Reference Document

Risk Factors
4.2. Risks relating to the Group’s industry 4
4.2. Risks relating to the Group’s industry
Technip could fail to retain its key personnel or fail to attract
the new qualified employees it will need to maintain and
develop its know-how.
Technip’s success in this field depends on its ability to recruit,
train and retain a sufficient number of employees including
managers, engineers and technicians who have the required skills
and expertise and local knowledge. Competition for recruitment
of individuals with this type of profile is strong.
Technological progress might render the technologies used
by Technip obsolete.
The oil industry is developing oil and gas reserves in increasingly
difficult conditions, such as the deep seas, high-pressure and hightemperature
fields and the Arctic. Technological development is
key to overcoming these difficulties and provides a significant
competitive edge.
Unlike in other sectors, this industry has not experienced any
technological breakdowns, but continuous research and development
is required in order to continually push the limits of
production-exploration. Technip’s success depends on continuous
and regular research and development in order to develop new
products and new installation methods that will provide solutions
at an acceptable cost to the market (for details regarding R&D
policy and expenses, see Section 11, Note 4-(c) included in
Section 20.1 of this Reference Document).
The failure to sustain continuous and regular research and
development could result in a decline in Technip’s market share,
which could have a significant impact on its activities and its
financial results.
Increasing price pressure by competitors could reduce the
volume of contracts meeting Technip’s margin criteria.
Most of Technip’s contracts are obtained through a competitive
bidding process, which is customary for the sector. Technip’s main
competitors are engineering and construction companies in the
United States, Europe, Asia and the Middle East. While service
quality, technological capability, reputation and experience are
considered in client decisions, price remains one of the determining
factors in most contract awards. Historically, this industry has been
frequently subject to intense price competition. Such competition
intensified from the growing demand over 2004-2008 and could
have a negative impact on the Group’s margin requirements if
demand were to shrink significantly and sustainably and consequently
have a negative impact on the Group’s revenues.
Impact of the current financial crisis on loans, letters of
credit, bank guarantees and other guarantees necessary to
Technip’s operations.
The fi nancial crisis, which began in July 2007 and became an
economic crisis in 2008, has led to an increase in the cost of
loans, bank guarantees and letters of credit, which are necessary
for the development of Technip’s activities. This increase is due to
balance sheet, liquidity and arbitrage constraints and constraints
with regard to allocations of equity that financial institutions
have faced.
Technip continues to benefit from bonding lines of significant
amounts with a large number of financial institutions, enabling
Technip to satisfy its contractual obligations. Nevertheless, the
changes in the banking market may have an impact on the future
issuance of bank guarantees and letters of credit in significant
amounts and may require the involvement of several banks.
These issuances could be more restrictive and more expensive
to structure in a banking market where banks are increasingly
reluctant to take risks on their peers. This could impact Technip’s
capacity to develop its business, its backlog and its earnings.
Despite Technip’s credit risk management and hedging procedures,
particularly during project assessments where such procedures
begin at the offer stage (as detailed in Sections 6.3.1 and 6.3.2
of this Reference Document), Technip cannot guarantee that it
will not be required to directly bear the risk of financial failure
of any of its clients, partners or subcontractors following the loss
of financing for certain projects and, more generally, due to the
impact of the current financial crisis on the availability of credit to
companies or the increase of negotiation periods for financing of
projects for which Technip is a contractor. Such trends may have
a significant adverse impact on Technip’s activities and financial
results.
The reduction in export credits could make financing certain
projects by Technip’s clients more difficult and lead to a
reduction in the number of new projects, which could limit
Technip’s growth opportunities.
Technip and its subsidiaries maintain contact with many export
credit agencies to promote projects which may be subject
to orders and to obtain as an exporter their assistance in the
hedging or guarantee of such projects.
Should the level of involvement of these export credit agencies
fall, customers could choose to undertake fewer projects. A
decline in the number of new contracts for this reason could
limit Technip’s growth opportunities and have a significant impact
on its business.
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