Capital adequacy and maturity matching status of Hungarian district heating companies

Abstract

In Hungary, district heating services cover 650,000 households (more than 2 million residential consumers) and a large number of public and industrial consumers. The capital adequacy and maturity matching status of Hungarian district heating companies is important because it has an impact on their ability to cope with economic crises. The financial situation of a company or a group of companies in an industry is analyzed by means of ratios of the financing structure. This paper examines the capital adequacy and maturity matching of district heating companies in Hungary using disaggregated annual reports. The methodology is based on report analysis, using data from the accounts of the companies providing district heat services in Hungary -72 companies make up the sample-. The analyses provide a comprehensive picture of the capital adequacy and coverage ratios of the district heating companies and show that the maturity matching principle is implemented differently for the different profiles of district heating companies. To achieve the research objectives, vertical and horizontal analyses were needed. Based on the accounting unbundled reports, it can be stated that the structure of owner's equity and liabilities of district heating companies is significantly influenced by the sales size and ownership structure. The principle of maturity consistency is implemented in different ways. This study has analyzed the characteristics of the owner's equity and liabilities of district heating companies - through horizontal and vertical studies - focusing on two main indicators. The largest share of the owner's equity and liabilities of district heating companies is represented by equity, with an average value of more than 50% each year. On average, the companies with a district heating profile, the largest sales size, own heat production, and the majority of the companies that are not privately owned are characterized by higher coverage.