Financing and Financial Position

Financing and Financial Position

In April 2021, the company agreed on the replacement of its previous EUR 51 million revolving credit facility and EUR 40 million project financing facility with the syndicate banks; the facilities were replaced with a new EUR 40 million committed revolving credit facility, a EUR 40 million committed project financing facility and a EUR 63 million non-committed project financing facility. EUR 10 million of the new EUR 40 million revolving credit facility will mature in March 2022 and EUR 30 million in April 2023. The new project financing facilities of EUR 40 and 63 million will be used to finance future construction projects. They fall due in April 2023 or within another repayment period agreed for separate construction projects.

At the end of April 2021, SRV carried out written procedures to extend the tenor of its EUR 100 million (of which EUR 40.0 million is outstanding) senior unsecured callable fixed-rate notes due 23 March 2022 by three years and the tenor of its EUR 75 million senior unsecured callable fixed-rate notes due 27 September 2023 (of which EUR 70.0 million is outstanding) by one and a half years, as well as to amend certain terms and conditions of these notes. In May 2021, SRV made a partial early repayment on the aforementioned notes of a total nominal amount of EUR 27.1 million and will also undertake to make partial early repayments of a total nominal amount of EUR 5 million on each interest payment day. The new due dates are 23 March 2025 for the EUR 100 million senior unsecured callable fixed-rate notes (with an outstanding principal of EUR 40.0 million at the end of the review period) and 27 March 2025 for the EUR 75 million senior unsecured callable fixed-rate notes (with an outstanding principal of EUR 70.0 million at the end of the review period).

As a result of the aforementioned arrangements, the maturity structure of the company’s unsecured debts improved significantly.

At the end of June, the company’s equity ratio (excluding the impact of IFRS 16) was 32.5 per cent (27.8% 12/2020) and gearing (excluding the impact of IFRS 16) was 80.3 per cent (82.1% 12/2020). The equity ratio calculated as per the covenants of financing agreements was 35.2 per cent, as the covenant calculation took into account the recognition of income from developer-contracted projects on the basis of percentage of completion. The equity ratio was negatively affected by the company’s high amount of cash and cash equivalents on the balance sheet date, and positively affected by the aforementioned arrangements for bonds and revolving credit facilities.

Net interest-bearing debt totalled EUR 279.8 million (289.1 12/2020) at the end of the review period. Net interest-bearing debt saw a year-on-year decrease of EUR 9.3 million. Excluding the impact of IFRS 16, net interest-bearing debt totalled EUR 152.5 (152.9) million, representing a fall of EUR 0.4 million on the comparison period. Housing corporation loans account for EUR 45.1 (40.7) million of the interest-bearing debt.

At the end of the period, the Group’s financing reserves totalled EUR 69.7 million (116.8 12/2020), consisting of unused project loans (EUR 9.7 million) and cash and cash equivalents (EUR 60.1 million). Financing reserves were affected by EUR 3.9 (49.2 1–6/2020) million in cash flow from operating activities and investments, EUR -42 (21.7) million in cash flow from financing activities, and a decrease in undrawn project loans.  The company’s current revolving credit facility of EUR 40 million was completely withdrawn at the end of the review period. EUR 30.5 million of the company’s EUR 40 million facility for project financing was unused at the end of the review period.

The financial covenants of SRV’s financing agreements are equity ratio, net gearing, minimum operating margin, minimum cash, the interest coverage ratio and certain other restrictions. 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. Due to the interest cover ratio covenant related to these notes, the total amount of SRV’s drawn down loans, such as the commercial paper programme, revolving credit facility, overdraft facilities, pension insurance (TyEl) re-lending, and hybrid loans or some other loans, may amount to EUR 100 million if the interest cover ratio test is failed. At the end of June, the drawn amounts for the items referred to above amounted to EUR 40 million in total. The main covenants of the financing agreements are presented in note 11 to the interim report.

The covenant levels of these financing agreements are determined on the basis of the accounting principles in force when the loan agreements were signed. Recognition of income on the basis of percentage of completion in developer contracting projects and the inclusion of capital loans into equity are taken into consideration in the calculation of the equity ratio covenant. The loan agreements also contain some other deviations from traditional covenant calculation methods. The covenants for all loan agreements were met on 30 June 2021.

SRV’s investment commitments totalled EUR 24.9 (26.4 12/2020) million at the end of June, and mainly consisted of investments in Fennovoima’s Hanhikivi-1 nuclear power plant 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, associated companies and joint ventures. The strengthening rouble led to translation differences of EUR 2.5 (-9.4 1–6/2020) million, which impacted both shareholders’ equity and the comprehensive result for the period. In addition to currency exchange rate gains with no cash flow impact amounting to EUR 1.4 (-4.2) million in financial income and expenses, the Group also entered similarly derived currency exchange rate gains of EUR 1.1 (-3.6) million with no cash flow impact under the profit accounted for by associated companies, which are due primarily to the conversion of currency-denominated loans to roubles and the stronger rouble exchange rate. Currency exchange rate gains were reduced by EUR -0.1 (5.9) million in net hedging returns. The total impact on shareholders’ equity was EUR 4.9 million. The currency risk position is presented in note 12 to the interim report.

Half-Year Financial Report 1-6/2021, 21 July 2021