BAM Abbreviated Annual Report 2011 - Siteseeing in the world of ...

carrying out this project but was not directly involved in
the work being done at the site of the accident. The
customer has instituted a judicial inquiry (known as a
Beweisverfahren) before the district court (the
Landgericht in Cologne). As part of these proceedings, a
number of specialists are investigating the cause of the
accident. Their investigation is expected to take some
time. Only once their investigation is complete will it be
possible to determine whether the consortium is in any
way responsible for the accident. The German Public
Prosecution Service is also carrying out its own
investigation to determine whether any criminal
offences may have been committed. The damage to
property is considerable and the parties involved have
claimed under several different insurance policies. The
Group is assuming, as matters currently stand, that no
substantial adverse financial consequences for the Group
will result from this event.
BAM Nuttall designed and built a guided busway in
Cambridge (United Kingdom). A difference of opinion
arose with the client about the delay in the execution of
the contract and about additional work that had been
carried out. The client believes that the damage
sustained as a result of the delay should be paid for by
BAM Nuttall. The client believes it paid too much and is
demanding reimbursement of the excess amount. Until
that amount is paid, it is withholding amounts from
invoices submitted by BAM Nuttall for work carried out.
BAM Nuttall disputes this viewpoint and is demanding
payment of the withheld amounts. The client took the
dispute to court in mid-2011. The size of the claim lodged
by the parties against each other runs into several tens of
millions of euros. The Group is assuming, as matters
currently stand, that no substantial adverse financial
consequences for the Group will result from these legal
proceedings.
In 2002, the European Commission commenced an
investigation into possible competition-law
infringements in connection with the market conduct of
several firms in the bitumen sector, both on the
production side and on the procurement side. One of the
company’s operating companies is involved in this
investigation, as a purchaser of bitumen. In September
2006, the European Commission confirmed
infringements of competition law and imposed fines on
the companies involved. The fine pertaining to the Group
operating company concerned amounts to €20.7 million
and is fully covered by provision. An appeal has been
lodged against the imposition of this fine.
Current estimated risk profile
The Group sees the current and the predicted economic
and financial circumstances in Europe as the main
negative factors in its current estimated risk profile.
These circumstances are putting pressure on output and
prices in the construction industry, resulting in pressure
on the Group’s return on investment. Furthermore, the
Group’s financial position (the operating capital) is under
pressure because clients have fewer opportunities and
are less willing to pre-finance projects.
Another effect of the difficult circumstances on the
financial markets is the pressure on borrowing as regards
to both the availability and the cost of loans. This applies
to both property and project loans. There is also pressure
on the Group’s balance sheet financing and guarantee
lines. The Executive Board is satisfied with the
refinancing in early 2012 of the credit facilities for a
five-year period until 2017.
In practice, there has proven to be sufficient PPP
financing still available for the projects for which BAM
submits a bid (almost exclusively projects where the
payment is based on availability). However, the
conditions attached are an increasing burden.
The Group’s financial position – in particular its debt
position – is closely related to its extensive property
holdings because of the increased risk posed by the
substantial pressure on the value of the underlying assets
(land, projects, plans).
The current estimate also indicates an increased risk
profile with regard to the Group’s primary processes, in
particular sourcing and carrying out projects. This
estimated increased risk is mainly due to the
aforementioned market pressure. Increasing pressure on
prices is causing customers to shift more and more risks
to the contractor, adding in turn to the imbalance
(‘asymmetry’) in the sector. Another factor causing the
risk profile to grow is the increasing complexity of new
contract types in particular (but also of the traditional
contract types as well). A somewhat increased risk profile
has also been estimated for human capital because of the
fact that the primary processes are carried out by people.
Having sufficient numbers of qualified employees
available is and will remain extremely important to the
Group.
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2011