Information on Risks and Uncertainties

This section indicates the main risks and uncertainties related to Maire Tecnimont Group and the markets in which it operates and has the purpose of examining the overall causes of risk to the corporate system that might have an impact on the business scenario in the foreseeable future.

20.1. Backlog Risk

The backlog had a value of Euro 4,535 million at 31 December 2008. The timing of the revenue stream or expected cash flows is subject to uncertainty due to the fact that unexpected events might occur that could have an impact on the contracts that make up the backlog (e.g., the delay, late start or stoppage of work or other events). To mitigate that risk, the Company has inserted special termination/cancellation clauses into the contracts that call for adequate reimbursement in the event of such circumstances.

20.2. Risks related to the growth of the Group and its order execution ability

The Group’s business has grown at a fast pace in recent years, spurring the inflow of orders. That growth strategy could be influenced by the economic cycle and macroeconomic factors (both general and relative to the markets in which the Group operates) outside the Group’s control. In order to support the growth rates achieved, the Group has implemented a number of organizational actions to support the changes underway.

The Group may encounter difficulties of a technical (e.g., meeting the scheduled delivery dates of new installations), operational (e.g., lower profit margins, price increases, difficulty in recruiting and retaining qualified personnel) and financial (e.g., the impossibility of obtaining the guarantees requested by clients or delivery of the foreign contracts within the established timeframe) nature, which may have negative effects on the Group’s operations and its economic, financial and equity situation. Maire Tecnimont considers all these risks typical to its business because these form the essence of its operational capacity. Over time, the Group has adopted operating methods aimed at highlighting, assessing and minimizing such risks. In fact, the Group regularly monitors and checks its work flows and its capacity to execute the new projects offered, both in terms of the availability of suitable professional profiles and technical more than financial risks.

20.3. Risks related to dependence on a small number of large-scale contracts

and a small number of clients

The Group’s business is driven largely by large-scale contracts valued at more than Euro 50 million. Roughly 86% of the Group’s consolidated revenue was generated by 30 major contracts at 31 December 2008, corresponding to around 74% of the backlog value. In addition, the Group does business with a small Group of clients. As at 31/12/08, the consolidated revenue streamed by the first eleven clients accounted for 63% of the Group’s total consolidated revenue. One of the main business guidelines for 2008 was that of increasing the number of projects awarded across a higher number of clients, leading the Group to tap into new markets and develop new sources of business.

20.4. Risks related to joint responsibility to the client

The Group companies either carry out the orders directly or in association with other operators (by forming, for example, consortia in Italy or joint ventures abroad). Generally, in this latter case, each party is jointly responsible to the client for the design and construction of the whole scope of work. In the event a client suffers damage at the hands of an associated operator, the Group Company involved could be asked to replace the subject liable for the

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damage and to pay the full cost of the damages caused to the client, without affecting the right to recourse in respect of the defaulting associate. The Company has a track record of stipulating agreements and associations with operators backed by proven industry experience whose financial solidity it has duly verified. That approach has ensured that, at the date of writing this report, none of the Group companies has ever been asked to replace, as an obligation of the partner of the JV, the Company in default.

20.5. Risks related to responsibility to the client for non-compliance or

damages caused by sub-contractors or suppliers

In carrying out its business, the Group uses the services of third-parties, including sub- contractors to produce, supply and assemble part of the installations constructed and suppliers of raw materials, semi-finished products, sub-systems, parts and services. The Group’s ability to comply with its obligations to the client therefore is influenced also by the correctness of both the sub-contractors and the suppliers in meeting their contractual obligations. In the event those sub-contractors and suppliers default, even partly, in their obligations to the Group, supplying it with products and/or services in breach of the agreed delivery dates or which fail to meet the quality standards required or are defective, the Group may, in turn, receive damage claims from the client, without affecting its right to seek recourse from the defaulting sub-contractors and suppliers. The system set up by the Group to evaluate and select the sub-contractors, which are selected not only through price valuation s but also their technical capabilities and financial structure, calls for these latter to provide performance bank guarantees. The Group companies are also the beneficiaries of insurance policies specially designed to cover any particularly negative situations that may arise.

20.6. Risks related to the investment trend of the markets in which the

Group operates

The Group’s outlet markets are characterized by a cyclical trend correlated mainly to the trend of investments, which latter are influenced by: i) economic growth; and ii) a high number of economic-financial variables (e.g. interest rates or crude oil prices) and political-social factors (economic policies, public spending, infrastructural allocations). As a result, a downturn in the economic cycle could have a negative impact on the Group’s economic, financial and equity situation. To help offset that risk, the Group has diversified both its geographical markets and its business lines.

20.7. Risks related to foreign business operations

Given that the Group operates in around 50 countries, it is exposed to various risk factors, including possible restrictions on international trade, market instability, limitations on foreign investment, infrastructural deficiencies, fluctuations in exchange rates, currency restrictions and controls and legislative changes. The Group is also exposed to risks inherent the greater difficulties of carrying out its business in regions located far from the markets and traditional sources of workforce and materials procurement and which are often disadvantaged and instable in political-social terms (e.g. Middle East, Iran, Russian Federation, Latin America and Nigeria). These risks, which vary from country to country have an unforeseeable degree of probability and could have a negative effect on the Group’s economic, financial and equity situation. To minimize the economic fallout deriving from such uncertainties, the Group always takes out insurance and/or coverage in line with the type of risk envisaged.

20.8. Risks related to market competitiveness

The Group operates in markets that are served by a great many companies, some of which have reached a higher level of market penetration, are much larger in size, and have

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significantly more financial resources than the Group. Consequently, a heightening of the competitive pressure, also stemming from a possible recession in the markets in which the Group operates (characterized by high cyclicity) could undermine its market positioning and obstruct it from winning some orders in the future, with possible negative effects on the Group’s economic, financial and equity situation. The current size of the Group, the ongoing strengthening of its financial position and organizational situation combined with its historical focus on enhancing internal processes, driving growth and backlog quality would, in the event, give it the time needed to implement all the corrective actions needed to reduce this type of risk to a minimum.

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