Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our primary exposure to market risk relates to unfavorable changes with respect to interest rates and currency exchange rates.

Interest Rate Risk**.** We are exposed to interest rate risk with respect to our fixed-rate and variable-rate debt. Fluctuations in interest rates impact the fair value of fixed-rate debt and expose us to the risk that we may need to refinance debt at higher rates at each instrument’s respective maturity date. Fluctuations in interest rates impact interest expense from our variable-rate debt. At December 31, 2023, 63% of our debt portfolio, on a gross basis, incurred interest at a fixed-rate and the remaining 37% of the portfolio incurred interest at a variable-rate.

As of December 31, 2023, our fixed-rate debt was $2.63 billion, which consisted primarily of our senior notes outstanding. The fair value of Quanta’s senior notes was $2.15 billion at December 31, 2023. A 10% change in the market price would cause a change in fair value of $214.5 million.

As of December 31, 2023, our variable-rate debt consisted of $867.1 million outstanding under our senior credit facility and $705.9 million outstanding under our commercial paper program. The weighted average interest rate on our borrowings under our senior credit facility for the year ended December 31, 2023 was 6.6%, and the weighted average interest rate on borrowings under our commercial paper program was 5.8%. Based on these borrowings outstanding as of December 31, 2023, we estimate that a 50 basis point increase or decrease in interest rates would impact annual interest expense by approximately $7.9 million.

For additional information about our debt obligations, refer to Note 10 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Foreign Currency Risk. We perform our services in some foreign countries, primarily Canada and Australia, and as a result, are exposed to changes in foreign currency exchange rates. Our reporting currency is the U.S. dollar. Our foreign entities typically use the local currency as their functional currency. Translation adjustments are deferred in accumulated other comprehensive income.

Some of our consolidated entities enter into transactions that are not denominated in their functional currency. This results in exposure to foreign currency risk for financial instruments, including, but not limited to, third-party and intercompany receivables and payables and intercompany loans.

Our policy is to maintain a balanced position in foreign currencies to minimize exchange gains and losses arising from changes in exchange rates. We maintain risk management control practices to monitor the foreign currency risk attributable to our intercompany and third-party outstanding foreign currency balances. These practices involve the centralization of our exposure to underlying currencies that are not subject to central bank and/or country specific restrictions. By centralizing most of our foreign currency exposure into one subsidiary, we are able to take advantage of natural offsets thereby reducing the overall impact of changes in foreign currency rates on our earnings.

Historically, we have not had significant exposure to foreign currency risk. Other income (expense), net, in the consolidated statements of income in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report reflects net foreign currency losses of $2.6 million in the year ended December 31, 2023 and net foreign currency gains of $0.7 million in the year ended December 31, 2022.

Other Risks. For a discussion about our concentration of credit risk; cash and cash equivalents; and investments in COLI assets, refer to Notes 4, 15, 16 and 17 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report for additional information.