Financing risks comprise liquidity and interest rate risks, as well as receivable default risks and risks relating to non-compliance with financial covenants agreed when taking up debt capital.

One financial covenant based on the equity ratio was agreed in connection with the placement of two promissory note bonds taken up in the 2008/09 financial year. Non-compliance would allow the lenders to terminate the facility prematurely.
The MVV Energie Group is not subject to any statutory minimum capital requirements, but aims to maintain an appropriate equity ratio enabling it to obtain a good rating on the capital market. This allows us to optimise our costs of capital. The equity ratio depicts group shareholders’ equity as a proportion of total assets. Shareholders’ equity consists of the share capital, capital reserve, retained earnings, unappropriated net profit and minority interests. Measures aimed at ensuring compliance with the targeted equity ratio are initially identified within the business planning process and also within the investment planning process for major (unbudgeted) investment measures. By issuing shares, the company can adjust its equity base to requirements. Given our comparatively strong equity base, we only see a low risk of non-compliance with this contractual requirement.

The MVV Energie Group was not affected by any bank insolvencies during the financial market crisis from September 2008 onwards. As a precaution, we established a system of ongoing bank risk supervision and implemented a number of preventative and other measures in response. These included increasing our available liquidity and extending the range of lenders. Where possible, we diversified our business relationships across all segments of the banking sector (cooperative, public sector, private sector). The Group optimises its liquidity position by means of internal group cash pooling, a system which also impacts positively on net interest expenses. Due to two opposing factors, financing terms showed a slight net deterioration in the past 2008/09 financial year in the course of the financial market crisis. While base rates fell due to central bank measures, risk premiums increased even though the credit standing of the MVV Energie Group remained stable and even improved partly.

Alongside the risk of customers failing to settle their liabilities in part or in total, receivables default risk is also seen as including the risk of any deterioration in customers’ creditworthiness. To limit the impact of such risks, we only perform our transactions with banks and trading partners of good credit standing. Where necessary, the provision of security and guarantees is agreed.