Page 174 - KELAG Annual Report 2019
P. 174

The structure of financial liabilities means that the interest rate risk is currently low. The share of
                                      variable-rate debt amounts to 10.47% of total borrowed capital (prior year: 6.63%). Most of the
                                      financing portfolio  has  a  fixed  interest rate  and  as  a  result is  not  subject to  any  fluctuations
                                      affecting cash. The variable interest rate share is continuously monitored and for risk reasons is
                                      limited to 40% at group level. An interest rate increase of 1% for variable-rate financial liabilities
                                      as of the reporting date would reduce financial income by EUR 0.5m (prior year: EUR 0.3m) per
                                      year. An interest rate decrease of 1% for variable-rate financial liabilities as of the reporting date
                                      would increase financial income by EUR 0.5m (prior year: EUR 0.3m) per year. The KELAG Group is
                                      financed  with  an  average  effective  interest  rate  of  2.67%  (prior  year:  2.78%). The  equivalent
                                      nominal interest rate is 2.59% (prior year: 2.70%). A change of +1% affects the market value of the
                                      interest hedging instrument by EUR 0.1m (prior year: EUR 0.2m) and a change of -1% would affect
                                      the market value by EUR -0.1m (prior year: EUR -0.2m).

                                      The Group Finance Framework Directive stipulates that only transactions in euros are approved
                                      for the fully consolidated group entities with their registered offices in Austria. KELAG’s scope of
                                      consolidation at year-end includes no financial liabilities in foreign currency and for this reason
                                      the foreign currency risk is of little importance. Because of the limited assets in foreign currencies
                                      (3.62% of total assets in 2019 and 3.79% of total assets in 2018), the currency translation risk is
                                      also negligible.

                                      In the area of market risks, the main risk for KELAG is that of changing prices for the commodities
                                      electricity and gas. These risks stem from the purchase and sale of electricity and gas. Purchase
                                      and  sale  transactions  are  carried  out  as  procurement  for  sales  activities  (electricity  and  gas),
                                      marketing of production volumes (electricity) and for proprietary trading (electricity and gas).

                                      This risk of market price fluctuations is counteracted by a commodity risk management system
                                      with limit mechanisms derived from the central risk management system. A core component of
                                      this is to minimise risks with a long-term sales and purchase strategy as well as a narrow limit
                                      system for proprietary trading. Hedging uses forward transactions with physical fulfilment as well
                                      as futures settled in cash for proprietary trading. Hedge accounting is applied for some of the
                                      derivatives entered into in this context, for the majority of the others, a “natural hedge” occurs in
                                      the  income  statement.  Those  contracts  that  serve  the  expected  purchase,  sale  or  usage
                                      requirements are recognised as own-use transactions.
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