During 2021, the short-term part of the rate curve stabilised at a new low after the turbulence experienced in 2020 following the COVID-19 pandemic events. The medium/long-term portion of rates was subject to several bullish movements recorded in the first quarter, after the summer period and, more decisively, from December 2021.
The European Central Bank has kept rates unchanged since March 2016, with the reference rate at 0%. An examination of the six-month Euribor rate shows that the rate, in heavily negative territory, is at a level of -0.48%.
The quotations of fixed rates, reflected in the values of the IRS, following the upward movements returned to positive territory for all medium and long-term maturities, reaching levels not recorded since the beginning of 2019.
During 2021, activities aimed at consolidating the financial structure of the Iren Group continued. Changes in financial requirements are monitored through careful planning, which makes it possible to forecast the need for new resources, taking into account the repayments of outstanding loans, changes in debt, investments, the trend in working capital and the balance of short‐term and long‐ term sources.
The organisational model adopted by the Iren Group, with the goal of financial optimisation of the companies, entails cash pooling with the parent, non-current loans and financial risk monitoring and management. Iren has relationships with leading Italian and international banks, for the purpose of procuring the types of loans best suited to its needs and at the best market conditions.
With reference to the transactions carried out in 2021, it should be noted that in March, the first tranche equal to 5 million euro of the 80-million-euro loan of the CEB (Council of Europe Development Bank), signed in May 2020 to support the water infrastructure investment plan, was drawn down.
Direct loans with EIB and CEB, with a duration of up to 16 years, not used and available, amount to a total of 295 million euro.
As reported in "Significant events of the year", with regard to market transactions, as part of the Euro Medium Term Notes (EMTN) programme of 4 billion euro, in October a TAP issue was finalised, placed within the fourth Green Bond issue, for an amount of 200 million euro, with gross annual coupon of 0.25% and maturity on 17 January 2031. The security has a BBB Fitch rating and is listed on the regulated market of the Irish stock exchange, where the prospectus was filed, and on the ExtraMOT market of the Italian Stock Exchange.
In order to optimise the Group's financial structure, the Liability Management activity continued and in June the voluntary early repayment of loans in the parent's portfolio was carried out for a total of 35 million euro.
Within the Group, the consolidated exposure decreased due to the early repayment of the Scarlino Energia, Alfa Solutions (formerly Studio Alfa) and Nove loans for a total of 18 million euro; the Futura mortgage, consolidated from the end of March 2021, amounting to 21 million euro, was extinguished early in April, together with the related interest rate risk hedges.
Financial debt from loans, which does not include financial liabilities recognised in accordance with IFRS 16, consisted of 14% loans and 86% bonds at the end of the year.
As regards financial risks, the Iren Group is exposed to various types of risk, including liquidity risk, interest rate risk, and currency risk. As part of its Risk Management activities, the Group uses non‐speculative hedging contracts to limit risks of fluctuations in the interest rate. No new Interest Rate Swap contracts were entered into during the year.
At the end of the year, the portion of floating rate debt not hedged by derivatives was equal to 1% of financial debt from loans, in line with the Iren Group's objective of maintaining adequate protection from significant increases in interest rates.
Overall, the activity carried out is aimed at refinancing debt with a view to improving the financial structure, structurally reducing the cost of capital and extending the average duration of financial debt.
The composition of financial debt from loans by maturity and rate type, compared with the situation at 31 December 2020, is shown in the chart below.
On 09 December 2021, the Standard & Poor's rating agency assigned, for the first time to the Iren Group, its long-term credit rating at the "BBB-" level with a "Positive" outlook. The same rating is also given to senior unsecured debt.
The "Investment Grade" rating from a second agency, after Fitch, expresses the Group's solid positioning in Italy, with a wide diversification of activities especially in regulated sectors and a significant territorial presence. Capital expenditures under the new Business Plan, primarily targeting organic growth and energy transition, combined with an expected continued improvement in credit metrics, support the "positive" outlook. From a financial point of view, the rating level assigned also expresses the Group's good liquidity profile.
Also in this context, on 22 December, the agency Fitch confirmed its "BBB" rating for Iren with a "Stable" outlook. This assessment is also based primarily on an analysis of the Business Plan to 2030, with particular reference to the investments planned in relation to the financial structure. The maintenance of a business portfolio consisting mainly of regulated and semi-regulated activities, the creation of value and the stability guaranteed by the integration of the various businesses are elements considered positive by the rating agency, together with the Group's liquidity profile.
To support the liquidity profile of the Group and the rating, Iren has the aforementioned medium/long-term credit lines agreed and available but not used for 295 million euro, which are in addition to current liquid assets.