Credit risk is the risk of financial losses which may be incurred if a counterparty or a customer being a party to a financial instrument fails to meet its contractual obligations.
Credit risk is mainly related to debt collection. The key factors that affect the occurrence of credit risk at the Company include:
- a substantial number of small customers resulting in an increase in the costs incurred to monitor debt collection;
- the necessity to supply electricity to budgetary units facing financial difficulties;
- legal requirements defining the principles for electricity supply suspension as a result of default on payment.
The Management Board applies a credit policy which provides monitoring exposure to credit risk on an ongoing basis and undertakes actions for risk minimization. The main tool for credit risk management is the analysis of the creditworthiness of most relevant partners of Enea SA under the terms of the contract with a counterparty are subject to appropriate structuring (terms of payment, any collateral contract, etc.).
The table below presents the structure of the assets illustrating the exposure of the Enea Group to credit risk:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Current and non-current financial assets held to maturity | 189 789 | 45 |
| Current and non-current financial assets measured at fair value through profit or loss | 392 350 | 298 199 |
| Trade and other receivables | 1 587 161 | 1 282 352 |
| Cash and cash equivalents | 687 316 | 1 573 195 |
| Total | 2 856 616 | 3 153 791 |
The credit risk relating to receivables differs for individual market segments in which the Group carries out its business activities:
- electricity and distribution service sales to individual customers – a considerable amount of past due receivables. Although they do not represent a serious threat to the Group’s financial position, measures aimed at their reduction have been undertaken. Steps aimed at improvement of the collection process have been taken involving development of new and update of the existing manuals and principles of collection and cooperation with professional entities. The collection process starts 20-25 days after the payment deadline. Thanks to unified collection policy, including soft collection, the entity is able to shorten the collection period and avoid long-lasting and quite ineffective hard collections, i.e. enforcement by court or a bailiff. Court or bailiff’s collections are applied to cases whose value is higher than the cost-benefit ratio for debt collection;
- sales of electricity and distribution services to business, key and strategic clients, where overdue receivables are higher than in the segment of individual clients. However, the collection procedure is similar and collection measures are undertaken within 6-10 business days of the payment date;
- other receivables – compared to the above segments the amounts of past due receivables are immaterial.
A key role in the debt collection process is played by employees supervising contacts with customers. They monitor the debt collection process and collect past due receivables through direct contact with the customer. Enea also cooperates in the field of debt collection activities with specialized external entities.
The Group monitors the amount of past due receivables on an ongoing basis and in justified cases files legal complaints and recognizes appropriate impairment losses.