27. Borrowings and other non-current financial liabilities - 2,211,609 thousand euros

€ thousand 31.12.2012 31.12.2011 Increase/ (Decrease)
Bonds          1,011,123               988,657                22,466
Medium/long–term loans          1,200,487             1,310,259 (109,772)
Total         2,211,609           2,298,916 (87,307)

The figures in the table include the fair value, at the balance sheet date, of hedging instruments stipulated by ACEA and certain Group companies which are shown separately from the hedged instrument in the table below.

€ thousand Hedged instrument Derivative fair value 31.12.2012 Hedged instrument Derivative fair value 31.12.2011
Bonds 1,000,351 10,772 1,011,123 1,023,329 (34,672) 988,657
Medium/long–term loans 1,169,967 30,520 1,200,487 1,286,722 23,537 1,310,259
Borrowings and other non-current financial liabilities 2,170,318 41,291 2,211,609 2,310,051 (11,135) 2,298,916

 

Bonds

These amounted to 1,000,351 thousand euros (1,023,239 thousand euros at 31 December 2011) and refer to the following:

  • 306,046 thousand euros to the bond loan issued by ACEA on 23 July 2004 and placed on the international Eurobond market. The bond has a term to maturity of ten years and yields a nominal fixed rate of 4.875%. Redemption will take the form of a lump-sum payment at par value, unless redeemed early. It should be noted that the terms and conditions include standard international Eurobond market clauses regarding Negative Pledge and Events of Default, including a Cross Default clause should the other borrowings of the company or its principal subsidiaries, totalling more than 15 million euros, become immediately repayable. Interest accrued during the period amounts to 14,607 thousand euros,
  • 514,968 thousand euros (including accrued interest) due to the bond loan issued by ACEA of 500 million euros in March 2010 with a 10-year duration and maturity term on 16 March 2020. The bonds have a minimum denomination of 50 thousand euros, and pay one gross coupon annually of 4.5% and were placed at an issue price of 99.779; the gross effective yield at maturity is therefore 4.528%. The bonds are subject to British law. The settlement date is 16 March 2010. Interest accrued during the period amounts to 22,549 thousand euros,
  • 176,501 thousand euros (187,272 thousand euros including the fair value of the hedge) due to the issue of a private bond loan (Private Placement) for 20 billion Japanese Yen and 15-year maturity (2025). The Private Placement was fully subscribed by a single investor. The coupons are paid on a deferred half-yearly basis every 3 March and 3 September applying a fixed rate in Yen of 2.5%. At the same time, a cross currency transaction was carried out to transform from yens to euros and the yen rate applied to a fixed euro rate. The cross currency transaction provides that, on a half-yearly basis and in arrears, the bank pays ACEA 2.5% on 20 billion Japanese Yen, while ACEA has to pay the bank the coupons on a quarterly basis in arrears starting from 3 June 2010 at a fixed rate of 5.025%. At 31 December 2012, the fair value of this hedge was a negative 10,772 thousand euros and has been allocated to a specific equity reserve. The exchange rate difference, a negative 10,888 thousand euros, of the hedged instrument calculated at 31 December 2012 was therefore allocated to an exchange provision. The exchange rate as at 31 December 2012 stood at 100.13, whilst it stood at 100.20 as at 31 December 2011. Interest accrued during the period amounts to 2,368 thousand euros. The loan agreement and the hedge contract contain an option, in favour of the investor and the agent bank respectively, connected to the trigger rating: the payable and its derivative instrument can be fully recalled if ACEA's rating falls below the investment grade level or if the debt instrument loses its rating.
  • 2,835 thousand euros regarding the issue of the bond loan by Consorcio Agua Azul. This bond loan has a twelve-year maturity and does not envisage the issue of guarantees by shareholders.

 

Medium/long–term loans

They totalled 1,465,936 thousand euros (1,384,613 thousand euros at 31 December 2011) and include: (i) principal outstanding at 31 December 2012 and falling due beyond twelve months amounting to 1,200,487 thousand (1,310,259 thousand euros at 31 December 2011), (ii) the portions of the same borrowings falling due in the twelve months thereafter, totalling 265,450 thousand euros (74,355 thousand in 2011) and (iii) 30,520 thousand euros as the negative fair value of interest rate risk and exchange rate risk hedges.

The following table shows medium/long–term borrowings by maturity and type of interest rate:

Bank Loans: TOTAL RESIDUAL
DEBT
DUE BY
 31.12.2013
FROM 31.12.2013
TO 31.12.2017
DUE AFTER 31.12.2017
fixed rate 372,462 24,484  86,320 261,658
floating rate 822,791 232,379 392,942 197,471
floating rate to fixed rate 270,683  8,587 65,999 196,097
Total 1,465,936 265,450 545,261 655,226

The following table provides a breakdown by company of the fair value of hedging derivatives compared with the figures from the previous year:

€ thousand 31.12.2012 31.12.2011 Increase/ (Decrease)
Acque (15,268) (10,655) (4,613)
Nuove Acque (1,510) (1,181) (329)
Umbra Acque (1,053) (814) (239)
ACEA (12,689) (10,887) (1,802)
Total (30,520) (23,537) (6,983)
  • Acque has swapped the interest rate on 80% of the loan obtained at the end of 2006 for a fixed rate. The company executed two different swap contracts with an estimated fair value of 15,268 thousand euros (10,665 thousand euros at 31 December 2011), which has been allocated to a special reserve of shareholders' equity;
  • Nuove Acque has swapped the basic and revolving facilities of the project financing agreement signed in 2005 to fixed rate. The duration of the swap runs from 15 March 2005 to 15 September 2021 with a fixed rate of 4.115%. At 31 December 2012 this value amounted to 1,510 thousand euros and is allocated to a special reserve of shareholders’ equity,
  • ACEA has swapped the interest rate on the loan (100 million euros) obtained on 27 December 2007 for a fixed rate. The swap was stipulated on 24 April 2008, effective as of 31 March 2008 (date of drawdown of the underlying loan) and expires on 21 December 2021. The negative fair value of this instrument is 12,689 thousand euros (10,887 thousand euros at 31 December 2011), which has been recognised in a separate component of shareholders’ equity,
  • Umbra Acque: which executed an interest rate swap. The negative fair value of this instrument is 1,053 thousand euros (814 thousand euros at 31 December 2011), recognised under financial management in the income statement;

The Group’s principal medium/long–term borrowings are subject to covenants to be complied with by the borrowing companies in accordance with normal international practices.

In particular, the loan to ACEA Distribuzione is subject to a financial covenant expressed in the current agreement as the ratio to two decimal places, consisting of a debt ratio of 0.65, which must not be exceeded at the end of each reporting period; this ratio must be complied with by both the borrowing company and the ACEA Group. The ratio, calculated with the same criteria as the aforementioned agreement, has been respected for 2012.

The loan agreements entered into by the Parent Company envisage:

  • standard Negative Pledge and Acceleration Events clauses;
  • clauses requiring compulsory credit rating monitoring by at least two major agencies;
  • clauses requiring the company to maintain a credit rating above certain levels;
  • the obligation to arrange insurance cover and maintain ownership, possession and usage of the works, plant and machinery financed by the loan through to the maturity date;
  • periodic reporting requirements;

clauses giving lenders the right to call in the loans on the occurrence of a certain event (i.e. serious errors in the documentation provided when negotiating the agreement, default on repayments, the suspension of payments), giving the bank the right to call in all or a part of the loan. 

During the year there was no evidence that any of the covenants had not been complied with.

Information on the fair value of the above borrowings is provided in the section “Additional disclosures on financial instruments and risk management policies”.