ANNUAL REPORT 2011 - DONG Energy

notes
32 Credit and market risks
DKK million
Clearing
centres AAA/Aaa AA/Aa A/A BBB/Baa Other total
2011 3,430 8,350 5,226 8,621 1,471 9,078 36,176
2010 7,153 7,097 4,883 8,212 357 7,897 35,599
Credit risks
The table above provides an overview of the credit quality of
the market value of derivative fi nancial instruments, cash and
bond portfolios and trade receivables at 31 December 2011
in the DONG Energy Group based on the individual counterparty’s
ratings with Standard & Poor’s and Moody’s.
The amounts stated do not include any collateral and therefore
do not refl ect the actual credit risk.
Like previous years, DONG Energy’s counterparty risks are
concentrated on companies with a rating of A/A or above. The
AA/Aa and A/A categories cover trading with large international
energy companies and banks. Such trading is regulated
under standard agreements, such as EFET and ISDA agreements,
which feature credit rating and netting provisions. The
AAA/Aaa category covers DONG Energy’s position in Danish
AAA-rated mortgage bonds.
The value of trading at clearing centres decreased signifi cantly
compared with 2010, whereas the other categories increased.
This refl ected a combination of changed trading activity in
connection with hedging of DONG Energy’s market risk and
market value changes in relation to the date of conclusion
of each transaction determined at 31 December. The ‘Other’
group predominantly consists of trade receivables from customers,
such as end users and PSO customers.
Further details of the Group’s risk management are provided
in the chapter on Risk and risk management on pages 44-49
of Management’s review.
market risks
The market risk on commodities primarily relates to portfolio
management and trading activities. The Group is exposed
to two types of energy risk: fl uctuations in market prices and
fl uctuations in volumes due to the fl uctuating needs of the
underlying business.
By virtue of its day-to-day activities, the Group is exposed to
fl uctuations in the prices of gas, oil, electricity, coal and CO2 108 112 COnsOliDatED finanCial statEmEnts – DONG ENERGY GROUP ANNUAL ANNUAL REPORT REPORT 2011
2011
and, to a lesser extent, other commodities. The Group trades
actively in these commodities in the relevant markets to hedge
and optimise its supply requirements and secure the Group’s
supply chain. In this connection, the Group uses derivatives to
hedge its positions.
The sensitivity analysis below shows the effect of market value
changes assuming a relative price change at 31 December
2011. The illustrated effect on profi t comprises fi nancial instruments
that remained open at the balance sheet date and have
an effect on profi t in the fi nancial year in question. Besides
derivative fi nancial instruments on commodities and currency,
fi nancial instruments in this context include receivables and
payables in foreign currencies.
It should be noted that the illustrated sensitivities only comprise
the Group’s fi nancial instruments and therefore exclude
the effect from contracts concluded under which physical
delivery of the underlying assets is made, as these are not
recognised as fi nancial instruments in accordance with IAS
39. The sensitivity thus only comprises the derivative fi nancial
instruments and not the physical contracts they hedge.
The implementation of business performance has made the
Group more sensitive to changes in commodity prices and
exchange rates in the statement of comprehensive income, but
has reduced its sensitivity in equity. The fi nancial instruments
that form part of the sensitivity analysis are fi nancial instruments
and fi nancial contracts measured at market value and
the Group’s receivables, cash and trade payables and its external
fi nancing such as bank loans and bond loans.
Net investments and associated hedging of net investments in
foreign subsidiaries are not included, as the effect of the sum
of the investment and the hedging is considered to be neutral
to price changes. For further details of the Group’s net investments
and hedging of same, reference is made to note 33.