UPM Annual Report 2022

ACCOUNTS FOR 2022

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

5.2 Net debt Net debt is defined as the total of current and non-current debt less cash and cash equivalents and interest-bearing current and non-current financial assets. In 2022, net debt increased by EUR 1,728 million. Net debt totalled EUR 2,374 million (647 million) at the end of 2022. Net debt has been impacted by energy hedging derivative market value payments, which are driven by the increase in energy futures prices and volatility in the energy markets In October 2020 UPM established a EUR 3 billion Euro Medium Term Note (EMTN) programme and launched a Green Finance Framework. The independent second opinion concerning the framework was provided by CICERO Shades of Green. UPM’s framework was rated with the highest-grade, CICERO Dark Green. In May 2022, UPM successfully issued its third Green Bond under its EMTN (Euro Medium Term Note) programme and Green Finance Framework. The EUR 500 million bond matures in May 2029 and pays a fixed coupon of 2.25%. There are no financial covenants connected to this or the previously issued bonds. The net proceeds from the bonds are used for financing and/or refinancing Eligible Projects and Assets under UPM’s Green Finance Framework. All issued euro bonds are listed on the Irish Stock Exchange plc, trading as Euronext Dublin.

Maturity table of derivatives included in net debt and guarantees at the end of 2022

Net debt EURm

2022 2021

EURm

2023

2024

2025

2026

2027 2028+ TOTAL

Bonds

1,974 1,604

1,624

Net settled interest rate swaps Net inflow

Loans from financial institutions

213 504

3

6

8

9

9

—

35

Lease liabilities

583 137 179

Net outflow

-24

-28

-26

-25

-25

-25

-153

Derivatives Other loans

23

Gross settled derivatives Gross currency swaps Total inflow

201

Non-current debt

4,476

2,566

7

7

7

7

7

160 -175

197 -208

Repayments of non-current debt Repayments of lease liabilities

9

7

Total outflow

-7

-7

-6

-6

-6

84 24

70

Forward foreign exchange contracts Total inflow

Derivatives

8 2

625 -623

— — —

— — —

— — —

— — —

— — —

625 -623

Other liabilities Current debt

441 558

Total outflow Guarantees

86

2

2

Total debt

5,034

2,652

Loan receivables

4

4

Derivatives

61 19 84

126

Other receivables

19

Maturity table of derivatives included in net debt and guarantees at the end of 2021

Non-current interest-bearing assets

148

Loan receivables

0 9

3 4

EURm

2022

2023

2024

2025

2026 2027+ TOTAL

Derivatives

Net settled interest rate swaps Net inflow

Other receivables Investment funds

500

292 100

20

16

14

14

14

14 -11

92 -25

1

Net outflow

—

-1

-3

-4

-5

Net debt

Cash and cash equivalents

2,067 2,576 2,660 2,374

1,460 1,858 2,006

Gross settled derivatives Gross currency swaps Total inflow

Current interest-bearing assets Total interest-bearing assets

2,500

20

7

7

7

7

7

178 -171

213 -178

Net debt

647

Total outflow

-1

-1

-2

-2

-2

2,000

15

Forward foreign exchange contracts Total inflow

Gearing ratio, %

1,500

574 -574

— — —

— — —

— — —

— — —

— — —

574 -574

10

Accounting policies

Total outflow Guarantees

1,000

2

2

5

EURm

Debt Debt comprising of bonds, bank and pension loans, lease liabilities and other loans is recognised initially at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the estimated life of the borrowing. UPM classifies debt as non-current unless due for settlement within a year. Most of the debt is hedged in a fair value hedge relationship as described in » Note 6.1 Financial risk management.

500

0

0

-500

-5

18 19 20 21 22

194

195

UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022

UPM FINANCIAL REPORT 2022

194

UPM FINANCIAL REPORT 2022

195