30 – Risk management
Capital risk
OMV’s financial steering framework is built upon the principles of operational efficiency, capital efficiency, financing efficiency, and sustainable portfolio management. With the focus on strengthening OMV’s balance sheet, delivering a positive free cash flow and growing its profitability, the financial steering framework represents sustainable, risk-monitored and future-oriented value creation for OMV and its stakeholders.
OMV manages its capital structure to safeguard its capital base in order to preserve investor, creditor and capital market confidence, as well as to provide a sustainable financial foundation for the future operational development of the Group. OMV’s financing strategy focuses on cash flow and financial stability. Principal targets are a positive free cash flow after dividends and a strong investment grade credit rating on the basis of a healthy balance sheet and a long-term leverage ratio (defined as net debt including leases/(equity + net debt including leases) of below 30%.
In EUR mn (unless otherwise stated) |
|
|
||||
---|---|---|---|---|---|---|
|
2023 |
2022 |
||||
Bonds |
6,073 |
7,320 |
||||
Lease liabilities |
1,587 |
1,524 |
||||
Other interest-bearing debts |
1,470 |
1,487 |
||||
Debt |
9,130 |
10,331 |
||||
Cash and cash equivalents |
7,011 |
8,124 |
||||
Net debt1 |
2,120 |
2,207 |
||||
Equity |
25,369 |
26,628 |
||||
Leverage ratio2 in % |
8 |
8 |
||||
|
Liquidity risk
For the purpose of assessing liquidity risk, yearly budgeted operating and financial cash flows of the Group are monitored and analyzed on a monthly basis. Thus, every month the Group generates a forecasted net change in liquidity, which is then compared to the total month end balances of money market deposits and loans, as well as to maturities of the current portfolio and the available liquidity reserves of the same month. This analysis provides the basis for financing decisions and capital commitments.
To ensure that the OMV Group remains solvent at all times and retains the necessary financial flexibility, liquidity reserves in the form of committed credit lines and short term uncommitted money market lines are maintained. As of December 31, 2023, the average weighted maturity of the Group’s debt portfolio (excluding lease liabilities) was 4.3 years (as of December 31, 2022: 4.6 years).
The OMV Group’s operational liquidity management is mainly handled via cash pooling systems, which enable optimum use of existing cash and liquidity reserves to the benefit of every individual member of the cash pooling system and the Group as a whole.
High volatility in commodity prices can potentially lead to peak liquidity demands in order to satisfy margin calls for exchange traded activities at short notice. In order to monitor and actively manage the OMV Group’s exposure to margin calls and associated liquidity risk, a number of targeted measures were implemented in 2023. Trading units of the Group are required to perform regular stress tests to evaluate the effect of predefined, extreme commodity prices on credit exposures and margin requirements. Additionally, preference is given to over-the-counter transactions vs. exchange traded instruments when entering new transactions.
Details of the OMV Group’s financial liabilities are shown in Note 26 – Liabilities.
Financial guarantee contracts
In 2023, Borealis AG granted a guarantee for the funding of Borouge 4 LLC under the Italian Export Credit Agency agreement.
In addition, Borealis and its joint venture partner TotalEnergies granted a guarantee for a Revolving Credit Facility (RCF) used by Bayport Polymers LLC (Baystar) as a liquidity instrument to conduct its ordinary cause of business.
On April 19, 2022, Bayport Polymers LLC, which is accounted for using the equity method, partially re-paid the loan to the Group in the amount of EUR 602 mn. The repayment was financed from the two tranches of senior notes in the amount of EUR 324 mn and EUR 278 mn, which mature in 2027 and 2032, respectively. Senior notes issued by Bayport Polymers LLC are fully guaranteed by Borealis AG.
Furthermore, in 2022, Borealis provided a parental guarantee for a lease of railcars.
For further details see the Credit Risk Management section.
Market risk
Derivative and non-derivative instruments are used to manage market price risks resulting from changes in commodity prices, foreign exchange rates and interest rates, which could have a negative effect on assets, liabilities or expected future cash flows.
For the purpose of mitigating market price risks, the Group enters into derivative financial instruments such as OTC swaps, options, futures and forwards.
Swaps do not involve an investment at the time the contracts are concluded; settlement normally takes place at the end of the quarter or month. The premi-ums on purchased options are payable when the contract is concluded; where options are exercised, payment of the difference between the strike price and average market price for the period takes place at contract expiration.
Commodity price risk management refers to analysis, assessment, reporting and hedging of market price risk exposure arising from non-trading and trading activities, covering production (oil, gas, power, and feedstock prices), refining (refinery margin, inventories up to a defined threshold), oil and gas marketing activities (marketing margin, inventories up to a defined threshold), and producing power (spark spreads) in addition to proprietary trading positions.
Limited proprietary trading activities may be performed for the purpose of creating market access within the oil, power, and gas markets up to a defined threshold.
Hedges are generally placed in the legal entities where the underlying exposure exists. When certain conditions are met, the Group may elect to apply IFRS 9 hedge accounting principles in order to recognize the offsetting effects on profit or loss of changes in the fair value of the hedging instruments at the same time as the hedged items.
Derivatives are mostly used for economic hedging purposes and not as speculative investments. However, where derivatives are not designated as hedging instruments (i.e., hedge accounting is not applied), they are valued at fair value through profit or loss for accounting purposes.
The following tables show the fair values of derivative financial instruments together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of the transactions outstanding at year-end and are not indicative of either the market risk or the credit risk.
In EUR mn |
|
|
|
|
|
|
||||
---|---|---|---|---|---|---|---|---|---|---|
|
2023 |
2022 |
||||||||
|
Nominal |
Fair value assets |
Fair value liabilities |
Nominal |
Fair value assets |
Fair value liabilities |
||||
Commodity price risk |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
Oil incl. oil products |
1,120 |
27 |
–8 |
1,337 |
47 |
–35 |
||||
Gas |
31 |
— |
— |
10 |
— |
–3 |
||||
Power |
411 |
13 |
–59 |
351 |
320 |
–2 |
||||
Commodity hedges (designated in hedge relationship)1 |
1,562 |
39 |
–67 |
1,697 |
367 |
–41 |
||||
|
|
|
|
|
|
|
||||
Oil incl. oil products |
10,614 |
2 |
–40 |
7,808 |
5 |
–22 |
||||
Gas |
16,104 |
714 |
–386 |
17,730 |
2,365 |
–1,374 |
||||
Power |
262 |
47 |
–29 |
779 |
282 |
–133 |
||||
Other2 |
190 |
98 |
–3 |
220 |
209 |
–2 |
||||
Commodity hedges |
27,171 |
861 |
–458 |
26,537 |
2,862 |
–1,531 |
||||
|
|
|
|
|
|
|
||||
Foreign currency risk |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
USD |
159 |
3 |
–0 |
266 |
7 |
–0 |
||||
SEK |
123 |
7 |
— |
157 |
— |
–4 |
||||
Foreign currency hedges (designated in hedge relationship)1 |
282 |
10 |
–0 |
423 |
7 |
–4 |
||||
|
|
|
|
|
|
|
||||
USD |
702 |
5 |
–11 |
1,207 |
4 |
–10 |
||||
NOK |
817 |
23 |
–0 |
2,493 |
1 |
–26 |
||||
SEK |
35 |
0 |
–0 |
26 |
0 |
–0 |
||||
Other |
153 |
1 |
–0 |
246 |
1 |
–4 |
||||
Foreign currency hedges |
1,707 |
29 |
–11 |
3,972 |
5 |
–39 |
||||
|
|
|
|
|
|
|
||||
Interest rate risk |
|
|
|
|
|
|
||||
Interest rate hedges (designated in hedge relationship)1 |
100 |
3 |
— |
103 |
6 |
— |
||||
|
The Group’s hedging reserve disclosed in the Consolidated Statement of Changes in Equity relates to the following hedging instruments:
In EUR mn |
|
|
|
|
|
---|---|---|---|---|---|
|
Forecast purchases |
Forecast sales |
Foreign currency |
Interest rate |
Total |
|
Commodity price risk |
Foreign currency risk |
Interest rate risk |
|
|
|
|
|
|
|
|
|
2023 |
||||
Cash flow hedge reserve as of January 1 (net of tax) |
245 |
8 |
3 |
7 |
264 |
Gains (+)/losses (–) of the period recognized in OCI |
–326 |
–24 |
5 |
–2 |
–347 |
Amounts reclassified to the income statement |
–62 |
24 |
1 |
–4 |
–40 |
Amounts reclassified to the balance sheet |
42 |
— |
— |
— |
42 |
Tax effects |
80 |
–0 |
–1 |
1 |
80 |
Cash flow hedge reserve as of December 31 (net of tax) |
–21 |
9 |
7 |
2 |
–2 |
|
|
|
|
|
|
Hedge ineffectiveness recognized in the income statement |
— |
0 |
— |
— |
0 |
|
|
|
|
|
|
|
2022 |
||||
Cash flow hedge reserve as of January 1 (net of tax) |
243 |
–9 |
–6 |
2 |
230 |
Gains (+)/losses (–) of the period recognized in OCI |
360 |
–40 |
–16 |
7 |
310 |
Amounts reclassified to the income statement |
–422 |
63 |
21 |
— |
–338 |
Amounts reclassified to the balance sheet |
57 |
— |
6 |
— |
63 |
Tax effects |
8 |
–5 |
–3 |
–2 |
–2 |
Cash flow hedge reserve as of December 31 (net of tax) |
245 |
8 |
3 |
7 |
264 |
|
|
|
|
|
|
Hedge ineffectiveness recognized in the income statement |
–1 |
1 |
— |
— |
–1 |
In EUR mn |
|
|
||
---|---|---|---|---|
|
Foreign currency risk |
|||
|
2023 |
2022 |
||
Reserve as of January 1 (net of tax) |
–13 |
–5 |
||
Valuation of the USD loans |
6 |
–13 |
||
Amounts reclassified to the income statement |
— |
2 |
||
Tax effects |
–1 |
3 |
||
Reserve as of December 31 (net of tax) |
–9 |
–13 |
||
|
At December 31, 2023, and December 31, 2022, the Group held the following items designated in a fair value hedge relationship:
In EUR mn |
|
|
|
|
---|---|---|---|---|
Hedged Item |
Carrying amount |
Cumulative amount of fair value hedge adjustment included in the carrying amount of the hedged item |
Effective gains (+)/losses (–) of the period recognized in the income statement |
Line item |
|
Liabilities |
|
|
|
|
|
|
|
|
|
2023 |
|||
Non-financial liability |
28 |
–8 |
1 |
Other liabilities |
|
|
|
|
|
|
2022 |
|||
Non-financial liability |
132 |
2 |
–6 |
Other liabilities |
At December 31, 2023, and December 31, 2022, the Group held the following cash flow, fair value, and net investment hedging relationships. The table shows the profile of the timing (maturity) of the nominal amount of the hedging instruments:
In EUR mn |
|
|
|
|
|
|
|
---|---|---|---|---|---|---|---|
|
Forecast purchases |
Forecast sales |
Recognized liability |
Net investment hedge |
Foreign currency |
Interest hedges |
|
|
Commodity price risk |
Foreign currency risk |
Interest rate risk |
Total |
|||
|
|
|
|
|
|
|
|
|
2023 |
||||||
Nominal value |
1,447 |
85 |
29 |
109 |
282 |
100 |
2,052 |
Below one year |
1,251 |
85 |
29 |
44 |
282 |
100 |
1,792 |
More than one year |
196 |
— |
— |
64 |
— |
— |
260 |
Fair value – assets |
39 |
|
— |
n.a. |
10 |
3 |
52 |
Fair value – liabilities |
66 |
|
1 |
n.a. |
0 |
— |
67 |
|
|
|
|
|
|
|
|
|
2022 |
||||||
Nominal value |
1,168 |
385 |
145 |
150 |
423 |
103 |
2,374 |
Below one year |
999 |
385 |
145 |
38 |
423 |
— |
1,989 |
More than one year |
169 |
— |
— |
113 |
— |
103 |
385 |
Fair value – assets |
357 |
|
10 |
n.a. |
7 |
6 |
380 |
Fair value – liabilities |
37 |
|
4 |
n.a. |
4 |
— |
44 |
The fair value assets and liabilities shown above are presented in the line items Other financial assets and Other financial liabilities in OMV’s Consolidated Statement of Financial Position.
Commodity price risk
European Emission Allowances
All of OMV’s business segments are exposed to fluctuations in the price of greenhouse gas emissions (GHG emissions) under the EU Emissions Trading Scheme (ETS). European Emission Allowance purchases are always executed in due time and it is OMV’s highest priority to fulfill all legal obligations under the ETS. OMV monitors price risks from emission allowances and manages them using derivative instruments (forwards) traded bilaterally on the secondary market (known as over-the-counter or OTC transactions).
Electricity prices
OMV’s business segments are exposed to fluctuations in electricity prices and, hence, closely monitor related price risks. OMV’s business segments hedge parts of the forecasted electricity purchases using derivative instruments and power purchase agreements (PPAs) in order to smooth out the effects from potentially extreme market price movements.
Chemicals & Materials
For petrochemical production, some of the forecasted cracker feedstock purchases and finished product sales are hedged through refined oil product swaps. Cash flow hedge accounting is applied to those derivatives, except for the derivatives that are used to limit the price risk on the inventory held for immediate consumption. Contracts not designated as cash flow hedges are classified as fair value through profit or loss and stated at fair value.
Borealis hedges its forecasted electricity purchases using electricity swaps. For these derivatives cash flow hedge accounting is applied.
Fuels & Feedstock
Fuels & Feedstock is exposed to market price risks arising from trading and non-trading activities, covering production, refining and marketing activities associated with crude oil and oil products in addition to limited proprietary trading positions aiming to create market access within oil and oil product markets.
In Fuels & Feedstock, derivative instruments are used for both hedging selected product sales and reducing exposure to price risks on inventory fluctuations. Crude oil and product swaps are used to hedge the refining margin (crack spread), which is the difference between crude oil prices and bulk product prices.
Furthermore, exchange-traded oil futures as well as OTC contracts (contracts for difference and swaps) are used to hedge short-term purchase and sales market price risks.
Energy
In order to protect the Group’s result and cash flow against the potential negative impact of falling oil and gas prices, and to ensure sufficient liquidity headroom in order to enable the Group’s growth strategy, OMV uses financial derivatives to secure favorable oil and gas prices. When doing so, OMV enters into derivative positions, selling forward parts of its future production, thereby locking in future oil and gas prices and reducing exposure to market prices in the periods for which the hedges are concluded. No such hedges were concluded in 2023 and 2022.
Furthermore, operational commodity price risk management in Energy includes hedging of market price risk exposure arising from non-trading and trading activities of gas marketing (hedge of the price risk on inventory fluctuations and the differences in terms and conditions of purchases and sales), as well as limited proprietary trading positions for the purpose of creating market access within the gas markets.
For all these derivative instruments no hedge accounting was applied.
Hedge Accounting of commodity hedges in Chemicals & Materials and Fuels & Feedstock
In the Chemicals & Materials and Fuels & Feedstock business segments, OMV is particularly exposed to volatile refining margins and inventory risks. In order to mitigate these risks, appropriate hedging activities are taken, which include margin hedges, stock hedges, feedstock and commodity hedges. Additionally, cash flow hedge accounting is applied to forecast electricity purchases and forecast natural gas purchases. Furthermore, a part of the hedges conducted for future sales and purchases of the crackers has been designated as a cash flow hedge.
The risk management objective is to harmonize the pricing of product sales and purchases in order to remain within an approved range of priced stocks at all times, by means of undertaking stock hedges so as to mitigate the price exposure. The range is a defined maximum deviation from the target stock level, as set out in the Annual Plan for hedging activities.
In terms of refinery margin hedges, crude oil and products are hedged separately with the aim of protecting future margins. Endorsed mandates are documented and defined within the Annual Plan for hedging activities.
For refinery margin hedges, only the product crack spread is designated as the hedged item, buying Brent crude oil on a fixed basis and selling the product also on a fixed basis. The crack spread for different products is a separately identifiable component and can therefore represent the specific risk component designated as a hedged item. There are limits set for the volume of planned hedged sales to avoid over-hedging.
For refinery margin hedges, hedge accounting is applied to a limited extent.
In 2023, physical oil product exchange contracts were concluded between the OMV Group and national stockholding companies in Germany. In order to reduce the risk of market price fluctuations between the withdrawal and return of products, derivative swap deals (sell fix, buy floating at the time of withdrawal and buy fix, sell floating at the time of return) were concluded and designated in a fair value hedge relationship (hedge of a recognized liability). In 2022 product exchange transactions with the Austrian, German and Slovakian national stockholding company were concluded.
Stock hedges are used to mitigate price exposure whenever actual priced stock levels deviate from target levels. Forecast sales for oil products and forecast purchase transactions for crude oil and oil products are designated as the hedged item. Historically, Brent crude oil has formed the largest risk component of the stock price, however in some cases oil products are also used for stock hedges. In such cases, the Platts/Argus product price is used as the risk component. Other components like product crack spreads and other local market cost components are not hedged. The hedging relationships are established with a hedge ratio of 1:1, as the underlying risk of the commodity derivatives are identical to the hedged risk components. Hedge ineffectiveness can arise from timing differentials between derivative and hedged item delivery and pricing differentials (derivatives are valued on the future monthly average price (or other periods) and sales/purchases on the pricing on the date of the transaction/delivery).
For “Forecast purchases” and the “Hedge of a recognized liability” the hedge ineffectiveness is included in the line item Purchases (net of inventory variation) in OMV’s Consolidated Income Statement. The hedge ineffectiveness and recycling of “Forecast sales” for hedges where a risk component of the non-financial item is designated as the hedged item in the hedging relationship, is shown in line item ‘Sales revenues’ in OMV’s Consolidated Income Statement.
Foreign exchange risk management
OMV operates in many countries and currencies, therefore industry-specific activities and the corresponding foreign exchange rate risks need to be analyzed precisely. The USD represents OMV’s biggest risk exposure, due to movement of the USD against the EUR and also against OMV Group’s other main currencies (RON, NOK, NZD, and SEK). Movements of these currencies against the EUR are also significant sources of risk. Other currencies have only a limited impact on cash flow and the operating result. The transaction risk to foreign currency cash flows is monitored on an ongoing basis. The Group’s long and short net position is reviewed on a semiannual basis as a minimum and the sensitivity is calculated. This analysis provides the basis for the management of transaction risks on currencies. Since OMV produces commodities that are mainly traded in USD, the OMV Group has an economic USD long position.
FX options, forwards and swaps are mainly used to hedge foreign exchange rate risks on outstanding receivables and payables. The market value of these instruments will move in the opposite direction to the value of the underlying receivable or liability if the relevant foreign exchange rate changes. When certain conditions are met, the Group may elect to apply IFRS 9 hedge accounting principles in order to recognize the offsetting effects on profit or loss of changes in the fair value of the hedging instruments at the same time as the hedged items. Certain hedges, that refer to a forecasted currency position are therefore classified as cash flow hedges and stated at fair value through other comprehensive income.
Translation risk is also monitored on an ongoing basis at Group level and the risk position is evaluated. Translation risk arises on the consolidation of subsidiaries, associated companies and joint ventures with functional currencies different from EUR. The largest exposure results from changes in RON, USD, NOK and SEK denominated assets against the EUR.
Foreign exchange translation differences relating to these net investments are recognized in other comprehensive income.
Borealis has hedged part of its investment in a joint venture that has USD as its functional currency, by designating certain external loans in USD as hedges of the Group’s investments in its foreign operations. The hedged risk in the net investment hedge is the risk of a weakening USD against the EUR that would result in a reduction in the carrying amount of the Group’s net investment in the joint venture in USD. The EUR/USD impact on the measurement of the loans is recognized in other comprehensive income.
To assess hedge effectiveness, the Group determines the economic relationship between the hedging instrument and the hedged item by comparing changes in the carrying amount of the debt that is attributable to a change in the spot rate with changes in the net investment in the foreign operation due to movements in the spot rate (the dollar-offset method). The Group’s policy is to hedge the net investment only to the extent of the debt principal.
There is an economic relationship between the hedged item and the hedging instrument, as the net investment creates a translation risk that will match the foreign exchange risk on the USD borrowing. The Group has established a hedge ratio of 1:1, as the underlying risk of the hedging instrument is identical to the hedged risk component.
Interest rate management
OMV’s debt portfolio as of December 31, 2023 had only limited exposure to changes in interest rates, with almost all liabilities having fixed interest rates. Any future financing activities will be exposed to the prevailing market conditions at the time and this could potentially lead to higher interest expenses.
To facilitate the management of interest rate risk, OMV’s existing liabilities are analyzed in terms of fixed and floating rate borrowings, currencies and maturities. Appropriate ratios for the various categories are established and where necessary, derivative instruments are used to hedge fluctuations outside predetermined ranges.
Interest rate swaps can be used to convert fixed rate debt into floating rate debt and vice versa. The impact of interest rate swaps was not material neither in 2023 nor 2022.
The hedge ineffectiveness and recycling of interest rate swaps are both shown in the line item ‘interest expenses’ in OMV’s Consolidated Income Statement.
Interest rate benchmark reform (IBOR Reform)
All transitions from interest rate benchmarks affected by IBOR reform to alternative benchmark rates have been completed at the reporting date.
Sensitivity analysis
For open hedging contracts, sensitivity analysis is performed to determine the effect of market price fluctuations (+/–10%) on market value. The sensitivity of the OMV Group’s overall earnings differs from the sensitivity shown below, since the contracts concluded are used to hedge operational exposure.
The effect of market price fluctuations on the income statement or other comprehensive income depends on the type of derivative used and on whether hedge accounting is applied. Market price sensitivity for derivatives to which cash flow hedge accounting is applied is shown in the sensitivity table for other comprehensive income. Sensitivity to market price fluctuations for all other open derivatives is shown in the sensitivity tables for profit before tax.
In EUR mn |
|
|
|
|
||||
---|---|---|---|---|---|---|---|---|
|
2023 |
2022 |
||||||
|
Market price +10% |
Market price –10% |
Market price +10% |
Market price –10% |
||||
Oil incl. oil products |
–4 |
4 |
4 |
–4 |
||||
Oil incl. oil products – designated in a hedge relationship1 |
3 |
–3 |
14 |
–14 |
||||
Gas |
–34 |
34 |
10 |
–10 |
||||
Power |
2 |
–2 |
13 |
–13 |
||||
Other2 |
28 |
–28 |
43 |
–43 |
||||
Total |
–4 |
4 |
83 |
–83 |
||||
|
In EUR mn |
|
|
|
|
---|---|---|---|---|
|
2023 |
2022 |
||
|
Market price +10% |
Market price –10% |
Market price +10% |
Market price –10% |
Oil incl. oil products |
–34 |
34 |
–39 |
39 |
Gas |
2 |
–2 |
5 |
–5 |
Power |
31 |
–31 |
48 |
–48 |
Commodity hedges (designated in a hedge relationship) |
–1 |
1 |
15 |
–15 |
For financial instruments, sensitivity analysis is performed for changes in foreign exchange rates of currencies material to the Group. On Group level, the EUR–RON sensitivity not only includes the net RON exposure versus the EUR but also the net RON exposure versus the USD, since the USD–RON exposure can be split into EUR–RON and EUR–USD exposure. The same is true for the EUR–NOK, EUR–SEK and EUR–NZD exposure.
In EUR mn |
|
|
|
|
||
---|---|---|---|---|---|---|
|
2023 |
2022 |
||||
|
10% appreciation of the EUR |
10% depreciation of the EUR |
10% appreciation of the EUR |
10% depreciation of the EUR |
||
EUR–RON |
–12 |
12 |
8 |
–8 |
||
EUR–USD |
1 |
–1 |
8 |
–8 |
||
EUR–NZD |
–6 |
6 |
–2 |
2 |
||
EUR–NOK |
7 |
–7 |
23 |
–23 |
||
EUR–SEK |
–4 |
4 |
–3 |
3 |
||
|
In EUR mn |
|
|
|
|
||
---|---|---|---|---|---|---|
|
2023 |
2022 |
||||
|
10% appreciation of the EUR |
10% depreciation of the EUR |
10% appreciation of the EUR |
10% depreciation of the EUR |
||
EUR–USD |
28 |
–28 |
43 |
–43 |
||
EUR–SEK |
–12 |
12 |
–16 |
16 |
||
|
OMV regularly analyzes the impact of interest rate changes on interest income and expenses from floating rate deposits and borrowings. Currently, the effects of changes in interest rates are not considered to be a material risk.
Credit risk management
The main counterparty credit risks are assessed and monitored at Group and segment level using predetermined criteria and limits for all counterparties, banks, and security providers. On the basis of a risk assessment, counterparties, banks, and security providers are assigned a credit limit, an internal risk class, and a specific limit validity. The risk assessments are reviewed annually as a minimum or on an ad hoc basis. The credit risk processes are governed by guidelines at OMV Group level stipulating the Group-wide minimum requirements. The main counterparties with contracts involving derivative financial instruments have investment grade credit ratings. OMV uses commercial trade insurance for parts of its receivables in some business areas to mitigate credit risk. Due to the high economic uncertainty resulting from the current geopolitical situation, special attention is paid to early warning signals like changes in payment behavior.
Credit risk is the risk that the OMV Group’s counterparties will not meet their obligation under a financial instrument or customer contract, leading to a financial loss.
Credit risk exists in relation to the financial guarantee contracts issued by Borealis to Bayport Polymers LLC and Borouge 4 LLC, which are accounted for using the equity method, where the maximum outstanding exposure for Borealis as of December 31, 2023 amounted to EUR 1,234 mn plus interest (2022: EUR 638 mn plus interest).
In 2023, Borealis AG granted a guarantee for the funding of Borouge 4 LLC under the Italian Export Credit Agency agreement. The total guarantee amounts to EUR 1,155 mn plus interest. Based on the already drawn financing by Borouge 4 LLC the guaranteed amount as of December 31, 2023 totaled EUR 536 mn plus interest.
The guarantee granted to Bayport Polymers LLC of EUR 588 mn plus interest (2022: EUR 623 mn plus interest) terminates earliest upon payment and/or termination of the obligation in 2027 and 2032, respectively and could be called at any time.
In addition, in 2023 Borealis granted a guarantee for a Revolving Credit Facility (RCF) used by Bayport Polymers LLC as a liquidity instrument to conduct its ordinary course of business. The maximum amount of the credit facility is EUR 90 mn plus interest. At year end, the RCF was fully utilized by Bayport Polymers LLC.
Furthermore, in 2022 Borealis provided a parental guarantee for a lease of railcars by Bayport Polymers LLC with maximum exposure of EUR 20 mn (2022: EUR 15 mn).
In general, a payment under the guarantee agreement is triggered by the non-performance by the guaranteed party of the obligation covered by the guarantee. Therefore, a financial liability initially measured at fair value was recognized.
In EUR mn |
|
|
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|
2023 |
2022 |
||||
Trade receivables |
3,455 |
4,222 |
||||
Investments |
85 |
69 |
||||
Bonds |
285 |
52 |
||||
Derivatives |
942 |
3,247 |
||||
Loans |
910 |
711 |
||||
Other sundry financial assets |
1,612 |
1,850 |
||||
Cash and cash equivalents |
6,920 |
8,090 |
||||
Financial guarantee contracts2 |
1,234 |
623 |
||||
Total maximum credit exposure |
15,442 |
18,862 |
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