33. Derivative financial instruments

Measurement of derivative financial instruments

As required by the International Financial Reporting Standards, derivative financial instruments disclosed in the financial statements are measured at fair value.

As at December 31st 2014, the Group held the following types of derivatives: Cross Currency Interest Rate Swaps (CCIRS), Interest Rate Swaps (IRS), purchased European and Asian currency call options, purchased and sold currency and commodity forwards (physically settled), purchased and sold futures, as well as purchased average rate forwards. In 2014, the Group also hedged against commodity price risk using Asian call options, risk reversal strategies (purchase of Asian commodity call options and sale of put options) and purchased commodity swaps.

Currency call options were measured at fair value using the Garman-Kohlhagen model, whereas Asian commodity call and put options were measured at fair value using the Espen-Levy model. Forwards, average rate forwards, swaps, CCIRS and IRS transactions are measured at fair value using the discount method. The measurement was based on market data such as interest rates, foreign-exchange rates, basis spreads, commodity prices and volatility of commodity prices as at December 31st 2014.

Hedge accounting

The Parent applies cash-flow hedge accounting with respect to foreign exchange transactions and commodity transactions, as well as fair-value hedge accounting with respect to an advanced loan. For details, see Note 2.3.12.

33.1.  Derivative financial instruments

Measurement at fair value
Hedged item Par value in currency Currency / asset Maturity date Exercise price (exercise price range) As at Dec 31 2014 As at Dec 31 2013 Hedged risk
               
Cross Currency Interest Rate Swap  
               
Euronotes  500 EUR 1-3 years 4.1580  193  108 currency and interest rate risk
loan  730 NOK 1-3 months 0.5595  53  35 currency and interest rate risk
loan  4,350 NOK 1-3 years 0.5033  53  (14) currency and interest rate risk
loan  3,900 NOK 1-3 months 0.5051  -  (25) currency exchange rate and interest rate
loan  1,150 NOK 1-3 months 0.5664  -  64 currency exchange rate and interest rate
               
           299  168  
               
Interest Rate Swap  
               
loan  1,500 PLN more than 3 years  1  (106)  (23) interest rate risk
               
           (106)  (23)  
               
Forward  
               
loan  850 NOK 3-12 months 0.4697  (5)  - foreign exchange risk
payments for gas  35 USD 1-3 months 3.3562  5  - foreign exchange risk
trading activities  1 electricity 1–3 months 168.8870  7  - energy price risk
trading activities  1 electricity 1–3 months 171.4998  (6)  - energy price risk
trading activities  1 electricity 3–12 months 171.0307  12  - energy price risk
trading activities  1.40 electricity 3–12 months 174.9214  (12)  - energy price risk
payments for gas  65 EUR 1-3 months 4.2385  2  - foreign exchange risk
payments for gas  40 EUR 3-12 months 4.2732  1  - foreign exchange risk
trading activities  2 gas – OTC 1-3 months 22.5500  (3)  - gas prices
trading activities  6 gas – OTC 3-6 months 25.6800  (27)  - gas prices
trading activities  3 gas – OTC 6-12 months 24.2500  (11)  - gas prices
trading activities  1 gas – OTC up to 1 month 21.9100  1  - gas prices
trading activities  2 gas – OTC 1-3 months 22.7100  3  - gas prices
trading activities  6 gas – OTC 3-6 months 25.0900  23  - gas prices
trading activities  3 gas – OTC 6-12 months 24.1200  11  - gas prices
trading activities  - electricity – OTC 1-3 months 39.9000  (1)  - energy prices
trading activities  2 electricity – OTC 6-12 months 50.7600  (33)  - energy prices
trading activities  - electricity – OTC 3-6 months 41.3000  1  - energy prices
trading activities  3 electricity – OTC 6-12 months 48.6000  36  - energy prices
trading activities  19 gas – OTC 1-3 years 25.0900  (69)  - gas prices
trading activities  15 gas – OTC 1-3 years 24.8700  50  - gas prices
trading activities  7 gas – OTC more than 3 years 26.3100  32  - gas prices
trading activities  - electricity – OTC 1-3 years 39.2200  (2)  - energy prices
trading activities  1 electricity – OTC 1-3 years 40.1100  4  - energy prices
loan  333 NOK 1-3 months 0.4978  -  1 currency exchange rate
payments for gas  10 EUR 1-3 months 4.2659  -  (1) currency exchange rate
payments for gas  29 EUR 3-12 months 4.2189  -  (1) currency exchange rate
payments for gas  130 USD 1-3 months 3.1221  -  (14) currency exchange rate
payments for gas  80 USD 3-12 months 3.1234  -  (7) currency exchange rate
payments for gas  24 EUR 1-3 months 4.2889  -  (3) currency exchange rate
payments for gas  78 EUR 3-12 months 4.2660  -  (6) currency exchange rate
               
           19  (31)  
               
Futures  
               
trading activities  1 gas – EEX AG 3-6 months 25.2100  (3)  - gas prices
trading activities  - gas – EEX AG 3-6 months 25.7800  2  - gas prices
trading activities  - gas – EEX AG 6-12 months 24.2100  2  - gas prices
trading activities  - electricity – EEX AG 3-6 months 43.6500  (1)  - energy prices
trading activities  2 electricity – EEX AG 6-12 months 35.8600  (6)  - energy prices
trading activities  - electricity – EEX AG 1-3 months 38.9300  1  - energy prices
trading activities  1 electricity – EEX AG 6-12 months 35.1400  3  - energy prices
trading activities  - gas – ICE ENDEX B.V. 3-6 months 23.4600  (1)  - gas prices
trading activities  1 gas – ICE ENDEX B.V. 6-12 months 22.1500  (1)  - gas prices
trading activities  1 gas – ICE ENDEX B.V. 3-6 months 25.2200  2  - gas prices
trading activities  - gas – ICE ENDEX B.V. 6-12 months 22.5500  1  - gas prices
trading activities  3 gas – EEX AG 1-3 years 24.3100  (9)  - gas prices
trading activities  2 gas – EEX AG 1-3 years 24.2800  6  - gas prices
trading activities  1 electricity – EEX AG 1-3 years 37.0800  (3)  - energy prices
trading activities  - electricity – EEX AG 1-3 years 35.9500  2  - energy prices
trading activities  1 electricity 1-3 months 151.3070  -  7 energy prices
trading activities  1 electricity 1-3 months 151.3070  -  (3) energy prices
trading activities  10 electricity 3-12 months 151.8480  -  8 energy prices
trading activities  10 electricity 3-12 months 151.8480  -  (12) energy prices
trading activities  0.2 TGE gas 1-3 months 116.8200  -  1 gas prices
               
           (5)  1  
               
Call options  
               
payments for gas  25 EUR 1-3 months 4.3350  -  - foreign exchange risk
payments for gas  72 EUR 3-12 months 4.3915  4  - foreign exchange risk
payments for gas  45 EUR 1-3 years 4.4975  5  - foreign exchange risk
payments for gas  260 USD 1-3 months 3.4221  29  - foreign exchange risk
payments for gas  90 USD 3-12 months 3.4575  12  - foreign exchange risk
payments for gas  21 EUR 3-12 months 4.3515  -  1 currency exchange rate
payments for gas  265 EUR 3-12 months 4.3848  -  6 currency exchange rate
payments for gas  180 USD 3-12 months 3.3077  -  5 currency exchange rate
               
           50  12  
               
Commodity call options  
               
payments for gas  1.015 Title Transfer Facility (TTF) 3-12 months 23.67  4  - commodity price risk
payments for gas  1.091 Title Transfer Facility (TTF) 1-3 years 24.95  8  - commodity price risk
payments for gas  0.502 FO 3-12 months 643.72  -  3 commodity prices
payments for gas  0.038 FO 1-3 years 630.00  -  1 commodity prices
payments for gas  0.251 GO 3-12 months 955.38  -  8 commodity prices
payments for gas  0.020 GO 1-3 years 955.00  -  1 commodity prices
payments for gas  5.800 TTF 1-3 months 28.11  -  1 commodity prices
payments for gas  8.650 TTF 3-12 months 26.73  -  26 commodity prices
               
           12  40  
               
Put commodity options  
               
payments for gas  0.024 FO 3-12 months 391.25  (7)  - commodity price risk
payments for gas  0.013 GO 3-12 months 672.12  (7)  - commodity price risk
               
           (14)  -  
               
Commodity swap  
               
payments for gas  0.087 FO 1-3 months 598.25  (18)  - commodity price risk
payments for gas  0.136 FO 3-12 months 483.61  (77)  - commodity price risk
payments for gas  0.052 GO 1-3 months 896.24  (15)  - commodity price risk
payments for gas  0.107 GO 3-12 months 773.05  (71)  - commodity price risk
payments for gas  4.301 Title Transfer Facility (TTF) 1-3 months 24.24  (41)  - commodity price risk
payments for gas  4.692 Title Transfer Facility (TTF) 3-12 months 23.83  (58)  - commodity price risk
payments for gas  0.186 Title Transfer Facility (TTF) 1-3 years 23.90  (1)  - commodity price risk
payments for gas  0.085 FO 3-12 months 602.18  -  1 commodity prices
payments for gas  0.028 GO 1-3 months 869.77  -  4 commodity prices
payments for gas  0.049 GO 3-12 months 893.39  -  6 commodity prices
payments for gas  1.730 TTF 1-3 months 27.47  -  3 commodity prices
payments for gas  7.050 TTF 3-12 months 25.79  -  17 commodity prices
payments for gas  4.135 TTF 1-3 months 27.78  -  (10) commodity prices
payments for gas  2.035 TTF 3-12 months 27.16  -  (5) commodity prices
               
           (281)  16  
               
      Total    (26)  183  
               
    including: - positive valuation (assets)  567  307  
      - negative valuation (liabilities)  (593)  (124)  
               
GO − Gasoil              
FO − Fuel Oil              
HFO − Heavy Fuel Oil              
TTF – Natural Gas at the Title Transfer Facility              
 

Positive valuation of derivatives as at the end of the period is presented in the statement of financial position as a separate item of current assets. Negative valuation of derivatives is presented in the statement of financial position as a separate item of current liabilities. Effects of valuation of open positions are taken to profit or loss for the period, or directly to equity if there is an effective portion which constitutes an effective hedge of changes in fair value of financial derivatives designated as cash flow hedges. In such a case, at the time of exercise of the derivative financial instrument and of the hedged item, the Group’s equity is decreased or increased, and the effective portion is charged to profit or loss at the place of origination of the hedged item’s costs. The non-effective portion and the fair value of transactions not designated as hedges is recognised under other items of the profit or loss of the period.

  Year ended Dec 31 2014 Year ended Dec 31 2013
Net gain/(loss) on valuation of derivative financial instruments – unrealised  70  257
Net gain/(loss) on valuation of derivative financial instruments – realised  (496)  (177)
Total net gain/(loss) on valuation of derivative financial instruments recognised in profit or loss  (426)  80
including:    
 recognised in raw materials and consumables used  (315)  (53)
 recognised in other income and expenses  (79)  168
 recognised in finance income or costs  (32)  (35)
Net gain/(loss) on valuation of derivative financial instruments recognised in other comprehensive income ­– unrealised
 
 (265)  72
Total net gain/(loss) on valuation of derivative financial instruments – recognised in equity  (691)  152