VINCI - 2005 annual report

1.3 CONCESSIONS
The main risks in connection with Concession projects relate to design
and construction (which are, however, usually borne by the undertakings
in charge of the construction), to factors that can affect traffi c levels and
to fi nancial variables (interest rates, infl ation, etc).
1.4 ACQUISITIONS
To control the risks connected with the integration of newly acquired
companies and to be able to apply the Group’s management principles in
them, VINCI’s policy is to acquire a majority interest in acquirees.
2. MARKET AND LIQUIDITY RISKS
2.1 LIQUIDITY RISK
The Group’s exposure to liquidity risk relates to its obligations to repay its
existing debt, in addition to the supplementary debt arising from the
acquisition in progress of ASF and, ASF’s own debt. In particular, the fi nancing
of this transaction includes a 7-year acquisition loan of €4.2 billion that
provides for a fi nancial ratio that must be met throughout the period of
the loan, failing which, the loan will become repayable.
2.2 MARKET RISK (INTEREST RATE, CURRENCY AND EQUITY)
VINCI is exposed to interest rate risk in connection with its fl oating-rate
debt, and to currency risk in connection with its activities in foreign
countries. However, as approximately 80% of the Group’s activities in
foreign countries are in the eurozone, VINCI’s exposure to currency risk
remains limited.
Management of interest rate and currency risks is explained in Note 26
to the consolidated fi nancial statements.
REPORT OF THE BOARD
Concession projects are systematically submitted to the Risk Committee
for examination and agreement. In order to limit the risk capital invested
by the Group, these projects are generally developed in partnership with
outside enterprises and are fi nanced so as to maximise the amount of debt,
which is generally with no or limited recourse against VINCI.
Any proposed acquisition or disposal is submitted to the Risk Committee
for agreement. The largest are also submitted to the Board of Directors
after examination by the Strategy and Investment Committee (see paragraph
3.2.2 of the Corporate Governance section).
Details of these obligations and the Group’s resources enabling it to meet
them (cash fl ow surpluses, unused confi rmed credit lines, fi nancial ratings)
are given in Notes 25 and 26.2 to the consolidated fi nancial statements.
VINCI has no exposure to equity risk. The Group no longer has any material
unconsolidated holding in a listed company and the investment
vehicles used to manage its cash surpluses are mainly monetary UCITS
and negotiable debt securities.
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