New Zealand Gazette – 1997 – No. 105

Page 2460

✨ Financial Statements Notes

KING COUNTRY ENERGY LIMITED

NOTES TO THE ANNUAL FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH THE ELECTRICITY INFORMATION DISCLOSURE REGULATIONS 1994

FOR THE YEAR ENDED 31 MARCH 1997

FINANCIAL INSTRUMENTS

Fair Values

The carrying amounts of cash, bank balances and investments are equivalent to their fair value.

The carrying amounts of receivables and creditors are invoiced amounts taking account of any amounts considered irrecoverable and are equivalent to their fair value.

The Fair value of electricity price hedging contracts can vary day to day as the spot market price for electricity varies. Hedges and Spot Prices are based on half hour Demands and there are therefore 48 varying prices for each block hedged. It is not possible to reliably measure the fair value of the electricity price hedging contracts at Balance Date due to an insufficient Secondary Market for these contracts.

The value of hedge prices contracted for at balance date relating to the period from 1 April 1997 to 30 September 2002 is estimated at $21.5 million (1996: $0). This amount has not been recognised in the financial statements.

Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash, investments and trade receivables. The maximum credit risk as defined by FRS 31 is the book value of these financial instruments, however the Company considers the risk of non recovery of these amounts as being minimal.

The Company places its cash deposits and investments with high-credit-quality financial institutions. Concentrations of credit risk with respect to receivables are limited due to a large number of customers included in the Company’s base.

The Company requires a deposit for all new customers if no credit references are received from other Energy Companies. These are refunded after two years. No other form of security or collateral is required to support financial instruments with credit risk.

Market Risk

The Company is exposed to market risk in respect of electricity purchases, this being a type of price risk as defined by FRS 31.

King Country Energy Limited has entered into electricity hedge contracts with ECNZ and Contact NZ Ltd in order to minimise the risk of price fluctuations on the electricity spot market. It is the Company's current policy to hedge at least 95% of its estimated electricity purchases.

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VUW Te Waharoa — NZ Gazette 1997, No 105

NZLII — NZ Gazette 1997, No 105

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✨ LLM interpretation of page content

🏭 Notes to the Financial Statements of King Country Energy Limited (continued from previous page)

Domain🏭 Trade, Customs & Industry
KeywordsFinancial Statements, Financial Instruments, Fair Values, Credit Risk, Market Risk, Electricity Hedge Contracts

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