Annual Report 2010 - AdP

8. Financial Risk
Group activities are exposed to a diverse range of financial risk, in particular, market risk, credit risk, swap risk and liquidity risk.
The financial risk management policy seeks to minimise any eventual adverse effects resulting from financial market unpredictability.
Adopting a conservative position and taking into account the types of assets in which the group invests, the group has opted in
favour of long term financing, particularly in funding sourced from the European Investment Bank (EIB).
In addition, AdP SGPS began a process of obtaining external financing in 2004 through a private placement of debt in 2005 and
three private bond issues in 2007.
The majority of long term financing lines were negotiated prior to 2008 and achieved conditions that were favourable at the time
and which now represent significant added value to the group.
As regards the interest rate regime, the group has preferred the fixed rate (directly or through other financial instruments), with
around two thirds of debt held under such terms.
AdP financial risk management is carried out centrally for the group, with the prior approval of its Board of Directors.
The interest rate risk management policy is focused upon reducing the exposure of debt related cash-flows to market fluctuations
through the contracting of structured financial instruments and, as far as is possible, corresponding reductions in financial costs.
9. Principles of Treasury Management
Since its foundation, AdP SGPS took on responsibility for coordinating and sourcing the financing necessary to meet group company
requirements and always taking into consideration the final objective of maintaining financial structural equilibrium from a consolidated
perspective.
Thus, AdP SGPS supervised companies and their relationships with the Cohesion Fund in order to facilitate access to European
Union support funding, negotiated support from the EIB and carried out its first long term debt issue in 2005 with further operations
taking place in 2007 and 2008 raising a total of € 600 million for the purpose of financing multi-municipal systems in the component
relating to investment and the working capital for the first years of operation.
Complementary to this medium and long term framework, AdP SGPS also centralised negotiations with the banking system over
obtaining short term financing thereby boosting its collective negotiating powers with financial sector institutions. This question is of
particular relevance given that some group companies are in more fragile financial positions and their access to credits would only
be attainable on fairly punitive terms. This factor furthermore contributed to the existence of the aforementioned weighting of long
term financing.
Similarly, the fact that AdP SGPS centralises the negotiation of credit lines and retains some surpluses (courtesy of the aforementioned
debt issue) has enabled the group to secure relatively smooth passage through the financial crisis ongoing since 2008.
Taking into account the group’s powers of negotiation derives from the volume of its short term financial assets, the volume of short
term debt and the capacity to access already approved lines from the EIB and furthermore taking into consideration that we are
referring to a universe of around 40 companies in different phases of development, we requested that a regime of exception be
opened up for the group and was duly attributed by dispatch issued by the Minister of State and Finances as detailed in no. 1 of
article 77 of LOE.
In October 2010, we engaged in negotiations with the Portuguese Institute of Treasury Management and Public Credit that took on
responsibility for defining and implementing procedures so that the sums that our concession holding companies are contractually
obliged to undertake within the denominated Fund for the Reconstitution of Capital are instead applied through the Treasury, which
had already come into effect at the end of the first quarter of 2011.
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