12. FINANCIAL ASSETS AND LIABILITIES CLASSIFIED

The accounting policies for financial instruments in accordance with the IAS 39 categories have been applied to the following financial assets and liabilities:

2014

Notes

Credits and other receivables

Fair value - hedging derivative financial instruments

Fair value - Negotiable derivatives

Available-for-sale 

Fair value - through profit and loss

Other financial assets/liabilities

Total carrying amount

Fair value

Assets

Cash and cash equivalents

17

-

-

-

-

-

114,258

114,258

114,258

Trade and other receivables

14

545,967

-

-

-

-

-

54,5967

545,967

Other investments

12 and 33

-

-

-

-

2,910

99,436

102,346

102,346

Available-for-sale financial assets

13

-

-

-

206,973

-

-

206,973

206,973

Income tax receivable

11

10,219

-

-

-

-

-

10,219

10,219

Derivative financial instruments

16

-

21,970

-

-

-

-

21,970

21,970

Total financial assets

556,186

21,970

-

206,973

2,910

213,694

1,001,734

1,001,734

Liabilities

Borrowings

20

-

-

-

-

-

2,604,466

2,604,466

2,730,714

Trade and other payables

23

-

-

-

-

-

618,679

618,679

618,679

Drivative financial instruments

16

-

24,581

-

-

-

-

24,581

24,581

Total financial liabilities

-

24,581

-

-

-

3,223,145

3,247,726

3,373,974

2013

Notes

Credits and other receivables

Fair value - hedging derivative financial instruments

Fair value - Negotiable derivatives

Available-for-sale 

Fair value - through profit and loss

Other financial assets/liabilities

Total carrying amount

Fair value

Assets

Cash and cash equivalents

17

-

-

-

-

-

167,987

167,987

167,987

Trade and other receivables

14

647,510

-

-

-

-

-

647,510

647,510

Other investments

12 and 33

-

-

-

-

2,839

122,163

125,002

125,002

Available-for-sale financial assets

13

-

-

-

156,886

-

-

156,885

156,885

Total financial assets

647,510

-

-

156,886

2,839

290,150

1,097,385

1,097,385

Liabilities

Borrowings

20

-

-

-

-

-

2,680,483

2,680,483

2,680,483

Trade and other payables

23

-

-

-

-

-

681,371

681,371

681,371

Income tax payable

11

-

-

-

-

-

44,935

44,935

44,935

Drivative financial instruments

16

-

36,661

342

-

-

-

37,003

37,003

Total financial liabilities

-

36,661

342

-

-

3,406,790

3,443,793

3,570,563

The caption “Fair value through profit and loss”, in the amount of 2,910 thousand Euros corresponds to the Group’s investment in the closed fund “Luso Carbon Fund” with a maturity of 10 years.

The caption "Financial Assets" includes a pledge bank deposit given to the EIB (Note 33.3) of 99,435 thousand Euros.

Loans obtained, as mentioned in Note 3.6 are measured, initially at fair value and subsequently at amortized cost, except for those which it has been contracted derivative fair value hedges (Note 16) which are measured at fair value. Nevertheless, REN proceeds to the disclosure of the fair value of the caption Borrowings, based on a set of relevant observable data, which fall within Level 2 of the fair value hierarchy.

The fair value of borrowings and derivatives are calculated by the method of discounted cash flows, using the curve of interest rate on the date of the statement of financial position in accordance with the characteristics of each loan.

The range of market rates used to calculate the fair value ranges between 0.144 % and 1.186 % (maturities of one day and fifteen years, respectively).

The fair value of borrowings contracted by the Group at 31 December 2014 is 2,703,714 thousand Euros (at 31 December 2013 was 2,807,253 thousand euros), of which 421,906 thousand Euros are recorded partly at amortized cost and includes an element of fair value resulting from movements in interest rates (at 31 December 2013 was 391,841 thousand Euros).

Estimated fair value – assets measured at fair value

The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2014 in accordance with the following hierarchy levels of fair value:

  • Level 1: the fair value of financial instruments is based on net market prices as of the date of the statement of financial position;

  • Level 2: the fair value of financial instruments is not based on active market prices but rather on valuation models;

  • Level 3: the fair value of financial instruments is not based on active market prices, but rather on valuation models, for which the main inputs are not taken from the market.

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

ASSETS:

AVAILABLE-FOR-SALE FINANCIAL ASSETS

Shares 161,634

41,572

-

203,206

FINANCIAL ASSETS AT FAIR VALUE

Fair value hedge derivatives -

21,970

-

21,970

OTHER FINANCIAL ASSETS

Treasury funds

2,910

-

-

2,910

164,544

63,542

-

225,176

LIABILITIES:

FINANCIAL LIABILITIES AT FAIR VALUE

Loans

FINANCIAL LIABILITIES AT FAIR VALUE

Cash flow hedge derivatives

During the year ended 31 December 2014 the company proceeded to a valuation of the interests held in Hidroeléctrica de Cahora Bassa, S.A. (“HCB”), which is classified as an available-for-sale financial asset (Note 13). The fair value of this asset reflects its current exit selling price. This price was determined on the basis of revenue approach, which reflects the current market expectations about those future amounts. Despite not listed, the data used in the price calculation is observable in the market. The fair value of this share amounts to 41,572 thousand Euros in the year ended on 31 December 2014.

Quality of financial assets

The credit quality of the financial assets that have not yet matured or are impaired can be valued by reference to external credit ratings disclosed by Standard & Poor’s or historical information about the entities to which they refer:

'14

'13

Trade and other receivables

  

BB+

229,081

410,227
Others without rating

316,886

237,283
Total trade and other receivables

545,967

647,510
Cash and cash equivalents

  

A+ to A-

1,218

1,268
BBB+ to BBB-

108,076

2,579
BB+ to B-

4,907

164,122
Without rating

57

18

Total cash and cash equivalents

114,258

167,987

Other financial assets

  

A+ to A-

99,435

117,163
BB+ to B-

-

5,000
Without rating

2,912

2,839
Total other financial assets

102,346

125,002

Trade and other receivables refer mainly to regulated electricity and gas services rendered.

The main transactions are carried out with authorised distributors in each of the businesses, such as EDP, GALP and some European distributors.

Overdue credits or with impairment at 31 December 2014 are as follows:

i) Trade and other receivables include 844 thousand Euros (Note 14) which have been adjusted for impairment, for which a pending litigation in process exists;

ii) There are some aged receivables relating to transactions with EDP group companies, for which the credit risk is considered as nil.

With respect to the current receivables and payables balances, its carrying amount corresponds to a reasonable approximation of its fair value.

The non-current accounts receivable and accounts payable refers, essentially, to tariff deviations which amounts are communicated by ERSE, being its carrying amount a reasonable approximation of its fair value, given that they include the time value of money, being incorporated in the next two years tariffs.