General

Van Oord N.V. and its Group companies use various financial instruments as part of their normal business activities. These are either accounted for under assets and liabilities or are not included in the balance sheet.

Credit risk

In principle, payment risks are covered by bank guarantees, insurance, etc., unless the creditworthiness of the debtor has been assured. These procedures and the geographical spread of the Group companies’ activities limit exposure to credit concentrations and market risks.

Liquidity risk

The principle underlying liquidity risk management is that sufficient cash resources must be maintained or credit facilities are available to meet current and future financial commitments under both normal and exceptional circumstances. Liquidity forecasts, which include available credit facilities, form part of the regular management information. In view of the nature of the activities and corresponding strongly fluctuating cash flows, the available cash at bank and in hand is usually not tied up for more than one year.

Fuel price risk

Fuel price is largely hedged through forward contracts and contractual arrangements with clients, with hedging activities executed centrally by Group Treasury.

Foreign exchange risk

Many project contracts are denominated in foreign currencies. The majority of material foreign currency exposures are managed through forward exchange contracts. Forward currency contracts concluded to hedge against exchange rate fluctuations are valued at cost, and cost price hedge accounting is applied. Differences in forward rates arising from renewed forward exchange contracts are included in the balance sheet under current liabilities or assets. Forward exchange contracts are concluded for future cash flows mainly in US dollars.

Interest rate risk

The EU Private Placements are of a fixed-interest nature. The Revolving Credit Facility is fully of a variable-interest nature. The variable-interest on this facility is based on Euribor (with a floor of 0%) plus a variable margin depending on leverage ratio. The Eksfin Green Loan has a fixed base rate plus a variable rate depending on the leverage ratio. The Boreas linked loan also has a variable interest. The variable interest on this loan is based on Euribor (with a floor of 0%) plus margin of 80 bps p.a.

With regard to interest rate risk exposure, Van Oord periodically evaluates the mix of fixed and variable interest rate liabilities, balancing the benefit of lower interest costs versus the variability of cash flows. Van Oord uses derivative financial instruments to hedge the interest rate exposure. Part of our floating interest has been hedged to a fixed rate by means of financial instruments. As per year-end, 84% (75%) of our total interest on non-revolving loans is fixed until maturity of the respective loans.

The effective interest rates and maturities of cash at bank and in hand and interest-bearing liabilities are as follows: