ANNUAL REPORT 2011 - DONG Energy

RIsk AND RISK MANAGEMENT
risk and risk policy Exposure and hedging
interest rate risks
DONG Energy’s interest rate risks relate to interestbearing
assets, financial price hedges, non-current liabilities
and current interest payments. The Group wants to
limit the effect of changes in interest rates. As a result, the
loan portfolio, including hybrid capital, was predominantly
fixed-rate at the end of 2011. Interest rate risk is managed
actively via a target for the duration of the net debt.
liquidity and financing risks
Implementation of DONG Energy’s strategy assumes financing
in the form of asset disposals or the raising of
loans in addition to the cash inflow from operating activities.
The refinancing risk is reduced by having a diversified
debt mix and maturity profile and ample cash resources in
the form of committed loan facilities, cash or liquid securities.
To secure financing on attractive terms, DONG Energy
has set targets for its credit rating and capital structure
(see page 42). The credit rating target is ratings of at least
BBB+ (Standard & Poor’s) and Baa1 (Moody’s).
Up to and including 2011, the capital structure target
was for adjusted net debt not to exceed three times cash
flows from operating activities. From and including 2012,
the target has been changed so that adjusted net debt
must not exceed 2.5 times EBITDA.
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manaGEmEnt’s rEviEw – DONG ENERGY GROUP ANNUAL ANNUAL REPORT REPORT 2011 2011
The table below shows the key indicators for interest rate
risk. Total interest rate risk at the end of 2011 was DKK 3.1
billion, calculated as the amount by which the market
value of debt, hybrid capital and cash and cash equivalents
would fall in the event of a one percentage point increase
across the interest rate curve. The interest rate risk
corresponds to the loan portfolio (excluding hybrid capital)
having a duration of 7.7 years.
In 2012, a one percentage point increase in the interest
rate would result in a DKK 32 million increase in net interest
expense compared with a total cost in 2012 for net debt
and hybrid capital at the end of 2011 of DKK 2.1 billion.
loan portfolio profile
(excl. hybrid capital) at 31 Dec. 2011
Fixed-interest portion 1 (%) 88.9
Duration (years) 7.7
Average time to maturity (years) 9.4
Average interest rate (%) 4.1
1 The fi xed-interest portion incl. hybrid capital was 91.5%
At the end of 2011, cash resources were DKK 23.1 billion,
of which DKK 13.4 billion was committed borrowing facilities
and DKK 9.7 billion available cash and cash equivalents
and securities.
DONG Energy’s current ratings are A- (Standard &
Poor’s) and Baa1 (Moody’s).
At the end of 2011, adjusted net debt amounted to 2.0
times cash flows from operating activities and 1.9 times
EBITDA.
Maturity profile, DKK billion
7
6
5
4
3
2
1
0
Committed borrowing facilities Bonds
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022+
Note: Excluding hybrid capital, which comprises: EUR 600 million
maturing in 3005 with first call date in 2015 and EUR 700 million
maturing in 3010 with first call date in 2021.