✨ Financial Instruments and Credit Risk
MercuryEnergy
Mercury Energy Limited and Subsidiaries
Notes to and forming part of the financial statements for the year ended 31 March 1997 continued
22. FINANCIAL INSTRUMENTS
Revenue - electricity price hedging contracts
The group has entered into electricity price hedges which establish a fixed price (hedge price) for a percentage of its estimated electricity needs. It is the group's current policy to hedge at least 50% of its estimated needs six months out.
On maturity of the electricity price hedges any difference between the hedge price and the spot market price is settled between the parties. Settlement occurs irrespective of the amount of electricity actually supplied.
Credit risk
Financial instruments which potentially subject the group to credit risk principally consist of bank balances, money market deposits and accounts receivable.
The group performs credit evaluations on all customers and requires a bond from customers who have yet to establish a suitable credit history with the company.
The group monitors the credit quality of the major financial institutions that are counterparts to its off balance sheet financial instruments and does not anticipate non performance by the counterparts.
With respect to electricity price hedges, the group has a potential credit risk exposure to the counter party dependent on the spot market price at settlement, and does not anticipate any non-performance of any obligations which may exist on maturity of these agreements.
Maximum exposures to credit risk as at balance date are:
| 1997 | 1996 | ||
|---|---|---|---|
| Line Activities | Electricity Retailing Activities | Generation Activities | |
| $000 | $000 | $000 | |
| Bank balances | 495 | 508 | - |
| 4 | |||
| Accounts receivable | 1,173 | 38,975 | - |
| Foreign exchange contracts | - | - | - |
NEW ZEALAND GAZETTE
No. 117
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VUW Te Waharoa —
NZ Gazette 1997, No 117
NZLII —
NZ Gazette 1997, No 117
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Mercury Energy Limited and Subsidiaries Financial Statements
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🏭 Trade, Customs & IndustryFinancial Instruments, Credit Risk, Electricity Price Hedging, Revenue, Accounts Receivable, Foreign Exchange Contracts, 1997, 1996