Financial risk management

Kinnevik has a model for risk management that aims to identify, control and reduce risks. The output of the model is reported to Kinnevik’s Audit & Sustainability Committee and Board of Directors on a regular basis. Kinnevik is mainly exposed to financial risks in respect of:

• Valuation risk, in relation to negative changes in the value of the portfolio
• Liquidity and financing risk, in relation to increased cost of financing, and difficulties in refinancing maturing loans and facilities, ultimately leading to payment obligations not being met
• Foreign exchange rate risk, in relation to transaction and translation currency exposure
• Interest rate risk, having an adverse impact on financing costs

Valuation risk

Kinnevik is invested in both listed and unlisted investee companies where valuations can fluctuate significantly due to a wide array of different factors.

On 31 December 2023, 32 percent (34 percent) of Kinnevik’s portfolio value was invested in listed investee companies and 68 percent (66 percent) in unlisted investee companies.

Kinnevik is a long-term shareholder and therefore has the flexibility not to have a general strategy for managing short-term fluctuations in the share prices of its listed investee companies. A 10 percent change in the prices of all listed shareholdings at 31 December 2023 would have affected the Group’s earnings and shareholders’ equity by SEK 1.3bn (1.5bn).

The value of Kinnevik’s investments in unlisted investee companies may increase or decrease due to a number of factors, of which changes in public equity markets is one. In the process of valuing its unlisted holdings, Kinnevik takes numerous factors into consideration. These include relative valuations of comparable publicly traded companies, operational and financial performance of the respective investee company, and valuations reflected in transactions in the respective investee company’s shares. Any changes in these considerations bear impact on the value of Kinnevik’s investments in unlisted investee companies and can negatively impact Kinnevik’s net asset value. For the companies that are valued based on multiples an increase in the multiple by 10 percent on 31 December 2023 would have increased the aggregate assessed fair value by SEK 2.1bn (2.1bn). Similarly, a decrease in the multiple by 10 percent would have decreased the aggregate assessed fair value by SEK 2.0bn (1.9bn).

Liquidity and financing risk

Kinnevik’s liquidity and financing risk is limited considering its substantial net cash position and material shareholding in Tele2. Kinnevik relies in part on dividends received from Tele2 to finance its operations and maintain recent years’ investment momentum. Without dividends from Tele2, Kinnevik would rely primarily on capital reallocation and/or debt
financing to secure the funding of its operations and maintain its targeted financial position.

On 31 December 2023, Kinnevik had cash and cash equivalents amounting to SEK 11,951m (13,848m) and committed but not utilized credit facilities amounting to SEK 4,230m (5,130m).

Financing risk covers the eventuality that Kinnevik is not be able to obtain financing, or that financing can only be obtained at considerable cost. As mentioned above, Kinnevik’s financing risk is limited in consideration of its substantial net cash position and material shareholding in Tele2. Debt financing is sourced from a number of different credit institutions with diversified maturities, and Kinnevik strives to refinance all facilities at least six months prior to maturity. On 31 December 2023, the total amount of committed financing was SEK 7,730m (8,630m) with an average remaining facility duration of 2.9 (2.2) years. For further details, please refer to Note 10 for the Group.

Foreign exchange rate risk

Foreign exchange rate risk comprises transaction and translation currency exposure. Transaction exposure arises from cash flows denominated in foreign currencies. Kinnevik’s debt funding and cash position is virtually entirely denominated in SEK. Excluding investments and divestments, Kinnevik does not have any material cash flows in foreign currencies.

Translation exposure arises from the translation of balance sheet items denominated in foreign currencies into SEK. Kinnevik’s balance sheet is mainly exposed to foreign exchange risk through investments denominated in either USD or EUR. On 31 December 2023, 46 percent (44 percent) of Kinnevik’s portfolio value, corresponding to a value of SEK 18.8bn (19.1bn), pertained to investments denominated in USD. The corresponding share of Kinnevik’s portfolio value for investments denominated in EUR was 20 percent (17 percent), corresponding to a value of SEK 8.1bn (7.5bn). An appreciation or depreciation of the basket
of currencies in which Kinnevik’s investments are denominated of 10 percent compared to the SEK would have increased/decreased the total portfolio value by SEK 2.8bn (2.9bn).

Kinnevik is also exposed to indirect translation exposure, as several of its investee companies operate internationally, whereby foreign currencies have an indirect effect on the value of these investments.

Interest rate risk

Kinnevik’s interest rate risk pertains to the risk that the value of interest-bearing receivables and liabilities will change negatively due to changes in market interest rates. On 31 December 2023, none of Kinnevik’s interest-bearing liabilities, SEK 3.5bn (3.5bn), were exposed to interest rate changes. SEK 3.25bn (3.25bn) out of Kinnevik’s SEK 3.5bn (3.5bn) in outstanding bonds were originally exposed to interest rate risk with floating rates (3 months STIBOR). This interest rate risk was hedged by entering into interest rate swaps maturing on the same dates as the relevant bonds. On 31 December 2023, these swaps had a market value of SEK 158 (286m). An increase of 1.00 percent in interest rates at the reporting date would have increased the market value of the swaps by SEK 71m. Similarly, a decrease in interest rates of the equivalent amount would have decreased the market value of the swaps by SEK 76m.

In connection with refinancing of current bonds and credit facilities, or if Kinnevik were to increase its receivables or liabilities considerably, the interest rate risk may change materially.