Investor Presentaiton
95
A.P. Moller-Maersk Annual Report 2020
Financials
Consolidated financial statements
Notes index
Note 16 Financial instruments and risks - continued
Table 16.61
Maturity
Fair value,
asset
Fair value,
liability
Interest rate hedging of borrowings
2020
Nominal
amount of
derivative
0-1 year
2-4 years
5-years
Gain/loss
on hedged
item
Gain/loss
on hedging
instrument
Average
hedge
rate
Combined fair value hedge, hedge of borrowings
EUR
45
559
559
-61
GBP
7
95
95
JPY
17
121
121
NOK
11
256
256
7835
44
-8
-3
-5
1522
1.8%
2.5%
-2
-2
1.8%
2.5%
Fair value hedge, hedge of borrowings
USD
80
900
500
400
-79
80
3.1%
Cash flow hedge, hedge of borrowings
EUR
GBP
NOK
USD
Total
2019
Combined fair value hedge, hedge of borrowings
35
461
461
49
313
313
4
81
51
30
155
297
227
1,905
700
680
525
333
4,691
751
1,739
2,201
-156
ཝཱཏྟཊྛ
-34
-11
4.2%
4.6%
-1
2.4%
-68
2.1%
11
17
35
733
14
92
10
11
206
92
34
250
EUR
GBP
JPY
NOK
Fair value hedge, hedge of borrowings
USD
14
900
Amounts in USD million =
3.5%
2.4%
Table 16.6
Interest rate risk
The Group has most of its debt denominated in USD, but
part of the debt (e.g. issued bonds) is in other currencies
such as EUR, NOK, GBP and JPY. The Group strives to
maintain a combination of fixed and floating interest
rates on its net debt, reflecting expectations and risks.
The hedging of the interest rate risk is governed by a du-
ration range and is primarily obtained using interest rate
swaps. The duration of the Group's debt portfolio is 2.1
years (2.2 years) excluding IFRS 16 leases.
A general increase in interest rates by one percentage point
is estimated, all else being equal, to affect profit before
tax and equity, excluding tax effect, positively by approx.
USD 39m and positively by approx. USD 30m, respectively,
(positively by approx. USD 11m and negatively by approx.
USD 14m, respectively).
This analysis assumes that all other variables, in particular
foreign currency rates, remain constant.
The hedging of the interest rate risk is done by cross-
currency swaps and interest rate swaps. The hedging is
a mix of fair value hedging, combined fair value hedging,
and cash flow hedging.
Due to buy-back of issued bonds in 2020, ineffectiveness
from cash flow hedges is recognised in the income state-
ment with a loss of USD 12m (loss of USD 4m).
The hedges are expected to be highly effective due to the
nature of the economic relationship between the exposure
and the hedge. The source of ineffectiveness is the credit
risk of the hedging instruments. For hedges where the
cost of hedging is applied, the change in basis spread is
recognised in other comprehensive income and is a time
effect during the lifetime of the swap and at maturity
amounts to 0. If the hedged transaction is prepaid, the
change in basis spread will be recognised in profit or loss
as ineffectiveness. The cost of hedging reserve amounts
to a gain of USD 6m (gain of USD 6m).
1 Currency element of the cross-currency swaps is not
designated into the hedge relationship and is recog-
nised in financial items.
224
509
-47
92
114
250
7530
23
3.5%
-5
2
-3
-3
4.2%
3.6%
10
-18
4.2%
900
-9
14
4.0%
Cash flow hedge, hedge of borrowings
EUR
23
60
867
447
420
-17
GBP
52
302
302
-1
3.9%
4.6%
NOK
27
341
341
-4
USD
82
98
1,182
730
452
-12
Total
146
331
4,873
92
1,742
3,039
-54
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