Page 112 - EVRY Annual Report 2012

Annual Accounts Group 112
NOK million 2012 2011 2010
Non-current interest bearing liabilities 3 533.4 3 681.3 3 492.5
Current interest bearing liabilities 34.4 37.5 1 060.7
Bank deposits 560.7 694.2 1 529.9
Net interest bearing liabilities 3 007.1 3 024.6 3 023.3
Equity 5 322.1 5 286.6 5 097.4
Total assets 12 113.6 12 626.5 13 305.5
Gearing 0.57 0.57 0.59
Equity ratio 44 % 42 % 38 %
2. Management of financial risk
The group’s policies for the management of financial risk are determined by the Board of Directors of EVRY ASA.
The main objective of financial risk management is to identify, quantify and manage exposure to financial risks.
Operational responsibility for monitoring and managing financial risk is the responsibility of EVRY’s centralised
finance function.
Financial risk is normally divided into three groups:
1. Market risk
a. Interest rate risk
b. Currency risk
c. Price risk /Energy contracts
2. Credit risk
3. Liquidity risk
1. Market risk
The group’s overall risk exposure is described as market risk, and can be subdivided into various categories.
Exposure to market risk changes when market prices change, and this relates principally to changes in interest
rates, exchange rates, prices of inputs and the cost of capital, all of which represent the total exposure to market
risk for the group.
1a. Interest rate risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in the general level of interest
rates. The group’s exposure to interest rate risk relates principally to interest-bearing liabilities on floating interest
rate terms. The principal objective for EVRY’s management of interest rate risk is to ensure a predictable outcome.
The group’s objec­tive is for between 50% and 70% of its borrowings to be on fixed rate interest terms. This will
ensure predictability in terms of interest costs and the related cash flows.
The group endeavours to manage the average duration of interest rate fixing terms to be between 1.5 years and 2.5 years.
See also Note 23 Financial instruments for more information on the group’s exposure to interest rate risk.
1b. Currency risk
The principal objective for EVRY’s management of currency risk is to reduce the effect of changes in exchange rates
on future cash flows and on the group’s financial condition.
Currency risk can be divided into i) transaction risk, ii) translation risk and iii) strategic risk:
i) Transaction risk represents the risk that future cash flows may fluctuate as the result of changes in exchange
rates, and it arises as a result of financial transactions that involve agreement on future receivables or liabilities that
are settled in a currency other than the group’s functional currency.
EVRY has both revenue and costs denominated in foreign currencies, accordingly it engages in some degree of
routine activity to hedge the foreign currency component of financial transactions. The group has also established
an arrangement for multicurrency bank accounts for the group, and these accounts are used to reduce exposure to
currency risk at the group level.