24. Financial instruments and financial risk management

24.1 Derivative financial instruments and hedging

The Group's risk management uses derivative financial instruments that predominantly serve the purpose of hedging price and interest rate risks. The accounting of these derivative financial instrument applies – in as far as hedging transactions are concerned and the criteria are met – the cash flow hedge and fair value hedge accounting methods.

The use of derivative financial instruments in the Group is subject to corresponding authorisation and control procedures. Proprietary trading is only carried out within very tightly defined limits.

Interest rate swaps are used for hedging future variable interest payments on funding and leasing contracts as well as highly probable funding in the future. Energie AG Group hedges these by purchasing interest rate swaps that correspond to the hedged item in terms of the base interest rate, payment dates, interest rate fixing date, nominal amounts and maturities. As their essential parameters concur, a commercial relationship between the hedged item and the hedging transaction can be affirmed. Hedges may be ineffective in the case of changes in the counterparty's and Energie AG's credit risk, as well as in cases where the measurement-relevant parameters differ from the hedged item and hedging transaction. The qualitative and quantitative effectiveness of a hedge is determined on the basis of the hypothetical derivatives method.

Futures and forwards are used to hedge price-related risks from electricity procurement and electricity sales. The objective of Energie AG Group is to hedge the price risk using derivative and non-derivative financial instruments and thereby reduce the cash flow risk from electricity purchasing and sales and/or the fair value risk from firm commitments. This means that only a portion of the total volume is hedged using derivative financial instruments. Hedging is carried out on a rolling basis. Either the entire price risk is hedged, or only a component of the risk. The commercial relationship results either from almost identical parameters of hedged item and hedging transaction (in particular base price, performance, term and price base), or the high correlation of prices in different market price zones in cases where only a component is hedged. A hedging ineffectiveness may result from temporal differences, price differences, different market price zones or the counterparty's credit risk. The qualitative and quantitative effectiveness of a hedge is determined on the basis of the hypothetical derivatives method.

Futures and swaps are used to hedge price risks from gas purchases and gas sales. The hedging aims at reducing the cash flow risk or fair value risk from firm commitments. The hedging volume is determined on the basis of the hedging strategy. Only a portion of the purchases and sales are hedged using derivative instruments. The commercial relationship either results from almost identical parameters (in particular volume, price and term), or from the high correlation of prices if the hedged item and the hedging transaction have a different price base. A hedging ineffectiveness may result from temporal differences, price differences, different market price zones or the counterparty's credit risk. The qualitative and quantitative effectiveness of a hedge is determined on the basis of the hypothetical derivatives method.

Futures are used to hedge procurement and sales of CO₂ emissions allowances. The hedging aims at reducing the cash flow risk. Only a portion of the total volume is hedged on the basis of the hedging strategy. The commercial relationship results from almost identical parameters (in particular volume, price and term). Ineffective hedges may result from temporal differences or the counterparties' credit risk. The qualitative and quantitative effectiveness of a hedge is determined on the basis of the hypothetical derivatives method.

Beyond that, gas-oil-swaps are concluded to hedge the price risks of purchasing fuel. The objective is to reduce the cash flow risk from fuel purchases. The hedging volume results from the hedging strategy and concerns only a portion of the fuel purchases. The commercial relationship is established on the basis of the parameters quantity, term and the evidence for the correlation of the prices of the hedged item and the hedging transaction. Ineffective hedges may result from temporal differences, price differences and the counterparties' credit risk. The qualitative and quantitative effectiveness of a hedge is determined on the basis of the hypothetical derivatives method.

The spark-spread risk from Gas- und Dampfkraftwerk Timelkam GmbH (CCGT power plant) and Cogeneration-Kraftwerke Management Oberösterreich GmbH (CMOÖ) is hedged using electricity, gas and CO₂ derivatives.

Due to the volatile and uncertain situation, hedging instruments associated with CCGT and CMOÖ (hedging for the procurement of gas and CO₂ emissions allowances, sale of electricity) were reversed in the previous year. The reversals resulted in income of EUR 25.5 million for the CCGT and expenses of EUR 17.1 million for the CMOÖ. Reversed derivatives are shown as positive or negative fair values without hedge FVPL. With effect from the fiscal year 2022/2023, newly concluded hedging instruments in connection with the CCGT and their reversal are also presented as derivatives without hedge FVPL (see Note 24.4).

The Group holds fair value hedges for firm commitments relating to transactions for procuring and supplying electricity.

Cash flow hedges are used to protect future cash flows. The Group also uses electricity and gas futures and forwards, CO₂ futures, as well as gas and gas-oil swaps, to hedge price risks; interest rate swaps are used to hedge the cash flow risks of variable-interest liabilities and highly probable funding in the future.

The cash flows from hedging transactions in the amount of EUR -960.9 million (previous year: EUR 1,694.6 million) included in the cash flow statement mainly comprise margins from electricity, gas and CO₂ futures as well as cash flows from collateral annexes. The non-cash items from derivatives of EUR -317.4 million (previous year: EUR -383.0 million) include amounts transferred from the cash flow hedge reserve because the hedged item affected profit or loss and non-cash items from derivatives without a hedging relationship. The collateral for derivatives in the amount of EUR 324.4 million (previous year: EUR -342.5 million) is cash and cash equivalents that had to be deposited as collateral for stock exchange transactions.

24.2 Disclosures on hedging transactions

24.2.1 Cash flow hedges

For cash flow hedges, the carrying amounts, nominal amounts and changes in fair values for the reporting period used for recognising an ineffective hedge are as follows:

If not yet cleared, the positive fair values of the derivatives are reported under assets in the non-current and current item “Derivative financial instruments”, while negative fair values, if not yet cleared, are reported under liabilities in the non-current and current item “Derivative financial instruments” (see 24.5).

The nominal values and average hedging prices for cash flow hedges are as follows:

The above reporting of derivatives is broken down by calendar year in which these fall due.

24.2.2 Fair value hedges

For fair value hedges, the carrying amounts, nominal amounts and changes in fair values for the reporting period used for recognising an ineffective hedge are as follows:

If not yet cleared, the positive fair values of the derivatives are reported under assets in the non-current and current item “Derivative financial instruments”, while negative fair values, if not yet cleared, are reported under liabilities in the non-current and current item “Derivative financial instruments” (see 24.5).

The nominal values and average hedging prices for fair value hedges are as follows:

The above reporting of energy derivatives is broken down by calendar year in which these fall due.

24.3 Disclosures on hedged items and the reserve for cash flow hedges

The carrying amounts of the hedged items in fair value hedges, the reserve for cash flow hedges and the change in the fair value for the determination of ineffective cash flow hedges and fair value hedges for the reporting period are as follows:

The development of the reserves for cash flow hedges is as follows:

24.4 Disclosures on derivatives not designated as hedging instruments

The Energie AG Group holds the following derivatives not dedicated to any hedging relationship:

24.5 Carrying amounts in accordance with IFRS 9

In accordance with IFRS 9 or IFRS 16, the carrying amounts of financial assets and liabilities are grouped into classes or measurement categories as follows:

The positive and negative long-term and short-term market values of the balance sheet item “Derivative financial instruments” are divided up as follows:

Cash flow hedges and fair value hedges are concluded in particular to hedge price change and interest rate change risks of hedged items. Derivatives not used for hedging are largely closed positions, with the criteria for hedge accounting according to IFRS 9 not being fulfilled. These positive and negative market values do not include futures, as these are cleared with daily margin payments.

As of 30 September 2023, the Energie AG Group holds shares in affiliated companies and other investments in the amount of EUR 76,081.0 thousand (previous year: EUR 40,444.4 thousand), as well as securities (stocks) in the amount of EUR 11,324.9 thousand (previous year: EUR 8,116.7 thousand) classified as “Financial Assets Through Other Comprehensive Income (FVOCI)”. These investments are held for long-term, strategic purposes. For fiscal year 2022/2023, the dividends distributed for securities amount to EUR 556.8 thousand (previous year: EUR 428.2 thousand). Dividends distributed for investments amount to EUR 5,951.6 thousand (previous year: EUR 2,607.0 thousand).

In the 2022/2023 fiscal year, one Czech investment (previous year: two Czech investments and Oberösterreichische Gemeinnützige Bau- und Wohngesellschaft mit beschränkter Haftung) was sold. EUR 75.2 thousand of accumulated profits (previous year: EUR 811.6 thousand of accumulated losses) were reclassified within equity.

24.6. Offsetting of financial assets and liabilities

The following table shows the effect of netting agreements:

At the Energie AG Oberösterreich Group, the derivative financial instruments and receivables/payables presented above are concluded on the basis of standard agreements (e.g. ISDA, EFET, German Master Agreement for Financial Derivative Transactions), which, in the event of insolvency of a business partner, permit the offsetting of outstanding transactions. The criteria for netting in the statement of financial position are not met, because either no net payments are being made or the legal enforceability of the netting agreements is uncertain.

24.7 Measurement at fair value

24.7.1 Fair value of financial assets and liabilities that are measured regularly at fair value

Pursuant to IFRS 13, financial instruments that are measured at fair value are classified within a fair value hierarchy. In view of possible uncertainties relating to possible estimates of the fair values, a distinction is made between three levels:

Level 1: Measurement on the basis of a published price quotation for identical assets or liabilities in an active market.

Level 2: Measurement on the basis of inputs that are observable either directly or indirectly in the market and measurements based on prices quoted in inactive markets.

Level 3: Measurement on the basis of inputs not observable in the market.

If the inputs used to determine the fair value of an asset or liability are attributable to different levels of the fair value hierarchy, the measurement at fair value is wholly assigned to the fair value hierarchy level that corresponds to the lowest input which, in the aggregate, is material for the measurement.

The financial instruments measured at fair value are assigned to levels 1 to 3:

Level 3 financial instruments have developed as follows: