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20.4 Notes to the annual financial statements
FINANCIAL INFORMATION CONCERNING ASSETS,
FINANCIAL POSITION AND FINANCIAL PERFORMANCE
20
To report on financial risk and exposure limits, DOFT prepares a monthly report
presenting the group’s positions and the performance of its financial transactions.
The report is sent to the senior management of the AREVA group and to the
Finance, Legal and Strategy departments. The reporting system includes weekly
reports submitted to the Chief Financial Officer, including a valuation of all positions
at their market value. Together, these reports and reviews are used to monitor the
counterparty risk.
Foreign exchange risk management
The volatility of exchange rates may impact AREVA SA’s currency translation
adjustments, equity and income.
Balance sheet risk:
Loans and borrowings granted by AREVA SA to its subsidiaries
are systematically converted into euros through currency swaps.
To limit the currency risk for long-term investments generating future cash flows in
foreign currencies, AREVA SA uses a liability in the same currency to offset the asset.
Trade exposure:
AREVA SA’s policy, which was approved by the Executive
Committee, is to systematically hedge foreign exchange risk generated by its
operations; it recommends hedging potential risks during the proposal phase, to the
extent possible, tominimize the impact of exchange rate fluctuations on net income.
AREVA SA acquires derivatives (principally currency futures) or special insurance
contracts issued by Coface to hedge its foreign exchange exposure from
trade, including accounts receivable and payable, confirmed off-balance sheet
commitments (orders received from customers or placed with suppliers), highly
probable future cash flows (budgeted sales or purchases, anticipated margins on
contracts) and proposals made in foreign currencies. These hedges are backed
by underlying transactions for identical amounts and maturities and, generally, are
documented and eligible for hedge accounting (except for hedges of proposals
submitted in foreign currencies).
The Financial Operations and Treasury Management Department covers its
exposures directly with its banking counterparties. A system of strict limits,
particularly concerning results, marked to market, and foreign exchange positions
that may be taken by the trading desk, is monitored daily by specialized teams that
are also charged with valuation of the transactions. In addition, analyses of sensitivity
to changes in exchange rates are periodically performed.
At December 31, 2016, derivatives used by AREVA SA to manage foreign exchange risk were as follows:
(Notional amounts by maturity date
at December 31, 2016)
2017
2018
2019
2020
2021 > 5 years
Total Market value
Forward exchange transactions
and currency swaps
999
135
55
33
-
-
1,221
-6
Currency options
-
-
-
-
-
-
-
-
Cross-currency swaps
-
-
-
-
389
-
389
-88
TOTAL
999
135
55
33
389
-
1,610
-93
Interest rate risk management
AREVA SA is exposed to the fluctuations of interest rates on its floating rate
borrowings and on its financial investments. The Financial Operations and Treasury
Management Department manages all interest rate risks.
AREVA SA uses several types of derivative instruments, as required by market
conditions, to allocate its borrowings between fixed rates and floating rates and to
manage its investment portfolio, with the goal being mainly to reduce its borrowing
costs while optimizing the management of its cash surpluses.
At December 31, 2016, the financial instruments used were:
p
cross-currency swaps covering loans to subsidiaries in USD;
p
rate swaps and inflation swaps negotiated with banks to cover New AREVA
Holding.
The amount of the commitments and the sensitivity of the positions taken by the
trading desk in connection with rate management are subject to limits based on
the type of transaction involved.
At December 31, 2016, the following financial instruments were used to hedge
interest rate exposure:
292
2016 AREVA
REFERENCE DOCUMENT