New Zealand Gazette – 1997 – No. 167

Page 4006

✨ Electricity Corporation Financial Notes



4006

NEW ZEALAND GAZETTE

No. 167

Electricity Corporation of New Zealand Limited
Notes to the Financial Statements

  1. Capital commitments

    Commitments in respect of contracts for capital expenditure

    1997 1996
    $M $M
    254 14

  2. Lease commitments

    Operating lease commitments are payable:

    Within one year 2 2
    Between one and two years 1 2
    Between two and five years 5 3
    Later than five years 12 7
    Total 20 14

    The operating leases are of a rental nature and are on normal commercial terms and conditions. The majority of the lease commitments are for building accommodation. The remainder relate to land or small items of plant and equipment.

  3. Contributions to retirement savings plan

    Contributions are made into ECNZ's Retirement Savings Plan in respect of ECNZ employees who are members of the Plan. ECNZ contributes a maximum of 10% of the relevant employee's basic salary. These contributions are charged against profit.

  4. Financial instruments

    (i) Currency, interest rate and revenue risk

    Nature of activities and management policies with respect to financial instruments:

(a) Currency

    ECNZ has exposure to foreign exchange risk as a result of offshore funding activities and transactions denominated in foreign currencies arising from normal trading activities. Where exposures are certain, such as borrowing commitments, it is ECNZ's policy to hedge these risks as they arise. ECNZ uses cross currency interest rate swaps and forward foreign exchange contracts to manage these exposures.

    Contract amounts of foreign exchange instruments outstanding at balance date are as follows:

    Cross currency interest rate swaps    1,237    1,528
    Forward foreign exchange contracts     163      171

    The cash settlement requirements of the above instruments approximate the contract amounts shown above.

(b) Interest rate

    ECNZ has a mixture of current to long term borrowings that are used to fund ongoing activities. It is ECNZ policy to manage exposure to interest rate risk via the use of interest rate swaps, forward rate agreements, interest rate options and interest rate futures. The notional principal or contract amounts of interest rate contracts outstanding at balance date are as follows:

    Interest rate swaps               736      327
    Forward rate agreements (FRA)       163      395
    Interest rate options             497      573
    Interest rate futures             183       29

    The cash settlement requirement of interest rate swaps is the net interest receivable of $2,671,751 (1996 $663,143 payable). The best approximation for FRA's is the current market value at balance date which is $36,921 (1996 $165,771). The cash settlement requirement of interest rate options is the net market value of the options, at strike date, if the option is exercised. Based on current market rates at balance date this would be $852,997 (1996 $107,636). Futures are cash settled each day to reflect the market value at the close of the previous business day.


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✨ LLM interpretation of page content

🏭 Electricity Corporation Financial Position (continued from previous page)

🏭 Trade, Customs & Industry
Electricity, Financial Statement, Capital Commitments, Lease Commitments, Retirement Savings Plan, Financial Instruments, Currency Risk, Interest Rate Risk, Revenue Risk