+1 - Solvay

As for Energy Supply, Solvay has been consistently implementing programs to reduce its energy consumption
for many years. While Solvay has energy-intensive industrial activities, particularly in Europe (soda ash,
electrolysis), it also operates a range of industrial activities with a relatively low energy consumption, in particular
in the Pharmaceuticals Sector and the SBU Specialty Polymers.
The risk exposure to availability and reliability of energy supply has to be managed well. A number of strategic
initiatives can reduce the effect of the volatility of energy markets : Solvay’s technological leadership in processes,
its flexible, high-performance industrial facilities, the construction of cogeneration units (which generate
both electricity and steam) in major plants and a strategy of supply coverage with medium to long-term contracts.
As permitted by the specific market conditions of each SBU, price increases are negotiated to offset the increase
of energy costs. Solvay is a founding member of Exeltium, a project by a group of electro-intensive industries
in France intended to ensure reliable and sustainable energy supply at a competitive price. In Belgium, Solvay
is examining a similar project called Blue Sky.
Solvay is monitoring the effect of the Kyoto protocol and the cost of CO 2
emissions. The Kyoto protocol
is endorsed by Solvay and is integrated in its strategy as it at least indirectly affects every company including
upstream operators (through energy cost and raw materials) and downstream businesses (with an impact on
transport, contractors and customers).
3. Regulatory, Political and Legal Risk
Regulatory Risk is Solvay’s exposure to events like the non-approval of a new pharmaceutical product, government
price regulation, new legislation affecting imports and exports, new regulations banning a product or making it
uneconomical to produce, etc.
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Legal Risk is the exposure to adverse consequences of non-compliance with regulations or contractual
undertakings, or the loss of rights or benefits expected from protection by regulation or contract. This includes
various areas like product liability, administrative or criminal sanctions, contractual or intellectual property disputes,
as well as the potentially adverse outcome of ongoing litigation.
Political Risk is Solvay’s exposure to, for example, the destruction or loss of control of production means
or the unavailability of raw materials, utilities or logistic or transport facilities resulting from political decisions, civil war,
nationalization, terrorism or other circumstances where the normal exercise of the public authority is disrupted.
Solvay must obtain and retain regulatory approval for operating most of its production facilities. Regulatory approval
is also required for the marketing and sale of pharmaceutical products and specialty products for specific uses like
healthcare. In particular, with the coming into effect of the REACh directive, a significant number of substances used
in Solvay chemicals and plastics will require similar approval.
Given the international scope of the Group, those regulatory approvals emanate from authorities or agencies in
many countries. The withdrawal of any previously granted approval or the failure to obtain an authorization may
have an adverse effect on our business and operating results. The same could also apply in the case of regulatory
changes likely to cause us to incur additional costs.
To the same extent, the existence of price controls in the Pharmaceuticals Sector negotiated with or imposed by
relevant health authorities or the possible existence of trade barriers and tariffs could also limit our revenues and
have an adverse impact on our business and operating results.
The geographical spread of the Group around the world is a factor reducing some regulatory and political risks.
Mitigation efforts
Proper design of the products and its production processes contributes to the management of regulatory and legal
risks, as well as the timely and thorough applications for necessary approvals.
In pharmaceuticals, processes have been set up for contacts with regulators and to promote the accurate and
appropriate flow of product information among all stakeholders, such as prescribers, patients, and regulators
supervising and controlling product use.
Solvay Global Annual Report 2007