Edisun Power Europe Ltd. Corporate Governance Report 2010 ...

38 Consolidated Financial Statements
All amounts are in 000 CHF if not otherwise noted
ing in the relevant foreign currencies.
(a) Market Risk
(i) Foreign Exchange Risk
The Group operates internationally and is exposed to foreign
exchange risk, primarily with respect to the euro. Foreign
exchange risk arises from future commercial transaction,
recognized assets and liabilities, and net investments
in foreign operations.
The Group has certain investments in foreign operations,
whose net assets are exposed to foreign-currency translation
risk. Currency exposure arising from the net assets of
the Group’s foreign operations is managed primarily
through borrowings denominated in the relevant foreign
currencies.
At December 31, 2010, if the currency had weakened/
strengthened by 5% against the euro with all other variables
held constant, post-tax profit for the year would have
been CHF 36 higher/lower, mainly as a result of foreign exchange
gains/losses on translation of euro-denominated
trade receivables, financial assets and borrowings.
(ii) Cash Flow and Fair Value Interest Rate Risk
The Group’s interest rate risk arises from long-term borrowings.
Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued at
fixed rates expose the Group to fair value interest rate risk.
Group policy is to maintain approximately 90% of its borrowings
in fixed rate instruments. For information regarding
fair values of fixed rate instruments refer to note 14.
(b) Credit Risk
Credit risk arises primarily from exposures to local electricity
companies, which are owned by the government or
federal state (canton, province). Such governments or
federal states have a Standard & Poors rating of AA or
higher. For further information regarding receivables refer
to note 9.
The table below shows the balance of the major counterparties
at the balance sheet date:
2010 2009
Zürcher Kantonalbank 500 2 744
Alternative Bank ABS 2 535 394
GLS Bank, Germany 277 814
Other 837 544
Total cash and cash equivalents 4 149 4 496
(c) Liquidity Risk
Prudent liquidity risk management implies maintaining
sufficient cash and marketable securities, the availability
of funding through an adequate amount of committed
credit facilities, and the ability to close out market positions.
The Company aims to maintain flexibility in funding
by negotiating credit lines and keeping committed bridge
loans available. Information regarding due dates of borrowings
is included in note 8. Trade and other payables
are in general due within 30 days.
(d) Capital Risk Management
The Company’s capital comprises shareholder equity as
recognized in the consolidated financial statements. The
objective of the Group's capital management is to ensure
the continuation of its business activities. Reasonable
income should be generated for the shareholders. Financial
resources should be available to mitigate risks, to
protect the Group against unforeseeable events, and to
be used for investments in new business segments. The
Company aims for an optimized balance-sheet structure
that reflects the cost of capital.
Company monitors its capital by means of the equity ratio.
2010
CHF
2009
CHF
Equity 21 744 30 339
Total assets 69 441 73 758
Equity ratio in % 31.3 41.1
The objective of the Company is a minimum equity ratio
of 20%.