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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE HEP GROUP (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2010 37. FINANCIAL INSTRUMENTS (continued) FOREIGN CURRENCY SENSITIVITY ANALYSIS The Group is mainly exposed to the changes of euro (EUR) and US dollar (USD). The following table details the Group’s sensitivity to a 10% increase and decrease in the HRK against EUR and USD. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents Management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated receivables and liabilities and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive / negative number below indicates an increase in profit and other equity where HRK strengthens 10% against the relevant currency. For a 10% weakening of the HRK against the relevant currency, there would be an equal effect, but the balance would be negative. 2010 2009 HRK’000 HRK’000 EUR change impact Profit or loss USD change impact 350,872 470,385 Profit or loss 38,853 44,809 INTEREST RATE RISK MANAGEMENT The Group is exposed to interest rate risk as it borrows funds at floating interest rates. The Group’s exposures to interest rates on financial assets and financial liabilities are shown in section of this note, the liquidity risk management. The Group manages this risk by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts. INTEREST RATE SENSITIVITY ANALYSIS The sensitivity analysis has been determined based on the interest rate exposure of the Group to financial instruments at the date of the statement of financial position.. For floating rates, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents Management’s assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s: Profit for the year ended 31 December 2010 would decrease/increase by HRK 21,153 thousand (2009: HRK - 22,031 thousand), based on exposure to interest rate risk. This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings, which accounted for 77% in 2010 (2009: 73%); and The Group’s sensitivity to interest rates has decreased during the current period mainly due to the reduction - in variable rate of debt instruments. 123 HEP ANNUAL REPORT 2010 CHAPTER 6 - FINANCIAL STATEMENTS
124 HEP ANNUAL REPORT 2010 CHAPTER 6 - FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE HEP GROUP (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2010 37. FINANCIAL INSTRUMENTS (continued) CREDIT RISK MANAGEMENT Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group is the sole provider of electric energy in the Republic of Croatia. As such, it has a public responsibility to provide services to all users, and locations within the country, irrespective of credit risk associated with particular customers. Trade receivables, net, consist of a large number of customers, spread across diverse industries and geographical areas. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities. Credit risk with respect to trade receivables is primarily related to domestic corporate receivables, specifically where services are provided to economic concerns, which are in a difficult financial position. Overdue receivables from households are limited due to Group’s ability to disconnect such customers from the power supply network. Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained. LIQUIDITY RISK MANAGEMENT Ultimate responsibility for liquidity risk management rests with the Management Board, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and other sources of financing, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Liquidity and interest rate risk tables The following table details the remaining period to contractual maturity for the Group’s non-derivative financial assets. The tables below have been drawn up based on the undiscounted cash flows of the financial assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period. MATURITY OF NON-DERIVATIVE FINANCIAL ASSETS Weighted average effective interest rate Less than 1 month 1 – 3 months 3 – 12 months % (HRK’000) (HRK’000) (HRK’000) (HRK’000) (HRK’000) (HRK’000) 2010 Non-interest bearing 1,096,670 1,424,595 194,103 396,981 21,317 3,133,666 Variable interest rate instruments 5.00% 23 46 196 105 - 370 Total 2009 1,096,693 1,424,641 194,299 397,086 21,317 3,134,036 Non-interest bearing 1,179,933 676,596 179,562 484,635 16,569 2,537,295 Variable interest rate instruments 6.00% 24 47 207 376 - 654 Total 1,179,957 676,643 179,769 485,011 16,569 2,537,949 1 – 5 years Over 5 years Total
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DRAVA, KUPA, RJE»INA, LOKVARKA, LI
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HEP ANNUAL REPORT 2010 2 HEP GROUP
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HEP ANNUAL REPORT 2010 CHAIRMAN’S
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HEP ANNUAL REPORT 2010 PRESIDENT’
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COMPANY PROFILE MISSION, VISION AND
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BASIC VALUES COMPETENCE AND CREATIV
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Plomin Holding d.o.o. develops loca
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ELECTRICITY PRODUCTION The Governme
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SHORT HISTORICAL OVERVIEW 1895 Firs
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HEP'S BUSINESS OPERATIONS IN 2010 B
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In 2010, the total electricity turn
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OPERATING EXPENSES The Group’s op
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ELECTRICITY SALES (GWh) 2010 2009 2
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CREDIT RATING In September 2010, St
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SUSTAINABLE DEVELOPMENT POLICY AND
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WASTE During 2010, the years-long t
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ENERGY BALANCE (10 3 m 3 ) 2009 201
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