Vinci SA (DG) Earnings Call Transcript & Summary

Good morning. Welcome to the First Half Financial results '22 for VINCI. [Operator Instructions]. Over now to your host, Mr. Xavier Huillard, Chairman and Chief Executive Officer, to begin today's conference call. Over to you, sir.

Thank you. Good morning to you all. Happy to be with you once again. You're all physically in good shape. Thanks for attending the presentation of our H1 activities. As per usual, I'm joined by Christian Labeyrie in the room. You have all the representatives of the Executive Committee, all the business bosses in particular, but also our Head of HR, Head of the Environment, who'll also be able to answer your questions later. As per usual, a few photographs. First slide is a photograph that invites to travel. For those of you who are off later on, Peloponnese in Greece, and it illustrates that the extension and linking up of motorway concessions is perfectly possible. 75 km extension of Corinth-Patras to Pyrgos built with our Greek partners, goes from Athens as far as Patras, where it joins up with the Rion-Antirion bridge that we've shown you many times and will be extended to the West of the Peloponnese 75 km through to the town of Pyrgos. I'm sure you've seen all the details of this transaction in the press release of March 21 last year. Another affiliation, this time in France, we reached an agreement with the government to build the Western bypass of Montpellier. Next slide, recent signing of the concessions contract of the 7 airports of Cape Verde for 40 years. The idea is to assist in the growth of the tourist potential of the country, representing a significant part of the island's economy. And we'll be rolling out across our airports our green initiatives. And given the local conditions of wind and sun units to produce solar and wind power. Next picture that illustrates the full ownership, 100% acquisition of TollPlus that develops, implements, operates tech solutions for motorway mobility and free flow dynamic tolls and all the back office underpinning all these electronic and dynamic toll systems. TollPlus employ 350 people. It's expanded in the U.S. and Europe, in particular, Ireland and a bit in India. Illustration of the markup of the future airport of [indiscernible], 1,400 beds, 54 operating theaters. And VINCI Energies has won very -- many important works, packages that illustrates the know-how and expertise of VINCI Energies. This is a transaction that was made possible and its funding after the [indiscernible] health plan. We considered one of the first effects of the broad stimulus plans put in place over the past few years in our country. Next, a picture of the subsea fixed link, which in 2029 will connect Denmark and Germany. You'll recall that we won and then started off the civil engineering works. This time, it's Cobra that won the contract for the electro-mechanical installations, incident management, traffic management for EUR 535 million. And Cobra already has underway the corresponding works on several road -- or rail infrastructures in Sweden and Norway. This is really just an artist view that illustrates the fact that VINCI Construction is expanding its operations into Oceania. So you have here an extra-dosed bridge, which is part of the Penlink project, North of Auckland in New Zealand. It's a 7 km structure, both road and soft mobility, with major green environmental ambitions. And to close the slide show, this is a fine product for VINCI Real Estate. It's to renovate a former hanger for airships located in Meudon, outskirts of Paris, to turn it into cultural event center promoted and funded by ArtNova, founded by Frédéric Jousset, 1 of the 2 Cofounders of Webhelp. He's left Webhelp's his stake and is investing heavily in art and culture. So all this was just to illustrate with a few photographs the fact that the world is full to the brim of projects to connect people and territories, mobility infrastructure, but also to improve the lives, the environmental footprint of human activity, health and culture. We have multiple occasions worldwide both to continue to be a force for good whilst being particularly mindful of the state of the planet. Returning to our half and the financial performance. Put briefly, we have recorded a strong performance during this first half. And VINCI Airport, that is recovering spectacularly traffic levels x3 versus H1 '21. On French Autoroutes, traffic levels now higher than in 2019. Growth in business and operating margins at VINCI Energies and VINCI Construction and a performance delivered by Cobra in line with our expectations. So the revenue for H1 has led 26% versus H1 '21. And when we exclude the contribution of Cobra, which is -- it's actually a 14% increase over last year. The operating income is over EUR 1.3 billion 1 year and way above that of H1 2019. Order book is being renewed very satisfactorily, and the order book is a good quality, which means we can be both prudent and selective in this environment where, of course, we are potentially impacted by the rise in raw materials. So we have to pick not just the right contracts that are in line with our requirements and the contractual clauses with price indexation. All our geographies are up, in particular, as you can see, particularly Europe outside France and Central and Southern America. And this is due essentially to the arrival of Cobra that's positioned on these geographies. For the first time in our history, I believe our revenue outside France has topped the 50% market, and that's fully consistent with the strategic roadmap that we set out 7 or 8 years ago, we're at 53% of our business outside France. If we delve deeper into the business details. VINCI Autoroutes light passenger traffic is above its 2019 level. Our foreign customers are back. We remain attentive and prudent because all that's pretty sensitive. I'm still with light vehicles here with the price of fuel at the pump. What's more remarkable is truck traffic is trending well, thanks in particular to the growth in e-commerce. And as I mentioned, we've signed the rider to deliver the Western bypass to the city of Montpellier, which will decongest the local roads by 2030 that are currently heavily congested. I repeat, every time we meet the road is the vital network of any economy, in particular, that of the French economy, it's therefore urgent to decarbonize road transport by developing vehicles that are decarbonized, light vehicles and, down the road, trucks. But by rolling out all the initiatives that are proposed by the low-carbon motorway concept launched a few years back by VINCI Autoroutes, by way of an illustration, we're going to make the motorway a place to -- for green energy production with a potential of 1 gigawatt peak on all the motorway air and service areas available on our motorway networks. What's interesting is this 1 gigawatt, even if we know it's slightly more complicated, is the power that will be needed to top up the batteries of our light vehicles by 2035. 1 gigawatt, that will be the addition of a great number of small solar power units, but this can help us to auto-produce the power that our customers will need once e-mobility has been fully rolled out in our country by 2035. It's also the rollout of electric charging stations that are high powered, and this will be done in 2023. In 2023, all our areas will be equipped with high-power recharge stations. In last June, we launched an app that I may have mentioned 6 months ago, it's Ulys Electric, allows all customers who opt for Ulys to geo-locate almost all the public recharge stations available across the country. Once they're in front of a station, they can unlock it and pay it without bothering about who's the manager of the charging station. That's a problem. You have to move around with several different cars. You're never sure you're going to be able to unlock the charging station, which puts a break on the rollout of e-mobility. That's going to be boosted through this Ulys app, giving a seamless transaction with almost all the public recharge stations in particular on our motorways. Final point, we responded to a call for tenders put out by the public investment bank, BPI in France, to trial, ERSs, electric road systems, through which we plan to power vehicles and trucks while they're on the road. There are several possible technologies. We've trialed some with VINCI Energy in Germany and Scandinavia. France is getting there. BPIs launched a call for projects and will be a trial ground on our motorways. And the 2 technologies which I believe have the wind in sales through induction and current capture in sort of a rail that is buried in the asphalt. VINCI Airport. The recovery is gathering pace. June traffic only down 25% versus 2019 pre-COVID. Many airports are very close to 2019 levels. It's the case in Portugal, other airports are already above 2019 traffic levels. That's the case of a number of airports in the Americas. Traffic at Gatwick, that took off, without any play on words, has grown strongly. It's only down 23% in June versus 2019. Airports in Cambodia and Japan are picking up slowly, far more slowly. And the simple reason for that is due to the reduction in the number of travelers and visitors from China. And on the Autoroutes, motorways managed outside France, there the recovery is similar to what we're seeing in France. Traffic recovery is almost back to 2019 levels with a very slight question mark depending on the way in which fuel prices at the pump will trend in the countries where we have assets, all leading to the good financial performance of VINCI Airport that you see shown on the slide. The revenue and consolidated EBITDA of H1 exceeds that of H1 2019. As previously mentioned, still on VINCI Airports, we won the concession for the 7 Cape Verde airports for 40 years, which, on the one hand, confirms our confidence in that mode of transport and also confirms our specific skills and expertise for everything that revolves around mobility-linked tourism. Portugal, a lot of tourism; Dominican Republic, a lot of tourism; ditto for Brazil; and likewise, Cape Verde. Lastly, at VINCI Airport, we continue -- and VINCI Concessions in general, we continue to systematically roll out our green strategy across all our assets. By way of illustration, less than 28% decrease of our CO2 emissions since '19, 98%. We're 50% ahead of the plan by 2030. Léon will be net 0 by '26. Toulon will be net 0 by 2023. In this industry, back to Airports specifically, there's an accreditation known as ACO with successive levels depending on your environmental performance. We have the 9 Portuguese airports and 3 Japanese airports that are accredited at the highest level, actually, one notch below the highest level, which is ACA 4. An entry into service as in the Autoroutes of solar plants and the launch of new projects on the airports and our Greek and German motorways, you've seen the press release. We've strengthened our stake in Lusoponte managing the 2 bridges, a stride that take us in Lisbon. We took the outright majority in the bridge the confederation in Canada that links the Canadian mainland with Prince Edward Island. And we have 100% control of TollPlus, as I said, works. Slide 17. Contracting, very good order intake both at VINCI Energy, Cobra and VINCI Construction. In particular, on the flow business, small day-to-day batches that are very important to boost our resilience. You see that the 3 columns on the right of this slide that are 3 geographic segments, France, Europe excluding France and international excluding Europe. The 3 geographies are up, but the segments made up of Europe excluding France and international excluding Europe are posting particularly strong growth. And that's the support of the arrival of Cobra that is focused on the Iberian Peninsula and Central and Latin America. VINCI Energies is in great shape, well established on the 3 very dynamic underlying trends that are energy efficiency, the energy transition and its corollary, which is the rollout of electrical power in the energy mix and the digital revolution and the huge needs in terms of data storage and data operations and security. The pace has accelerated VINCI Energy in the second quarter, up 8% versus 21%, 10% outside France. And outside France now accounts for 55% of the total. Cherry on the cake, VINCI Energies is taking advantage of this to improve its operating margin, coming in at 6.5% as against 6% in H1 '21. Still a continuous slow flow of small bolt-ons, some dozen bolt-ons since the start of the year with the same rationale, the same logic to supplement our geographic networks or areas of expertise. Order intake, good news, up further by 9%, giving us very good visibility. What we keep repeating and proving through this rather disrupted period is the strategic positioning of VINCI Energy. The very highly decentralized model of VINCI Energy giving a lot of agility and nimbleness. This quest for tech value-added makes VINCI Energy a tremendous machine that has a great role to play in combating climate change. The integration of Cobra, as I said, is going according to expectation. Good momentum in flow business, in particular, in Spain, that's not surprising, also in Peru, Mexico or in Colombia. But also with some good EPC projects, engineering, procurement, construction, as you know, such as offshore AC-DC conversion platforms for wind farms that are far out at sea. If you require some technical explanations on this, I was -- knew nothing about this technology about 6 months about it. But now you can -- I can give you all the answers. I'm really fascinated by this technology. This illustration shown here on this slide that transforms AC to DC power. And it can only happen, DC. Otherwise, you'd have a lot of loss of power through the dual effect. Whatever the diameter of the cable you put on the sea to connect it to land. This is a good example of what the Cobra people can do through major EPC projects. And other illustrations. The high-voltage power lines in Brazil, Cobra for 20 years now has delivered PPP, 20,000 km of high-voltage lines in Brazil. They are fully familiar with this business segment and this geography. And of course, at Cobra, we continue to grow our renewable energy fields, and we've begun the CapEx on the first transaction, a project, photovoltaic, 1,500 megawatts peak power in Brazil. Others in the pipe should enter the construction phase in the coming months. Cobra's economic performance delivered, as you can see, both in terms of development business operating margin, shown on this slide, EBIT margin and order intake. Good half at VINCI Construction in spite of disruption brought about by the significant high number of raw materials, bitumen, steel, cement, energy. Nevertheless, revenues up 11% versus H1 '21 driven by business outside France, up 18%. But still nevertheless, growth in France 4%. This activity is very healthy, made up of many local projects of building, civil engineering. That's the flow business. But it's also particularly strong on big building projects in the Paris region and large mobility infrastructures, the Greater Paris Express the high-speed line HS2, with Balfour Beatty in the U.K. and several motorways or rail infrastructure in Canada, Australia, New Zealand, not to mention the preparatory work of the subsea fixed link previously mentioned between Denmark and Germany. VINCI Construction delivers 50% of its business outside France in accordance with our strategic roadmap. Order intake, stable, these metrics. Good news because it attests and demonstrates great selectivity, great many projects that are offered by our clients globally. And we have the choice. We can go all out on projects that fit our skills and know-hows, where we can express ourselves to the full. We can include contractual clauses that suit us down to the ground, price revision clauses. So as not to be subsequently impacted by further significant price hikes of the number of supplies or materials. I often speak of major projects, but what you need to know is VINCI Construction has a day-to-day activity made up of small- and medium-sized work packages. H1, actually, it's 2/3 of our order intake that our works packages below EUR 5 million. So it's a lot of small works packages, and that's very important in order to ensure our resilience. The operating margin, VINCI Construction is up versus H1 '21. Let me remind you that at this stage doesn't reflect the full year because of the seasonal nature of a lot of VCs work, in particular, road works. And to close, VINCI Real Estate is going through a somewhat more challenging phase. It's not reflected in the business. It's slightly up if we include our shares in co-developments, but it's reflected in the service markets in large cities such as Paris. That's kind of in wait-and-see mode on the back of the pandemic number of clients are waiting to see what's going to pan out in terms of demand for commercial real estate offices. And the residential metric, most relevant is reservations that's down 15% over the half versus H1 '21, which was positively impacted by the post-COVID recovery. What's Paris [indiscernible] is strong housing needs in France, strong demand for sociological reasons, in particular, difficult to produce housing. Why? Well, for a number of reasons previously mentioned: price of land has reached significantly high levels; the reluctance of certain elected representatives to build; the time it takes to get a planning positions and to overcome the appeals on a lot of this planning permission. And then there are 2 further reasons: of course, rising interest rates, which reduces the ability by private owners to acquire their homes or at least in terms of the surface area, all this squeezed by rising borrowing costs. And this, of course, impacts property developers and other players. The constructors are asking more to build a square meter of office space than they wanted a year ago. This situation mustn't last for too long. I hope the government has realized the importance of this situation. We were delighted to note that our Housing Minister has been appointed in the [indiscernible] government. It wasn't the case in the previous government, that's rather strange. Over to Christian Labeyrie.

Thank you, Xavier. So I'll give you some comments as usual on the main figures, perhaps with a bit of repetition. I do apologize if I repeat some of the things that Xavier has said. First slide is the analysis of the consolidated revenue, which is up 26% on the first half, 13% reflecting the scope change mainly due to the integration of Cobra, which has been consolidated since the 31st of December 2021. As you can see, organic growth was up strongly at 12%. And the currency impact is strong this year due to the appreciation of most currencies, in particular, the dollar versus the euro. The next slide is another way of analyzing the revenues by geography. Organic growth, as you can see, is stronger outside of France than in France, but it's still strong. In France, at approximately 8%, and the scope effects mainly reflect international activities and namely the integration of Cobra. And as Xavier said, the share of revenue internationally is now above that of our French revenue, 53% versus 45%. Regarding analysis of results, where you've heard at length about that, there are arrows going upwards for all the businesses. And the performance has improved also in relative value versus revenue, even though margins vary considerably depending on the business. Next slide is the analysis of the income statement. Well, we're not going to go into detail on everything. I'd like to leave some room for questions. But on the results, the equity affiliates, the improvement is due to Japan since we're consolidating our interest in Kansai Airport of 40% under the equity method. We still haven't reached breakeven because, in terms of air traffic, Japan is somewhat lagging behind other areas, but the losses are less in 2022 than in 2021 and 2020. Further, what we can say is that there are some nonrecurring items to the tune of EUR 54 million, which are mainly accounting impacts due to the inclusion in our financial statements of companies which were affiliates, which now have been consolidated, equity accounted. This concerns the confederation bridge in Canada and TollPlus for toll management. The interesting point here is the decline in net financial expense, which has been more than halved. What you need to remember, and I think I heard spoken about this when we released results in February, in terms of the cost of our debt load, we're benefiting fully from the effect of the refinancing conducted last year at a lower cost compared to the redemptions which have occurred for existing debt. This impacts ASF and VINCI and furthermore cash investments which were being done at negative interest rates now around 0. And we hope that this will go into the black soon. That's the positive impact of interest rates going up. There's an accounting impact on provisions for major repair work to VINCI Motorway. So we -- there's a positive impact here, although there is a less positive impact on operating income. So it's a zero-sum game, basically. But -- and a few other items here also regarding financial results. Now tax is stable, but this is due, first of all, to an increase in the taxable income in 2022. So it's quite logical. We have higher tax, but we have a lower tax -- corporate tax rate in France, where it should last as we got to reach the target rate of 25%. And before we were at even 34% previously, so we benefited from the lower corporate tax rate. And last year, in the EUR 800 million, there was EUR 400 million of an accounting charge, which was a revaluation of our deferred tax rate because Mr. Johnson at the time had gone back, reneged on his promise to cut corporate tax rates. So all that leads us to a positive result of EUR 1.9 billion, which, quite frankly, is beyond all expectations and well above that of last year. But we should have had a 2019 column to show that we've improved even on the pre-COVID situation. So high quality, very good results. Next slide, it's the analysis of the change in net financial debt. The debt load has gone up, but that comes as no surprise. This usually happens every year in the first half given that 2020 and 2019 were atypical. So we were very glad to retrieve long-standing customer receivables. We reduced significantly our investment. That's no longer the case, of course, EBITDA is up strongly on previous years including 2019. Working capital has increased strongly. I recall that prior to 2020, we had working capital that increased in the first half to EUR 0.5 billion to EUR 1 billion, so we're back to normal situation in 2020 versus 2020, 2021, maybe a bit better. This is due to the improvement in customer receivables in accessible of the growth in revenue, which is the reverse phenomenon from previous years' clients who are paying us less or more slowly than prior to -- during the COVID period. Perhaps this is due to the rise in interest rates. Now looking at supplies in our present situation, we didn't do that. We tend to pay our suppliers more quickly, in fact, to place orders in order to secure our energy supply. And this applies to VINCI Construction and VINCI Energy. So we've booked in advance the supplies, equipment, services in order to establish our cost on the secure footing. The other aspects here, which are down payments on major projects, in 2020, 2021, we had very significant down payments on major projects. As Xavier explained, our order book renewal mainly concerns medium to small deals, which are usually paid at the end of the execution. So all this combines to account for the EUR 2.5 billion figure, which we hope will reverse by the end of the year because, as you know, the best part of our cash flow is in the second half. Interest expense is more or less in line. Over a 10-year period, you can see that free cash flow for the first half is slightly negative, depending on the years, but it's only a small part of the annual situation, which, unfortunately, that's just how it is in the last few months or weeks of the year. The next slide is the balance sheet. With over EUR 50 billion of capital employed in the Concessions, mainly profits in Construction, equity is high. It's even up. Lease debt is stable, and cash is lower because given the financial market situation since the war in Ukraine, the markets were not propitious for IFR issues. And therefore, all our first half spending in addition to free cash flow, which is not really significant, it's the dividend balance for 2021 plus share buybacks. We had share buybacks of EUR 900 million plus acquisitions in the various business units. So all this has weighed on the cash from EUR 9 billion on consolidated to EUR 6 billion cash at the end of June, which should be restored in the next few months especially if we are able to benefit from the window of opportunity and we're able to launch bond issues exploiting favorable market conditions. So we'll remain opportunistic in that regard. And we've accumulated a lot of cash. We've reduced it, but it's still very comfortable, that over EUR 6 billion. The next slide is a reminder of our financial policy. Our credit ratings are unchanged. They're excellent. And in small characters at the bottom in the footnote, given what I've just said about our opportunistic refinancing policy, we're cautious people. We went to our relationship banks, 10 banks to ask for a one-off facility in order not to touch our EUR 8 billion structural backup. So we asked for one-off, so thank you very much, EUR 2.5 billion, with maturity extendable to 2 years, which enabled us to wait for better times in order to refinance our debt redemptions. We've redeemed since the beginning of the year EUR 2.4 billion in existing debt. We haven't refinanced that. And looking ahead to 2023, it's over EUR 3 billion. So this also accounts for the fact that cash has declined because we haven't refinanced it. And we're not rushing given current uncertainty, and we think that things will become clear in the next few months. So I think that's the last slide. No, there's another one after that. Recalling that in the present situation, we've continued to optimize the cost of our net debt, which is just above 2%. Of course, if we had to borrow now, it will be more than 2% borrowing cost, of course, especially if we borrow in currencies other than the euro, for example, dollars and sterling. Thank you very much. Now a few words on how we see the full year for 2022. Slide #33, you can see the chart -- the quarterly chart since 2020. Our view is that for the year as a whole for 2022, global traffic will be in excess of the levels of 2019, in particular on HVs, heavy vehicles, which should continue to outperform for the reasons we've already given. And given our conclusion for the first half, light vehicles should also increase. But we're more prudent there because, of course, there's always uncertainty due to the increase in fuel cost. But if the provisions made by the state ensure a fuel price of less than EUR 1.50 per liter, that should enable us to maintain stable light vehicle traffic versus 2019. So the conclusion is we'll have higher traffic for the full year than for 2019. The main change is VINCI Airports. You have lots of colors in the chart which shows how our business has evolved over the different platforms some consolidated, some are not. What we're aiming for the full year is overall traffic close to 70% of the traffic that we saw in 2019, unless we have a new pandemic episode. And 6 months ago, when we last met, our guidance was 60%. So this is taking into account the step-up in traffic, which was -- has been referred to several times since the beginning of the presentation. What is important is that if we're at 70% of 2019 traffic for VINCI Airports, this will lead to a faster return to net income and free cash flow both positive for 2022. Now looking at the works, construction, looking at the order book, the order book is at a very good level, in fact, at a historic level in volume terms. And it's also of high -- the quality of the order book is very good. Again, there are issues with availability of some supplies and materials, spectacular price increases in some materials and supplies. That means that we have to really fight in order for new contracts to have proper price in taxation. And for contracts which are underway, and some of which may not have proper coverage for price increases, then we have to fight by looking for additions from the clients. And we have to fight for this by hedging when we can, price increase for materials or moving ahead in relation to price increases or optimizing -- by optimizing the projects by extracting cost savings that can enable us to offset at least in part the increases in material prices. So our teams are very strongly mobilized, and this enables us to confirm the guidance that we gave 6 months ago. VINCI Energy will confirm its operating margin. Cobra should post EUR 5.5 billion in business with operating margins among the best in the profession. And VINCI Construction should post further growth in revenue, and it should also improve its operating margin. Overall, the strong performance of the first half of 2022 vindicates our capacity to exceed in 2022 the net income posted in 2019. Now at this stage, I would conclude simply by saying that VINCI is a wonderful machine, very well diversified in its businesses. And in terms of cycles, short term, midterm -- medium term, long term in terms of geographies. It's well positioned on major trends regarding the energy transition, the environmental transition. It is a machine which is extremely flexible in terms of its organization, which ensures its ability to go through periods of turbulence, and it's also extremely combative. And we are well equipped to pursue in the years ahead a virtuous growth trajectory. And Pierre is making -- is looking at me. I'd just like to conclude with Slide 37, which illustrates the fact that the Board, which met yesterday, has decided on an interim dividend for 2022 of EUR 1 per share. And you will recall that the last pre-COVID interim payment was in 2019. And if I recollect correctly, it was EUR 0.70 per action -- per share. We have finished our presentation, and we are ready to take your questions.

I have 3 questions. Going back to Slide 19 with the reference to the ex-ACS portfolio, solar projects or wind farm project and with the Brazil -- the Belmonte project, can we have some idea of the phasing of the other projects because including -- if we include the significant increase in production prices of metal, the target margin, which was 70%, has it been confirmed? Or is it being called into question? Looking at the traffic forecast that we've given earlier, is there not some concern for light vehicles? Looking at the second quarter, we saw a decline in Cofiroute in June on Sanef, your competitor, we saw a decline. How is July going? And how is the traffic on the A86? We don't have any figures for that on the press release. And further, looking at the margin for VINCI Construction in the first half, your competitors have talked about lower business on motorways. Does that apply to motorway?

Good Lord, Christophe is so curious. I didn't really understand your reference to 70% of my comment from -- EBITDA margin. You're talking about the EPC margin? On the operating margin on projects, first of all, we confirm that the Cobra machine is able to deliver at least 1 billion gigawatts per year. The increase in cost of material supplies, for example, photovoltaic panels, would tend to erode the margin on these transactions. Unless we consider that the selling price of green electricity over time can remain at the extraordinary level at which we find it today. But as we are prudent people, we think that we have to be able to absorb the increase of prices in supplies, in particular, photovoltaic panels, and be reasonable in our expectations at which we book this green energy. But if the panels or the wind farms remain at current levels, the consequence is that the -- the cost of green power will remain at a very attractive level. And this should not have a negative impact on the operating margins. The problem is with transactions which are just in between, in other words, those which have been launched before the price increase and those which have to absorb fully the loss arising from higher material prices with, at times, revenue which is based given that you've had access to tariffs from the regulators, so off-peak charges in France, or because you've signed with power-intensive industries such as PPI. Are you still following? Okay. So in that case, the way you get out of that is that you agreed to erode your margin in order to take those -- see through those deals or you wait for the proper window of opportunity, which is what we do. The benefit when you develop an ENR project is that you're in control of the timing of the CapEx. You're not held to a deadline by the client, your own customers. So you can postpone slightly in order to select windows of opportunity, which will enable you to buy at a more attractive price your suppliers than if you were being driven by a deadline, a calendar imposed by the customer. That mean -- that's why they're slightly less ready to build now than there was a year ago. We have EUR 570 billion photovoltaic power in Brazil. And Christophe will correct me if I'm wrong, there are some projects which are basically ready to build. Can we quote them? There are other projects in Brazil, 1 gigawatt peak, as Xavier said, others in Spain and other Latin American countries. Now the way you have to look at the financial aspect of these projects, I'd given a few examples last time. And the conclusion was that the rate of return on -- internal rate of return on average is double digit, which is due to the fact that you're developing it yourself. It's not double digit. Of course, when you buy assets which are already ready to produce, but that's not our model. Our model is to develop ourselves. My conviction here, I've said this several times, is that there won't be green power for everybody in the next 10 to 15 years. And based on that, the cost -- the price of green power will remain attractive for everyone. At present, it's very attractive, but we think that in the longer term, it will remain at an attractive level because there will be a lack of production facilities versus the needs of so many people including ourselves who need to decarbonize their business. Right. Well, I'll let Pierre Coppey answer on -- it's more -- it's unquestionable because it's dependent on fuel prices. So our feeling is that, in the worst case scenario, we could say at around 0% versus 2019. And to add to the comparison versus Sanef, the VINCI Autoroutes network has the best geography, the best traffic due to demographic prosperity of the regions in which we established. And we see the gap widening versus ASF. And as you're specialist, Jean-Christophe, be careful of the base effects and the calendar effects. And the A86 is doing very well. Thank you very much. No, we're not going to go into any more detail.

The third question, I think, was Eurovia. Well, our competitors have negative signals for Eurovia, but well, for the first half, that's certainly not the case. We had very good activity in Eurovia for the first half. The other Eurovias are integrated into VINCI Construction. Eurovia France is very big. Eurovia France has strong activity, very strong activity in the first half may be due to favorable weather conditions and positive margins, which is very good for the first half of Eurovia. And it's up on pre-COVID margins. That's the present situation. And then that does not prejudge what may happen in 2023 or the rest of 2022. I don't know what you've heard from others. They were prudent. Okay. Well, they do whatever they want.

Just a slight view on light vehicles. The rest seems to be holding up well. Do you see further signs, I mean, red flags looming, order book that remains up? I mean can we expect order intake realistically to stay positive going forward as of now? Second question, on the contracting margins, you mentioned the kind of protections, what are the protections that you have today in your contracts, be it Energy, Construction, in the face of this soaring inflation, be it for Energy, raw materials, what's your dependence on gas, too? My third question for Christian on the free cash flow negative this year. No great surprise that H1 is negative in working cap. We were expecting that. But can we have the view that a full year WCR will stabilize, which is generally your view? Could you give us a landing point on your vision of free cash flow full year? And if I could just slip in a fourth, we had a very interesting meeting with Pierre Coppey a few weeks back on decarbonization plan. I mean in your view, is there a hope that we at last have a plan with the government on fully fledged funding, which will include an extension to the Concessions?

Do you have the whole afternoon ahead of you, so I can answer -- order intake, first off, if one day the order book were to decline, you must certainly not read that as a negative sign. Proof is that a few years back, we had order books that were way below, and it didn't prevent us from sleeping at night. So you need to look at the details because very often the order books are positively impacted by a number of big deals. And we've done some in the business of VINCI Construction, a fair number or not as many this year. In due course and on the other hand, we tend to garner in a fair number this year on EPC and Cobra business, whereas they didn't exist with us last year. So order intake, what's important is to remain rigorous and selective. The good news is that the world is full of projects for buildings and civil engineering. It's true. And our market share infinitesimal and global stake, so we're in a position to select rigorously, as I said, contracts where we can express ourselves to the full in terms of engineering value-added project optimization, especially contractual clauses, price reviews. Where we're going to see strong growth in the business of VINCI Energy and Cobra because what I also mentioned, energy transition, energy efficiency and for VINCI Energy, explosion of digital tech, positive skyrocketing of digital tech. It's going to be true for the kind of flow business, more medium-sized jobs, that's a focus with tech value-added. Ditto for Cobra in the same segment. But also for Cobra in EPC, the shot I showed you earlier, that fascinates me. These AC-DC converter stations, you need to understand that it's absolutely in the spend when you have offshore wind farm with over 45, 50 km from the coast. The number of offshore wind farms planned worldwide in our geographies in the North Sea, in the Irish Sea and one day in France, particularly in the Mediterranean. But also in the Americas, the number of offshore wind farms far out at sea due to wind speed but also environmental and visual pollution. Number of projects is rising hugely. Every time there's such a project, you need an AC-DC converter station. And for 1 giga of peak power, that piece of kit is worth EUR 1 billion. That explains the price of green power produced by offshore. Wind farms is, of course, a lot higher than the price of green power produced by land-based PV. Because it's out at sea, it's complicated. So the market of these converter stations is rising. There are real barriers to entry. We're fortunate in having a partnership with a number of major equipment suppliers. Siemens, ABBG, the 2 deals last week, I mean, you saw the press release with Amprion in JV with Siemens that we're delivering these 2 installations, each worth EUR 1 billion. And we have 50%. Our scope of work represents about 50% of that. That's going to grow a great deal. High voltage lines, we've been talking about this for many years now in all countries, particularly in Germany but a lot in countries such as Brazil. The energy transition has, by way of a consequence, a radical restructuring of the high-voltage energy transmission grids. And that's why 8 years ago, we bought out [indiscernible]. We thought it was going to take off. It didn't really take off back then, but it's taking off now the market for restructuring the high-voltage lines, to take account of the places of production and places of energy consumption are shifting because of the energy transition. All that is going to require dozens and dozens of billions on a global scale. Some countries such as Brazil, where you can enter those markets through PPPs. It's not the case in Germany, it's not the case in France and other countries, but you can do that in the form of PPP. You do the financing, the engineering, the right of way, planning, permission, construction, maintenance and the project. It's an availability scheme. We're not paid on the power that runs through but our ability to ensure that the infrastructure will be able to support the power transmission decided by the regulator. So the EPC world is very vast globally for VINCI Construction, and we can do some project picking. And the EPC world and the energy world is growing strongly on the back of the energy transition. Sorry, that was a bit of a long answer to your question, but I'm convinced that it's -- this one is going to run in one for a while. Price protection, there are 2 types of contracts, those that we already have in our order books and those that we're about to tender for. And the second category, we can choose our price. I mean we select contracts where there are protection clauses through price escalation clauses. And we set the price of the day on the -- for the supply, so there's no problem. The possible problems can be on the contracts in our order books already. 3 types, small contracts, you can be impacted but modestly because the contracts delivered rapidly. You sign it, you get started, so the price isn't very different from what you included in your price proposal. And I mean it's barely started, that it's finished. I mean, okay, I'm simplifying, so they're revolving almost these small contracts. On the bigger contracts, you have cost plus fee contracts, HS2 there, you pass on the reality of the cost and you paid through a fee that's based on the quantity of material and personnel that you use to deliver the project. There, you're wonderfully protected. The big contracts, excluding cost plus fees, public contracts in countries such as France, always protected through a price escalation clause. The slight differential is to write no whether that formula reflects our price structure, that second order. And then you've got another contract for a property developer. The property developer has got a fixed price because it's presold. He can't up his margin. And so he had construction suppliers, constructors who are offering a fixed price. Today, we refuse to do fixed prices, which poses problems to people who have to have a final customer fixed price. Contracts are the third type, there are not public contracts that don't comprise a price revision clause into the previous [indiscernible]. We're fighting. As I said earlier, we're combative, and we're getting there. Not always at 100%, but it's worth fighting for. Pierre, did I say that right?

On free cash flow, I think I said when we presented the results that you should not be under any illusions that the 2021 performance could not be repeated in 2022 and that you have to table in something to the tune of EUR 4 billion, maybe a bit more. So we're still on that expectation. Now I'll repeat what I said, we don't know what is going to happen on WCR until the last day of the year. You have to be aware of this when you look at the chart for cash flow generation. So a lot of this involves actions on the ground. A lot of this is depending on what happens on the ground and not what happens at the holding company, which we're managing, is that the teams have to ensure that the cash comes in, they have to invoice in a timely manner, et cetera, et cetera. So with outreach measures on all of this across the board, we revised our forecast every month. And for the time being, we are targeting free cash flow of EUR 4 billion based on the feedback from the ground for the year as a whole. But of course, there's a lot of uncertainty because we'll only know the final results at the end of the year. Of course, VINCI Autoroutes, we have much greater visibility, or VINCI Airports as well, but VINCI Energy and more so VINCI Construction, it's somewhat different, of course.

There was a question on the motorway plan. What was the question? Decarbonization. Pierre, do you want to redo a pitch on decarbonization?

Well, small pitch? Well, the small pitch is to recall that transport account for 1/3 of this country's GHG emissions. In the transport sector, 85% of the transport of road transport and 95% come from the road. So if you want to decarbonize, you have to start off with motorways, which account for most of the transport and transport emissions. There's a need for investment in recharging stations, as Xavier said, investment in infrastructure because the whole growth in intermodality enabled more intermodal interaction. And as we've said, we have a program for the deployment of photovoltaic panels on public motorways where, in the short term, we could reach 1 gigawatts. So all this is part of government plans and the discussions are due to open in the weeks ahead on the modalities. And on implementation, it's always difficult when it comes to motorways, but this is part of the government's prior priorities.

Yes. Congratulations on this excellent first half. I have several questions. The first one is on Airports. Should we expect operational leverage in the first half or the threshold effects from a certain traffic level where you reopen terminals and you restore fixed cost that we didn't have in the first half of 2021? And I'd also like to ask how is retail doing in this recovery phase given the fact that the list of passengers is somewhat different perhaps from what you had prior to the pandemic and due to inflationary pressures. My second question is on Cobra. Can you give us some idea of Cobra's margin in the first half of last year so that we can better assess performance? And what can you say about the seasonal impact of margins? On the energy transition, you promised a higher margin. I know that the first half is not significant for the year as a whole. Can we expect more than 10 basis points improvement in margins for the year as a whole?

I think we'll ask Nicolas to answer the first question regarding the Airport business and non-aeronautical revenue.

Well, first of all, regarding costs, we had a very strong recovery in the first half such that we were able to keep our cost base at a very low level because we made significant cost savings. So this means that a lot of the revenue goes through to EBITDA and even upper to EBIT. 65 -- EUR 45 million in OpEx, that's interesting because this continues over time. And then, of course, irrespective of terminal reopenings, we've reopened everything. We had some terminal maintenance in Léon that was programmed. So apart from one terminal that's on the maintenance, we don't have any particular maintenance projects. So there will be some delays. And we're going to have structural cost savings, it will be quite high, arising from the crisis. Second question, quite similar to the previous year, we have -- the passenger mix is somewhat different, but we don't have much exposure to business traffic at VINCI Airport, so there's no particular. We're very close to 2019 levels. We have reviewed with another operator, and we have attractive yields this summer, notwithstanding significant traffic volumes. There are no structural apparent changes in what we're seeing. And in Japan, the Chinese traffic will deliver yield that we don't get with domestic Japanese traffic. But that's quite anecdotal on Japan only but with the same type of spending, so no structural change.

Can you elaborate regarding the seasonal impact of VINCI Energy's business?

Well, on infrastructure business, which is similar to Eurovia's business, and this can be impacted by adverse weather conditions at the beginning of the year. So it depends on the geographies, there's -- at VINCI Energies, what we find is that we're able to modulate all this, and basically, it's quite linear.

Including the margins, does that go for the margin as well?

So that, I think, is the answer to the question. That's why I started off with VINCI Energy. It's the same business. 60% of Cobra's business is similar to VINCI Energy's light business. And on the EPC business, there's no real seasonal effect because we have to stick to deadlines both in the summer and in winter. And the margins have a similar trend. They can be impacted by seasonal factors, and you've seen this on the margins for the full year of VINCI Energy, for example, for many years. And that's where the absolute value of Cobra, will stick by what I said. The full year margin of Cobra will make it one of the best players in the profession. And there's no comparison -- you can't compare to 2021 because the context was completely different with different scope, different accounting methods. Christophe, do you want to add something?

Well, what you've said on the consolidation method I see as of the 31st, so the accounting method, the results publication methods were very specific to that particular method of accounting for the assets. And now we no longer have access to that. So no possible comparison here. You'll be able to do that in a year, 1 year's time.

Okay. That's it. Yes, that's it. Construction, no, that's it. Okay. Can't hear -- the interpreter cannot hear the question. No, we're not going to say more than what we've said. What we're saying is that the operating margin will improve on 2021 in 2022, but we're not saying any more than that, unless Pierre wishes to say more. No? Okay. Perhaps we can take questions on the phone if there are no further questions in the room. So let's go ahead with the announcement.

[Operator Instructions] First question, Charles Maynadier from Kempen.

3 questions, VINCI Autoroutes, the government asked you to make a gesture given the current economic -- did you accept rapidly? Can you give us an order of magnitude of this impact on Q3? And then the next price hike in February '23, inflation calculated November, and November will be quite high and will lead to a sharper tariff increase. Do you think there's a risk that the government is going to ask you to put your hand in your pocket again? And will you be ready to do that? And VINCI Energy, as you said, holding up well in a very promising sector, energy transition, digital. But the dry powder, I just wanted to know if you received an expression of interest from potential buyers.

I'll answer the last question because it's rather anecdotal so as to allow Pierre to prepare his answer on the first 2 parts of your question. Yes, I mean for years, from time to time, there are people who revolve, the problem is it's not for sale and it's rather we that are buying. As to private equity, I think I read somewhere that they were far more bothered than previously to raise the funding alone to continue to go on their shopping spree. And the private equity is not the case for infrastructure funds, but it's at least the case of PE. So yes, it's true regularly when no turns up for M&A, we're either opposite a seller who's a PE fund or with competitors who are people from PE. Doesn't prevent us from doing them. So Pierre, on the tariffs?

So tariffs index, 70% of inflation under the 95 degree, the baseline, references not November, it's October. We're moving towards high inflation baseline, which will no doubt be the subject of discussions. I mean it's written both in the contracts as well in the regulatory setup. And as my granny used to say, that doesn't exclude the danger, so the question doesn't arise as yet. So far measures taken at the request of the government when the government asked us to -- for a gesture, we offered a rebate on the holders of holiday vouchers, who are using their holiday vouchers to pay the toll. We're expecting positive effects on the Ulys app and toll badge. But it's too soon to measure the impact as of today on the revenue because the measure has only been enforced since July 15. So we'll give you the total impact at the end of the year. But I think it's -- I believe it's contained.

Next question, Stephanie D'Ath, Royal Bank of Canada.

Yes. The first concerned with the transport lines maintained stable traffic next year. I mean historically, if we want to have a vision into next year, do you think that you'll have the time to combine this with the plan on final agreement before the beginning of next year? You have to obtain a European agreement from the commission. My second, your pipeline of 15 gigawatt for the next few years in the current context, where we see Germany in EUR 180 billion investment for the transformation for energy transition, do you think there's potential there to have more than 40 giga. My first -- third question concerns the EBIT number for Construction. The impact of road works, historically, the margins is more positive in H2 than in H1. Is that correct?

Well, I'll start by answering, and Pierre, you can come in. No, on VINCI Construction, you mustn't reason like that. You must reason simply by taking into account what we said. That's to say the margin full year will be up versus the margin that we booked in '21. Do the math that way. On the potential going forward, we've always said that, of course, we're in the business of growing renewable energy fields at a rate above 1 giga. We're prudent people. It's a new business. So what we believe we have to demonstrate that we're capable of producing 1 gigawatt on the basis of what we've acquired. That is to say Cobra and its pipe, once we have the feeling that we've been able to deliver on that part of the contract, we'll be able to deploy additional capital to do the same thing in other geographies as to end up by having development of renewable energy fields above 1 giga per year. We're going gradually. We don't have the intention of being a leader of the pack in the field because of the colossal investment by oil majors for which it's existential. We're quietly following our own way. Strategy involves developing ourselves or essentially ourselves and biding our time sells to make sure that we do indeed master this new business. On the Autoroutes, the motorways, over to Pierre.

Well, I think the answer was really contained in the question. Yes, negotiating process is a lengthy council of state legislative green light endorsement by Brussels. So they're very lengthy, time-consuming procedures. And we can find, of course, ways of anticipation and acceleration. What's important is a genuine will. There's really genuine will to move forward on decarbonizing the motorway network. I mean our strategy that was to educate as many people as possible on the idea that it was urgent act for motorway mobility, this strategy is paying off. But great many people are convinced of that. They're also convinced that mustn't procrastinate for too long here. And this requires capital. It requires that the capital be leveraged by people such as ourselves. So we're in a context that's globally favorable to accelerate the talks mentioned by Pierre Coppey, so it's not impossible that you reach an agreement before next year's tariff increase. Well, it depends what you put in the agreement.

No further question.

So that's it. Thanks very much. Thank you all. Thanks for your presence. We are pleased to see you all again. Have a good holiday because many of us are going off on holiday in the coming hours, at least I am and so is Christian. See you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]