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Notes to the consolidated financial
statements, REC Group
REC Annual Report 2011
bonds nor the convertible EUR bond contains financial covenants.
There is cross default between all the loan agreements above
certain threshold amounts. Please refer to note 17 for further
information on the loan agreements. The calculations of financial
covenants have certain adjustments compared to the reported IFRS
numbers. At December 31, 2011, REC complied with all financial
covenants in the loan agreements.
The solar market is expected to remain challenging in 2012 and
REC’s margins and cash flow are hence expected to be lower than in
2011. REC currently has adequate liquidity and ample headroom in
its banking facilities, within its agreed financial covenant levels.
However, the Company has for some time had discussions with its
bank group to improve its flexibility in the loan agreement going
forward allowing the company to focus on further cost
improvement initiatives. The amendments discussed address
among other things the extension of the final maturity date,
covenant levels and definitions allowing for shut down of assets
in Norway (costs related to shut downs) and capital expenditures in
relation to further cost improvements of the operations.
REC’s bank credit and guarantee facilities agreement previously
had restrictions on the amount of capital expenditure, other
investments or acquisitions if the financial ratios are weaker than
defined thresholds. Due to satisfactory level of the ratio net debt/
EBITDA (leverage ratio) in the two consecutive third and fourth
quarters of 2010, the restrictions do no longer apply. According to
the agreements, REC ASA can pay dividends in future financial
years as long as REC Group is in compliance with the financial
covenants after the distribution of any dividends. However,
REC ASA had no distributable equity at December 31, 2011.
Below is shown the calculation of leverage ratio (net debt/EBITDA),
interest coverage ratio and equity ratio under the 2010 bank credit
facility.
(NOK INMILLION, EXCEPT RATIOS)
2011
2010
Interest bearing financial liabilities, excluding prepayments interest calculation (see note 17)
6 272
8 786
Less convertible bond included above, reported as equity for the covenant calculation
-1 315
-2 175
Less finance lease in capacity lease contracts (max NOK 1,250 million)
-861
-965
Less cash and cash equivalents
-1 596
-849
Less any net interest bearing debt held in proportionally consolidated joint ventures
2
0
Net debt for covenant calculation
2 502
4 797
EBITDA REC Group
2 867
3 532
Exclude EBITDA effects of any plant closures in 2010 and a specific legal proceeding*
-27
65
Exclude EBITDA of any proportionally consolidated joint ventures
7
9
Exclude EBITDA effect of eliminated internal profit on sale to proportionally consolidated joint ventures
0
-7
Nominal EBITDA REC Group for for covenant calculation
2 848
3 599
Total assets REC Group
24 470
36 865
Exclude total assets of proportionally consolidated joint ventures
-35
-9
Include carrying value of investment in shares in proportionally consolidated joint ventures
53
19
Total assets REC Group for covenant calculation
24 488
36 875
Total equity REC Group
12 192
22 152
Add convertible bond, reported as equity for the covenant calculation - principal amount
2 481
2 500
Deduct comprehensive income (in period of ownership) of proportionally consolidated joint ventures
18
10
Total equity for covenant calculation
14 691
24 662
Financial income
51
35
Financial expenses before capitalization of borrowing costs
-705
-1 381
Deduct calculated net interest
17
14
Deduct interest for capacity finance leases
46
74
Deduct expensed, add some of the paid up-front fees
105
461
Net interest paid for covenant calculation
-486
-798
Leverage ratio
0.88
1.33
Equity ratio
60.00%
66.88%
Interest cover ratio
5.85
4.51
* The exclusion for any plant disclosures was in effect only up to June 30, 2011 and do not apply for any subsequent plant closures. The exclusion for effects of a legal
proceeding related to a specific legal proceeding that was concluded in 2011.