability of the Company’s specialists involved in measuring the contract’s physical percentage-of-completion. For a sample of construction revenue (i) inspecting contracts signed between the Company and customers to evaluate the effects on revenue recognition of the relevant contractual conditions, (ii) assessing the underlying supporting documentation for the revenue recognized, (iii) interviewing and inspecting documentation prepared by project personnel and (iv) involving professionals with specialized skills and knowledge in engineering, who assisted in the evaluation of the physical percentage-of-completion of the sample of construction revenue based on information provided by the Company.

 

 

 

 

Other Information

 

Management is responsible for the other information. The other information comprises the 2023 Integrated Report but does not include the consolidated financial statements and our auditors’ report thereon.

 

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

 

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

 

Auditors’ Responsibilities for the Audits of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs approved for their application in Peru by the Dean’s Council of the Peruvian Professional Association of Public Accountants will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

 

As part of an audit in accordance with ISA approved for their application in Peru by the Dean’s Council of the Peruvian Professional Association of Public Accountants, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

 

 

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

 

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Lima, Peru

 

February 29, 2024

 

Countersigned by:  
   
               
Ronald J. Villalobos (Partner)  
Peruvian Certified Public Accountant  
Registration No. 60262  

 

 

 

 

AENZA S.A.A. and Subsidiaries

 

Consolidated Financial Statements

 

Content   Page
     
Consolidated Statements of Financial Position   5
     
Consolidated Statements of Profit or Loss   6
     
Consolidated Statements of Other Comprehensive Income   7
     
Consolidated Statements of Changes in Equity   8
     
Consolidated Statements of Cash Flows   9-10
     
Notes to the Consolidated Financial Statements   11 - 123

 

S/= Sol
US$= US dollar

 

i

 

 

AENZA S.A.A. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2022 and 2023

 

In thousands of soles  Note  2022   2023 
Assets           
Current assets           
Cash and cash equivalents  9   917,554    1,003,888 
Trade accounts receivable, net  10   1,078,582    1,061,801 
Accounts receivable from related parties  11   27,745    15,443 
Other accounts receivable, net  12   393,195    348,072 
Inventories, net  13   346,783    360,497 
Prepaid expenses      28,098    29,098 
Total current assets      2,791,957    2,818,799 
              
Non-current assets             
Trade accounts receivable, net  10   723,869    768,971 
Accounts receivable from related parties  11   542,392    528,285 
Prepaid expenses      17,293    14,081 
Other accounts receivable, net  12   285,730    311,404 
Inventories, net  13   65,553    70,282 
Investments in associates and joint ventures  14   14,916    12,747 
Investment property, net  15.A   61,924    58,260 
Property, plant and equipment, net  15.B   284,465    307,165 
Intangible assets and goodwill, net  16   787,336    752,456 
Right-of-use assets, net  15.C   50,207    36,295 
Deferred tax asset  23   295,638    255,763 
Total non-current assets      3,129,323    3,115,709 
Total assets      5,921,280    5,934,508 
              
Liabilities             
Current liabilities             
Borrowings  17   574,262    516,029 
Bonds  18   77,100    81,538 
Trade accounts payable  19   1,027,256    1,164,266 
Accounts payable to related parties  11   53,488    44,372 
Current income tax      69,652    38,398 
Other accounts payable  20   705,442    608,828 
Other provisions  21   132,926    117,086 
Total current liabilities      2,640,126    2,570,517 
              
Non-current liabilities             
Borrowings  17   305,631    306,678 
Bonds  18   792,813    741,387 
Trade accounts payable  19   9,757    4,001 
Other accounts payable  20   102,319    509,311 
Accounts payable to related parties  11   27,293    28,564 
Other provisions  21   569,027    98,067 
Deferred tax liability  23   128,308    188,694 
Total non-current liabilities      1,935,148    1,876,702 
Total liabilities      4,575,274    4,447,219 
              
Equity  22          
Capital      1,196,980    1,371,965 
Legal reserve      132,011    - 
Voluntary reserve      29,974    - 
Share Premium      1,142,092    - 
Other reserves      (97,191)   (68,440)
Accumulated results      (1,342,362)   (41,148)
Equity attributable to owners of the Company      1,061,504    1,262,377 
Non-controlling interest  31   284,502    224,912 
Total equity      1,346,006    1,487,289 
Total liabilities and equity      5,921,280    5,934,508 

 

The accompanying notes are part of the consolidated financial statements.

 

1

 

 

AENZA S.A.A. and Subsidiaries
Consolidated Statements of Profit or Loss
For the years ended December 31, 2022 and 2023

 

In thousands of soles  Note  2022   2023 
Revenue           
Revenue from construction activities      2,451,067    2,443,984 
Revenue from services provided      1,104,900    1,103,323 
Revenue from real estate and sale of goods      849,157    754,168 
Total revenue from ordinary activities arising from contracts with customers  24   4,405,124    4,301,475 
Cost             
Cost of construction activities      (2,465,279)   (2,176,767)
Cost of services provided      (874,187)   (842,531)
Cost of real estate and sale of goods      (566,138)   (586,609)
Cost of sales and services  25   (3,905,604)   (3,605,907)
Gross profit      499,520    695,568 
Administrative expenses  25   (214,487)   (219,370)
Other income and expenses  27   (290,614)   13,705 
Operating profit (loss)      (5,581)   489,903 
Financial expenses  26.A   (156,474)   (190,044)
Financial income  26.A   15,454    31,300 
Interest for present value of financial asset or liability  26.B   (86,014)   2,576 
Share of the profit or loss of associates and joint ventures accounted for using the equity method  14   1,907    3,011 
(Loss) profit before income tax      (230,708)   336,746 
Income tax expense  28   (131,346)   (195,625)
(Loss) profit for the year      (362,054)   141,121 
(Loss) profit attributable to:             
Owners of the Company      (451,151)   84,599 
Non-controlling interest      89,097    56,522 
       (362,054)   141,121 
(Loss) profit per share attributable to owners of the Company during the year  33   (0.403)   0.071 
Diluted (loss) profit per share attributable to owners of the Company during the year  33   (0.377)   0.062 

 

The accompanying notes are part of the consolidated financial statements.

 

2

 

 

AENZA S.A.A. and Subsidiaries
Consolidated Statements of Other Comprehensive Income
For the years ended December 31, 2022 and 2023

 

In thousands of soles  Note  2022   2023 
(Loss) profit for the year     (362,054)  141,121 
Other comprehensive income           
Items that may be subsequently reclassified to profit or loss           
Reclassification from other comprehensive income to profit and loss      (7,461)   - 
Foreign currency translation adjustment, net of tax      (20,911)   29,056 
Exchange difference from net investment in a foreign operation, net of tax      (289)   (168)
Other comprehensive income for the year, net of tax  29   (28,661)   28,888 
Total comprehensive income for the year      (390,715)   170,009 
Comprehensive income attributable to:             
Owners of the Company      (479,713)   113,350 
Non-controlling interest      88,998    56,659 
       (390,715)   170,009 

 

The accompanying notes are part of the consolidated financial statements.

 

3

 

 

AENZA S.A.A. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2022 and 2023

 

In thousands of soles   Note   Number of
shares in
thousands
    Capital     Legal
reserve
    Voluntary
reserve
    Share
premium
    Other
reserves
    Accumulated
results
    Total     Non-controlling
interest
    Total  
Balances as of January 1, 2022         871,918       871,918       132,011       29,974       1,131,574       (68,629 )     (893,803 )     1,203,045       252,965       1,456,010  
(Loss) profit for the year         -       -       -       -       -       -       (451,151 )     (451,151 )     89,097       (362,054 )
Foreign currency translation adjustment         -       -       -       -       -       (20,814 )     -       (20,814 )     (97 )     (20,911 )
Reclassification from other comprehensive income to profit and loss         -       -       -       -       -       (7,461 )     -       (7,461 )     -       (7,461 )
Exchange difference from net investment in a foreign operation         -       -       -       -       -       (287 )     -       (287 )     (2 )     (289 )
Comprehensive income of the year         -       -       -       -       -       (28,562 )     (451,151 )     (479,713 )     88,998       (390,715 )
                                                                                     
Transactions with shareholders:                                                                                    
Dividend distribution   32     -       -       -       -       -       -       -       -       (19,847 )     (19,847 )
Acquisition of (profit distribution to) non-controlling interests, net         -       -       -       -       -       -       -       -       (36,879 )     (36,879 )
Capital increase for bond’s conversion         325,062       325,062       -       -       10,518       -       -       335,580       -       335,580  
Dilution of non-controlling shareholders         -       -       -       -       -       -       2,592       2,592       (735 )     1,857  
Total transactions with shareholders         325,062       325,062       -       -       10,518       -       2,592       338,172       (57,461 )     280,711  
Balances as of December 31, 2022         1,196,980       1,196,980       132,011       29,974       1,142,092       (97,191 )     (1,342,362 )     1,061,504       284,502       1,346,006  
Balances as of January 1, 2023         1,196,980       1,196,980       132,011       29,974       1,142,092       (97,191 )     (1,342,362 )     1,061,504       284,502       1,346,006  
Profit for the year         -       -       -       -       -       -       84,599       84,599       56,522       141,121  
Foreign currency translation adjustment         -       -       -       -       -       28,918       -       28,918       138       29,056  
Exchange difference from net investment in a
foreign operation
        -       -       -       -       -       (167 )     -       (167 )     (1 )     (168 )
Comprehensive income of the year         -       -       -       -       -       28,751       84,599       113,350       56,659       170,009  
Transactions with shareholders:                                                                                    
Dividend distribution   32     -       -       -       -       -       -       -       -       (102,033 )     (102,033 )
Acquisition of (profit distribution to) non- controlling interests, net         -       -       -       -       -       -       -       -       (13,678 )     (13,678 )
Capital increase   22.A     174,985       174,985       -       -       (88,000 )     -       -       86,985       -       86,985  
Reserve reclassification   22.B,C     -       -       (132,011 )     (29,974 )     (1,054,092 )     -       1,216,077       -       -       -  
Dilution of non-controlling shareholders         -       -       -       -       -       -       538       538       (538 )     -  
Total transactions with shareholders         174,985       174,985       (132,011 )     (29,974 )     (1,142,092 )     -       1,216,615       87,523       (116,249 )     (28,726 )
Balances as of December 31, 2023         1,371,965       1,371,965       -       -       -       (68,440 )     (41,148 )     1,262,377       224,912       1,487,289  

 

The accompanying notes are part of the consolidated financial statements.

 

4

 

 

AENZA S.A.A. and Subsidiaries
Consolidated Statements of Cash Flow
For the years ended December 31, 2022 and 2023

 

In thousands of soles  Note  2022   2023 
Operating activities           
(Loss) profit before income tax      (230,708)   336,746 
Adjustments to profit not affecting cash flows from operating activities:             
Depreciation  15   74,988    76,026 
Amortization of intangible assets  16.iii   102,035    160,879 
Impairment (reversal) of inventories  13.f   (1,972)   - 
Impairment of accounts receivable and other accounts receivable  25(iv) y 27.C   182,114    - 
Reduction of trade payables  27   (5,244)   (407)
Impairment of property, plant and equipment  25   10,187    - 
Impairment of intangible assets  16   2,530    - 
Reclassification from other comprehensive income to profit and loss      (7,461)   - 
Other provisions  21   294,337    32,997 
Renegotiation of liability for acquisition of non-controlling Morelco  27.a   (3,706)   - 
Financial expense, net      159,774    154,095 
Impairment of investment  27.c   14,804    - 
Insurance recovery      -    (7,183)
Share of the profit and loss of associates and joint ventures accounted for using the equity method  14 (a) and (b)   (1,907)   (3,011)
Reversal of provisions  21   (11,930)   (17,966)
Disposal (reversal) of assets      137    (5,980)
Profit on sale of property, plant and equipment      (3,889)   (4,991)
Loss (profit) on remeasurement of accounts receivable and accounts payable, net      87,477    (2,576)
Net variations in assets and liabilities:             
Trade accounts receivable      (336,106)   (28,640)
Other accounts receivable      (133,349)   55,517 
Other accounts receivable from related parties      22,572    26,410 
Inventories      78,899    (15,979)
Prepaid expenses and other assets      16,545    9,802 
Trade accounts payable      130,929    131,664 
Other accounts payable      (86,194)   (188,223)
Other accounts payable to related parties      (4,737)   (23,120)
Other provisions      (41,000)   (9,291)
Interest paid      (145,773)   (161,473)
Payments for purchases of intangible assets - Concessions      (5,645)   (5,900)
Income tax paid      (124,047)   (150,628)
Net cash provided by operating activities      33,660    358,768 
Investing activities             
Proceeds from sale of property, plant and equipment      11,274    9,816 
Interest received      12,894    31,225 
Dividends received  14 (a) and (b)   380    5,175 
Acquisition of investment property      (53)   (193)
Acquisition of intangible assets      (159,512)   (117,856)
Acquisition of property, plant and equipment      (63,155)   (71,277)
Net cash applied to investing activities      (198,172)   (143,110)

 

5

 

 

AENZA S.A.A. and Subsidiaries
Consolidated Statements of Cash Flow
For the years ended December 31, 2022 and 2023

 

In thousands of soles  Note  2022   2023 
Financing activities           
Borrowing received      493,031    281,653 
Payment of borrowings received  17.i   (216,195)   (314,335)
Payment of leases  17.i   (8,536)   (819)
Payment of bonds issued      (56,745)   (69,694)
Payment of debt transaction costs      (13,736)   (9,959)
Dividends paid to non-controlling interest  32   (34,477)   (86,926)
Cash received (return of contributions) from non-controlling shareholders      (36,879)   (13,678)
Capital increase      -    86,985 
Net cash provided (applied to) by financing activities      126,463    (126,773)
(Net decrease) net increase in cash      (38,049)   88,885 
Exchange difference      (1,575)   (2,551)
Cash and cash equivalents at the beginning of the year      957,178    917,554 
Cash and cash equivalents at the end of the year  9   917,554    1,003,888 
Non-cash transactions:             
Capitalization of interests      937    832 
Acquisition of right-of-use assets      21,567    3,792 
Dividends declared to non-controlling interest  32   1,995    15,107 
Capitalization of convertible bonds  22   335,580    - 

 

The accompanying notes are part of the consolidated financial statements.

 

6

 

 

AENZA S.A.A. and Subsidiaries
Notes to the Consolidated Financial Statements

 

1.General Information

 

A.Incorporation and Operations

 

AENZA S.A.A., (hereinafter the “Company” or “AENZA”) is the parent of the AENZA Corporation that includes the Company and its subsidiaries (hereinafter, the “Corporation”) and is mainly engaged in its investments in the different companies of the Corporation. In addition, the Company provides specialized management consulting services and operational leasing of offices to the companies of the Corporation. The Company registered office is at Av. Petit Thouars No 4957, Miraflores, Lima.

 

The Corporation is a conglomerate of companies whose operations encompass different business such as engineering and construction, energy, infrastructure (public concession ownership and operation) and real estate business. See details of the Corporation’s operating segments in note 7.

 

B.Authorization for the Financial Statements Issuance

 

The consolidated financial statements for the year ended December 31, 2023 have been prepared and issued with authorization of Management and the Board of Directors on February 29, 2024 and will be presented for consideration and approval to the General Shareholders’ Meeting that will be held within the terms established by Law. In Management’s opinion, the financial statements as of December 31, 2023, will be approved without any modifications.

 

The consolidated financial statements for the year ended December 31, 2022 were prepared and issued with the authorization of Management and the Board of Directors on May 15, 2023 and were approved by the General Shareholders’ Meeting on June 12, 2023.

 

C.Compliance with laws and regulations

 

As a result of the investigations into the cases known as Club de la Construccion and Lava Jato, AENZA has entered into an effective collaboration process. On September 15, 2022, the Plea Agreement (hereinafter “the Agreement”) was entered into between the Public Prosecutor’s Office, the Attorney General’s Office and the Company, whereby AENZA accepted they were utilized by certain former executives to commit illicit acts in a series of periods until 2016 and committed to pay a civil penalty to the Peruvian Government of approximately S/ 488.9 million (approximately S/ 333.3 million and US$ 40.7 million). Agreement was homologated by judgment dated August 11, 2023 and entered into force with its consent, which was notified to AENZA on December 11, 2023.

 

According to the Agreement, payment shall be made within twelve (12) years at a legal interest rate in soles and dollars (3.55% and 1.90% annual interest as of December 31, 2023, respectively). The Company also undertakes to establish a series of guarantees through a trust composed of i) a trust agreement that includes shares issued by a subsidiary of the Company, ii) mortgage on a property owned by the Company, and iii) a guarantee account with funds equivalent to the annual installment for the following year. Among other conditions, the Agreement includes a restriction for AENZA and subsidiaries Cumbra Peru S.A. and Unna Transporte S.A.C. to participate in public infrastructure and construction, and road maintenance contracts for two (2) years from the approval of the Agreement. The other member companies of the Corporation are not subject to any impediment or prohibition to contract with the Peruvian Government.

 

On December 27, 2023, the initial installment of the Civil Compensation was paid to the Peruvian Government for S/ 10.3 million and US$ 1.2 million. As of December 31, 2023, the Company maintains the amount of S/469.8 million (As of December 31, 2022, the balance was S/ 488.9 million) (see note 20.a).

 

7

 

 

AENZA S.A.A. and Subsidiaries
Notes to the Consolidated Financial Statements

 

D.NYSE Delisting and SEC Deregistration of the ADSs issued by AENZA.

 

On October 31, 2023, AENZA’s Board of Directors decided to initiate the delisting process of shares, represented by American Depositary Securities (ADSs), on the New York Stock Exchange (NYSE), and the deregistration process of such instruments with the Securities and Exchange Commission of the United States of America (SEC) and the termination of the ADS Program.

 

In the opinion of Management and the Board of Directors, this decision will generate efficiencies for the Company, considering the low liquidity of the ADSs and the high annual costs of NYSE listing and SEC registration, and will not affect the Company’s long-term plans. AENZA’s shares will continue to be listed on the Lima Stock Exchange (BVL).

 

December 7, 2023 was the last trading day of the ADSs on the NYSE. AENZA will file a Form 15F with the SEC to terminate its obligations under Section 13(a) and 15(d) of the U.S. Securities Act of 1933, upon compliance with the requirements of such legislation.

 

2. Basis of Preparation and Material Accounting Policies

 

Significant accounting policies applied to prepare the consolidated financial statements are detailed below. These policies have been applied consistently to all years presented in these financial statements; unless otherwise indicated.

 

Going concern basis of accounting

 

Management maintains reasonable expectations that the Corporation has adequate resources to continue in operation for a reasonable period of time and that the going concern basis of accounting remains appropriate. As of December 31, 2023, AENZA’s consolidated backlog amounted to S/ 4,278 million (US$ 1,152 million). Corporation believes that backlog provides visibility for potential growth in the coming years and that is strategically targeted to key end-markets such as mining, infrastructure, power, energy and real estate. As a leading Peruvian conglomerate in Infrastructure, Energy, Real Estate, and Engineering & Construction segments with a diversified and difficult-to-replicate portfolio of best-in-class assets and projects is well-positioned to capitalize upon the significant infrastructure deficit and other business opportunities in Latin America.

 

As of December 31, 2023, the Corporation’s net current assets were S/ 2,819 million and the Corporation’s cash and cash equivalents were S/ 1,004 million. As of December 31, 2023, Corporation had a total outstanding indebtedness of S/ 1,645 million (US$ 443 million). In 2023, the Corporation recognized a profit of the year of S/ 141 million (S/85 million attributable to owners of the Company). For the year ended December 31, 2022, the Company recognized in its consolidated financial statements the total liabilities associated with the Plea Agreement recognizing an expense of S/ 258.3 million. In this sense AENZA is committed to pay a civil compensation to the Peruvian Government of approximately S/ 488.9 million.

 

Additionally, in March 2022, the Corporation entered into a bridge loan credit agreement for up to US$ 120 million that matures in October 2023. In 2023, payments of US$ 20 million were made, and the term extension of the bridge loan agreement was signed for up to US$ 100 million for a period of twelve months.

 

The appropriateness of the going concern basis of accounting has its supports on the continued generation of own resources and, if necessary, borrowings from local and international sources and capital contributions from the owners of the Company. Management has the ability to take the following mitigation actions to preserve liquidity and optimize the Corporation’s cash flow:

 

  Reducing non-essential capital expenditures and deferring or cancelling discretionary spend;
    
  Financial restructuring, including a short-term and long-term structural solutions and capital increase.

 

Based on these factors, Management has a reasonable expectation that the Corporation has adequate resources for its operations.

 

Material accounting policy information

 

The Corporation adopted the Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) from 1 January 2023. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in the consolidated financial statements. The amendments require the disclosure of “material”, rather than “significant”, accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies, assisting entities to provide useful, entity-specific accounting policy information that users need to understand other information in the consolidated financial statements. Management reviewed the accounting policies and made updates to the information disclosed in note 2 Basis of Preparation and Material Accounting Policies (2022: Basis of Preparation and Significant Accounting Policies).

 

8

 

 

AENZA S.A.A. and Subsidiaries
Notes to the Consolidated Financial Statements

 

A.Basis of preparation

 

i.Basis of accounting

 

The consolidated financial statements of the Company and its Subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) effective as of December 31, 2023.

 

ii.Basis of measurement

 

These consolidated financial statements have been prepared on the historical cost basis, according to the Corporation’s accounting records.

 

iii.Responsibility for the information

 

The information contained in these financial statements is the responsibility of the Management of the Corporation that expressly states that all the principles and criteria included in the IFRSs as issued by the IASB, effective as of December 31, 2022 and 2023, have been applied.

 

iv.Functional and presentation currency

 

These consolidated financial statements are presented in soles (S/), which is the Corporation’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. The functional currencies of the Subsidiaries domiciled in Chile and Colombia are CLP (Chilean Pesos) and COP (Colombian Pesos), respectively.

 

v.Use of judgments and estimates

 

In preparing these consolidated financial statements, Management has made judgments and estimates that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

 

Judgments

 

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in the following notes:

 

Revenue recognition: identification of performance obligations and determination of revenue recognition at a point in time (note 2.W).

 

Lease term: whether the Company and its Subsidiary are reasonably certain to exercise extension options in leases (note 2.Y).

 

Estimate of current tax payable and current tax expense in relation to an uncertain tax treatment (note 2.R).

 

Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties as of December 31, 2022 and 2023, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities is included in the following notes:

 

  Measurement of expected credit losses (ECL) allowance for trade receivables and contract assets: (note 2.I);
    
  Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources (note 2.T);
    
  Recognition of deferred tax assets: availability of future taxable profit against which deductible temporary differences and tax losses carried forward can be utilized in previous periods (note 2.R);
    
  Allowance for inventory obsolescence (note 2.J);
    
  Allowance for useful lives and residual values of property, plant, and equipment (note 2.L).
    
  Impairment test of intangible assets and goodwill: key assumptions underlying recoverable amounts (note 2.M)

 

9

 

 

AENZA S.A.A. and Subsidiaries
Notes to the Consolidated Financial Statements

 

Measurement of fair values

 

A number of the Corporation’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

The Corporation has an established control framework with respect to the measurement of fair values. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Corporation assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which the valuations should be classified. The Company regularly reviews significant unobservable inputs and valuation adjustments.

 

When measuring the fair value of an asset or a liability, the Corporation uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

Level 1:Measurement based on quoted prices in active markets for identical assets or liabilities.

 

Level 2:Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

Level 3:Measurement based on inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs, generally based on internal estimates and assumptions of the Corporation).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Corporation recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during the period which the change occurred.

 

B.Consolidation of financial statements

 

i.Subsidiaries

 

The Company ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

 

Business acquisition-related costs are expensed as incurred. Balances, income, and expenses from transactions between Corporation companies are eliminated. Profits and losses resulting from inter-group transactions that are recognized as assets are also eliminated.

 

ii.Business Combinations

 

The Corporation accounts for business combinations using the acquisition method when control is transferred to the Corporation. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred.

 

iii.Non-controlling interests

 

For each business combination, the Corporation shall select between measuring the non-controlling interests in the acquiree at fair value or at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. Changes in the Corporation’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

10

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

iv.Associates

 

Associates are those entities in which the Corporation has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Corporation has joint control, whereby the Corporation has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

 

Interests in associates and the joint venture are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Corporation’s share of the profit or loss and other comprehension income of equity-accounted investees, until the date on which significant influence or joint control ceases.

 

v.Joint arrangements

 

Under IFRS 11, investments in joint arrangements are classified as either a joint operation or as a joint venture depending upon each investor’s rights and obligations arising from the arrangement. The Corporation has assessed the nature of its joint arrangements and determined that they are joint ventures.

 

Joint ventures are accounted for using the equity method. Under the equity method, interest in joint ventures is initially recognized at cost and adjusted thereafter to recognize the Corporation’s share of post-acquisition profits and losses, as well as movements in other comprehensive income. When the Corporation’s share in the losses of a joint venture equals or exceeds its interest in such joint venture (including any long-term share that is substantially part of the Corporation’s net investment in the joint venture), the Corporation does not recognize additional losses, unless it has assumed obligations or made payments on behalf of the joint ventures.

 

Unrealized gains on transactions between the Corporation and its joint ventures are eliminated to the extent of the Corporation’s interest in such joint ventures. Unrealized losses are also eliminated, unless the transaction provides evidence of an impairment of the transferred asset. Gains arising from the application of the equity of accounting method are recognized in the consolidated statement of profit or loss and other comprehensive income.

 

In the Corporation, joint operations mainly relate to consortia (entities without legal personality) created for the development of construction contracts. Considering that the only objective of this type of consortium is to develop a specific project, all revenue and costs are included within revenue from construction activities and cost of construction activities, respectively.

 

vi.Changes in ownership interest in a subsidiary that do not result in a loss of control

 

Transactions with non-controlling shareholders that do not result in loss of control are accounted for as equity transactions, i.e. as transactions with owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of shares to non-controlling shareholders are also recorded in equity at the time of disposal.

 

vii.Disposal of subsidiaries

 

When the Corporation loses control of a subsidiary, any interest retained in said entity is remeasured at its fair value at the date it loses control of the subsidiary, and any change in respect to the carrying amount is recognized in profit or loss. The fair value is considered the initial carrying amount for purposes of accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Corporation had directly disposed of the related assets or liabilities. This means that the amount previously recognized in other comprehensive income could be reclassified to profit or loss for the year.

 

11

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

viii.Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Corporation’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

 

C.Foreign currency translation

 

i.Functional and presentation currency

 

These consolidated financial statements are presented in soles (S/), which is the Corporation’s functional and presentation currency. All subsidiaries, joint arrangements, and associates use the Peruvian sol as their functional currency, except for foreign subsidiaries, for which the functional currency is the currency of the country in which they operate.

 

ii.Transactions and balances

 

Transactions in foreign currency are translated into functional currency at the exchange rates at the dates of the transactions or the valuation date in the case of items that are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the statement of profit or loss, except when deferred in other comprehensive income. Foreign exchange gains and losses of all monetary items are included in the statement of other comprehensive income under ‘Exchange difference, net’.

 

Exchange differences arising from foreign currency loans granted by the Company to its subsidiaries are recognized in profit or loss both in the consolidated financial statements of the Company and in the separate financial statements of the subsidiaries. In the consolidated financial statements, such exchange differences are recognized in other comprehensive income and are reclassified to profit or loss in the event of the disposal of the subsidiary or debt repayment to the extent such loans qualify as part of the “net investment in a foreign operation.”

 

iii.Corporation companies

 

The results and financial position of the Corporation entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the Corporation’s presentation currency are translated into the presentation currency as follows:

 

(i)assets and liabilities for each statement of financial position are translated at the closing rate at the date of that consolidated statement of financial position;

 

(ii)income and expenses for each statement of profit or loss are translated at the average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate prevailing on the date of the transaction);

 

(iii)capital is translated by using the historical exchange rate for each capital contribution made; and

 

(iv)all resulting exchange differences are recognized as separate components in other comprehensive income, under ‘Translation of net investment in foreign operations’.

 

Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate. Exchange differences are recognized in other comprehensive income.

 

12

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

D.Operating segments

 

Operating segments are reported in a manner consistent with the internal reporting provided to the Corporation’s Management.

 

If there are changes in the internal organization in a manner that causes the identification of operating segments to change, the Corporation shall restate the comparative information for earlier periods unless the information is not available.

 

E.Public service concessions

 

Concession agreements entered into between the Corporation and the Peruvian Government whereby the Corporation, acting in its capacity as concessionaire, assumes obligations for the construction and improvement of infrastructure, and which qualify as public service concessions are accounted as defined by IFRIC 12 Service Concession Arrangements. Under these arrangements, the government controls and regulates the infrastructure services provided by the Corporation and establishes to whom these services are to be provided and at what prices. The concession agreement establishes the obligation to return the infrastructure to the grantor at the end of the concession term or when there is any expiration event. This feature gives the grantor the control over the risks and rewards of the residual value of the assets at the end of the concession term. For this reason, the Corporation will not recognize infrastructure as part of its property, plant, and equipment. The consideration to be received from the Peruvian government for public infrastructure construction or improvement activities is recognized as a financial asset, intangible asset, or both, as set forth below:

 

i.It is recognized as a financial asset to the extent that it has an unconditional contractual right to receive cash or another financial asset either because the government guarantees to pay specified or determinable amounts or because the government covers the shortfall between the amounts received, as concessionaire, from users of the public service and specified or determinable amounts. These financial assets are initially recognized at fair value, and, subsequently, at amortized cost (financial asset model).

 

ii.It is recognized as an intangible asset to the extent that the agreement provides the Corporation with a contractual right to charge users for public services rendered. The resulting intangible asset measured at cost is amortized as described in note 2.M (intangible asset model).

 

iii.It is recognized as a financial asset and an intangible asset when the Corporation is paid partly by a financial asset and partly by an intangible asset (bifurcated model).

 

F.Financial instruments

 

i.Recognition and initial measurement

 

Trade accounts receivable are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Corporation becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade account receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not measured at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. An account receivable without a significant financing component is initially measured at the transaction price.

 

ii.Classification and subsequent measurement

 

Financial assets

 

On initial recognition, assets are classified as measured at amortized cost or Fair Vale Through Profit and Loss (“FVTPL”). The classification depends on the purpose for which the financial assets were acquired based on the Company’s business model for managing the financial assets and the characteristics of the contractual cash flows of the financial asset.

 

Management determines the classification of its financial assets at the date of initial recognition and reevaluates this classification as of the date of each consolidated financial statement closing. As of December 31, 2022 and 2023, the Company only holds financial assets at amortized cost.

 

13

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

A financial asset is measured at amortized cost if both of the following conditions are met and is not measured at FVTPL:

 

-It is held within a business model whose objective is to hold the financial assets to collect contractual cash flows; and

 

-Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

All financial assets not classified as measured at amortized cost or fair value through other comprehensive income as described above are measured at FVTPL. This includes all derivative financial assets that are not cash flow hedge. On initial recognition, the Corporation may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at fair value through other comprehensive income as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch or recognition that would otherwise arise.

 

Subsequent measurement and gains and losses:

 

Financial assets at FVTPL  

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

     
Financial assets at amortized cost  

These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Debt investments at FVOCI   These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

 

The Corporation classified its financial assets at amortized cost.

 

Financial liabilities

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, and are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest income and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

iii.Derecognition

 

Financial assets

 

The Corporation derecognizes a financial asset when the contractual rights to the cash flows from financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset.

 

The Corporation enters into transactions whereby it transfers assets recognized in its consolidated statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

14

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Financial liabilities

 

The Corporation derecognizes a financial liability when its contractual obligations are discharged or canceled, or expire. The Corporation also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

iv.Offsetting

 

Financial assets and financial liabilities are offset, and the net amount presented in the consolidated statement of financial position when, and only when, the Corporation currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

 

v.Derivative financial instruments and hedge accounting

 

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivative financial instruments are measured at fair value, and changes therein are generally recognized in profit or loss. The Corporation designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates.

 

At inception of designated hedging relationships, the Corporation documents the risk management objective and strategy for undertaking the hedge. The Corporation also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.

 

As of December 31, 2022 and 2023, the Corporation does not hold derivative financial instruments.

 

G.Impairment

 

i.Financial assets

 

Financial instruments and contract assets

 

The Corporation considers a financial asset to be nonperforming when contractual payments are more than 365 days past due. However, in certain cases, the Corporation may consider a financial asset to be nonperforming when internal or external information indicates that it is unlikely that the Corporation will receive the contractual amounts due before the Company executes the guarantees received. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

IFRS 9 Financial Instruments requires that expected credit losses be recorded for all financial assets, except those carried at FVTPL, estimating them over twelve months or over the lifetime of the financial instrument (“lifetime”). Under this standard, the Company applies the general approach for trade and other accounts receivable, which requires assessing whether credit risk has significantly increased to determine whether the loss shall be estimated based on 12 months after the reporting date or during the lifetime of the asset.

 

Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit loss (“ECL’s”). When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Corporation considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Corporation’s historical experience and informed credit assessment, loss of the time value of money and individual analysis of the clients (considering their geographical location).

 

At each reporting date, the Corporation assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Evidence that a financial asset is credit-impaired includes the following observable data:

 

significant financial difficulty of the issuer or debtor;

 

a breach of contract such as a default or being more than 90 and 180 days past due;

 

it is probable that the debtor will enter bankruptcy or other financial reorganization; or

 

the disappearance of an active market for a security because of financial difficulties.

 

For financial assets for which the Company has no reasonable expectation of recovering either all or a portion of the outstanding amount, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset.

 

The gross carrying amount of a financial asset is written off when the Corporation has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers and for corporate customers, the Corporation individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Corporation expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Corporation’s procedures for recovery of amounts due.

 

ii.Non-financial assets

 

At each reporting date, the Corporation reviews the carrying amounts of its non-financial assets (other than investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets with an indefinite useful life are tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Cash Generating Unit’s (“CGU”). Goodwill arising from a business combination is allocated to CGU or group of CGUs that are expected to benefit from the synergies of the combination.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using an after-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

H.Cash and cash equivalents

 

In the consolidated statements of financial position and cash flows, cash and cash equivalents include cash on hand, demand deposits with banks, other highly liquid investments with maturities of three months or less and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are included in the balance of other financial liabilities as current liabilities.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

I.Trade accounts receivable

 

Trade accounts receivable are amounts due from customers for goods or services sold by the Corporation. If any trade account receivable is expected to be collected within one year, it is classified as current; otherwise, it is classified as non-current.

 

Trade accounts receivable are initially recognized at transaction value, and subsequently, they are measured at amortized cost using the effective interest method, less any estimation for impairment, except for trade accounts receivable of less than one year that are recorded at face value which is similar to their fair values due to their short-term maturity.

 

It includes Management’s estimates corresponding to collection rights for services performed but not yet invoiced and/or approved by client, which have been valued using the percentage of completion method. It corresponds mainly to the Engineering and Construction segment (subsidiaries Cumbra Peru S.A. and Cumbra Ingenieria S.A.). In the Infrastructure segment, concerning concessions, it corresponds to future collections for public services, mainly represented by unconditional contractual rights to be received from the Grantor under the financial asset model (note 2.E)

 

J.Inventories

 

The inventories include land, work-in-progress and finished buildings related to the real estate activity, materials used in the construction activity, and supplies traded as part of the exploration and extraction activity.

 

i.Real Estate Activity

 

Land used for the execution of real estate projects is recognized at acquisition cost. Work-in-progress and finished real estate include the costs of design, materials, direct labor, borrowing costs (directly attributable to the acquisition, construction, production of the qualifying asset), other indirect costs, and general expenses related to the construction. The lands used for real estate projects with launch date in future periods are presented as non-current asset.

 

Net realizable value is the estimated selling price in the ordinary course of business, less applicable selling expenses. Annually, the Corporation reviews whether inventories have been impaired identifying three groups of inventories to measure their net realizable value: i) land bought for future real estate projects which are compared to their appraisal value, if the acquisition value is higher, a provision for impairment is recognized; ii) land under construction: in this case impairment is measured based on cost projections; if these costs are higher than selling prices of each real estate unit, an estimate for impairment is recorded; and iii) finished real estate units: these inventory items are compared to the selling prices less commercialization costs; if they are higher, a estimation for impairment is recorded.

 

For the reductions in the carrying amount of these inventories to their net realizable value, a provision is recognized for impairment of inventories with a charge to profit or loss for the year in which those reductions occur.

 

ii.Exploration and extraction activities

 

Inventories are valued at the lower of production costs and net realizable value (“NRV”), on the basis of the weighted average method. The NRV represents the value at which it is estimated to realize oil, gas and its derivatives LPG and Saturated Acyclic Hydrocarbons, which is calculated on the basis of international prices less the discounts usually granted. Miscellaneous supplies, materials, and spare parts are valued at the lower of cost and replacement value, based on the average method. The cost of inventories excludes financing expenses and exchange differences. Inventories in transit are recorded at cost, using the specific identification method.

 

The Corporation registered a provision for materials impairment to profit and loss for the cases in which book value exceeds recoverable value.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

iii.Other activities

 

Materials and supplies are recorded at the lower of cost (by the weighted average method) and their replacement cost. The cost of these items includes freight and non-refundable applicable taxes.

 

Impairment of these items is estimated on the basis of specific analyses performed by Management on their turnover. If it is identified that the carrying amount of inventories of materials and supplies exceeds their replacement value, the difference is charged to profit or loss in the period in which this situation is determined.

 

Management considers that, as of the date of the consolidated financial statements, it is not necessary to record provisions additional to those recognized in the financial statements to cover losses due to obsolescence of these inventories.

 

K.Investment properties

 

Investment properties are shown at cost less their accumulated depreciation and impairment losses, if any. Subsequent costs attributable to investment properties are capitalized only if it is probable that future economic benefits will flow to the Company and the cost of these assets can be measured reliably; otherwise, they are recognized as expenses when incurred.

 

Maintenance and repair expenses are recognized in profit or loss in the period when they are incurred. If the carrying amount of a property is greater than its estimated recoverable amount, it is immediately reduced to its recoverable amount.

 

Depreciation is calculated under the straight-line method at a rate that is considered sufficient to absorb the cost of assets at the end of the useful life and considering their significant components, with substantially different useful lives (each component is accounted for separately for depreciation purposes and is depreciated over its separate useful life). The estimated useful lives of those properties range from 5 to 50 years.

 

These investment properties have been leased under operating leases to third parties.

 

L.Property, plant, and equipment

 

i.Recognition and measurement

 

These assets are stated at historical cost less accumulated depreciation and accumulated losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of these items.

 

Assets under construction are capitalized as a separate component. Upon completion, the cost of these assets is transferred to their definitive category. Replacement units are assets whose depreciation begins when units are installed for use within the related asset.

 

ii.Subsequent expenditure

 

Subsequent expenditures are included in the carrying amount of the asset or they are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the Corporation, or are likely to extend the estimated useful life of the asset, and the cost of these assets can be measured reliably. Maintenance and repair expenses are presented in the consolidated statement of profit or loss in the period when incurred.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

iii.Depreciation

 

Depreciation is calculated using the straight-line method based on the estimated useful life of the asset. The estimated useful lives are as follows:

 

    Years 
Buildings and premises   3 to 50 
Machinery and equipment   2 to 20 
Vehicles   2 to 10 
Furniture and fixtures   2 to 10 
Other equipment   2 to 10 

 

Depreciation of machinery and equipment, and vehicles recognized as “Major equipment” is calculated based on their hours of use. Under this method, the total number of hours that the machinery and equipment can operate is estimated and an hourly value is established.

 

The residual value and the useful life of an asset are reviewed and adjusted, if necessary, at year-end. Profit or loss for the sale of assets are recognized in ‘Other income and expenses’ in the statement of profit or loss. Regarding joint operations that carry out construction activities, the difference between the proceeds from disposals of fixed assets and their carrying amount is shown within ‘Revenue from construction activities’ and ‘cost of construction activities’, respectively.

 

M.Intangible assets

 

i.Goodwill

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the purchase consideration, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the fair value of the net identifiable assets. If the purchase consideration, the amount of any non-controlling interest in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree is lower than the fair value of the net assets of the acquired subsidiary, then the difference is recognized in the statement profit or loss.

 

Goodwill arising from a business combination is allocated to each cash-generating unit (CGU), or group of CGUs, that are expected to benefit from the business combination. Goodwill is monitored at the operating segment level.

 

Goodwill is tested for impairment at least annually or more often if there is evidence of impairment. Any impairment is recognized as an expense in ‘Other income and expenses’ and cannot be reversed later.

 

ii.Trademarks

 

Separately acquired trademarks are shown at historical cost. Trademarks acquired in a business combination are recognized at fair value at the acquisition date. Management has determined that these trademarks have indefinite useful lives.

 

The trademark is tested for impairment at least annually or more often if there is evidence of impairment. Any impairment is recognized as an expense in ‘Other income and expenses’. The carrying amount written off due to impairment is reviewed at each reporting date to verify possible reversals of the impairment and is recognized in ‘Other income and other expenses’.

 

iii.Concession rights

 

The intangible asset related to the right to charge users for the services covered by the concession (note 2.E) is initially recorded at the fair value of construction or improvement services and, prior to the beginning of amortization, an impairment test is performed; it is amortized using the straight-line method, from the date revenue from services starts using the effective period of the concession agreement.

 

iv.Contractual customer relationships

 

Contractual customer relationships are assets resulting from business combinations that were initially recognized at fair value, determined on the basis of the present value of the expected net cash flows from such relationships, over a period of time based on the estimated customer tenure (the estimation of useful life is based on the contract terms which fluctuates between 5 and 9 years). The useful life and the estimate of impairment of these assets are individually assessed.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

v.Cost of well development

 

Costs incurred during the development phase associated with the preparation of the wells for the extraction of hydrocarbons from the lots located in Talara, are capitalized as part of intangible assets. These costs are amortized over the useful lives of the wells (estimated in remaining periods for Lots I and V and the unit-of-production method for Lots III and IV), until the end of the term of the contracts with Perupetro. The Lot I contract expired in 2021 and Lot V contract expired in 2023.

 

The Corporation has established the Successful Efforts Method as its policy for the recognition and evaluation of exploration oil assets. In 2022 and 2023, no exploratory well drilling activities were carried out.

 

vi.Software

 

Software development costs that are directly attributable to the design and testing of identifiable and unique software controlled by the Corporation are recognized as intangible assets when the following criteria are met:

 

it is technically feasible to complete the software so that it will be available for use;

 

Management has the intention to complete the software and use or sell it;

 

there is an ability to use or sell the software;

 

it can be demonstrated that the software is likely to generate future economic benefits;

 

the technical, financial and other resources necessary to complete the development of the software to enable its use or sale are available; and

 

expenses attributable to the software during its development can be reliably measured.

 

Other development costs that do not meet these recognition criteria are recognized in profit or loss as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Software development costs recognized as assets are amortized over their estimated useful lives, which range from 2 to 12 years.

 

vii.Surface rights

 

It refers to the rights held by the subsidiary Promotora Larcomar S.A. Land use rights are stated at historical cost less amortization and any accumulated impairment losses. The useful life of the surface rights is 60 years according to the signed contract and may be extended if agreed by parties. Amortization will begin when it becomes ready for its intended use by Management.

 

N.Trade accounts payable

 

Trade accounts payable are obligations to pay for goods or services acquired from suppliers in the ordinary course of business. Accounts payable are classified as current liabilities if payment is to be made in a year or less or in the normal operating cycle of the business if it is higher; otherwise, they are presented as non-current liabilities.

 

Accounts payable are initially recognized at fair value, and subsequently, they are measured at amortized cost using the effective interest method, except for trade accounts payable of less than one year that are recorded at face value which is similar to their fair values due to their short-term maturity.

 

O.Financial liabilities at FVTPL

 

Financial liabilities designated at initial recognition at FVTPL are designated at the initial recognition date, and only if the criteria of IFRS 9 are met. The Corporation does not maintain financial liabilities at fair value.

 

P.Other financial liabilities

 

They correspond to loans and bonds issued by the Corporation, which are initially recognized at their fair value, net of transaction costs incurred. These financial liabilities are subsequently recorded at amortized cost; any resulting difference between the funds received (net of transaction costs) and the redemption value is recognized in the statement of profit or loss during the loan term using the effective interest method.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Costs incurred to obtain these financial liabilities are recognized as transaction costs to the extent that it is probable that a part or the whole loan will be received. In this case, these charges defer until the loan is received.

 

Q.Borrowing costs

 

Borrowing costs are recognized in profit or loss in the period in which they have been incurred, except for intangible assets and inventories in which the borrowing costs are capitalized.

 

General and specific borrowing costs directly attributable to acquisitions, construction or development of qualifying assets, which are assets that necessarily take a substantial period of time (more than twelve months) to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. The Corporation suspends the capitalization of borrowing costs during the periods in which the development of activities of a qualifying asset has been suspended. The income obtained from the temporary investment of specific borrowings that have not yet been invested in qualifying assets is deducted from the borrowing costs eligible for capitalization.

 

R.Current and deferred income tax

 

Income tax of the period comprise current and deferred income tax. Tax is recognized in the statement of profit or loss, except to the extent that it relates to items recognized in the statement of other comprehensive income or directly in equity. In this case, the tax is also recognized in the statement of other comprehensive income or directly in equity, respectively.

 

The current tax is calculated on the basis of the tax laws enacted at the date of the statement of financial position in the countries where the Company and its subsidiaries operate and generate taxable income. Management, where applicable, makes provisions on the amounts expected to be paid to the tax authorities.

 

A provision is recognized for those matters for which the determination of taxes is uncertain, but it is considered probable that there will be a future outflow of economic resources to a tax authority. Provisions are measured at the best estimate of the amount expected to be paid. The assessment is based on the tax judgment of professionals within the Company supported by prior experience in relation to such activities and in certain cases based on specialized independent tax advice.

 

Deferred income tax is recognized on temporary differences arising from tax basis of assets and liabilities, and their balances in consolidated financial statements. A deferred income tax asset is only recognized to the extent that it is probable that future taxable profits will be available, against which temporary differences can be utilized. Deferred income tax is determined using tax rates and legislation enacted as of the date of the consolidated statement of financial position that are expected to be applied when the deferred tax is realized or paid. A deferred tax asset is only recognized so far as it is probable that there would be future tax benefits against which temporary differences can be utilized.

 

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Corporation and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax arising from the initial recognition of goodwill is not recognized; likewise, the deferred tax is not recorded if it arises from the initial recognition of an asset or liability in a transaction that is not a business combination that does not affect the accounting or tax profit or loss at the time of the transaction.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

S.Employee benefits

 

The Corporation recognizes a liability when the employee has rendered services in exchange for which is entitled to receive future payments and an expense when the Corporation has consumed the economic benefit from the service rendered by the employee in exchange for the benefits in question.

 

The Corporation determines employee benefits in accordance with current labor and legal regulations and classifies them as short-term benefits, long-term benefits, and termination benefits.

 

Short-term benefits are those other than severance indemnities, the payment of which is settled in the twelve months following the end of the period in which the employees have rendered their services; they correspond to current compensation (wages, salaries, and social health contributions), annual and sick leave, profit sharing and incentives and other non-monetary benefits.

 

Long-term benefits are those benefits to be paid more than twelve months after the end of the period in which the services have been rendered. As of December 31, 2022 and 2023, the Corporation did not grant benefits under this category.

 

Termination benefits are those benefits payable as a result of: (i) the entity’s decision to terminate the employee’s contract before the retirement date, and (ii) the employee’s decision to voluntarily accept the termination of the employment relationship.

 

i.Short-term benefits

 

Current compensation

 

Current compensation consists of wages, salaries, social health contributions, legal bonuses and compensation for length of service (CTS, for its Spanish acronym). Wages, salaries and social health contributions are paid monthly based on the consideration for services rendered.

 

The Corporation entities recognizes the expense for legal bonuses and their related liabilities under laws and regulations currently in force in Peru, Chile, and Colombia. In Peru, legal bonuses correspond to two monthly payments which are accrued based on the consideration for the service. There are no legal bonuses in Chile; in Colombia, it is called service bonus and corresponds to a monthly remuneration per year.

 

Compensation for length of service (CTS) corresponds to the employee’s indemnity rights which are accrued based on the consideration for the service rendered calculated in accordance with the legislation in force in each country where the entities comprising the Corporation operate. They are determined as follows: (i) in Peru, it is equivalent to half the compensation in force at the date of payment and is made through deposit in bank accounts designated by the workers in the months of May and November of each year; (ii) in Colombia, it is equivalent to 8.33% of the monthly remuneration, and (iii) in Chile this benefit is not available.

 

Annual paid absences

 

Personnel’s annual vacations are recognized on an accrual basis. The provision for estimated liability corresponding to personnel’s annual vacations, resulting from services rendered by the employees, is recorded on the date of the statement of financial position and corresponds to: (i) one month for personnel in Peru, (ii) fifteen days for personnel in Colombia, and (iii) in the case of Chile, they are subject to the worker’s seniority and range from fifteen to thirty days.

 

Profit sharing and incentives

 

The workers’ profit sharing is determined on the basis of the legal provisions in force in each country where the entities of the Corporation operate, as follows: (i) in Peru, it is equivalent to 5% of the taxable base determined by each Company of the Corporation, in accordance with current income tax legislation, (ii) in Chile, workers’ profit sharing is a component of the remuneration (equivalent to 4.75 minimum wages per year) or 10% of the profit, to be determined by the employer, (iii) in Colombia, these benefits are not provided to employees.

 

ii.Termination benefits

 

The Corporation entities recognize liabilities and expenses for severance indemnities when they occur, based on the legal provisions in force in each country. Under Peruvian law, compensation for arbitrary dismissal for personnel with indefinite-term contracts is 1.5 times the monthly compensation for each year worked, up to a maximum of twelve monthly compensations.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Under Colombian legislation, for the first year worked, the equivalent of 30 days of salary is granted, and from the second year on, the compensation will be the equivalent of 20 days of salary for each additional year (or the proportion); under the legislation of Chile, the employee receives a compensation of thirty days of monthly salary for each year worked with a maximum of 330 days.

 

T.Other provisions

 

Provisions are recognized when the Corporation has a present obligation, either legal or constructive, as a result of past events, and when it is probable that an outflow of resources will be required to settle the obligation and it is possible to reliably estimate its amount. Provisions are reviewed at the end of each period. If the time value of money is significant, provisions are discounted using a pre-tax rate that reflects, when appropriate, specific risks of liabilities. The reversal of the discount due to the passage of time results in an increase of the obligation which is recognized with a charge to the statement of profit or loss as a finance cost.

 

Contingent obligations are disclosed when their existence will only be confirmed as a result of future events or when the amount cannot be measured reliably. Contingent assets are not recognized and are disclosed only if it is probable that the Corporation will generate economic benefits in the future.

 

Provision for the closure of oil production wells

 

Subsidiary Unna Energia S.A. recognizes a provision for the closure of operating units that correspond to the legal obligation to close oil production wells once the production phase has been completed. At the initial date of recognition, the liability that arises from said obligation is measured at fair value and discounted to present value, following the valuation techniques established in IFRS 13 Fair Value Measurement; accordingly, the same amount is simultaneously charged to the intangible account in the statement of financial position.

 

Subsequently, the liability will increase in each period to reflect the financial cost considered in the initial measurement of the discount, and the capitalized cost will be depreciated based on the useful life of the related asset. When a liability is settled, the subsidiary recognizes any gain or loss that may arise. The fair value changes estimated for the initial obligation and interest rates are recognized as an increase or decrease in the carrying amount of the obligation and related asset, according to IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities. Any reduction in this provision, and therefore, any reduction in the related assets which exceeds the carrying amount of the asset, will be immediately recognized in the statement of comprehensive income.

 

If the review of the obligation resulted in the need to increase the provision, and as a result, the carrying amount of the related asset also increases, the subsidiary takes into account whether this increase corresponds to an indication that the asset has become impaired and if so, impairment tests will be conducted (note 2.G).

 

U.Put option arrangement

 

In the case of a put option contract on the equity of a subsidiary that allows the shareholder to reallocate its shares in a certain period, the amount payable under the option is initially recognized at the present value of the reimbursement under ‘Other accounts payable’, directly charged to equity. The charge to equity is recorded separately as put options subscribed on the non-controlling interest.

 

Subsequently, the financial liability is updated by changes in the assumptions on which the estimation of the expected cash flows is based and by the financial component due to the passage of time. The effects of this update are recognized in profit and loss.

 

In 2021, Cumbra Peru S.A. acquired the entire non-controlling interest of the subsidiary Morelco S.A.S. As of December 31, 2022, Cumbra Peru S.A. the liability was totally paid.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

V.Capital

 

Common shares are classified as equity and are determined using the par value of the shares that have been issued.

 

Incremental costs directly attributable to the issuance of new shares or options are shown in equity as a deduction of the received amount, net of taxes.

 

W.Revenue from contracts with customers

 

Revenues from contracts with customers are recognized, for each performance obligation, either during a period of time or at a point in time, depending on which method best reflects the transfer of control of the underlying products or services to the obligation of particular performance with the customer.

 

The Corporation recognizes the revenue through the application of the five steps defined in the regulations: i) identifying the contract with the customer; ii) identifying performance obligations in the contract; iii) determining the transaction price; iv) allocating the transaction price to performance obligations; and v) recognizing revenue when (or as) a performance obligation is satisfied.

 

The following describes the Corporation’s policy of recognition for each type of revenue in line with IFRS 15:

 

i.Engineering and construction

 

Revenues from engineering and construction (E&C) contracts are recognized over time as the customer simultaneously receives and consumes the benefits provided by the Corporation’s performance, the Corporation’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; and the Corporation’s performance does not create an asset with an alternative use. For these reason, the Corporation accounts for revenue over time by measuring the progress towards complete satisfaction of its performance obligations under each contract.

 

The Corporation applies the output method to measure the physical percentage-of-completion which is based on surveys of projects performance by the Corporation’s experts. The Corporation considers this method depicts the transfer of control of the goods or services to the customers, as it reflects also an enforceable right to payment by the Corporation for work performed to date.

 

The Corporation assesses whether one or more of the following factors has been satisfied: a) the contract, applicable law or other evidence provides a legal basis for the modification; b) additional costs were caused by circumstances that were unforeseen on the date of execution of the contract and not a result of deficiencies incurred by the Corporation’s performance; c) modification-related costs are identifiable and considered reasonable in view of the work performed; or d) evidence supporting the modification is objective and verifiable. When one or more of the foregoing factors is satisfied, the changes to the rights and obligations in the contract modification are considered by the Corporation to be enforceable.

 

The nature of some contracts, such as cost plus fee contracts, unit price contracts or similar contracts give rise to variable consideration that may include reimbursable costs, incentives and penalties. To include variable consideration related to a contract modification in the estimated transaction price, the Corporation must conclude that it is “highly probable” that a significant revenue reversal will not occur. The Corporation determines the likelihood of revenue reversal occurring (and therefore whether such price will be recovered) based on an analysis of whether any of the following factors are present: i) contractual entitlement; ii) past practice with the customer; iii) specific discussions or preliminary negotiations with the customer; or iv) verbal approval by the customer. If, as a result of such analysis, the Corporation concludes that it is “highly probable” that there will not be a significant reversal of the amount of revenue recognized, it recognizes the variable consideration relating to the contract modification. When the benefit of the contract cannot be reliably estimated, the associated revenue is recognized to the extent that the costs incurred are recoverable. Revenue is invoiced upon receipt of customer approval.

 

A provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost to complete the contract, which is determined based on the incremental costs of fulfilling the obligation under the contract and an allocation of other costs directly related to fulfilling the contract. When it is probable that total contract costs will exceed the related revenue, the expected loss is recognized immediately.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The Corporation estimates the amount of revenue to be recognized as variable consideration using judgments and estimates to determine the most probable value, which is expected to best predict the amount of consideration to which the Corporation will be entitled.

 

ii.Real-estate

 

Sale of real estate - urban and industrial lots

 

Revenue from real estate sale contracts is recognized when control over the property has been transferred to the client with the delivery record. Revenue is measured based on the price agreed under the contract. Until this is met, the revenue received will be counted as customer advances. These sales contracts have two performance obligations: i) the one corresponding to the transfer of the property, which includes the common areas of the building where these real estates are located, and ii) the one corresponding to the transfer of the common area outside the real estate assets but that are part of the real estate projects, which are recognized when the common area has been delivered.

 

Sale of urban lots

 

Revenue related to sales of urban lots is recognized when control over the property is transferred to the customer. Until this is met, the revenue received will be counted as customer advances. Revenue is measured based on the transaction price agreed under the contract. These sales contracts have a single performance obligation for the sale of lots, which is executed upon delivery of the sale of the assets.

 

Sale of industrial lots

 

Revenue related to sales of industrial lots is recognized when control over the property has been transferred to the customer. Until this is met, the revenue received will be counted as customer advances. These sales contracts have two performance obligations: i) transfer of the industrial lot and ii) urban authorization of the industrial lot.

 

iii.Energy

 

Revenues from services rendered for oil and gas extraction, storage and dispatch of fuels and other services

 

Revenues from the rendering of oil and gas extraction, fuel storage and dispatch and other services rendered are recognized when the full specific service is provided, calculating the service actually provided as a portion of the total services to be provided. This type of revenue has a single performance obligation, that is performed when the service is provided at a point in time.

 

Revenues from sale of oil and oil byproducts

 

Revenue from the sale of oil and byproducts is recognized when the control of the assets is transferred to the customer, which is when the goods are delivered. In this type of revenue, there is a single performance obligation for the sale of oil and byproducts which is enforced at the delivery of the goods.

 

iv.Infrastructure

 

Revenue from concession services

 

Revenue from concession services corresponds to operation and maintenance services and is recognized according to its nature in the period in which the service is provided. In this type of revenue, there is a single performance obligation, enforced when the service is provided.

 

Revenues from toll collection

 

Revenues generated by Red Vial 5 S.A. from toll collection through vehicle control booths are grouped in three different toll stations, located along the Ancon - Huacho - Pativilca road sections. This type of transactions are recognized at a point of time due to the control is transferred to the time of toll collection.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

X.Cost and expense recognition

 

Engineering and construction contracts

 

Contract costs include all the incurred direct costs such as materials, labor, subcontracting costs, manufacturing and supply costs of equipment, start-up costs, depreciation and amortization, and indirect costs. Periodically, the Company evaluates the reasonableness of the estimates used in the determination of the total estimated contract cost of the contract. If, as a result of this evaluation, the total estimated cost of the project exceeds expected revenues, an adjustment is made in order to reflect onerous contract and the corresponding effect in profit or loss of the period in which the loss is incurred.

 

Cost for sale of oil and byproducts

 

The costs of services provided, and the costs of sales of oil and byproducts are recognized when incurred, which in this case are incurred at the same time that related revenue is recognized. Other costs and expenses are recognized as they accrue, regardless of the moment when they are paid, and are recorded in the accounting periods to which they relate.

 

Cost for concession operation services

 

The costs for operation and maintenance services are recognized when incurred, at the same time that related revenue is recognized. Other costs and expenses are recognized as they accrue, regardless of the moment when they are paid, and are recorded in the accounting periods to which they relate.

 

Y.Leases

 

Lease contracts are analyzed for the purpose of identifying those containing the characteristics specified in IFRS 16 Leases for recognition, measurement, presentation and disclosure.

 

The Corporation evaluates in every lease contract the following:

 

If it conveys the right to control the use of an identified asset;

 

If the contract term is longer that twelve months;

 

If the underlying asset amount is a material amount, and,

 

That the fees to be paid are not entirely variable.

 

Leases in which the Corporation is a lessee

 

The Corporation recognizes a right-of-use asset and a lease liability at the lease commencement date.

 

The right-of-use asset is initially measured at the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. The term of the lease includes the periods covered by an option to extend the contract if the Corporation is reasonably sure to exercise that option.

 

The lease liability is the total unpaid installments, measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Corporation’s estimate of the amount expected to be payable under a residual value guarantee, or if the Corporation changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset.

 

In the engineering and construction segment, interest expenses related to leasing contracts of the core business are reported in gross margin; the rest of the Corporation segments reports them in finance expenses.

 

Operating cash flows will be greater since cash payments for the main portion of the lease debt are classified within the financing activities. Only the portion of the payments that reflects interest can continue to be presented as operating cash flows.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Leases in which the Corporation is a lessor

 

Operating leases and assets are included in the consolidated statement of financial position according to the nature of the asset. Revenues from operating leases are recognized on a straight-line basis over the term of the lease agreement and the incentives granted to lessees are reduced from rental income. Accordingly, the Corporation, as lessor, has not changed the recognition of its leases.

 

Z.Dividend distribution

 

Dividend distribution to the shareholders is recognized as a liability in the financial statements in the period in which dividends are approved.

 

3.Standards, amendments, and interpretation of international financial reporting standards

 

A.New amendments to IFRS mandatory as of January 1, 2023

 

The following standards and interpretations and amendments to existing standards were issued with mandatory application for the accounting period beginning January 1, 2023, but were not relevant and did not have a material impact on the Corporation’s operations:

 

Effective date   New standards
January 1, 2023   IFRS 17 Insurance Contracts
    Modifications
January 1, 2023   Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Amendments to IFRS 17)
  Amendments to IAS 8 - Definition of accounting estimates
  Amendments to IAS 12 - Deferred Taxes Relating to Assets and Liabilities Arising from a Single Transaction
  Amendment to IAS 12 - International Tax Reform Pillar II Model Rules

 

B.New IFRSs and interpretations issued after the date of presentation of the consolidated financial statements

 

The following accounting pronouncements issued are applicable to annual periods beginning after January 1, 2023, and have not been applied in the preparation of these consolidated financial statements. The Corporation intends to adopt the accounting pronouncements applicable to them on their respective dates of application and not in advance.

 

Effective date   New standards or modifications
January 1, 2024   Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current
  Amendments to IFRS 16 – Leasehold Liabilities on a Sale and Leaseback Sale.
  Amendments to IAS 1 - Non-Current Liabilities with Covenants
  Amendments to IAS 7 and IFRS 7 - Supplier Financing Arrangements
   
January 1, 2025   Amendment to IAS 21 - Lack of Convertibility
     
Effective date Deferred indefinitely     Amendments to IAS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

 

These accounting pronouncements issued but not yet effective are not expected to have a material impact on the Corporation consolidated financial statements.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

C.Sustainability standards pronouncements not yet effective

 

The following pronouncements are applicable to the preparation of sustainability reports. The Corporation intends to adopt the pronouncements on their respective dates of application and not in advance.

 

Effective date   New standards or modifications
January 1, 2024   IFRS S1 General Requirements for Disclosures about Sustainability Disclosures Related to Financial Information
    IFRS S2 Climate-related Disclosures

 

The enactment of sustainability IFRS S1 and S2 will be applicable in Peru once the Accounting Standards Board issues a pronouncement for the application of these standards for reporting entities in the country.

 

4.Financial Risk Management

 

The Corporation’s Management is responsible for managing financial risks. The corporation Management manages the general administration of financial risks such risks include currency risk, price risk, fair-value and cash-flow interest rate risks, credit risk, the use of derivative and non-derivative financial instruments, and investment of liquidity surplus, as well as financial risks; all of which are regularly supervised and monitored.

 

A.Financial risk factors

 

The Corporation’s activities expose it to a variety of financial risks: market risks (including currency risk, price risk, fair-value and cash-flow interest rate risks), credit risk, and liquidity risk.

 

The Corporation’s general program for risk management is mainly focused on financial market unpredictability and seeks to minimize potential adverse effects on the Corporation’s financial performance.

 

(a)Market risk

 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market prices involve four types of risk: interest rate risk, exchange rate risk, commodity price risk and other price risks. Financial instruments affected by market risk include bank deposits, trade accounts receivable, other accounts receivable, other financial liabilities, bonds, trade accounts payable, other accounts payable and accounts receivable from and payable to related parties.

 

(i)Currency risk

 

Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will be reduced by adverse fluctuations in exchange rates. Management is responsible for identifying, measuring, controlling and reporting the exposure to foreign exchange risk.

 

The Corporation is exposed to foreign exchange risk arising from local transactions in foreign currencies and from its foreign operations. As of December 31, 2022 and 2023, this exposure is focused mainly on fluctuations of the U.S. dollar, Chilean peso, and Colombian peso. The Corporation’s management monitors this risk by analyzing the country’s macroeconomic variables.

 

The balances of financial assets and liabilities denominated in foreign currencies correspond to balances in U.S. Dollars, Chilean pesos and Colombian pesos, which are stated exchange rate published on that date, according to the currency type:

 

   As of December 31, 2022   As of December 31, 2023 
   Buy   Sale   Buy   Sale 
U.S. Dollars (a)   3.808    3.820    3.705    3.713 
Chilean Peso (b)   0.004449    0.004463    0.004224    0.004233 
Colombian Peso (c)   0.000792    0.000794    0.000969    0.000971 

 

(a)U.S. Dollar as published by the Superintendencia de Banca y Seguros (hereinafter SBS).

(b)Chilean peso as published by Banco Central de Chile.

(c)Colombian peso as published by Banco de la Republica de Colombia.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The consolidated statement of financial position as of December 31, includes the following balances:

 

In thousands of US dollars  2022   2023 
Assets        
Cash and cash equivalents   58,280    105,542 
Trade accounts receivable, net   124,593    174,305 
Accounts receivable from related parties   142,435    142,435 
Other accounts receivable   75,536    85,535 
    400,844    507,817 
Liabilities          
Borrowings   (215,076)   (213,821)
Bonds   (5,569)   (3,890)
Trade accounts payable   (119,104)   (152,383)
Accounts payable to related parties   (3,171)   (3,504)
Other accounts payable   (88,012)   (64,277)
Other provisions   (42,241)   (2,032)
    (473,173)   (439,907)

 

The Corporation assumes foreign exchange risk because it does not use derivative financial instruments to mitigate exchange rate fluctuations.

 

For the periods ended December 31, 2022 and 2023, the Corporation’s exchange gains and losses was, (note 26.A):

 

In thousands of soles  2022   2023 
Gain   449,864    153,252 
Loss   (450,133)   (176,414)
    (269)   (23,162)

 

If, as of December 31, 2023, the U.S. Dollars, the Chilean peso, and the Colombian peso had been strengthened/weakened against the Peruvian Sol, with all other variables held constant, the pre-tax results for the year would have the following impact:

 

   Profit (loss) before income tax 
Effect in thousands of soles  Strengthening   Weakening 
For the year ended as of December 31, 2023          
USD (5% movement)   (1,158)   1,158 
USD (10% movement)   (2,316)   2,316 
For the year ended as of December 31, 2022          
USD (5% movement)   (13)   13 
USD (10% movement)   (27)   27 

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The consolidated statement of changes in equity includes foreign currency translation adjustments originated by its subsidiaries. The consolidated statement of financial position includes the following assets and liabilities in its currency (in thousands):

 

   2022   2023 
   Assets   Liabilities   Assets   Liabilities 
Chilean Pesos   60,684,971    81,864,810    37,715,040    53,101,695 
Colombian Pesos   96,944,436    59,114,296    183,305,679    125,307,739 

 

The Corporation’s foreign currency translation adjustment in 2023 was positive by S/ 29.1 million (negative by S/ 20.9 million in 2022).

 

(ii)Price risk

 

The Corporation is exposed to the risk of hydrocarbon price fluctuations which impacts on the selling price of the products that it commercializes, which are significantly affected by changes in global economic conditions, resource availability, and the cycles of related industries. Management considers reasonable these possible fluctuations in the hydrocarbons prices, based in the Corporation´s economic market environment.

 

If, as of December 31, 2023, the oil price had increased/decreased, with all other variables held constant, the pre-tax profit for the year would have the following impact:

 

   Profit (loss) before income tax 
Effect in thousands of soles  Strengthening   Weakening 
For the year ended as of December 31, 2023        
(5% movement)   5,225    (4,144)
(10% movement)   11,350    (7,431)
For the year ended as of December 31, 2022          
(5% movement)   28,400    (29,800)
(10% movement)   56,400    (62,000)

 

(iii)Fair-value and cash-flow interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates.

 

The Corporation’s interest rate risk arises mainly from its long-term financial liabilities. Variable rate long-term financial liabilities expose the Corporation to cash-flow interest rate risk. Fixed-rate financial liabilities expose the Corporation to fair-value interest rate risk.

 

The Corporation assumes the interest rate risk, due to they do not use financial derivative instruments for mitigate variations in the interest rate risk.

 

The sensitivity to a reasonably possible change in interest rates is shown below. With all other variables held constant, the Corporation’s income before income taxes would be affected by the impact on variable rate borrowings. For the period ended December 31, 2023, the impact on income before income taxes on a 10% increase or decrease amounts to approximately S/ 3.1 million (S/ 2.5 million and S/ 2.6 million, respectively, in 2022). The assumed movement in basis points related to the interest rate sensitivity analysis is based on the current market environment.

 

(b)Credit risks

 

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or commercial contract, resulting in a financial loss.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Credit risk for the Corporation arises from its operating activities due to credit exposure to customers and from its financial activities, including deposits with banks and financial institutions, foreign exchange transactions, and other financial instruments. The maximum exposure to credit risk for the consolidated financial statements as of December 31, 2022 and 2023 is represented by the sum of cash and cash equivalents (note 9), trade accounts receivable (note 10), other accounts receivable (note 12) and accounts receivable from related parties (note 11).

 

Customer credit risk is managed by Management subject to the Corporation’s established policies, procedures and control related to customer credit risk management. The credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined based on this assessment. The maximum credit risk exposure at the reporting date is the carrying value of each class of financial assets disclosed in note 10.

 

The Corporation assesses the concentration of risk with respect to trade accounts receivable as low risk because sales are not concentrated in small customer groups and no customers account for 10% or more of the Corporation’s revenues.

 

Management monitors the credit risk of other receivables on an ongoing basis and assesses those receivables that show evidence of impairment to determine the required allowance for doubtful accounts.

 

Concerning loans to related parties, the Corporation has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board of Directors (note 11).

 

Management does not expect the Corporation to incur any losses from the performance of these counterparties, except for the ones already recorded in the consolidated financial statements.

 

(c)Liquidity risk

 

Prudent liquidity risk management implies holding enough cash and cash equivalent, and financing available through a proper number of credit sources, and the ability to close positions in the market. Historically, the Corporation’s cash flows from operations have enabled it to meet its obligations including its financing activities. The Corporation has implemented various actions to reduce its exposure to liquidity risk and has developed a Financial Plan based on several steps, which were designed with a commitment to compliance within a reasonable period of time. The Financial Plan is intended to meet the various obligations at the Company and Corporation entities levels.

 

The Corporate Finance Office monitors the cash flow projections made on liquidity requirements of the Corporation to ensure it exists sufficient cash to meet operational needs so that the Corporation does not breach borrowing limits or covenants, where applicable, on any of its borrowing facilities. Less significant financing transactions are controlled by the Finance Management of each subsidiary.

 

Such forecasting takes into consideration the Corporation’s debt financing plans, covenant compliance, compliance with ratio targets in the statement of financial position and, if applicable, with external regulatory or legal requirements.

 

As of December 31, 2023, the Company has significant current payment obligations mainly arising from the Collaboration and Benefits Agreement (note 1.C) and the Bridge Loan (note 17.a). For this purpose, Management is developing a financial plan with the aim of covering the short-term part of these obligations.

 

Cash surplus on the amounts required for the administration of working capital are invested in checking accounts that generate interest and time deposits, selecting instruments with appropriate maturities or sufficient liquidity.

  

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The table below analyzes the Corporation’s financial liabilities grouped according to the remaining period from the date of the statement of financial position to the date of maturity. The amounts disclosed in the table below are the contractual undiscounted cash flows, which include interest to be accrued according to the established schedule.

 

       Contractual cash flows 
   Carrying   Less than   1-2   2-5   More than     
In thousands of soles  amount   1 year   years   years   5 years   Total 
As of December 31, 2022                        
Other financial liabilities (except for finance leases and lease liability for right-of-use asset)   819,973    599,310    71,732    216,392    -    887,434 
Finance leases   835    873    -    -    -    873 
Lease liability for right-of-use asset   59,085    19,075    31,705    23,386    113    74,279 
Bonds   869,913    141,246    185,114    419,969    707,800    1,454,129 
Trade accounts payables (except non-financial liabilities)   1,037,013    1,027,256    9,757    -    -    1,037,013 
Accounts payables to related parties   80,781    53,488    25,420    697    1,176    80,781 
Other accounts payables and other provisions (except non-financial liabilities)   712,071    186,326    64,307    89,868    470,129    810,630 
    3,579,671    2,027,574    388,035    750,312    1,179,218    4,345,139 
           
         Contractual cash flows 
    Carrying    Less than    1-2    2-5    More than      
In thousands of soles   amount    1 year    years    years    5 years    Total 
As of December 31, 2023                              
Other financial liabilities (except liability for right-of-use asset)   780,145    568,284    165,022    163,943    -    897,249 
Lease liability for right-of-use asset   42,562    17,754    23,487    8,725    73    50,039 
Bonds   822,925    140,546    177,121    345,473    679,085    1,342,225 
Trade accounts payables (except non-financial liabilities)   1,168,267    1,164,266    4,001    -    -    1,168,267 
Accounts payables to related parties   72,936    44,372    28,564    -    -    72,936 
Other accounts payables and other provisions (except non-financial liabilities)   673,663    195,279    57,601    138,356    410,377    801,613 
    3,560,498    2,130,501    455,796    656,497    1,089,535    4,332,329 

 

B.Capital management

 

The Corporation’s objective in managing capital is to safeguard its ability to continue as going concern in order to generate returns to its shareholders, benefits to stakeholders, and keep an optimal capital structure to reduce capital cost. Since 2017, due to the situation of the Corporation, Management has monitored deviations that might cause the non-compliance of covenants and may hinder renegotiation of liabilities. In special situations and events, the Corporation identifies potential deviations, requirements and establishes a plan.

 

The Corporation may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce its debt to maintain or adjust the capital structure.

 

The Corporation monitors its capital based on the leverage ratio. This ratio is calculated as net debt divided by the sum of net debt plus equity. The net debt corresponds to the total financial liabilities (including current and non-current indebtedness) adding the provision for civil compensation less cash and cash equivalents.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

As of December 31, 2022 and 2023, the leverage ratio is as follows:

 

In thousands of soles  Note   2022   2023 
Total borrowing, bonds and civil compensation (*)   17 and 18    2,238,699    2,115,471 
Less: Cash and cash equivalents   9    (917,554)   (1,003,888)
Net debt (a)        1,321,145    1,111,583 
Total equity (b)        1,346,006    1,487,289 
Total net debt plus equity (a) + (b)        2,667,151    2,598,872 
Gearing ratio        0.50    0.43 

 

(*)As of December 31, 2023, the provision for civil compensation amounts to S/ 469.8 million (S/ 488.9 million as of December 31, 2022).

 

During the years ended December 31, 2022 and 2023, there were no changes in the objectives, policies or processes related to capital management.

 

5.Use of Judgments and Estimates

 

The estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including the reasonable expectation of occurrence of future events depending on the circumstances.

 

A.Significant accounting estimates and criteria

 

The Corporation makes estimates and assumptions regarding the future. Resulting accounting estimates very rarely will be the same as the actual results. The following are the estimates and assumptions that have significant risk as to produce a material adjustment to the balances of assets and liabilities for next periods.

 

i.Impairment testing of goodwill and other finite useful-life fixed assets and indefinite useful-life intangible assets

 

Impairment testing is undertaken annually to determine if goodwill arising from business acquisitions and other useful-life indefinite intangible assets are impaired, in accordance with the policy described in note 2.G. For this purpose, goodwill is allocated to the different CGUs to which it relates while other indefinite useful-life intangible assets are assessed individually.

 

The recoverable amounts of the CGU and of other indefinite useful-life intangible assets have been determined based on the higher of their value-in-use or fair value less costs to sell. This testing requires the exercise of Management’s professional judgment to analyze any potential indicators of impairment such as the use of estimates in determining the value in use, including preparing future cash flows, macro-economic forecasts as well as defining the interest rate at which said cash flows will be discounted.

 

If the Corporation experiences a significant drop in revenues or a drastic increase in costs or changes in other factors, the fair value of their business units might decrease. If Management determines that the factors reducing the fair value of the business units are permanent, those economic factors will be taken into consideration to determine the recoverable amount of those business units and therefore, goodwill, as well as other indefinite useful-life intangible assets may be deemed to be impaired, which could result in write-off being necessary.

 

As a result of these evaluations, as of December 31, 2022 and 2023, no provision for goodwill impairment was identified (note 16.iii). As of December 31, 2022, the Corporation recognized impairment of the Vial y Vives-DSD brands for S/ 2.5 million; however, no provision was identified for the Morelco brand (note 16.iv).

 

As of December 31, 2022 and 2023, the Corporation conducted a sensitivity analysis increasing or decreasing the assumptions of gross margin, discount rate, and revenue and terminal growth rate by 10% (this percentage corresponds to the relevant evaluation range for management). This analysis assumes that all other variables remain constant.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Goodwill

 

In 2023, if the gross margin, discount rate, and perpetual growth rate were 10% below or above management’s estimates, collectively and/or independently, the Corporation would not have had to recognize a provision for impairment of goodwill of UGE Engineering and Construction (Morelco), because its fair value would have increased or decreased by S/ 14.5 million.

 

In 2022, if the gross margin, discount and perpetual rate were 10% below or above management’s estimates, collectively and/or independently, the Corporation would not have had to recognize an impairment provision for goodwill of UGE Engineering and Construction (Morelco), because its fair value would have increased or decreased by S/ 13.5 million.

 

Trademarks

 

In 2023, if the revenue growth rate, discount rate and perpetual growth rate were 10% below or above management’s estimates, collectively and/or independently, the Corporation would not have had to recognize an impairment provision for the Vial y Vives-DSD brand because its fair value would have increased or decreased in the range of S/ 0.5 million and S/ 15 million, and for the Morelco brand, the Corporation would not have had to recognize an impairment provision because its fair value would have increased or decreased in the range of S/ 3.5 million and S/ 7.4 million.

 

In 2022, if the revenue growth rate, discount rate and perpetual growth rate were 10% below or above management’s estimates, collectively and/or independently, the Corporation would not have had to recognize an impairment provision for the Vial y Vives-DSD brand because its fair value would have increased or decreased in the range of in the range of S/ 3.1 million and S/ 3.9 million; and for the Morelco brand, the Corporation would not have had to recognize an impairment provision because its fair value would have increased or decreased in the range of S/ 2.1 million and S/ 16.1 million.

 

ii.Taxation

 

Determination of the tax obligations and expenses requires interpretations of the applicable tax legislation. The Corporation has professional advice on legal tax matters before making any decision on tax matters.

 

Deferred tax assets and liabilities are calculated based on the temporary differences arising between the taxable basis of assets and liabilities and the respective amounts stated in the financial statements of each entity comprising the Corporation, using the tax rates in effect in each of the years in which the difference is expected to reverse. Any change in tax rates will affect the deferred tax assets and liabilities. This change will be recognized in the consolidated statement of profit or loss in the period in which the change takes effect.

 

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which temporary differences and tax losses can be used. For this purpose, the Corporation takes into consideration all available information, including factors such as historical data, projected income, current operations, and tax planning strategies. A tax benefit related to a tax position is only recognized if the benefit will be realized.

 

The income tax for the year includes Management’s evaluation of the amount of taxes to be paid in uncertain tax positions, where the liabilities have not yet been agreed with the tax administration. The Corporation’s possible maximum exposure to tax contingency amounts to S/ 411.6 million.

 

iii.Percentage of completion revenue recognition

 

Revenue from services based on construction contracts are recognized by the percentage of completion method, according to the output method (note 2.W.i). The Corporation needs to estimate the cost to be obtained upon completion of the work. Projections of these costs are determined by Management based on their execution budgets and adjusted periodically in order to use updated information to reflect actual performance in the work. In this regard, Management believes that the estimates made at the end of the year are reasonable.

 

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Notes to the Consolidated Financial Statements

 

Contract revenues are recognized as such in the consolidated statement of comprehensive income and the costs related to the construction contract are recognized as costs of construction in the consolidated statement of comprehensive income in the accounting periods in which the project was executed. Costs directly related to a specific contract include: labor costs at the construction site (including construction supervision), costs of materials used in construction, depreciation costs of equipment used in the contract, design and technical assistance costs directly related to the contract, among others (note 2.X). However, any expected and likely cost overruns related to the contract over total expected income under the contract is recognized as expense immediately. In addition, any change in the estimates under the contract is recognized as a change in accounting estimates in the period in which the change is made and future periods, if applicable. In certain construction contracts, the terms of these agreements allow to retain an amount to customers until construction is completed.

 

As of December 31, a sensitivity analysis was performed considering a 10% increase/decrease in the construction margins in the following sectors: i) buildings, ii) energy, iii) industry, iv) infrastructure, v) mining, vi) oil & gas, vii) water and sewage, and viii) various services, as shown below:

 

   2022   2023 
Revenue   2,451,067    2,443,984 
Gross profit   (14,212)   267,217 
%   0.58    10.93 
Plus 10%   0.64    12.02 
Increase in profit (loss) before income tax   (1,475)   26,550 
    (15,687)   293,767 
Less 10%   0.52    9.84 
Decrease in (loss) profit before income tax   1,475    (26,550)
    (12,737)   240,667 

 

iv.Provision for decommissioning and well closure

 

The provision for decommissioning and well closure is an obligation established by law for all operators. Accordingly, it is more likely than not that an outflow of resources will be required to settle the obligation and it is possible to reliably estimate its amount. The operator is responsible for this activity to the extent that the wells have been worked during the contract period.

 

As of December 31, 2022 and 2023, the estimate of the amount calculated by the Corporation is based on the following factors:

 

-Total number of wells to be plugged,

 

-Well decommissioning and plugging costs (these costs are estimated on the basis of plug and abandonment performed in previous periods and with quotations made for the Lot I and Lot V abandonment plan), and

 

-Costs for facility abandonment and remediation areas

 

The Corporation estimates the present value of its future obligation for decommissioning and well closure costs (well closure liability) and increases the carrying amount of the asset to be retired in the future, which is shown in intangible assets item in the consolidated statement of financial position. The provision is recognized at the present value of the expected disbursements in local and foreign currency to settle the obligation using the Peruvian sovereign bond discount rate in local and foreign currency, respectively for 3, 5 and 22 years, effective as of December 2022 and 2023.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The pre-tax discount rates are the following:

 

    2022     2023  
Discount rates   USD     PEN     USD     PEN  
Lot I     5.41 %     7.21 %     5.04 %     6.12 %
Lot V     5.29 %     6.96 %     5.21 %     5.69 %
Lot III     6.57 %     8.22 %     5.62 %     6.93 %
Lot IV     6.57 %     8.22 %     5.62 %     6.93 %

 

The liability for the closure of wells and other oil premises is readjusted to reflect changes arising from the passage of time and from reviews conducted either at the date of occurrence or the amount of the present value of the originally estimated obligations (note 21).

 

If, as of December 31, 2022 and 2023, the estimated rate had increased or decreased by 10%, the impact on pre-tax profit would not have been significant. This analysis assumes that all other variables remain constant:

 

In thousands of soles  2022   2023 
10%   383    (1,359)
(10%)   409    1,447 

 

v.Impairment of investment in associate and account receivable to Gasoducto Sur Peruano S.A.

 

As a consequence of the termination of the concession agreement signed between Gasoducto Sur Peruano S.A. (hereinafter “GSP”) and the Peruvian State (note 14.a.i), in 2019 the Company impaired the full value of its investment in GSP.

 

Regarding trade accounts receivable, to GSP (note 11 and note 14), the Management has determined its recoverability under the following assumptions: (i) the amount that GSP will recover as a result of a possible public auction y (ii) the liquidation of the company via the GSP Creditor´s meeting.

 

Accounts receivable related to GSP as of December 31, 2022 and 2023 amount to S/ 542.4 million and S/ 554 million, respectively (note 11).

 

The calculation of the impairment estimate adheres to a process of liquidation of GSP in accordance with Peruvian legislation, according to which the value of the asset to be recovered is used first to cover the payments of liabilities in the different categories of creditors and the remainder, if it is the case, to cover the payment to the shareholders, taking into account the existing subordination agreements.

 

In 2018, in relation to the amount to be recovered by GSP, the Company assumed a recovery of the minimum amount established in the Concession Agreement, which is equivalent to 72.25% of the Net Book Value (NBV) of the Concession assets. This amount represented a minimum payment to be obtained by GSP based on a public auction to be set up for the adequate transfer of the Concession’s assets to a new concessionaire, under the relevant contractual terms and conditions.

 

Beginning 2019, the recovery of NBV estimated by Management equals 50%, considering the agreements reached in the Final Collaboration and Benefits Agreement and a total term of eight years has been considered, which included the formation of the Creditors’ Meeting, the approval of the settlement plan, the presentation of the arbitration claim, as well as the entire arbitration process.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

As of the date of this report, GSP is under liquidation. AENZA S.A.A. has pointed as chairman of the Creditors’ Meeting. On December 28, 2023, the Instituto Nacional de Defensa de la Competencia y de la Proteccion de la Propiedad Intelectual INDECOPI ordered the ex officio liquidation of GSP and the Technical Secretariat of the Commission called a Sole Meeting of Creditors for January 29, 2024, with the sole purpose of appointing a Liquidator for the process and approving a new Liquidation Agreement. The Sole Meeting was formed by the Creditors in attendance and approved the corresponding proposals by simple majority. Thus, on the aforementioned day, with 59% of the votes in attendance, the appointment of Alva Legal Asesoria Empresarial S.A.C. as GSP’s liquidator and the proposed Liquidation Agreement were approved. With this, the liquidation process of GSP continues its course, as well as the necessary actions for the recovery of NBV.

 

The Company considers that the term of eight (8) years for the recovery of the investment is adequate, considering the possibility of an arbitration process and the time it will take to execute the award. See assumptions and recognized values in note 14.a.i. The Company’s management maintains the recovery estimate in 8 years, applying a discount rate of 5.86% as of December 31, 2023.

 

B.Significant judgments in applying accounting policies

 

Consolidation of entities in which the Corporation holds less than 50%

 

The Corporation owns some direct and indirect subsidiaries in which it has control, even having less than 50% of the voting rights. These entities are mainly related to indirect subsidiaries in the real estate business owned through Viva Negocio Inmobiliario S.A.C., having control over relevant activities affecting the subsidiaries’ returns, even though the Corporation holds interest between 30% and 50%. Additionally, the Corporation has de facto control by a contractual agreement with the majority investor over Promotora Larcomar S.A. of which it owns 46.55% of the equity interest.

 

Consolidation of entities in which the Corporation does not have joint control but holds rights and obligations over the assets and liabilities

 

The Corporation assesses, on an ongoing basis, the nature of the contracts signed with one or more parties. If the Corporation is not determined to have control or joint control but has rights to the assets and obligations for the liabilities under the arrangement, the Corporation recognizes its assets, liabilities, income and expenses and its interest in any jointly controlled assets or liabilities and any income or expenses arising from the arrangement as a joint operation in accordance with IFRS 11 – Joint Arrangements (note 2.B.v).

 

6.Interests in Other Entities

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. Additionally, the consolidated financial statements include interests in joint operations in which the Company or certain subsidiaries have joint control with their partners (note 2.B).

 

A.Main subsidiaries

 

The following table shows the main direct and indirect subsidiaries classified by operating segment (note 7):

 

Name   Country   Economic activity
Engineering and Construction:        
Cumbra Peru S.A.   Peru, Chile, and Colombia   Service of civil construction, electromechanical assembly, and building, management and implementation of real estate projects, and other related services. 
         
GyM Chile S.p.A.   Chile   Investment funds, investment companies, and similar financial entities.
         
Vial y Vives – DSD S.A. (VyV)   Chile   Construction engineering projects, civil construction, and related technical advisory, rental of agriculture and livestock, forest, construction and civil engineering machinery and equipment without operators.
         
Morelco S.A.S.   Colombia, Ecuador, and Peru   Provision of construction and assembly services, supply of equipment and materials, operation and maintenance, and engineering services in the specialties of mechanics, instrumentation, and civil works. 
         
Cumbra Ingenieria S.A.   Peru, Mexico, and Chile   Engineering advisory and consultancy, project execution, and project studies and supervision, and work management.

 

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

Name   Country   Economic activity
Energy:        
Unna Energia S.A.   Peru   Oil and natural gas products and byproducts extraction, operation and exploitation services, as well as fuel storage and dispatch services.
         
Oiltanking Andina Services S.A.  (OTAS)   Peru   Operation of the gas processing plant of Pisco – Camisea.
         
Transportadora de Gas Natural Comprimido Andino S.A.C. (TGNCA)   Peru   Development of natural gas activities and the supply, transport and trading of natural gas.
         
Infrastructure:        
         
Unna Transporte S.A.C.   Peru   Operation and maintenance of highways and concessions. 
         
Tren Urbano de Lima S.A. (TULSA)   Peru   Concession to operate the metro transportation system of Lima Metropolitana.
         
Carretera Andina del Sur S.A.   Peru   Concession to construct, operate, and maintain Section 1 of “Interoceanica Sur” highway.
         
Red Vial 5 S.A.   Peru   Concession to restore, operate, and maintain the “Ancon – Huacho – Pativilca” Section of “Panamericana Norte” Highway.
         
Carretera Sierra Piura S.A.C.   Peru   Concession to operate and maintain the Buenos Aires – Canchaque provincial highway.
         
Concesionaria Via Expresa Sur S.A.   Peru   Concession to design, construct, operate, and maintain Via Expresa – Paseo de la Republica in Lima.
         
Real estate:        
Viva Negocio Inmobiliario S.A.C. (VIVA)   Peru   Development and management of real estate projects directly or jointly to other partners.
         
Parent company operation:        
         
CAM Holding S.p.A.   Chile   Investment company. 
         
Aenza Servicios Corporativos S.A.C. (before Qualys S.A.C.)   Peru   Provision of human, economic and technological services to the Corporation’s companies.
         
Promotores Asociados de Inmobiliarias S.A.   Peru   It operates in the real estate industry and is engaged in development and sale of offices.
         
Negocios del Gas S.A.   Peru   Investment company for construction, operation, and maintenance of natural gas and natural gas liquids transportation systems.
         
Inversiones en Autopistas S.A.   Peru   Company holding shares, interests, or other any ownership or credit investment.
         
Operadores de Infraestructura S.A.C.   Peru   Activities related to the leasing of advertising space and commercial premises on Line 1 of the Lima Metro.

 

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AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The following table shows the Corporation’s subsidiaries and related interest as of December 31, 2022 and 2023:

 

   2022   2023 
In percentage  Percentage of
common shares
directly held by
Parent (%)
   Percentage of
common shares
held by
Subsidiaries (%)
   Percentage of
common shares held
by non-controlling
interests (%)
   Percentage of
common shares
directly held by
Parent (%)
   Percentage of
common shares
held by
 Subsidiaries (%)
   Percentage of
common shares held
by non-controlling
interests (%)
 
Engineering and Construction:                        
Cumbra Peru S.A.   99.39%   -    0.61%   99.53%   -    0.47%
- Morelco S.A.S.   -    100.00%   -    -    100.00%   - 
- GyM Chile S.p.A.   -    100.00%   -    -    100.00%   - 
- Vial y Vives - DSD S.A.   -    99.16%   0.84%   -    99.16%   0.84%
- Cumbra Inversiones Colombia S.A.S.   -    100.00%   -    -    100.00%   - 
Cumbra Ingenieria S.A.   89.41%   -    10.59%   89.41%   -    10.59%
- Ecologia Tecnologia Ambiental S.A.C.   -    100.00%   -    -    100.00%   - 
- GM Ingenieria y Construccion de CV   -    100.00%   -    -    100.00%   - 
- Cumbra Ingenieria Chile S.p.A.   -    -    -    -    100.00%   - 
- GM Ingenieria Bolivia S.R.L.   -    98.57%   1.43%   -    -    - 
Energy:                              
Unna Energia S.A.   95.00%   -    5.00%   95.00%   -    5.00%
- Oiltanking Andina Services S.A.   -    50.00%   50.00%   -    50.00%   50.00%
- Transportadora de Gas Natural Comprimido Andino S.A.C.   -    100.00%   -    -    100.00%   - 
Infrastructure:                              
Unna Transporte S.A.C.   100.00%   -    -    100.00%   -    - 
Tren Urbano de Lima S.A.   75.00%   -    25.00%   75.00%   -    25.00%
Carretera Andina del Sur S.A.C   100.00%   -    -    100.00%   -    - 
Red Vial 5 S.A.   18.20%   48.80%   33.00%   18.20%   48.80%   33.00%
Carretera Sierra Piura S.A.C.   99.96%   0.04%   -    99.96%   0.04%   - 
Concesionaria Via Expresa Sur S.A.   98.89%   1.11%   -    98.89%   1.11%   - 
Real Estate:                              
Viva Negocio Inmobiliario S.A.C.   99.54%   -    0.46%   99.54%   -    0.46%

 

Parent company operations:                        
AENZA Servicios Corporativos S.A.C.   100.00%   -    -    100.00%   -    - 
Promotora Larcomar S.A.   46.55%   -    53.45%   46.55%   -    53.45%
Negocios del Gas S.A.   99.99%   0.01%   -    99.99%   0.01%   - 
Agenera S.A.   99.00%   1.00%   -    99.00%   1.00%   - 
Inversiones en Autopistas S.A.   1.00%   99.00%   -    1.00%   99.00%   - 
Cam Holding S.p.A.   100.00%   -    -    100.00%   -    - 

 

39

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

B.Public service concessions

 

The Corporation has public service concessions. When applicable, the income attributable to the construction or restoration of infrastructure has been accounted for by applying the models described in note 2.E (financial asset model and intangible assets).

 

In all Corporation’s concessions, the infrastructure returns to the Grantor at the end of the Agreement.

 

Find below the concessions held by the Corporation as of December 31, 2022 and 2023:

 

Name of Concessionaire   Description   Estimated
investment
  Consideration   Interest   Concession
termination
  Accounting
model
Carretera Andina del Sur S.A.   This company operates and maintains a highway of 750 km from San Juan de Marcona Port to Urcos, Peru, which is connected to the Interoceanica highway. The highway has five tolls and three weigh stations.   US$ 99 million   Transaction secured by the Peruvian Government comprising annual payments for highway maintenance and operation, under responsibility of the Ministerio de Transporte y Comunicaciones (MTC).   100.00 %   2032   Financial asset
                           
Carretera Sierra Piura S.A.C.   This company regularly operates and maintains a highway of 78 km, which connects Buenos Aires and Canchaque towns in Peru. The highway has one toll.   US$ 31 million   Transaction secured by the Peruvian Government regardless traffic volume. Revenue is secured by an estimated annual amount of US$ 1.4 million.   100.00 %   2025   Financial asset
                           
Concesionaria La Chira S.A.   Design, financing, construction, operation, and maintenance of “Planta de Tratamiento de Aguas Residuales y Emisario Submarino La Chira” project. About 25% of sewage of Lima is treated under this project.   S/ 450 million   Transaction secured by the Peruvian Government consisting of monthly and quarterly payments settled by Sedapal´s collection trust.   50.00 %   2037   Financial asset
                           
Tren Urbano de Lima S.A.   Concession to operate the Electric Mass Transportation System of Lima and Callao, Line 1 Villa El Salvador - Avenida Grau - San Juan de Lurigancho, the only railway system in Lima Metropolitana, including (i) operation and maintenance of existing trains (24 trains as initial investment and 20 additional trains) and (ii) operation and maintenance of the railway system (railway and infrastructure).   S/ 566 million   Transaction secured by the Peruvian Government through a quarterly payment made by the MTC based on kilometers per train.   75.00 %   2041   Financial asset
Red Vial 5 S.A.   Operation and maintenance of the highway connecting Lima to the northwest of Peru. This highway is 183km long and is known as Red Vial 5, from Ancon to Pativilca and has three tolls.   US$ 187 million   Collected from users (self-funded concession; revenue comes from toll collection).   67.00 %   2028   Intangible
                           
Concesionaria Via Expresa Sur S.A.   Design, financing, construction, operation and maintenance of the infrastructure associated with the Via Expresa Sur project.   -   Contract whereby the Company was entitled to charge users a toll rate; the Peruvian State guaranteed to pay the Company an amount to cover the deficit between the amount charged to users and the annual limits stipulated in the contract. On December 16, 2022, the Metropolitan Municipality of Lima and the Concessionaire Via Expressa Sur declared the expiration of the Concession Contract.   100.00 %   2022   Financial asset

 

40

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

C.Hydrocarbon and gas contracts

 

As of December 31, 2023, the subsidiary Unna Energia S.A. has mainly two contracts signed with Perupetro S.A. (in 2022, it had three contracts), as indicated below:

 

i.License agreement for the exploitation of hydrocarbons (Lot III)

 

Subscribed with Perupetro S.A. in March 2015 for a period of thirty years for oil, and forty years for non-associated natural gas counted from April 5, 2015, the date corresponding to the start of operations. The lot is located in the provinces of Talara and Paita, Grau region, northeastern Peru. As of December 31, 2023, the Company held a total of 514 wells of which 137 wells were active and 377 wells were inactive (as of December 31, 2022 it held 505 wells of which 172 wells were active and 333 wells were inactive).

 

ii.License agreement for the exploitation of hydrocarbons (Lot IV)

 

Subscribed with Perupetro S.A. in March 2015 for a period of thirty years for oil, and forty years for non-associated natural gas counted from April 5, 2015, the date corresponding to the start of operations. The lot is located in the provinces of Talara and Contralmirante Villar, department of Piura and Tumbes, Grau region, northeastern Peru. As of December 31, 2023, the Company had a total of 594 wells of which 377 wells were active and 217 wells were inactive (as of December 31, 2022 it had 578 wells of which 361 wells were active and 217 wells were inactive).

 

iii.Service contract for exploration and exploitation of hydrocarbons (Lot I)

 

Contract terminated on December 26, 2021, signed in 1991 by Cavelcas del Peru S.A. (CAVELCAS) and Perupetro S.A. for a period of twenty years. On July 31, 1995 CAVELCAS made the assignment of the contractual position for 100% of the participation to the Company, the latter assuming the technical, economic and financial responsibility of the operations. In March 2010 an extension agreement was signed for this contract until December 2021. To date, the Company is in the process of obtaining the approval of the Abandonment Plan, in order to execute the activities under its responsibility due to the termination of the Contract.

 

iv.Service contract for exploration and exploitation of hydrocarbons (Lot V)

 

This contract was signed with Perupetro S.A. in 1993 for a period of twenty years. In March 2010 the Extension Agreement to the oil services contract was signed until October 7, 2023. The lot is located in the provinces of Talara and Contralmirante Villar, departments of Piura and Tumbes, Grau region, northeastern Peru. To date, the Company is in the process of obtaining the approval of the Abandonment Plan in order to execute the activities under its responsibility due to the termination of the Contract.

 

v.Contract for the operation of hydrocarbon supply terminals.

 

On July 16, 2014, Petroperu S.A. signed contracts for the operation of the North and Central hydrocarbon supply terminals with the subsidiary Unna Energia S.A. and Oiltanking Peru S.A.C., for the provision of reception, storage and dispatch services for a term of twenty years from the date of signing the contracts, for which the Terminales del Peru Consortium was formed, which began operating on September 2, 2014. Unna Energia S.A. is the operator and both consortium members exercise joint control of the business and have a 50% shareholding.

 

41

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

D.Joint operations

 

As of December 31, 2022 and 2023, the Corporation participates in 38 and 37 joint operations with third parties, respectively. The table below lists the main joint operations in which the Corporation participates.

 

    Percentage of interest  
Joint operations   2022     2023  
AENZA S.A.A.            
- Concesionaria La Chira S.A.     50 %     50 %
Cumbra Peru S.A.                
- Consorcio Huacho Pativilca     67 %     67 %
- Consorcio GyM – CONCIVILES     67 %     67 %
- Consorcio Chicama – Ascope     50 %     50 %
- Consorcio Constructor Alto Cayma     50 %     50 %
- Consorcio Ermitaño     50 %     50 %
- Consorcio GyM-Stracon     50 %     50 %
- Consorcio HV GyM     50 %     50 %
- Consorcio La Chira     50 %     50 %
- Consorcio Lima Actividades Comerciales Sur     50 %     50 %
- Consorcio Lima Actividades Sur     50 %     50 %
- Consorcio Rio Urubamba     50 %     50 %
- Consorcio Alto Cayma     49 %     49 %
- Consorcio La Gloria     49 %     49 %
- Consorcio Norte Pachacutec     49 %     49 %
- Consorcio Italo Peruano     48 %     48 %
- Consorcio Vial Quinua     46 %     46 %
- Consorcio Constructor Ductos del Sur     29 %     29 %
- Consorcio Constructor Chavimochic     27 %     27 %
- Consorcio Intipunku     49 %     49 %
Unna Energia S.A.                
- Consorcio Terminales     50 %     50 %
- Terminales del Peru     50 %     50 %
Unna Transporte S.A.C.                
- Consorcio Peruano de Conservacion     50 %     50 %
- Consorcio Manperan     67 %     67 %
- Consorcio Vial Sierra     100 %     1000 %
- Consorcio Vial Ayahuaylas     99 %     99 %
- Consorcio Vial Sullana     99 %     99 %
- Consorcio Vial del Sur     99 %     99 %
Cumbra Ingenieria S.A.                
- Consorcio Vial la Concordia     88 %     88 %
- Consorcio GMI- Haskoningdhv     70 %     70 %
- Consorcio Supervisor Ilo     55 %     55 %
- Consorcio Poyry-GMI     40 %     40 %
- Consorcio Internacional Supervision Valle Sagrado     33 %     33 %
- Consorcio Ecotec – GMI – PIM     90 %     90 %
- Consorcio Ribereno Chinchaycamac     100 %     100 %
- Consorcio Supervisor GRH     83 %     83 %
- Consorcio Ecotec – GMI     100 %     100 %

 

All joint agreements listed above are operated in Peru.

 

42

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The main activities of the joint operations correspond to:

 

Joint agreements   Economic activity
     
AENZA S.A.A.   Construction, operation, and maintenance of the raw sewage treatment plant of La Chira to the south of Lima. The purpose of the project is to face environmental problems of Lima, due to raw sewage flowing into the sea.
     
Cumbra Peru S.A.   Consortiums created only to come into construction contracts.
     
Unna Energia S.A.   Terminales del Peru and Consorcio Terminales provide services of reception, storage, shipment, and transportation of liquid hydrocarbons such as gasoline, fuel for aircrafts, diesel and residual fuel, among others. 
     
Unna Transporte S.A.C.   Services of refurbishment, routinary and regular maintenance of highways, and highway preservation and conservation services. 
     
Cumbra Ingenieria S.A.   Engineering advisory and consulting services, execution of studies and projects, project management, and work supervision. 

 

7.Operating Segments

 

A.Basis of Segmentation

 

The Corporation has four strategic division, which are its reportable segments. These reportable segments offer different products and services, and are managed separately because they require different business strategies.

 

Separate financial information is available for the reportable segments that are regularly evaluated by the Executive Committee (Chief operating decision maker, “CODM”) which is led by the Corporate General Manager, in deciding how to allocate resources and assess performance.

 

Reportable segments are reported consistently with the internal reports that are reviewed by the Executive Committee. This Committee acts as the maximum authority in operation decision making and is responsible for allocated resources and assessing the performance of each operating segments.

 

The Corporation’s reporting segments are: (i) engineering and construction, (ii) energy, (iii) infrastructure, and (iv) real estate.

 

Corporation’s sales and accounts receivable are not concentrated in a few customers. There are no external customers representing 10% or more of the Corporation’s revenue.

 

43

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

B.Information on reportable segments

 

The operations of Corporation in each reportable segment are as follows:

 

(a)Engineering and construction: traditional engineering services such as architectural planning, structural, civil and design engineering for advanced specialties including process design, simulation, and environmental services, as well as construction services related to: i) civil works, such as the construction of hydroelectric power stations and other large infrastructure facilities; (ii) electromechanical construction, such as concentrator plants, oil and natural gas pipelines, and electric transmission lines; iii) building construction, such as offices, residential buildings, hotels, and affordable housing projects, shopping centers, and industrial facilities.

 

This reportable segment is mainly comprised by the companies Cumbra Peru S.A. and Cumbra Ingenieria S.A. (located in Peru), Vial y Vives D.S.D. (located in Chile) and Morelco S.A. (located in Colombia). These companies are engaged in engineering and construction services and subjected to the execution of contracts and compliance of the regulations applicable to the engineering and construction industry. These construction companies can execute projects in similar countries in South America (Peru, Chile and Colombia).

 

(b)Energy: oil exploration, exploitation, production, treatment, and trade of oil, separation and trade of natural gas and its byproducts at the gas processing plant, as well as the construction and assembly of oil facilities or those linked to the oil and gas industry and the storage and dispatch of fuel and oil by products.

 

(c)Infrastructure: long-term concessions or similar contractual arrangements in Peru for three different operating segments (i) toll roads, (ii) transportation, and (iii) water treatment, which are presented as the infrastructure reportable segment. This segment executes the operation and maintenance services for its assets.

 

(d)Real Estate: develops and sales properties to low and middle-income, which are experiencing a significant increase in available income, and also luxury properties to a lesser degree, as well as the development of commercial and office space.

 

44

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

The following table shows the Corporation’s financial statements by operating segments:

 

    Engineering           Infrastructure           Parent              
In thousands of soles   and
construction
    Energy     Toll roads     Transportation     Water
treatment
    Real estate     Company
operations
    Eliminations     Consolidated  
As of December 31, 2022                                                      
Assets                                                      
Cash and cash equivalents     209,737       104,553       130,213       171,747       2,910       111,487       186,907       -       917,554  
Trade accounts receivables, net     697,512       80,245       34,183       118,867       898       146,316       561       -       1,078,582  
Accounts receivable from related parties     86,146       68       51,523       4,455       52       378       115,736       (230,613 )     27,745  
Other accounts receivable, net     298,784       39,921       28,902       15,229       30       5,380       7,294       (2,345 )     393,195  
Inventories, net     41,933       29,935       9,655       39,780       -       227,067       -       (1,587 )     346,783  
Prepaid expenses     10,945       2,055       5,496       369       160       448       8,625       -       28,098  
Total current assets     1,345,057       256,777       259,972       350,447       4,050       491,076       319,123       (234,545 )     2,791,957  
Trade accounts receivable, net     2,806       -       16,215       699,487       1,392       3,969       -       -       723,869  
Accounts receivable from related parties     299,268       -       15,858       42       14,015       -       602,004       (388,795 )     542,392  
Prepaid expenses     -       826       14,549       1,731       632       -       65       (510 )     17,293  
Other accounts receivable, net     101,366       89,782       -       -       7,346       55,347       31,889       -       285,730  
Inventories, net     -       -       -       -       -       65,553       -       -       65,553  
Investments in associates and joint ventures     975       12,049       -       -       -       2,752       1,509,790       (1,510,650 )     14,916  
Investment property, net     -       -       -       1,507       -       19,823       40,594       -       61,924  
Property, plant and equipment, net     102,822       176,596       6,193       848       150       7,531       1,286       (10,961 )     284,465  
Intangible assets and goodwill, net     131,431       363,066       274,597       238       -       615       13,414       3,975       787,336  
Right-of-use assets, net     8,745       12,795       7,106       23       143       2,580       38,485       (19,670 )     50,207  
Deferred tax asset     175,702       4,572       26,787       -       415       23,781       59,316       5,065       295,638  
Total non-current assets     823,115       659,686       361,305       703,876       24,093       181,951       2,296,843       (1,921,546 )     3,129,323  
Total assets     2,168,172       916,463       621,277       1,054,323       28,143       673,027       2,615,966       (2,156,091 )     5,921,280  

 

45

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

    Engineering           Infrastructure           Parent              
In thousands of soles   and
construction
    Energy     Toll roads     Transportation     Water
treatment
    Real estate     Company
operations
    Eliminations     Consolidated  
As of December 31, 2022                                                      
Liabilities                                                      
Borrowings     19,191       38,612       3,844       17       6       43,118       480,735       (11,261 )     574,262  
Bonds     4,554       -       41,343       31,203       -       -       -       -       77,100  
Trade accounts payable     740,142       124,259       52,916       52,292       223       35,939       16,950       4,535       1,027,256  
Accounts payable to related parties     297,505       2,734       46,257       22,421       296       12,227       20,291       (348,243 )     53,488  
Current income tax     12,495       247       8,609       2,433       104       45,092       672       -       69,652  
Other accounts payable     490,494       19,724       49,187       9,146       1,298       115,661       24,837       (4,905 )     705,442  
Provisions     81,288       20,535       1,722       1,197       -       540       27,644       -       132,926  
Total current liabilities     1,645,669       206,111       203,878       118,709       1,927       252,577       571,129       (359,874 )     2,640,126  
Borrowings     6,480       100,597       3,462       -       138       10,852       192,435       (8,333 )     305,631  
Bonds     16,719       -       177,341       598,753       -       -       -       -       792,813  
Trade accounts payable     -       -       -       9,757       -       -       -       -       9,757  
Other accounts payable     94,261       -       2,243       189       2,932       -       2,694       -       102,319  
Accounts payable to related parties     7,886       57,300       1,176       27,294       21,663       -       189,451       (277,477 )     27,293  
Provisions     11,453       49,701       11,463       4,947       -       -       491,463       -       569,027  
Deferred tax liability     16,670       53,242       -       58,396       -       -       -       -       128,308  
Total non-current liabilities     153,469       260,840       195,685       699,336       24,733       10,852       876,043       (285,810 )     1,935,148  
Total liabilities     1,799,138       466,951       399,563       818,045       26,660       263,429       1,447,172       (645,684 )     4,575,274  
Equity attributable to owners of the Company     363,404       417,970       166,678       177,208       1,483       278,501       1,165,811       (1,509,551 )     1,061,504  
Non-controlling interest     5,630       31,542       55,036       59,070       -       131,097       2,983       (856 )     284,502  
Total liabilities and equity     2,168,172       916,463       621,277       1,054,323       28,143       673,027       2,615,966       (2,156,091 )     5,921,280  

 

46

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

    Engineering           Infrastructure           Parent              
In thousands of soles   and
construction
    Energy     Toll roads     Transportation     Water
treatment
    Real estate     Company
operations
    Eliminations     Consolidated  
As of December 31, 2023                                                      
Assets                                                      
Cash and cash equivalents     342,120       40,707       124,283       134,252       3,235       175,920       183,371       -       1,003,888  
Trade accounts receivables, net     783,231       119,948       26,353       127,336       943       3,038       952       -       1,061,801  
Accounts receivable from related parties     57,024       642       59,279       3,569       643       406       161,430       (267,550 )     15,443  
Other accounts receivable, net     265,378       40,298       21,101       6,372       1       10,418       6,849       (2,345 )     348,072  
Inventories, net     51,108       46,064       6,760       43,993       -       212,582       -       (10 )     360,497  
Prepaid expenses     15,461       2,022       4,651       334       169       71       6,388       2       29,098  
Total current assets     1,514,322       249,681       242,427       315,856       4,991       402,435       358,990       (269,903 )     2,818,799  
Long-term trade accounts receivable, net     744       -       6,430       756,990       1,453       3,354       -       -       768,971  
Long-term accounts receivable from related parties     298,946       -       17,157       42       14,015       -       419,282       (221,157 )     528,285  
Prepaid expenses     -       480       11,920       1,611       580       -       -       (510 )     14,081  
Other accounts receivable, net     102,250       77,116       -       -       7,346       59,764       64,928       -       311,404  
Inventories, net     -       -       -       -       -       70,282       -       -       70,282  
Investments in associates and joint ventures     968       10,536       -       -       -       2,103       1,737,129       (1,737,989 )     12,747  
Investment property, net     -       -       -       1,427       -       18,203       38,630       -       58,260  
Property, plant and equipment, net     83,146       211,127       5,187       1,047       233       5,562       863       -       307,165  
Intangible assets and goodwill, net     143,228       370,370       225,363       138       -       617       12,740       -       752,456  
Right-of-use assets, net     4,874       8,270       3,226       25       122       1,317       28,700       (10,239 )     36,295  
Deferred tax asset     153,841       5,142       24,098       -       421       15,577       56,670       14       255,763  
Total non-current assets     787,997       683,041       293,381       761,280       24,170       176,779       2,358,942       (1,969,881 )     3,115,709  
Total assets     2,302,319       932,722       535,808       1,077,136       29,161       579,214       2,717,932       (2,239,784 )     5,934,508  

 

47

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

    Engineering           Infrastructure           Parent              
In thousands of soles   and
construction
    Energy     Toll roads     Transportation     Water
treatment
    Real estate     Company
operations
    Eliminations     Consolidated  
Liabilities                                                      
Borrowings     24,081       39,052       15,358       26       5       11,618       437,729       (11,840 )     516,029  
Bonds     3,611       -       49,369       28,558       -       -       -       -       81,538  
Trade accounts payable     928,109       111,816       48,232       38,272       121       21,622       16,094       -       1,164,266  
Accounts payable to related parties     78,561       80,357       47,599       69,632       7       10,990       17,154       (259,928 )     44,372  
Current income tax     19,370       677       3,159       13,160       54       323       1,655       -       38,398  
Other accounts payable     416,927       26,122       34,045       10,429       1,167       86,968       33,170       -       608,828  
Provisions     83,831       20,215       1,171       1,925       -       193       9,751       -       117,086  
Total current liabilities     1,554,490       278,239       198,933       162,002       1,354       131,714       515,553       (271,768 )     2,570,517  
Borrowings     697       84,989       594       -       123       73,058       147,399       (182 )     306,678  
Bonds     10,834       -       130,750       599,803       -       -       -       -       741,387  
Trade accounts payable     -       -       -       4,001       -       -       -       -       4,001  
Other accounts payable     47,984       -       493       161       3,141       -       457,532       -       509,311  
Accounts payable to related parties     7,481       -       1,226       28,563       23,146       -       197,485       (229,337 )     28,564  
Provisions     12,366       46,287       10,002       2,228       -       -       27,184       -       98,067  
Deferred income tax liability     58,804       66,415       -       63,473       -       -       2       -       188,694  
Total non-current liabilities     138,166       197,691       143,065       698,229       26,410       73,058       829,602       (229,519 )     1,876,702  
Total liabilities     1,692,656       475,930       341,998       860,231       27,764       204,772       1,345,155       (501,287 )     4,447,219  
Equity attributable to ownners of the Company     604,039       424,874       146,259       162,680       1,397       289,942       1,369,744       (1,736,558 )     1,262,377  
Non-controlling interest     5,624       31,918       47,551       54,225       -       84,500       3,033       (1,939 )     224,912  
Total liabilities and equity     2,302,319       932,722       535,808       1,077,136       29,161       579,214       2,717,932       (2,239,784 )     5,934,508  

 

48

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

   Engineering       Infrastructure       Parent         
In thousands of soles  and
construction
   Energy   Toll roads   Transportation   Water treatment   Real estate   Company
operations
   Elimination   Consolidated 
For the year ended December 31, 2022                                    
Revenue   2,679,198    633,792    614,525    388,811    4,412    367,276    68,091    (350,981)   4,405,124 
Gross profit (loss)   (23,293)   118,934    105,400    119,729    4,644    151,797    11,702    10,607    499,520 
Administrative expenses   (126,844)   (13,942)   (12,861)   (10,806)   (947)   (15,932)   (35,543)   2,388    (214,487)
Other income and expenses   79,114    639    25,291    (3,042)   -    (5,014)   (332,399)   (55,203)   (290,614)
Operating profit (loss)   (71,023)   105,631    117,830    105,881    3,697    130,851    (356,240)   (42,208)   (5,581)
Financial expenses   (70,040)   (17,704)   (26,655)   (7,235)   (1,691)   (9,407)   (65,285)   41,543    (156,474)
Financial income   2,010    1,692    2,119    2,440    223    1,086    52,271    (46,387)   15,454 
(Loss) gain on present value of financial asset or financial liability   (6,196)   2,078    (267)   -    -    2,616    (84,245)   -    (86,014)
Share of profit or loss in associates and joint ventures   13,511    3,098    -    -    -    626    14,338    (29,666)   1,907 
(Loss) profit before income tax   (131,738)   94,795    93,027    101,086    2,229    125,772    (439,161)   (76,718)   (230,708)
Income tax   (15,755)   (30,905)   (19,587)   (31,836)   (746)   (42,885)   10,397    (29)   (131,346)
(Loss) profit for the year   (147,493)   63,890    73,440    69,250    1,483    82,887    (428,764)   (76,747)   (362,054)
(Loss) profit from attributable to:                                             
Owners of the Company   (145,695)   56,800    59,262    51,937    1,483    31,094    (428,905)   (77,127)   (451,151)
Non-controlling interest   (1,798)   7,090    14,178    17,313    -    51,793    141    380    89,097 
    (147,493)   63,890    73,440    69,250    1,483    82,887    (428,764)   (76,747)   (362,054)

 

49

 

 

AENZA S.A.A. and Subsidiaries

Notes to the Consolidated Financial Statements

 

   Engineering       Infrastructure       Parent         
In thousands