Financing and Financial Position
At the end of the period, the Group’s financing reserves totalled EUR 49.8 million (106.8 9/2018), consisting of unused committed liquidity facilities and unused project loans (EUR 25.7 million) and cash and cash equivalents (EUR 24.1 million). In addition, the company has a TEL loan of about EUR 14 million at its disposal. SRV also has a EUR 100 million credit facility whose use includes certain restrictions due to an interest coverage ratio covenant. However, the credit facility can be used in full to refinance commercial papers.
In May, SRV issued EUR 58.4 million in capital notes that bear interest at a fixed interest rate of 12 per cent. EUR 20.5 million of the proceeds were used for early repayment of the EUR 45 million 8.750 per cent notes and EUR 37.9 million for early repayment of the EUR 100 million 6.875 per cent notes maturing on 23 March 2021. The capital notes do not have a specified maturity date, but SRV is entitled to redeem the capital notes for the first time on the fourth (4) anniversary of the issue date. The capital notes strengthened the company’s capital structure and financial position as well as extended the maturity of loans.
In June, SRV extended its current long-term binding revolving credit facility of EUR 100 million with a Nordic banking consortium by one year. The new due date of this EUR 100 million facility is 16 June 2021.
SRV’s financing agreements contain standard covenants. The financial covenants are equity ratio (also based on percentage of completion), net gearing, minimum liquidity, and the interest coverage ratio. The interest coverage ratio is the ratio of the Group’s operating margin (EBITDA) to its net financial expenses. The interest cover ratio is tested only if and when new loan financing is withdrawn; the covenant does not prevent the refinancing of existing sources of financing.
The covenant levels of these financing agreements are determined on the basis of the accounting principles in force when the loan agreements were signed. Therefore, although IFRS 16 has recently come into force, it will have no effect on the covenants for existing loan agreements.
Net interest-bearing debt totalled EUR 513.2 (346.5) million at the end of the review period. Net interest-bearing debt rose by EUR 166.7 million on the comparison period. Lease liabilities arising from the adoption of IFRS 16 accounted for EUR 173.5 million. Excluding the impact of IFRS 16, net interest-bearing debt declined by EUR 6.8 million. Housing corporation loans account for EUR 103.5 (99.4) million of the interest-bearing debt. Cash flow from operating activities was EUR -98.9 (-27.6) million and cash flow from investing activities was EUR 12.0 (-13.6) million. Cash flow from operating activities was weakened primarily by an increase in inventories and a decrease in non-interest-bearing debt. Cash flow from operating activities will be positively affected by the completion of 540 housing units in the last quarter. The majority of housing units are sold.
Net financial expenses since the beginning of the year totalled EUR -18.9 (-11.2) million. Net financial expenses were increased by the negative fair value revaluation of a ten-year interest rate hedge (including interest expenses) to EUR -5.4 million (-0.6). When the interest level rises from its current level, a positive change in the fair value of the interest rate hedge will be recognised in the income statement, and vice versa. EUR 0.6 (1.1) million in interest expenses have been capitalised in accordance with IAS 23 since the beginning of the year. Exchange rate gains in financial expenses totalled EUR 3.9 (-2.4) million. IFRS 16 had an impact of EUR -5.0 million on financial expenses. Net financial expenses were increased by an amount of EUR -0.7 (-1.9) million due to the early redemption of a bond.
SRV’s investment commitments totalled EUR 52.7 (70.7) million at the end of September, and mainly consisted of investments in Fennovoima’s Hanhikivi-1 nuclear project and the Tampere Central Deck and arena project.
SRV is exposed to changes in the exchange rate of the rouble through its Russian subsidiaries. The strengthening rouble led to translation differences of EUR 10.3 (-9.0) million, which impacted both shareholders’ equity and the comprehensive result for the period. In addition to currency exchange rate gains of EUR 3.9 (-2.4) million in financial income and expenses, the Group also entered similarly derived currency exchange rate gains of EUR 6.8 (-8.0) million (with no cash flow impact) under the profit accounted for by associated companies. These are primarily due to the conversion of currency-denominated loans to roubles. Currency exchange rate gains were reduced by EUR -3.4 (-0.3) million in hedging expenses.
Interim report 1-9/2019, 31 October 2019