Annual report - HSE

4.5.8.8 Financial instruments and risks
This section refers to Section 4.5.7.19 of the financial report as well as to the chapter about
financial risks in the business report.
4.5.8.8.1 Credit risk
An important part of activities where we face the risk of partners’ non-fulfilment of
obligations results from trading and financial activity where the majority of these activities
are represented by contractual relations with partners with high credit rating. We decide
upon the form of business relationship with other partners on the basis of prior analysis
of partner’s credit rating, which further defines the possible volume and time horizon of
operations, elements of contractual relationship and particularly the necessary volume
of additional collaterals for complying with contractual liabilities in form of bank and
corporate guarantees, advances received and other adequate forms of insurance. In
forming contractual relationship and selecting insurance we particularly consider possible
limitations of partner’s local legislation, since it is fundamental in the procedure of
collection of potentially unfulfilled obligations or realisation of insurance received.
Credit exposure to individual partners is monitored on a daily basis; accordingly, credit
risks are monitored and managed through adaptation of operational limits and timely
demands to potentially submit additional insurances. If assessed that the partners’ credit
ratings have deteriorated or that increased credit exposure was a result of increase in
general (expected) level of market prices, we immediately request additional insurances.
Unsecured part of receivables is the sum of portion of sales to partners on open account
within the framework of defined loan limits. Sale on open account is in accordance with
internal regulations and possible within the framework of approved loan limits to partners
with regard to their financial capacity and risk. The most frequent among unsecured
receivables are the receivables from partners with the highest credit rating and from
partners which belong to a highly regulated activity and are frequently state-owned. The
latter also include providers of system services, where insurance for receivables cannot
be obtained, as in case of stock exchanges, but belong to credit rating category with a low
non-fulfilment risk nevertheless.
Regardless of estimated low partnership risk, each credit rating class represents higher
or lower average risk of loss due to non-payment or non-fulfilment of contractual
obligations. Even the secured receivables carry a certain risk of non-fulfilment with
regard to the guarantor’s credit rating. Both are monitored through assessing the value
of potential loss due to non-fulfilment. Receivables due from partners are secured with
bank and corporate guarantees, pledge of receivables from contracts on management
of transaction accounts, and deposits. Receivables are exclusively secured with bills
of exchange, namely in combination with corporate guarantees, or as an independent
instrument in case of smaller volume of transactions with a partner. If in the latter case the
partner is a limited liability company owned by physical persons, receivables are secured
with bills of exchange. The company has secured app. 85% of its receivables from buyers.
In 2012, our partners have regularly complied with their obligations, with rare exceptions.
In case of delays, the customers in Slovenia and abroad are charged default interest
under contractual rate. The majority of overdue receivables at the end of 2012 refer to
invoices issued for electricity sold that have already been settled by the time this report
was prepared.
At the end of 2012, the company has EUR 854,273 of doubtful receivables.
In 2012, a new doubtful receivable from electricity sales was created and amounts to 75%
of the initial receivable. The value of doubtful receivables was assessed considering the
average amount of repayments in receivership proceedings.
Annual Report HSE 2012
4 Financial Report of the company HSE
151