2013-vinci-annual-report

Regarding concessions operation, the main risks relate to the level of and changes in traffic, infrastructure usage, and customer-users’
acceptance of tolling and toll charges whenever toll receipts account for virtually all the revenue. Traffic levels on motorway concessions are
correlated to economic activity, especially heavy goods vehicle traffic. They may also be affected by fuel prices for all vehicles. As for airport
concessions, traffic may also be affected by sanitary crises (such as SARS or H1N1), natural events or harsh weather conditions as well as by
terrorist attacks or threats.
Risks connected with changes in the legal and regulatory environment during the lifetime of contracts must be assessed on the basis of the
contractual framework governing their terms. This framework may or may not provide for compensation mechanisms applying in the event
of changes in the legislative, regulatory or tax framework, or in the event of the contract’s early termination.
REPORT OF THE BOARD OF DIRECTORS 127
Concession companies’ toll increases, in particular for motorway tolls, are generally linked to inflation. These companies are therefore exposed
to a contraction in the inflation rate.
The Group’s reputation may be tarnished in the event of default in the quality of services provided (maintenance of the road network, vehicle
recovery, exceptional events management, required performance levels).
A centralised system involving law enforcement authorities has been established in VINCI Autoroutes to combat toll fraud.
For motorway infrastructure, the cost of renewing surface courses, the wear of which is related to traffic intensity, is covered by major repairs/
maintenance provisions, as specified in Note 20.3 to the consolidated financial statements (page 256), and therefore does not constitute a
significant risk.
The main financial, legal and regulatory risks are described in sections 2 and 3, dealing respectively with Financial and Legal risks.
Contracting (VINCI Energies, Eurovia, VINCI Construction)
The relationship between the Group’s businesses and their clients may be deteriorated by unilateral decisions taken by the latter (early
contract termination) or by their default (late payments or even insolvency). As such, measures to manage contracts, cash flow and components
of working capital needs are set up and closely monitored.
Obtaining official authorisations (in particular planning permission, environmental permits and acceptance certificates prior to commissioning)
may represent unknowns that are managed on a case-by-case basis by clearly planning the various steps preceding the construction and
acceptance of the structure.
The timetable and/or construction cost may differ from bid estimates as both depend on a wide range of parameters, some of which are
difficult to anticipate, such as weather conditions, or changes in the cost of labour, subcontracting, materials, commodities and energy (see
above). The use of revision clauses and the short lifespan of most contracts mitigate but do not eliminate unit cost inflation risk. In addition,
the risk of hikes in outsourcing costs may be transferred to subcontractors and suppliers by means of fixed-price agreements with them.
Commodity price exposure varies according to business activities. Exposure to oil prices mainly affects Eurovia, the business activities of
which consume bitumen, fuel oil and petrol/diesel. This risk is dealt with under market risks in section 2.3. It should be underlined that Eurovia
sources 38% of its aggregates from Group quarries.
A lack of qualified personnel or inadequate staffing levels may lead to lower-than-expected yields or design or construction errors, leading
to technical non-compliance, quality shortfalls of the works and even accidents affecting individuals (company, partner employees or
third-party individuals), the works or other goods. These damages, associated with possible repairs to remedy the problems, may give rise
to additional costs and delays in completion. The subsidiary’s reputation may also be affected. However, this risk is reduced by the Group’s
arrangements for recruiting and training operational staff (see 1.2.1).
For large projects, the technical complexity of the design and construction of unique infrastructure assets and site constraints (presence of
underground utilities, maintenance of traffic during works, actions of local residents or other third parties) and geological conditions may
also represent significant threats.
Some of the Group’s activities may also be affected by the environmental and technological risks described in section 4.
During the execution phase, management of the aforementioned risks is ensured at various levels: first, by the professionalism of the staff
concerned, followed by the involvement of management in the periodic reviews. At the business line or division level, oversight is also ensured
by the financial and management committees, presided by the Chairman and CEO and/or the Executive Vice-President and Chief Financial
Officer. Monitoring of business activities enables corrective measures to be taken in case of performance shortfall.
Property
The Group’s property development activities are exposed to numerous administrative, technical, commercial and fiscal uncertainties that
may result in delays (or even the abandonment of certain projects), budget over-runs and incertitude regarding programme selling prices.
The various property operations conducted by the Group are mainly undertaken in France and are therefore particularly sensitive to changes
in that country’s economic climate (interest rates) and fiscal environment.