Groupe Renault - 2020 Universal Registration Document

401 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 04 CONSOLIDATED FINANCIAL STATEMENTS GROUPE RENAULT GROUPE RENAULT: A COMPANY THAT ACTS RESPONSIBLY CORPORATE GOVERNANCE FINANCIAL STATEMENTS RENAULT AND ITS SHAREHOLDERS ANNUAL GENERAL MEETING OF RENAULT ON APRIL 23, 2021 ADDITIONAL INFORMATION Management of financial risks 25 - B - The Group is exposed to the following financial risks: liquidity risk; P market risks (foreign exchange, interest rate, equity and P commodity risks); bank counterparty risk and credit risk on customer and dealer P financing. Risk management differs depending on the operating segment. The risks described below concern the Automotive segments, (considering AVTOVAZ separately in certain cases), and the Sales Financing segment. The Mobility Services segment does not have any specific financial risks since it is financed by the Automotive segments. Liquidity risk B1 The Group must have sufficient financial resources to finance its automotive and sales financing businesses, and the investments necessary for their growth. To ensure this is the case, the Automotive and Sales Financing segments borrow on the capital and banking markets to refinance their gross debt and guarantee liquidity. This exposes them to liquidity risks if markets are closed for long periods or credit is hard to access. The Automotive and Sales Financing segments are also credit-rated by several agencies. Any downgrading of external credit ratings could limit and/or increase the cost of their access to the capital markets. LIQUIDITY RISKS – AUTOMOTIVE SEGMENTS The Automotive segment’s liquidity risk is managed by the Financing and Treasury department. It is founded on an internal model that defines the level of the liquidity reserve the Automotive segments must maintain to finance their operations and development. The liquidity reserve is closely monitored by a monthly review and reporting that is validated by the Chief Financial Officer. Monitoring and management of the liquidity reserve level were reinforced in view of the COVID-19 pandemic. Renault SA handles most refinancing for the Automotive (excluding AVTOVAZ) segment through long-term resources via the capital markets (bond issues and private placements), short-term financing such as NEU CP (Negotiable European Commercial Paper), or bank financing. Renault SA has several debt programs at December 31, 2020: an EMTN Bond program with a €7 billion ceiling. This program has P been registered with the AMF; a Shelf Registration bond on the Japanese market with a P JPY200 billion ceiling. This program has been registered with the Japanese stock market authorities (Kanto Local Finance Buro); a NEU CP program with a €2.5 billion ceiling. This program has P been registered with the Bank of France. Renault SA and its debt programs are credit-rated by several agencies. In 2020, in the context of the COVID-19 pandemic, Renault SA’s rating was downgraded by S&P on April 9 to BB+ with a negative outlook and by Moody’s on May 28 to Ba2 with a negative outlook. The Japanese agencies E&I and JCR also downgraded Renault SA’s credit outlook from stable to negative on August 3 and October 5 respectively. In 2020, to cover its liquidity requirements in the context of the COVID-19 pandemic, Renault SA arranged the following financing: a €5 billion bank credit line guaranteed by the French government P (in June 2020). €4 billion of this credit had been drawn at December 31, 2020 (see note 23-C); a new Eurobond issue under its ETMN program, with nominal P value of €1 billion, 5.5-year maturity and a coupon of 2.375% (in November 2020). Renault SA also has confirmed credit lines opened with banks worth €3,430 million at December 31, 2020 (€3,480 million at December 31, 2019). These credit lines mature in more than one year and were undrawn at December 31, 2020 (and 2019). They form a liquidity reserve for the Automotive segments. The maturities of the Automotive segment’s financial liabilities at December 31, 2020 are presented in note 23-D. The contractual documentation for Renault SA’s confirmed credit arrangements, bank loans and market financing does not contain any clause that could affect the continued supply of credit as a result of changes in either Renault’s credit rating or its financial ratios. Certain types of financing, particularly market financing, contain standard clauses ( pari passu , negative pledge and cross-default clauses). AVTOVAZ also uses local bank credit for refinancing. Its credit lines total €1,139 million at December 31, 2020, of which €1,021 million mature in more than one year. AVTOVAZ decides to make drawings on the basis of cash forecasts. The maturities of AVTOVAZ financial liabilities at December 31, 2020 are presented in note 23-D. These financial liabilities contain no covenant that would lead to accelerated repayment if certain financial ratios are not respected. AVTOVAZ also uses reverse-factoring arrangements (see note 23-E). At December 31, 2020, the Automotive segments have a liquidity reserve of €16.4 billion, sufficient to cover their commitments over a 12-month horizon. This reserve consists of €12.95 billion of cash and cash equivalents, and €3.43 billion of unused confirmed credit lines. LIQUIDITY RISKS – SALES FINANCING SEGMENT The Sales Financing segment is very attentive to diversification of its sources of liquidity. In recent years, Renault has diversified its sources of financing widely, moving into new distribution zones in addition to its longstanding base of euro bond investors. RCI Banque’s liquidity risk management follows the recommendations of the European Banking Authority. It uses several indicators and analyses (static liquidity, liquidity reserve, several stress scenarios), which are updated and reported to RCI Banque’s Financial Committee on a monthly basis. The stress scenarios include assumptions concerning deposit leakage, loss of access to new financing, partial unavailability of certain elements of the liquidity reserve and forecasts for issuance of new credit.