Liquidity risk

Eneco is a capital-intensive business. Its financing policy is aimed at the development and retention of an optimum financing structure taking into account its current asset base and investment programme. The criteria are access to the capital market and flexibility at acceptable financing costs.

Financing is drawn centrally and apportioned internally. Subsidiaries are financed by a combination of equity and intercompany loans.

A specific liquidity risk arises from margining through clearing houses. Risk limits have been set to cover both the outstanding balance and price change sensitivity for the purposes of managing this. This risk is the subject of daily reports to senior management and monthly reports to the Board of Management. The sensitivity of the margin call to a 1% price change was € 0.1 million in 2012 (2011: € -0.4 million). Another liquidity risk arises from the margining of the market value of the cross-currency swap contracts entered into with a number of banks. If the market value of these contracts exceeds the contractual limits, Eneco has to deposit the excess with these banks. At 31 December 2012, Eneco had deposited a total of € 31 million (2011: nil).

Great importance is attached to managing all the above risks to avoid Eneco finding itself in a position in which it could not meet its financial obligations. In addition, liquidity needs are planned on the basis of long, medium and short-term cash flow forecasts. The cash flow forecasts incorporate operating and investing cash flows, dividends, interest payable and debt redemption. The Treasury department sets this capital requirement against available funds. A report is submitted to the Board of Management every month.

Daily callable credit facilities up to € 116 million (2011: € 100 million) have been agreed with a number of banks for overdrafts on current accounts. There is also a committed credit facility available up to an amount of € 1.25 billion up to October 2016 (2011: € 1.25 billion.). An extension to October 2017 for a maximum of € 1.1 billion was agreed in 2012. This facility was not drawn during 2012. Eneco also has a syndicated guarantee and letter of credit facility of € 200 million available to 1 December 2014. Under this facility, Eneco can obtain guarantees to cover counterparty risk on contracts with energy suppliers to the extent that those risks exceed the agreed limit.

The table below shows forecast nominal cash outflows and any interest arising from financial instruments over the coming years. The cash flows from derivatives are based on the prices and volumes in the contracts.

A of 31 December 2012

Within 1 year

Within 1 to 5 years

After 5 years

Total

Derivative financial instruments

486

152

35

673

Interest-bearing debt

158

843

1,626

2,627

Trade and other payables

1,552

104

191

1,847

Total

2,196

1,099

1,852

5,147

As of 31 December 2011

Within 1 year

Within 1 to 5 years

After 5 years

Total

Derivative financial instruments

173

31

34

238

Interest-bearing debt

227

568

1,887

2,682

Trade and other payables1

1,544

89

135

1,768

Total1

1,944

688

2,056

4,688

  1. 2011 figures restated for comparative purposes.