Derivative financial instruments (valued at fair value) can be broken down as follows:
Amounts in millions of EUR December 31, 2014 December 31, 2013
Assets 328 117
Non-current 328 117
Current – –
Liabilities -198 -763
Non-current -191 -753
Current -7 -10
Total derivative financial instruments 130 -646
– of which: call/put arrangements Reggefiber Group B.V. (net) – -334
– of which: designated in a hedge relationship 131 -310
– of which: call option Telefónica Deutschland -3 –
– of which: forward exchange contracts 1 -1
– of which: other derivative financial instruments not designated in a hedge relationship 1 -1
The ineffective portion of the fair value hedges and cash flow hedges during 2014 recognized in the Consolidated Statement of Profit or Loss resulted in a loss of EUR 7 million (2013: EUR 3 million gain).
In 2014, the call/put arrangements regarding Reggefiber Group B.V. were exercised (2013: EUR 334 million net liability). Refer to Notes 30 and 31 for more information.
KPN reports its derivatives positions on the balance sheet on a gross basis. Part of the derivatives portfolio is subject to master netting agreements that allow netting under certain circumstances. If netting had been applied, the total derivatives asset position would be EUR 161 million and the total derivatives liability position would be EUR 31 million at December 31, 2014 (asset position of EUR 20 million and liability position of EUR 666 million at December 31, 2013).
The call option KPN provided to Telefónica to acquire a 2.9% stake in Telefónica Deutschland from KPN, exercisable for EUR 510 million one year after the sale of E-Plus, either partially or in full, is recognized as a non-current liability of EUR 3 million as of December 31, 2014 (refer to Note 19).
Bonds denominated in foreign currency
All bonds denominated in foreign currencies are hedged with cross-currency swaps. The swaps are used to mitigate the exposure on currency risk and interest rate risk. KPN hedged the currency exposure by effectively fixing the counter value in foreign currency to Euro and by hedging the interest rate exposure by swapping the fixed interest rates in foreign currency to fixed rates in Euro. The hedges are until maturity of the underlying senior bonds, or until the first call date in case of the hybrid bonds.
For these hedges, KPN meets the criteria of, and also applies, cash flow hedge accounting. KPN determines the effectiveness of the hedges at inception and on a quarterly basis. KPN uses the dollar offset method for its cash flow hedges related to cross-currency swaps.
FINANCIAL STATEMENTS — CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Statement of Profit or Loss
Key Consolidated Financial
Statements General Notes Notes to
Profit or Loss Notes to
Financial Position Other Notes
Corporate Financial
Statements Other Information
< Notes to Profit or Loss 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Other Notes >
An overview of the cross-currency swaps at December 31, 2014 and December 31, 2013 is presented below (in millions):
Nominal (receive) Coupon (receive) Nominal (pay) Coupon (pay) Maturity date Fair value in EUR1
2014
GBP 135 5.75%, annual EUR 158 4.89%, annual March 18, 2016 16
GBP 96 6.0%, annual EUR 123 4.58%, annual May 29, 2019 1
GBP 400 6.875%, annual EUR 460 6.78%, annual March 14, 2020 35
USD 600 7.0%, semi-annual EUR 465 6.34%, semi-annual March 28, 2023 -15
GBP 400 5.0%, annual EUR 467 5.02%, annual November 11, 2026 -5
GBP 850 5.75%, annual EUR 971 5.73%, annual September 17, 2029 14
USD 1,000 8.375%, semi-annual EUR 756 8.56%, semi-annual October 1, 2030 -154
Total -108
2013
GBP 275 5.75%, annual EUR 328 4.89%, annual March 18, 2016 3
GBP 250 6.0%, annual EUR 290 5.12%, annual May 29, 2019 8
GBP 400 6.875%, annual EUR 460 6.78%, annual March 14, 2020 -5
USD 600 7.0%, semi-annual EUR 465 6.34%, semi-annual March 28, 2023 -65
GBP 400 5.0%, annual EUR 467 5.02%, annual November 11, 2026 -36
GBP 850 5.75%, annual EUR 971 5.80%, annual September 17, 2029 -63
USD 1,000 8.375%, semi-annual EUR 756 8.56%, semi-annual October 1, 2030 -244
Total -402
1) Negative amounts are liabilities.
Following the bond tender in November 2014, KPN settled a cross-currency swap with a notional of GBP 140 million related to the GBP 2016 bond and a cross-currency swap with a notional of GBP 250 million related to the GBP 2019 bond. KPN terminated hedge accounting for these two swaps. The remaining outstanding notional of the GBP 2019 bond of GBP 96 million has been fixed with a new swap to a counter value of EUR 123 million with a fixed EUR coupon of approximately 4.58% per annum. KPN applies hedge accounting for this new swap.
Part of KPN’s derivatives portfolio contains reset clauses or collateral postings at pre-agreed dates (reference is made to Note 30).
Bonds denominated in EURO
Since 2011, the Eurobonds with maturities on September 21, 2020 (notional EUR 1.0 billion before the tender offer), October 4, 2021 (notional EUR 500 million) and September 30, 2024 (notional EUR 700 million before the tender offer) have been swapped to a floating rate based on three-month Euribor using fixed-to-floating interest swaps. At inception, the first two years have been fixed with a floating-to-fixed interest rate swap. In subsequent quarters, KPN entered into additional forward starting swaps to maintain a horizon of fixed interest rates of at least one year.
For the fixed-to-floating interest rate swaps, KPN meets the criteria of, and also applies, hedge accounting. KPN determines the effectiveness of these fair value hedges at inception and on a quarterly basis, based on a regression method.
KPN is not allowed to apply hedge accounting for the above-mentioned floating-to-fixed swaps, which are held at fair value through profit and loss. During 2014, KPN booked a loss in the Consolidated Statement of Profit or Loss of EUR 1 million (2013: EUR 17 million gain).
Key Consolidated Financial
Statements General Notes Notes to
Profit or Loss Notes to
Financial Position Other Notes
Corporate Financial
Statements Other Information
< Notes to Profit or Loss 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Other Notes >
An overview of the interest rate swaps at December 31, 2014 and December 31, 2013 is presented below (in millions).
Nominal Currency Maturity date Pay Receive Hedge accounting Fair value in EUR
2014
710 EUR September 21, 2020 Floating Fixed Fair value 75
500 EUR October 4, 2021 Floating Fixed Fair value 66
595 EUR September 30, 2024 Floating Fixed Fair value 97
Total 238
Nominal Currency Maturity date Pay Receive Hedge accounting Fair value in EUR
2013
1,000 EUR September 21, 2020 Floating Fixed Fair value 43
500 EUR October 4, 2021 Floating Fixed Fair value 26
700 EUR September 30, 2024 Floating Fixed Fair value 23
Total 92
Nominal Currency Maturity date Pay Receive Hedge accounting Fair value in EUR
2014
710 EUR September 21, 2016 Fixed Floating None -4
600 EUR September 30, 2015 Fixed Floating None -3
500 EUR October 4, 2016 Fixed Floating None -3
Total -10
Nominal Currency Maturity date Pay Receive Hedge accounting Fair value in EUR
2013
1,000 EUR September 21, 2016 Fixed Floating None -5
700 EUR September 30, 2015 Fixed Floating None -4
500 EUR October 4, 2016 Fixed Floating None -3
Total -12
Reggefiber
As of December 31, 2014, Reggefiber has floating-to-fixed interest rate swaps with a notional of EUR 26 million. These swaps are related to an amortizing floating-rate loan and are held at fair value through profit and loss in KPN’s Consolidated Financial Statements.
Foreign exchange contracts
The fair value of foreign exchange exposure hedge contracts is determined using market forward exchange rates at the balance sheet date.
Amounts in millions of EUR Contract volume 2014 Fair value 2014 Contract volume 2013 Fair value 2013
Term shorter than 1 year 114 1 104 -1
Term longer than 1 year – – – –
Total 114 1 104 -1
For further details on derivative financial instruments, reference is made to Note 30.
FINANCIAL STATEMENTS — CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Statement of Profit or Loss
Key Consolidated Financial
Statements General Notes Notes to
Profit or Loss Notes to
Financial Position Other Notes
Corporate Financial
Statements Other Information
< Notes to Profit or Loss 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Other Notes >