Note 7 - Financial Instruments

Fair value

(1) Financial instruments - the composition of the derivatives

	June 30,			December 31,
	2023			2022
	€ in thousands
Derivatives presented under current assets
Swap contracts		366			273

Derivatives presented under non-current assets
Swap contracts		1,221			1,488

Derivatives presented under current liabilities
Financial power swap		(8,309	)		(33,183	)

Derivatives presented under non-current liabilities
Financial power swap		(563	)		(28,354	)

(2) Financial instruments measured at fair value for disclosure purposes only

The carrying amounts of certain financial assets and liabilities, including cash and cash equivalents, trade receivables, other receivables, other short-term investments, deposits, derivatives, bank overdraft, short-term loans and borrowings, trade payables and other payables are the same or proximate to their fair value.

The fair values of the other financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:

June 30, 2023

Fair value

Carrying

Valuation techniques for

Inputs used to

amount

Level 1

Level 2

Level 3

determining fair value

determine fair value

€ in thousands

Non-current liabilities:

Debentures

139,578

134,454

Loans from banks and others
(including current maturities)

287,299

250,362

Discounting future cash flows by the market interest rate on the date of measurement.

Discount rate of Euribor+ 2% with a zero floor, Euribor+ 5.27%, fixed rate for 5 years, 2.65%-4.5% Linkage to Euribor, fixed rate 2.58%-3.03%, fixed rate 2.75%-7% Linkage to Consumer price index in Israel and floating interest rate based on the Bank of Israel Rate plus a spread of 4.35%.

426,877

134,454

250,362

	December 31, 2022
			Fair value
	Carrying								Valuation techniques for	Inputs used to
	amount		Level 1		Level 2		Level 3		determining fair value	determine fair value
	€ in thousands
Non-current liabilities:
Debentures		110,428		102,957		-		-
Loans from banks and others (including current maturities)		273,863		-		217,073		-	Discounting future cash flows by the market interest rate on the date of measurement.	Discount rate of Euribor+ 2% with a zero floor, Euribor+ 5.27%, fixed rate for 5 years 2.65%-4.5% Linkage to Euribor, fixed rate 2.58%-3.03%, fix rate 2.75%-7% Linkage to Consumer price index in Israel and floating interest rate based on the Bank of Israel Rate plus a spread of 4.35%.
		384,291		102,957		217,073		-

(3) Fair value hierarchy of financial instruments measured at fair value

The table below presents an analysis of financial instruments measured at fair value on the temporal basis using valuation methodology in accordance with hierarchy fair value levels. The various levels are defined as follows:

●

Level 1: quoted prices (unadjusted) in active markets for identical instruments.

●

Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.

●

Level 3: inputs that are not based on observable market data (unobservable inputs).

June 30, 2023

Level 1

Level 2

Level 3

Total

Valuation techniques for

€ in thousands

determining fair value

Swap contracts

1,587

Fair value is measured by discounting the future cash flows over the period of the contract and using market interest rates appropriate for similar instruments, including the adjustment required for the parties’ credit risks.

Financial power swap

(8,872

)

(8,872

)

Fair value is measured by discounting the future fixed and assessed cash flows, over the period of the contract and using market interest rates appropriate for similar instruments. The value is adjusted for the parties’ credit risks.

There have been no transfers from any Level to another Level during the six months ended June 30, 2023.

	December 31, 2022
	Level 1		Level 2		Level 3			Total			Valuation techniques for
	€ in thousands										determining fair value
Marketable securities		2,836		-		-			2,836		Market price
Swap contracts		-		1,761		-			1,761		Fair value is measured by discounting the future cash flows over the period of the contract and using market interest rates appropriate for similar instruments, including the adjustment required for the parties’ credit risks.
Financial power swap		-		-		(61,537	)		(61,537	)	Fair value is measured by discounting the future fixed and assessed cash flows over the period of the contract and using market interest rates appropriate for similar instruments. The value is adjusted for the parties’ credit risks.

(4) Level 3 financial instruments carried at fair value

The table hereunder presents a reconciliation from the beginning balance to the ending balance of financial instruments carried at fair value in level 3 of the fair value hierarchy:

	Financial assets
	Financial power swap
	€ in thousands

Balance as at December 31, 2022		(61,537	)

Total gains (losses) recognized:
In profit or loss
Unrealized under financing income and expenses		271
Realized under financing income and expenses		6,141
In other comprehensive income		46,253

Balance as at June 30, 2023		(8,872	)