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25. Loans and other financial liabilities, including derivatives

This note contains information concerning the contractual provisions for the Group's interest-bearing loans and other financial liabilities that are measured at amortised cost.

(in millions of euros)

31 December 2019

31 December 2018

Non-current liabilities

  

Private loans

600

652

Other financial liabilities

39

42

Currency derivatives

9

-

Commodity derivatives

8

2

Total

656

696

   

Current liabilities

  

Private loans

58

72

Bank overdrafts

40

22

Commodity derivatives

1

2

Total

99

96

   

Total liabilities

755

792

The ‘Private loans’ item includes a debt payable by the Group to the Ministry of Infrastructure and Water Management of €148 million (2018: €180 million) associated with the deferred payments of franchise fees. Of that amount, €115 million has been included under ‘Non-current liabilities’, for the portion that is due to be paid after 2020. The portion that will be paid in 2020 (€33 million) is recognised in ‘Current liabilities’. The interest rate is fixed at 3.027%. The terms and conditions of the loan were agreed in detail with effect from 1 January 2015 under the new main rail network franchise.

The other private loans have terms expiring between 2019 and 2029 and interest rates ranging from 0.8% to 1.5%.

The reconciliation of changes in liabilities resulting from financing activities is as follows:

(in millions of euros)

Private loans

Bank overdrafts

Other financial liabilities

Interest rate swaps used for hedging

Currency derivatives

Commodity derivatives

Lease liabilities

Total

Balance as at 1 January 2018

646

19

48

2

 

4

33

752

         

Dividend paid to shareholders

-

 

-

-

 

-

 

-

Repayment of borrowings

-431

      

-431

Addition of loans

504

 

-

    

504

Total net cash flow from financing activities 2018

73

-

-

-

 

-

 

73

         

Movements due to discounting

-

 

-

    

-

New finance leases

      

13

13

Movements in working capital

 

3

     

3

Other movements

5

 

-6

-2

 

-

 

-3

Balance as at 31 December 2018

724

22

42

-

 

4

46

838

Adjustments due to application of IFRS 16

      

1,604

1,604

Carrying amount as at 1 January 2019

724

22

42

-

-

4

1,650

2,442

         

Dividend paid to shareholders

        

Repayment of borrowings

-454

     

-420

-874

Addition of loans

400

 

-

    

400

Total net cash flow from financing activities 2019

-54

-

-

-

-

-

-420

-474

         

Movements due to discounting

-

 

-

    

-

New leases

      

826

826

Movements in working capital

-18

18

     

-

Currency differences

      

53

53

Other movements

6

 

-3

 

9

5

-

17

Balance as at 31 December 2019

658

40

39

0

9

9

2,109

2,864

Accounting policies

Non-derivative financial instruments

On initial recognition, these instruments are measured at fair value plus any directly attributable transaction costs. After initial recognition, loans and receivables are measured at amortised cost using the effective interest method.

Derivative financial instruments (derivatives)

The Group holds derivatives to hedge its foreign currency, interest rate and commodity risks. On initial recognition, derivatives are measured at fair value, which is the same as the cost applicable on that date. Attributable transaction costs are charged to the income statement when they are incurred. After initial recognition, derivatives are measured at fair value and any changes are accounted for as described below.

Hedge accounting

The method for recognition of the result depends on whether hedge accounting is used and, if so, whether the hedging relationship is effective. If the hedging relationship is effective, hedge accounting is used for these derivatives. When a hedging transaction is entered into, the hedging relationship is documented. Regular assessments are performed to determine if the hedging transaction was effective throughout the past period and whether the hedging transaction is expected to be effective throughout the coming period. If the hedging instrument expires, is sold, terminated or exercised or no longer meets the criteria for hedge accounting, application of hedge accounting ends with immediate effect.

Cash flow hedges

If a derivative is classified as a hedge for variability in cash flows ensuing from a particular risk associated with a recognised asset or liability, or if a highly probable forecast transaction could affect profit or loss, the effective portion of the changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of the changes in the fair value of the derivative is recognised directly in the income statement. The accumulated amount is reclassified to the income statement in the same period in which the hedged position affects the income statement.

Fair value hedges

Changes in the fair value of a derivative hedging instrument that is classified as a fair value hedge are charged or credited to the income statement together with the changes in the fair value of the assets and liabilities (or groups thereof) insofar as they are attributable to the hedged risk.

If a hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, hedge accounting is discontinued prospectively. The cumulative gain or cumulative loss that was previously recognised in equity remains in equity until the forecast transaction has occurred. The amount recognised in equity is reclassified to the income statement (under net change in the fair value of the cash flow hedges reclassified from equity) in the same period in which the hedging instrument affects the income statement.

Economic hedges

Hedge accounting is not applied to derivatives that are used as economic hedges of assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of exchange rate gains and losses.

Energy hedging

The Group uses accrual accounting for commodity derivatives intended for its own use, under the exception allowed by IAS 39.5 insofar as the requirements of IAS 39.5 are met. This is applicable to purchases of diesel and fuel oil and energy in the Netherlands and is discussed in the section on risks and in ‘Off-balance sheet commitments’. The other commodity derivatives, which do not meet the criterion of being intended for the Group’s own use, are measured at fair value, and hedge accounting is used where possible.

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