| FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT | 4. FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT 4.1. Financial risks management 4.1.1. Overview As a result of its activities, the Company is exposed to various financial risks, which are managed in accordance with the Financial Risk Management, Counterparty and Issuer Risk, Debt, Derivative and Cash Management Policies (“Financial Policies”) approved at the Board of Directors’ meeting held on August 13, 2020. The main factors considered by Management are: (i) Liquidity; (ii) Credit; (iii) Exchange rate; (iv) Interest rate; (v) Fluctuations of commodity prices; and (vi) Capital. Management are focused on generating consistent and sustainable results over time, however, arising from external risk factors, unintended levels of volatility can influence the Company’s cash flow and income statement. The Company has policies and procedures for managing market risk which aims to: (i) Reduce, mitigate or transfer exposure with the aim of protecting the Company’s cash flow and assets against fluctuations in the market prices of raw material and products, exchange rates and interest rates, price and adjustment indices (“market risk”) or other assets or instruments traded in liquid or illiquid markets to which the value of the assets, liabilities and cash flow are exposed; (ii) Establish limits and instruments with the purpose of allocating the Company’s cash to financial institutions falling within acceptable credit risk exposure parameters; and (iii) Optimize the process of contracting financial instruments for protection against exposure to risk, drawing on natural hedges and correlations between the prices of different assets and markets, avoiding any waste of funds for inefficient transactions. All financial transactions entered into by the Company aim to protect existing exposures, with the assumption of new risks being prohibited, except those arising from its operating activities. Hedging instruments are contracted exclusively for hedging purposes and are based on the following terms: (i) Protection of cash flow against currency mismatches; (ii) Protection of revenue flows for debt settlement and interest payments against fluctuations in interest rates and currencies; and (iii) Protection against fluctuations in the prices of pulp and other supplies related to production. The Treasury team is responsible for identification, evaluating and seeking protection against possible financial risks. The Board of Directors approves financial policies that establish the principles and guidance for global risk management, the areas involved in these activities, the use of derivative and non-derivative financial instruments, and the allocation of a cash surplus. The Company only uses the most liquid financial instruments, and: (i) Does not enter into leveraged transactions or other forms of embedded options that change the purpose of protection (hedge); (ii) Does not have double-indexed debt or other forms of implied options; and (iii) Does not have any transactions requiring margin deposits or other forms of collateral for counterparty credit risk. The Company does not use hedge accounting. Therefore, gains and losses from derivative operations are fully recognized in the statements of income, as disclosed in Note 27. The Company maintained its conservative approach and strong cash and marketable securities positions, as well as its hedge policy, during the crisis caused by the COVID-19 pandemic, and even though there were impacts on the fair value of its financial instruments due to the effects on all global economies, these impacts were as expected, according to the sensitivity analyses disclosed in previous reports, and measures were taken in relation to the risks associated with the financial instruments, in particular with the risks of liquidity, credit and exchange rate variations, as set forth below. 4.1.2. Rating All transactions with financial instruments are recognized for accounting purposes and classified in the following categories: December 31, December 31, Note 2022 2021 Assets Amortized cost Cash and cash equivalents 5 9,505,951 13,590,776 Trade accounts receivable 7 9,607,012 6,531,465 Dividends receivable 11 7,334 6,604 Other assets (1) 931,173 886,112 20,051,470 21,014,957 Fair value through other comprehensive income Investments - Celluforce 14.1 24,917 28,358 24,917 28,358 Fair value through profit or loss Derivative financial instruments 4.5.1 4,873,749 1,442,140 Marketable securities 6 7,965,742 7,758,329 12,839,491 9,200,469 32,915,878 30,243,784 Liabilities Amortized cost Trade accounts payable 17 6,206,570 3,288,897 Loans, financing and debentures 18.1 74,574,591 79,628,629 Lease liabilities 19.2 6,182,530 5,893,194 Liabilities for assets acquisitions and associates 23 2,062,322 405,952 Dividends payable 11 5,094 919,073 Other liabilities (1) 147,920 164,216 89,179,027 90,299,961 Fair value through profit or loss Derivative financial instruments 4.5.1 4,846,795 7,894,528 4,846,795 7,894,528 94,025,822 98,194,489 61,109,944 67,950,705 1) Does not include items not classified as financial instruments. 4.1.3. Fair value of loans and financing The financial instruments are recognized at their contractual amounts. Derivative financial instrument agreements, used exclusively for hedging purposes, are measured at fair value. In order to determine the market values of financial instruments traded in public and liquid markets, the market closing prices were used at the balance sheet dates. The fair values of interest rate and index swaps are calculated based on the present value of their future cash flow, discounted at the current interest rates available for transactions with similar remaining terms to maturity. This calculation is based on the quotations of B3 and ANBIMA for interest rate transactions in Brazilian Reais, and the British Bankers Association and Bloomberg for London Interbank Offered Rate In order to determine the fair values of financial instruments traded in over-the-counter or unliquidated markets, a number of assumptions and methods based on normal market conditions and not for liquidation or forced sale, are used at each balance sheet date, including the use of option pricing models such as Garman-Kohlhagen, and estimates of discounted future cash flow. The fair value of agreements for the fixing of oil bunker prices is obtained based on the Platts index. The results of the trading of financial instruments are recognized at the closing or contract dates, where the Company undertakes to buy or sell these instruments. The obligations arising from the contracting of financial instruments are eliminated from the financial statements only when these instruments expire or when the risks, obligations and rights arising therefrom are transferred. The estimated fair values of loans and financing are set forth below: Yield used to discount/ December 31, December 31, methodology 2022 2021 Quoted in the secondary market In foreign currency Bonds Secondary Market 40,309,832 51,183,520 Estimated present value In foreign currency Export credits (“Prepayment”) LIBOR 17,724,315 19,441,297 Assets Financing SOFR 138,644 In local currency BNDES – TJLP DI 1 292,487 355,494 BNDES – TLP DI 1 1,393,010 686,247 BNDES – Fixed DI 1 21,656 44,544 BNDES – SELIC (“Special Settlement and Custody System”) DI 1 575,129 543,269 BNDES - Currency basket DI 1 10,866 25,001 CRA (“Agribusiness Receivables Certificate”) DI 1/IPCA 1,835,336 3,281,250 Debentures DI 1 5,643,440 5,633,533 NCE (“Export Credit Notes”) DI 1 1,384,396 1,352,291 NCR (“Rural Credit Notes”) DI 1 294,089 289,344 Export credits (“Prepayment”) DI 1 1,320,415 1,321,449 70,943,615 84,157,239 The book values of loans and financing are disclosed in Note 18. Management considers that, for its other financial liabilities measured at amortized cost, their book values approximate their fair values, and therefore the fair value information is not being presented. 4.2. Liquidity risk management The Company’s purpose is to maintain a strong cash and marketable securities position to meet its financial and operating obligations. The amount held in cash is used for payments expected in the normal course of its operations, while the cash surplus amount is invested, in general, in highly liquid financial investments according to the Cash Management Policy. The cash position is monitored by the Company’s Management, by means of management reports and participation in performance meetings with determined frequencies. During the year ended December 31, 2022, the variations in cash and marketable securities were as expected, and the cash generated from operations was used for the most part for investments and debt service. On February 8, 2022, the Company, through its subsidiaries Suzano Pulp and Paper Europe S.A. and Suzano International Trade GmbH, in order to improve the management of its financial liquidity, took out a credit line (“Revolving Credit Facility”), increasing the total available through revolving credit lines from US$500,000 to US$1,275,000. Of the amount taken out, US$100,000 is available until February 2024, with this remaining amount of the line of credit already available from February 2019, in its original amount of US$500,000. The additional amount of US$1,175,000 is available to February 2027 and has the same financial costs as the line available to February 2024. On December 31, 2022, the Revolving Credit Facility was available, but had not been used. The Company signed with the Brazilian National Bank for Economic and Social Development (“BNDES”) a Credit Limit Opening Agreement (“CALC”), a Revolving Credit Limit in the amount of up to R$3,000,000, to be disbursed in the coming years on forestry, social and industrial investments. ● On November 29, 2022 there was the first used of the Credit Limit of R $400,000 for the Industrial projects of 2021 and 2022 (Note 18.6.1). ● On December 27, 2022 there was the second used of the R $400,000 Credit Limit for the 2021 and 2022 Forestry projects (Note 18.6.1). All derivative financial instruments were over-the-counter derivatives and do not require deposit guarantee margins. The remaining contractual maturities of financial liabilities are disclosed as at the date of this financial information. The amounts as set forth below consist of undiscounted cash flow, and include interest payments and exchange rate variations, and therefore may not reconcile with the amounts disclosed in the balance sheet. December 31, 2022 Book Future Up to 1 More than value value year 1 - 2 years 2 - 5 years 5 years Liabilities Trade accounts payable 6,206,570 6,206,570 6,206,570 Loans, financing and debentures 74,574,591 105,341,912 6,823,274 7,899,772 39,476,527 51,142,339 Lease liabilities 6,182,530 11,053,487 1,050,947 992,379 2,668,855 6,341,305 Liabilities for asset acquisitions and associates 2,062,322 2,203,302 1,986,633 99,331 57,421 59,917 Derivative financial instruments 4,846,795 6,515,262 728,070 1,341,108 4,299,970 146,114 Dividends payable 5,094 5,094 5,094 Other liabilities 147,920 147,920 61,500 86,420 94,025,822 131,473,547 16,862,088 10,419,010 46,502,773 57,689,675 December 31, 2021 Book Future Up to 1 1 - 2 More than value value year years 2 - 5 years 5 years Liabilities Trade accounts payable 3,288,897 3,288,897 3,288,897 Loans, financing and debentures 79,628,629 111,723,608 6,357,717 5,761,795 36,672,089 62,932,007 Lease liabilities 5,893,194 10,676,580 937,964 1,780,115 1,632,555 6,325,946 Liabilities for asset acquisitions and associates 405,952 467,499 111,438 131,371 144,171 80,519 Derivative financial instruments 7,894,528 11,774,569 1,688,266 1,391,727 8,694,576 Dividends payable 919,073 919,073 919,073 Other liabilities 164,216 164,216 92,123 72,093 98,194,489 139,014,442 13,395,478 9,137,101 47,143,391 69,338,472 4.3. Credit risk management Related to the possibility of non-compliance with the counterparties’ commitments as part of a transaction. Credit risk is managed on a group basis and arises from cash equivalents, marketable securities, derivative financial instruments, bank deposits, Bank Deposit Certificates (“CDB”), fixed income box, repurchase agreements, letters of credit, insurance, receivable terms of customers, and advances to suppliers for new projects, among others. 4.3.1. Trade accounts receivable and advances to suppliers The Company has commercial and credit policies aimed at mitigating any risks arising from defaults by its customers, mainly through contracting credit insurance policies, bank guarantees provided by first-tier banks, and collateral based on liquidity. Moreover, portfolio customers are subject to internal credit analysis aimed at assessing the risks regarding payment performance, both for exports and for domestic sales. For customer credit assessment, the Company applies a matrix based on the analysis of qualitative and quantitative aspects to determine the individual credit limits to each customer according to the identified risks. Each analysis is submitted for approval according to an established hierarchy and, if applicable, for approval at a Management meeting and by the Credit Committee. The risk classification of trade accounts receivable is set forth below: December 31, December 31, 2022 2021 Low (1) 9,430,244 6,491,726 Average (2) 129,900 19,147 High (3) 67,977 55,355 9,628,121 6,566,228 1) Current and overdue up to 30 days. 2) Overdue between 30 and 90 days. 3) Overdue more than 90 days. A portion of the amounts above does not consider the expected credit losses calculated based on the provision matrix of R$21,109 and R$34,763 as at December 31, 2022 and 2021, respectively. 4.3.2. Banks and financial institutions The Company, in order to mitigate its credit risk, ensures its financial operations are diversified among banks, with a main focus on first-tier financial institutions classified as high-grade by the main risk rating agencies. The book value of financial assets representing exposure to credit risk is set forth below: December 31, December 31, 2022 2021 Cash and cash equivalents 9,505,951 13,590,776 Marketable securities 7,965,742 7,758,329 Derivative financial instruments (1) 4,833,330 1,413,975 22,305,023 22,763,080 1) Does not include the derivative embedded in a forest partnership agreement for the supply of standing wood, which is not a transaction with a financial institution. The counterparties, mainly financial institutions, with whom the transactions are performed classified under cash and cash equivalents, marketable securities and derivatives financial instruments, are rated by the main ratings agencies. The risk ratings are set forth below: Cash and cash equivalents and marketable securities Derivative financial instruments December 31, December 31, December 31, December 31, 2022 2021 2022 2021 Risk rating (1) AA- 47,681 57,193 A+ 1,149,694 8,318 A 1,485,424 601,475 A- 1,095 10,677 brAAA 17,117,171 21,149,838 1,418,968 576,195 brAA+ 1,173 2,282 41,321 brAA 133,030 132,698 730,468 118,796 brAA- 47 brA+ 352 313 brA 17,595 brBB+ 2 brBB- 2,897 22,824 Others 199,428 41,148 17,471,693 21,349,105 4,833,330 1,413,975 1) We use the Brazilian Risk Ratings issued by the agencies Fitch Ratings, Standard & Poor’s and Moody’s. 4.4. Market risk management The Company is exposed to several market risks, mainly related to fluctuations in exchange rate variations, interest rates, inflation rates and commodity prices that could affect its results and financial situation. To mitigate the impacts, the Company has processes to monitor its exposure and policies that could support the implementation of risk management. These policies establish the limits and the instruments to be implemented for the purpose of: (i) Protecting cash flow due to currency mismatch; (ii) Mitigating exposure to interest rates; (iii) Reducing the impacts of fluctuations in commodity’s prices; and (iv) Changes to debt indexes. Market risk management involves the identification, assessment and implementation of the strategy, with the effective contracting of adequate financial instruments. 4.4.1. Exchange rate risk management The fundraising, financing and currency hedging policies of the Company are guided by the fact that a substantial part of net the revenue arises from exports with prices negotiated in US Dollars, while a substantial part of the production costs are in Brazilian Reais. This structure allows the Company to enter into export financing arrangements in US Dollars, and to reconcile the financing payments with the cash flow of receivables from sales in foreign markets, using the international bond market as an important portion of its capital structure, and providing a natural cash hedge for these commitments. Moreover, the Company enter into US Dollar sales transactions in the futures markets, including strategies involving options, to ensure attractive levels of operating margins for a portion of revenue. Such transactions are limited to a percentage of the net surplus of foreign currency over an 24-month The assets and liabilities that are exposed to foreign currency, substantially in US Dollars, are set forth below: December 31, December 31, 2022 2021 Assets Cash and cash equivalents 8,039,218 13,411,978 Marketable securities 4,510,652 2,394,667 Trade accounts receivable 7,612,768 5,043,453 Derivative financial instruments 3,393,785 1,028,450 23,556,423 21,878,548 Liabilities Trade accounts payable (2,030,806) (605,557) Loans and financing (61,216,140) (65,972,300) Liabilities for asset acquisitions and associates (2,053,259) (273,179) Derivative financial instruments (4,698,323) (7,362,631) (69,998,528) (74,213,667) (46,442,105) (52,335,119) 4.4.1.1. Sensitivity analysis – foreign exchange rate exposure – except for derivative financial instruments For market risk analysis, the Company uses scenarios to evaluate both its asset and liability positions in foreign currency, and the possible effects on its results. The probable scenario represents the amounts recognized, as they reflect the translation into Brazilian Reais on the base date of the balance sheet (R$ to U.S.$ = R$5.2177). This analysis assumes that all other variables, particularly interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the U.S. Dollar at the rates of 25% and 50% before taxes. The following table set forth the potential impacts at their absolute amounts: December 31, 2022 Effect on profit or loss and equity Probable Possible Remote (base value) (25%) (50%) Cash and cash equivalents 8,039,218 2,009,805 4,019,609 Marketable securities 4,510,652 1,127,663 2,255,326 Trade accounts receivable 7,612,768 1,903,192 3,806,384 Trade accounts payable (2,030,806) (507,702) (1,015,403) Loans and financing (61,216,140) (15,304,035) (30,608,070) Liabilities for asset acquisitions and associates (2,053,259) (513,315) (1,026,630) 4.4.1.2. Sensitivity analysis – foreign exchange rate exposure – derivative financial instruments The Company has sales operations in US Dollars in the futures markets, including strategies using options, to ensure attractive levels of operating margins for a portion of its revenue. These operations are limited to a percentage of the net foreign exchange surplus over an 24-month horizon, or to investments in the Cerrado Project according to the extraordinary hedge described above, and are therefore pegged to the availability of ready-to-sell foreign exchange in the short term. In addition to the transaction described above, the Company also taken out derivative instruments linked to the US Dollar and subject to exchange variations, seeking to adjust the debt’s exchange rate index to the cash generation currency, as provided for in its financial policies. For the calculation of the mark-to-market (“MtM”) price, the exchange rate of the last business day of the period was used. These market movements caused a positive impact on the mark-to-market position entered into by the Company. This analysis below assumes that all other variables, particularly the interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the US Dollar by 25% and 50%, before taxes, based on the base scenario for the year ended December 31, 2022. The following table set out the potential impacts in each of these assumed scenarios: December 31, 2022 Effect on profit or loss and equity Probable Possible Remote (base value) 25% 50% Dollar/Real Derivative financial instruments Derivative options 1,596,089 (5,557,847) (12,762,202) Derivative swaps (1,768,134) (2,862,661) (5,725,322) Derivative Non-Deliverable Forward (‘NDF’) Contracts (2,474) (314,397) (628,793) Embedded derivatives 40,418 (71,082) (142,165) NDF parity derivatives (1) 161,055 (40,264) (80,528) Dollar/Euro Derivative financial instruments NDF parity derivatives (1) 161,055 (724,977) (1,449,953) 1) Long positions at US$/EUR parity in order to protect the Capex cash flow of the Cerrado Project against the appreciation of the Euro. 4.4.2. Interest rate risk management Fluctuations in interest rates could increase or reduce the costs of new loans and transactions already entered into. The Company is constantly looking for alternatives to the use of financial instruments in order to avoid negative impacts on its cash flow. Considering the termination of LIBOR in June 2023, the Company is evaluating its contracts which have clauses that provide the discontinuation of the interest rate. Most debt contracts linked to LIBOR have some clause to replace this rate with a reference index or equivalent interest rate and, for contracts that do not have such a specific clause, a renegotiation will be carried out between the parties. Derivative contracts linked to LIBOR provide for a negotiation between the parties to define a new rate, or an equivalent rate will be provided by the respective calculation agent. It is worth mentioning that the clauses related to the replacement of the indices in the Company’s debt contracts indexed to LIBOR, establish that a replacement of the indexation rate in the contracts can only be considered in two circumstances: (i) after a communication from an official government entity formally stating the replacement/termination of the reference rate used in the contract, which must define the exact date on which the rate will be extinguished; and / or (ii) syndicated operations begin to be executed at a rate indexed to the Secured Overnight Financing Rate (“SOFR”). Considering that on March 5, 2021 the UK Financial Conduct Authority (“FCA”) announced the date of extinction of LIBOR 3M as June 30, 2023, the Company can, from the date of this announcement, begin negotiations regarding changing the indices for its debt contracts and related derivatives. The Company mapped all of its contracts subject to LIBOR reform that have yet to transition to an alternative benchmark rate as at December 31, 2022. The Company has R$16,930,445 related to loan and financing contracts, and R$548,941 related to derivative contracts, and initiated contact with the respective counterparties to each contract, to ensure that the terms and good market practices are adopted for the transition period of the index until June 2023, and these terms are still under negotiation between the parties. The Company understands that it will not be necessary to change the risk management strategy due to the change in the indices of the financial contracts linked to LIBOR. The Company believes that it is reasonable to assume that the negotiation of the indices in its contracts will move towards to the replacement of LIBOR by SOFR, because SOFR is the new interest rate adopted by the capital markets. Based on the available information, the Company does not expect to have a significant impact on its debts and derivatives linked to LIBOR. 4.4.2.1. Sensitivity analysis – exposure to interest rates – except for derivative financial instruments For its market risk analysis, the Company uses scenarios to evaluate the sensitivity of its operations to variations in the following rates: Interbank Deposit Rate (“CDI”), Long Term Interest Rate (“TJLP”), Special System for Settlement and Custody (“SELIC”) and the London Interbank Offered Rate (“LIBOR”), which could impact the results. The probable scenario represents the amounts already booked, as they reflect Management’s best estimates. This analysis assumes that all other variables, particularly exchange rates, will remain constant. The other scenarios considered a depreciation of 25% and 50% in market interest rates. The following table set forth the potential impacts at their absolute amounts: December 31, 2022 Effect on profit or loss and equity Possible Remote Probable (25%) (50%) CDI/SELIC Cash and cash equivalents 1,441,758 49,200 98,400 Marketable securities 3,383,832 115,473 230,947 Loans and financing 8,001,775 273,061 546,121 TJLP Loans and financing 317,281 5,711 11,422 LIBOR Loans and financing 16,930,445 201,781 403,562 4.4.2.2. Sensitivity analysis – exposure to interest rates – derivative financial instruments This analysis assumes that all other variables remain constant. The other scenarios assumed a depreciation of 25% and 50% in market interest rates. The following table sets out the potential impacts of these assumed scenarios: December 31, 2022 Effect on profit or loss and equity Probable Remote Probable 25% 50% CDI Derivative financial instruments Liabilities Derivative options 1,596,089 (594,361) (1,140,951) Derivative swaps (1,768,134) (10,977) (22,123) LIBOR Derivative financial instruments Liabilities Derivative swaps (1,768,134) 369,294 738,044 4.4.2.3. Sensitivity analysis to changes in the consumer price indices of the US economy For the measurement of the probable scenario, the United States Consumer Price Index (“US-CPI”) was considered on December 31, 2022. The probable scenario was extrapolated considering a depreciation of 25% and 50% in the US-CPI to define the possible and remote scenarios, respectively, at their absolute amounts. The following table sets out the potential impacts at their absolute amounts: December 31, 2022 Effect on profit or loss and equity Probable Possible Remote (base value) (25%) (50%) Derivative embedded in a commitment to purchase standing wood, originating from a forest partnership agreement 40,418 (31,599) (65,159) 4.4.3. Commodity price risk management The Company is exposed to commodity prices, mainly the pulp sales price in the foreign market. The dynamics of rising and falling production capacities in the global market and the macroeconomic conditions may impact the Company´s operating results. Through a specialized team, the Company monitors hardwood pulp prices and analyses future trends, adjusting the forecasts aimed at assisting with preventive measures to calculate the different scenarios. There is no sufficiently liquid financial market to mitigate the risk of a material portion of the Company’s operations. Hardwood pulp price protection instruments available on the market have low liquidity and low volume, and high levels of distortion in price formation. The Company is also exposed to international oil prices, reflected in logistical costs for selling in the export market, and indirectly in the costs of other supply, logistics and service contracts. In such cases, the Company evaluates whether to contract derivative financial instruments to mitigate the risk of price variations in its results. On December 31, 2022 and December 31, 2021, the Company did not take out positions to hedge its logistics costs. 4.5. Derivative financial instruments The Company determines the fair values of derivatives contracts, which differ from the amounts realized in the event of early settlement due to bank spreads and market factors at the quotation date. The amounts presented by the Company are based on estimates using market factors, and make use of data provided by third parties, measured internally and compared to the calculations performed by counterparties. The fair value does not represent an obligation to make an immediate disbursement or receipt of cash, given that such an effect will only occur on the dates of contractual fulfillment or upon the maturity of each transaction, when the result will be determined, depending on the case and on the market conditions on the agreed dates. A summary of the methodologies used for the purpose of determining the fair value by type of instrument is presented below: (i) Swaps: the future value of the asset and liability are estimated based on the cash flows projected using the market interest rate of the currency in which the tip of the swap is denominated. The present value of the US Dollar-denominated tip is measured using the discount based on the exchange coupon curve (the remuneration, in US Dollars, of the Reais invested in Brazil) and in the case of the R$-denominated tip, the discount is made using Brazil’s interest curve, being the future curve of the DI, considering the credit risk of both the Company and the counterparty. The exception is pre-fixed contracts x US$, for which the present value of the tip denominated in US$ is measured through a discount using the LIBOR curve disclosed by Bloomberg. The fair value of the contract is the difference between these two points. Interest rate curves were obtained from B3. (ii) Options (Zero Cost Collar): the fair value was calculated based on the Garman-Kohlhagen model, considering both the Company’s and the counterparty credit risk. Volatility information and interest rates are observable and obtained from the B3 exchange, and are used to calculate the fair values. (iii) Non- deliverable forward (“NDF”) contracts: a projection of the future currency quote is made, using the exchange coupon curves and the future DI curve for each maturity. Next, the difference between this quotation and the rate at which the operation was contracted is verified, considering the credit risk of the Company and the counterparty. This difference is multiplied by the notional value of each contract, and brought to its present value based on the future DI curve. Interest rate curves were obtained from B3. (iv) Swap US-CPI: liability cash flows are projected based on the US inflation curve US-CPI, obtained based on the implicit rates for inflation-linked US securities (Treasury Protected against Inflation – “TIPS”), disclosed by Bloomberg. Cash flows from the asset components are projected at the fixed rates implicit in the embedded derivatives. The fair value of an embedded derivative is the difference between the two components, adjusted to present value base on the curve of the exchange coupon obtained from B3. (v) Swap VLSFO (marine fuel): a future projection of the asset price is made, using the future price curve disclosed by Bloombe |
