Full of Energy - Energie AG Oberösterreich

ANNUAL REPORT2007/2008THE GROUPGROUP MANAGEMENT REPORTTHE ENERGY SEGMENTTHE WASTE MANAGEMENT SEGMENTTHE WATER SEGMENTCONSOLIDATED FINANCIAL STATEMENTS114Accounts receivable (trade debtors), as well as otherfinancial assets mainly have short terms to maturity.As a result, their book values as at the balance-sheetdate correspond approximately to the attributablecurrent value. The attributable current values of longtermborrowings, if material, correspond to the cashvalues of the payments linked to the assets, alwaystaking account of the current market parameters.The financial assets in valuation class "available forsale" comprise unquoted equity instruments, the fairvalue of which could not be reliably established andwhich are shown in the balance sheet at purchaseprices. The book values can be gathered from thetable above. The losses from the disposal of suchassets amounted to EUR 332.7 thousand during the2007/2008 business year (EUR 545.7 thousand for theyear before).Accounts payable and other financial debts regularlyhave short times to maturity. The values in the balancesheet approximately reflect the attributable currentval ues. The current value of financial liabilities, ifma te rial, are established as cash values of the paymentslinked to debts, on the basis of the respectivelyapplic able market parameters.The net result from valuation of the financial instrumentsis spread out as follows across the differentclasses of financial instruments:2007/2008 2006/2007in EUR 1,000 in EUR 1,000Loans and receivables 12,847.5 11,030.9Held-to-maturity investments - 2,527.7 0.0Available-for-sale financial assets - 24,961.4 23,624.5Financial assets at fair value held through profit or loss (FV options) 78.1 7,624.1Financial assets/liabilities at fair value held through profit or loss (trading) 2,592.5 97.3Financial liabilities measured at amortized cost - 35,638.9 - 35,334.0Net result - 47,610.0 7,042.9Total gains from interest 15,109.4 11,913.3Total expenses for interest - 35,638.9 - 35,334.0The net result of the category "loans and receivables"mainly comprises gains from cross-border leasing andgains from invested money, as well as borrowings. Itis shown in the financial result. Moreover, the itemcomprises gains from the re-transfer of value adjustments,as well as gains from receiving written-offamounts due, as well as expenses for value adjustmentsand write-downs of accounts receivable. Theyare shown in the result of operations.The net result of "held to maturity" investments isshown in the financial result and essentially comprisesthe write-downs made for these instruments, as wellas gains from interest earned from securities and se -curity deposits.The net result of "available for sale" financial assetsshows the valuation result of participations, valued withno effect on the result and securities, as well gains fromparticipations. They are shown under other financialresults.The net result of financial assets at fair value throughprofit or loss (FV options) essentially comprises the re -sults of valuation, as well as distributions from securi -ties. It is shown under other financial results.The net result of financial liabilities measured at amortizedcost essentially comprises expenses for interestfor financial liabilities. It is part of the financial result.The net result of financial assets and financial liabilitiesat fair value through profit or loss (held for trad -ing) essentially derives from the derivatives used byEnergie AG. The valuation result for the derivatives ofthe energy sector is comprised in the result of operations,that of interest and foreign-currency derivativesin the financial result.21.4. MANAGEMENT OFFINANCIAL RISKSPRINCIPLES OF FINANCIAL-RISKMANAGEMENTOn account of its business activities and its financialtransactions, Energie AG is exposed to various financialrisks. These risks essentially comprise foreign-currencyand interest risk, liquidity risk, default risk, sharepricerisk of securities, and price risk in the commodityarea (price risks of the energy industry).The central Group Treasury handles the managementof financial risks. Any possible hedging is done on acentral basis for all corporate entities. A corporatefinancial guideline (Treasury Policy) is the basis forman aging financial risks. It applies to the main objectives, principles and the distribution of tasks withinthe Group.The Group Treasury primarily secures financial risks ona central basis, also using derivative financial instruments.As a matter of principle, such transactions areonly entered with counterparties of very good ratingin order to minimize the default risk.If a controlling influence – and eventually full consolidation– is obtained when acquiring a company, theacquired company is integrated into the central GroupTreasury in the course of a post-acquisition project.Foreign-Currency RiskThe exposure is essentially limited to the risk of translatingvalues assets in the neighboring countries(espe cially the Czech Republic, Hungary, Slovakia).The foreign-currency risk of the Energie AG Group canbe classified as low, on account of the low level offinancial assets exposed to the foreign-currency risk, aswell as on account of the financing structure. More -over, there is also a transaction risk of a subordinatedextent, due to payments in foreign currency.Interest RiskThe Energie AG Group holds financial instruments withsensitive interest rates in order to meet the operation aland strategic requirements for controlling liquidity.The risk of changes in interest rates essentially resultsfrom financial instruments with variable interest rates(cash-flow risk). On the asset side, interest risks are duemainly to borrowings and credit balances with creditinstitutions, on the liability side they are mainly dueto financial liabilities with variable interest rates, aswell as amounts due to banks. Moreover, interest riskaccrues from interest-related derivatives.The sensitivity of these financial instruments to risks ofchanges in interest rate is analyzed so that the effectsof assumed changes in the level of market in terest onthe result (after tax) and on equity is shown. Theinstruments held on the reporting date were used asa basis for the analysis. In this context, it was assumedthat the risk prevailing on the balance-sheet date es -sentially represents the risk during the entire businessyear. The corporate tax rate of 25% was used as taxrate. Another assumption for the analysis was that allother variables, especially exchange rates, will remainunchanged.An increase in the level of market interest rates –after the aforementioned assumptions – by 100 basispoints as at the balance-sheet date would have re -sulted in a reduction (increase for the previous year)of the result (after tax) and of equity in the amountof EUR 829 thousand (EUR 798 thousand for the previousyear).A decrease in the level of market interest rates – afterthe aforementioned assumptions – by 100 basis pointsas at the balance-sheet date would have resulted in anincrease (reduction for the previous year) of the result(after tax) and of equity in the amount of EUR 963thousand (EUR 798 thousand for the previous year).Commodity Price RiskCommodity price risks arise mainly from the procurementand sale of electricity, as well as from the procurementof the fuels coal and gas. Moreover, EnergieAG incurs price risks when entering into speculativepositions in the course of proprietary trading,which is therefore exercised only within narrow limits.The risk can therefore be classified as immaterial.Hedging instruments for electrical energy and fuels(futures, forwards and swaps) are entered in order tosecure risks of the energy industry.Sensitivity analyses were made for the commodityprice risk, which show the effect of assumed changesin the level of market prices on the result (after tax) andon equity. The respective amounts held on the balancesheetdate were used as a basis. In this context, it wasassumed that the risk on the balance-sheet date es -sentially represents the risk during the business year.The corporate tax rate in the amount of 25% was usedas a basis. Moreover, it was assumed for the purpose115