This note contains information concerning the contractual stipulations for the Group's interest-bearing loans and other financial liabilities that are measured at amortised cost.
The ‘Private loans’ item includes a debt payable by the Group to the Ministry of Infrastructure and Water Management of €213 million (2016: €246 million) associated with the deferred payments of franchise fees. Of that sum, €180 million has been included under ‘Non-current liabilities’, for the portion that is due to be paid after 2018. The portion that will be paid in 2018 (€33 million) is recognised in ‘Current liabilities’. The interest rate is fixed at 3.027%. The terms and conditions of the loan were agreed in detail with effect from 1 January 2015 under the new main rail network franchise.
The other private loans have terms expiring between 2018 and 2029 and interest rates ranging from minus 0.42% to plus 0.75%.
The finance lease liabilities have a gross liability of €47 million and an applicable actuarial interest rate of 1.7%. They concern leases in perpetuity. The Group's liquidity risks, currency risks and interest rate risks associated with the loans and other financial liabilities are explained in more detail in note 26.
The reconciliation of changes in liabilities resulting from financing activities is as follows.
Non-derivative financial instruments
On initial recognition, these instruments are valued at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are valued at amortised cost using the effective interest method.
Derivative financial instruments (derivatives)
The Group holds derivatives to hedge its foreign-currency, interest-rate and commodity risks. Derivatives are valued on initial recognition at fair value, which is the same as the cost applicable on that date. Attributable transaction costs are charged to the income statement when they are incurred. Subsequent to initial recognition, derivatives are measured at fair value and any changes are accounted for as described below.
The method for recognition of the result depends on whether hedge accounting is used and if so, whether the hedging relationship is effective. If the hedging relationship is effective, then hedge accounting is used for these derivatives. When a hedging transaction is concluded, the hedging relationship is documented. Checks are made regularly to see if the hedging transaction was effective in the past period and whether the hedging transaction is expected to be effective over the coming period. If the hedging instrument expires, is sold, terminated or exercised, or no longer satisfies the criteria for hedge accounting, then application of hedge accounting ends with immediate effect.
If a derivative is classified as a hedge for fluctuations in cash flows ensuing from a certain risk associated with a recognised asset or liability, or because an extremely likely expected transaction could affect the profit or loss, then the effective portion of the changes in the fair value of the derivative is recognised in the unrealised results and presented in the hedging reserve in equity. Any ineffective portion of the changes in the fair value of the derivative is recognised directly in the income statement. The accrued amount is transferred to the income statement in the same period in which the hedged position affects the income statement.
Fair value of hedges
Changes in the fair value of a derivative hedging instrument that is classified as a fair-value hedge are charged or credited to the income statement together with the changes in the fair value of the assets and liabilities (or groups thereof) insofar as they are attributable to the hedged risk.
If a hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, then hedge accounting is discontinued prospectively. The cumulative profit or cumulative loss that was previously recognised in equity remains part of the equity until the expected transaction has taken place. The amount recognised in equity is transferred to the income statement (with the net change in the fair value of the cash-flow hedges transferred from equity) in the same period in which the hedging instrument affects the income statement.
Hedge accounting is not applied to derivatives that are used as economic hedges of assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of the exchange-rate gains and losses.
Hedging energy costs
The Group uses accrual accounting for commodity derivatives intended for its own use, claiming the exception allowed by IAS 39.5 insofar as the stipulations of IAS 39.5 are met. This is applicable to purchases of diesel and fuel oil and energy in the Netherlands and is explained in the section on risks and in ‘Off-balance-sheet commitments’. The other commodity derivatives that do not meet the criterion of being intended for the Group’s own use are valued at fair value, and hedge accounting is used where possible.