VINCI - 2008 annual report

Report of the Board of Directors
2.3 Market risks (interest rate, currency and equity)
Because of its level of borrowings, VINCI is exposed to changes in interest rates (mainly in the eurozone) in connection with its net fl oating-rate
debt and to changes in the spreads applied by lenders. VINCI is also exposed to currency risk in connection with its activities outside France and
to fi nancing in foreign currencies. However, approximately 75% of VINCI’s activities in international markets is conducted through subsidiaries
operating in the eurozone. The only debt issued by a Group entity in a currency other than its reporting currency was repaid in March 2008. In
consequence, VINCI’s exposure to currency risk remains limited. Management of interest rate and currency risks is explained in Notes 23.1 and
23.3 to the consolidated fi nancial statements (on pages 238 to 243).
Investment vehicles used to manage cash surpluses are mainly monetary UCITS, negotiable debt securities and bank deposits. Equity risk is
described in Note 23.2 to the consolidated fi nancial statements on page 242.
2.4 Impact of Public Private Partnerships (PPPs) on the Group’s fi nancial situation
The impact of a PPP project on the Group’s fi nancial situation, in particular regarding the interest rate and liquidity risks, is one of the items taken
into account in responding to an invitation to tender.
Depending on their size, such projects are submitted to either the holding company’s or the division’s Risk Committee for examination and
approval. The largest PPP projects are carried out through special purpose entities, dedicated solely to realising the project. These vehicles are
fi nanced by loans made directly to the project company, with no recourse against the shareholder, backed by the future income stream with the
objective of minimising the capital outlay.
Capital contributions in PPP projects are therefore limited, generally to a maximum of 20% of capital invested. The impact on the Group’s liquidity
is therefore slight.
Debt raised by project companies is hedged at fi xed and / or capped fl oating rate for a very large proportion, generally more than 80%. The proportion
hedged generally corresponds to commitments made to lenders. The impact of interest-rate fl uctuations on PPPs is therefore limited.
3. Legal risks
Given the diversity of its activities and geographical locations, the Group operates within a complex legal and regulatory environment governed
by the place where the service is provided and the sector involved. In particular, rules relating to public and private-sector contracts and tenders,
competition and market concentration, commercial, fi nancial and stock market law are applicable. The Group’s activities could lead it to being
held civilly or criminally liable, in France and in foreign countries. Civil liability risks relate in particular to construction companies. The fi nancial
risks relating to any invoking of Group companies’ civil liability are covered by insurance policies described in paragraph 5 below.
It should also be noted that, with respect to concession operations, in particular in France, the Group is dependent on public authorities. Under
the French law applicable to government bodies, these can – subject to compensation – alter the terms and conditions of outsourced public
service contracts during their performance.
Information on the principal disputes in which the Group is involved can be found in Note F to the consolidated fi nancial statements, on page
249. The policy on taking provisions in respect of disputes is referred to in a note to the consolidated fi nancial statements on page 185 and their
amount is disclosed on pages 226 and 228.
The Report of the Chairman includes a paragraph on compliance with laws and regulations in force.
4. Environmental, industrial and technological risks
4.1 Economic risks and opportunities associated with climate change
Only one VINCI facility is concerned by France’s national greenhouse gas quota scheme (PNAQ II): CIFC’s plant (part of Eurovia) at Fos-sur-Mer
near Marseilles, for 190,086 tonnes. In accordance with the law, an approved inspector validates the emissions before 15 February each year.
Emissions at CIFC’s plant amounted to 170,112 tonnes of CO 2 in 2006, 158,661 tonnes in 2007 and 162,658 tonnes in 2008. 18,000 tonnes of
CO 2 quota were sold in 2008.
VINCI divides climate change risks into four categories, each one being the subject of a diff erent approach in terms of economic risks and opportunities:
– physical risks such as damage or project delays due to the increasing number of climate events;
– regulatory risks caused by the introduction of more stringent international, European and national regulations aimed at reducing greenhouse
gas emissions;
– competition risks caused by a possible increase in customer demand for more fuel-effi cient products and processes;
– the risks of no action being taken to combat climate change.
4.2 Industrial and environmental risks
VINCI has low exposure to industrial and environmental risks.
Some of Eurovia’s activities – which are closely regulated – have characteristics similar to those of industry and can therefore be exposed to these
risks, which are limited and well identifi ed.
– Binder plants: the use or manufacture of products that are potentially hazardous to the environment is subject to continuous monitoring and
internal inspections by Eurovia’s quality, safety and environment managers.
– Coating plants: the setting up of an environmental regulation monitoring group for the industrial sites allows managers to takes the necessary
action to ensure continuing compliance with regulations; regular and unannounced external inspections to analyse products and measure the
quantities in stock ensure the plants comply with regulations.
106 VINCI __ 2008 ANNUAL REPORT