Liquidity and refinancing risk management
Liquidity or refinancing risk arises when a company is not able to arrange funding at terms and conditions corresponding to its creditworthiness. Cautious maturity distribution of interest-bearing debt and sufficient cash, short-term investments and committed and uncommitted credit facilities are maintained to protect short-term liquidity and to manage refinancing risk. Diversification of funding among different markets and an adequate number of financial institutions are used to safeguard the availability of liquidity at all times. Treasury monitors bank account structures, cash balances and forecasts of the subsidiaries and manages the utilization of the consolidated cash resources.
At the end of 2020, Cash and cash equivalents amounted to EUR 274 million (EUR 316 million) and interest-bearing financial assets managed centrally by Treasury to EUR 73 million (EUR 42 million). Due to the global nature of operations, some of the Valmet subsidiaries are located in countries in which currency is subject to limited exchangeability or capital controls. Given Valmet’s total liquidity position, related balances are considered to be immaterial.
In 2020, the outstanding Nordic Investment Bank loan was repaid and replaced with a new 10-year EUR 50 million loan. Additionally, Valmet signed term-loan agreements with total value of EUR 500 million, of which EUR 279 million was outstanding as at December 31, 2020. Valmet also signed an 8-year loan agreement of EUR 100 million with the European Investment Bank, which was undrawn at the end of the reporting period.
Valmet’s liquidity was additionally secured by a committed revolving credit facility worth EUR 200 million, which matures in 2024, committed overdraft limits of EUR 14 million and an uncommitted commercial paper program worth EUR 200 million. All the above-mentioned facilities were undrawn at the end of the reporting period.
Net working capital management is an integral part of the liquidity risk management. Treasury monitors and forecasts net working capital fluctuations in close co-operation with the subsidiaries. Net working capital dincreased to EUR -588 million (EUR -426 million) as at December 31, 2020 due to e.g. large capital projects’ milestone payments.
Group’s refinancing risk is managed by balancing the proportion of current and non-current interest-bearing debt and average maturity of non-current interest-bearing debt including committed undrawn credit facility. The average maturity of non-current interest-bearing debt, including current portion, and committed undrawn credit facility as at December 31, 2020, was 2.3 years (3.1 years). The amount of current nterest-bearing debt, including current portion of non-current interest-bearing debt was 4 percent (23%) of total debt portfolio. As at December 31, 2020, Valmet’s interest-bearing liabilities consist of debt and lease liabilities, and debt portfolio includes only loans from financial institutions.
The tables below present undiscounted cash flows on the repayments and interests on Valmet’s financial liabilities (excl. lease liabilities and derivatives) by the remaining maturities from the balance sheet date to the contractual maturity date. The remaining maturities of lease liabilities are presented in Financial Statements 2020 in Note 5, and correspondingly remaining maturities of derivatives in Note 10.