ANNUAL REPORT 2011 - DONG Energy
ANNUAL REPORT 2011 - DONG Energy
ANNUAL REPORT 2011 - DONG Energy
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isk and risk policy Exposure and hedging<br />
Credit risks<br />
<strong>DONG</strong> <strong>Energy</strong> seeks to mitigate its credit risks by systematically<br />
credit-rating counterparties, by using financial<br />
standard contracts and by requiring security. Allocated<br />
credit lines are monitored continuously and counterparties<br />
in the areas of energy trading and financial activities are<br />
monitored daily.<br />
Monitoring of counterparties and allocation of credit<br />
lines are based on limits fixed by the Board of Directors<br />
and the Executive Board. An internal credit rating is required<br />
for major counterparties. Information from external<br />
credit rating analyses, information in the public domain<br />
and <strong>DONG</strong> <strong>Energy</strong>’s own analyses are used to establish<br />
the internal rating and to assess the extent of the commitment<br />
with each counterparty.<br />
results deferred for subsequent recognition<br />
in the business performance results<br />
At the end of <strong>2011</strong>, the deferred earnings impact of financial<br />
and physical contracts entered into as part of the risk management<br />
of the Group’s commercial exposure and hedging<br />
of the loan portfolio was DKK -0.5 billion. The deferred earnings<br />
impact will be recognised in the business performance<br />
results in the period in which the commercial exposure is<br />
recognised. In 2012, the effect of the contracts on the business<br />
performance results will be DKK +0.9 billion, assuming<br />
market prices, most of which will have an impact on<br />
EBITDA, remain unchanged.<br />
<strong>DONG</strong> <strong>Energy</strong> did not suffer any losses on individual major<br />
counterparties in <strong>2011</strong>. However, the recession has led<br />
to a certain rise in the number of cases of arrears among<br />
retail customers, although from a very low level, and the<br />
number appears to have peaked.<br />
For an overview of the credit quality, reference is made<br />
to note 32 to the consolidated financial statements.<br />
DKK million<br />
deferred<br />
for sub -<br />
sequent<br />
recognition<br />
end-<strong>2011</strong><br />
Expected transfer to business<br />
performance results<br />
2012 Other years<br />
Oil 361 114 247<br />
Gas 1,188 1,032 156<br />
Electricity (134) (78) (56)<br />
Coal (103) (30) (73)<br />
Currency (946) (177) (769)<br />
Interest (848) (6) (842)<br />
total derivative<br />
fi nancial<br />
instruments (482) 855 (1,337)<br />
Commodities and currency are recognised in revenue and cost of sales.<br />
Interest is recognised in net fi nance costs.<br />
<strong>DONG</strong> ENERGY <strong>DONG</strong> ENERGY GROUP <strong>ANNUAL</strong> <strong>REPORT</strong> <strong>2011</strong> – manaGEmEnt’s rEviEw 49
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