Calculation and Development
To manage E.ON's capital structure we use a steering metric called debt factor. The debt factor is defined as economic net debt divided by EBITDA2.
The debt factor is calculated as follows:
|EUR in millions||Dec 31, 2018||Dec 31, 2017
|FX hedging adjustment||-28||114|
|Net financial position||-3,031||-4,998|
|Provisions for pensions||-3,261||-3,620|
|Economic net debt||-16,580||-19,248|
In addition to liquid funds also our non-current securities are taken into account when calculating economic net debt, as these are liquid investments predominantly used to fund our provisions.
The net financial position includes effects from foreign-currency hedging of financial transactions, which is analogous to the hedged underlying transaction.
Other items that are debt-like are also considered. These are mainly provisions for pensions and asset retirement obligations.
The low interest-rate environment continued. In some cases this led to negative real interest rates on asset-retirement obli-gations. As in prior years, our provisions therefore exceeded the amount of our asset-retirement obligations at year-end without factoring in discounting and cost-escalation effects. This limits the relevance of economic net debt as a key figure. We want economic net debt to serve as a useful key figure that aptly depicts our debt situation. In the case of material provisions affected by negative real interest rates, we have therefore used the aforementioned actual amount of the obligations instead of the balance-sheet figure to calculate our economic net debt since the 2016 financial year.