✨ Financial Statements Notes
9 SEPTEMBER NEW ZEALAND GAZETTE 3371
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (Continued)
- Financial Instruments:
Financial Instruments which potentially subject the company to credit risk principally consist of cash bank balances, short term deposit, and accounts receivable. Northpower does not generally require collateral from customers.
Northpower places its cash and short term deposits with high credit quality financial institutions (A1 or better), and limits the amount of credit exposure to any one institution in accordance with company policy.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument: bank balances, short term deposits and receivables.
The carrying amount is the fair value for each of these classes of financial instrument.
Revenue Recognition - Electricity Price Hedging Contracts:
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. If the spot market price is greater than the hedge price, electricity generators must settle the difference with Northpower Limited. Conversely, if the spot market price is less than the hedge price, Northpower Limited must settle the difference with electricity generators.
Credit Risk - Electricity Price Hedging Contracts:
With respect to electricity price hedges, Northpower Limited’s exposure is on any potential difference between the spot price and the hedge price where, on maturity of these agreements, the spot price is greater than the hedge price. Northpower Limited does not anticipate any non-performance of any obligations which may exist on maturity of these agreements.
Fair Value - Electricity Price Hedging Contracts:
The fair value of electricity price hedging contracts can vary from day to day as the spot market for electricity varies. As at balance date, the secondary market for electricity price hedging contracts was not sufficiently active in order to obtain a reliable measure of the fair value of Northpower Limited’s hedging contracts. On maturity of these agreements there is potentially an asset or liability in relation to the electricity price hedges which has not been recognised in the financial statements. As at balance date, the contract amount of the electricity hedging activity amounted to $43.3 million.
- Segment Information:
Northpower Ltd operates predominantly in the electricity supply industry within the Northland area.
Northpower is also involved in generation and contracting, but neither activity is considered significant.
- Contingent Liabilities:
Guarantee of subsidiaries bank overdraft $75,000.
A claim against Northpower Ltd has been lodged in the Employment Court. The claim is not material.
- Commitments:
| Line Business | Energy Business | |||
|---|---|---|---|---|
| 1998 | 1997 | 1998 | 1997 | |
| $ | $ | $ | $ | |
| Estimated capital | ||||
| commitments contracted | ||||
| for at balance date | 0 | 440,000 | 417,000 | 440,070 |
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VUW Te Waharoa —
NZ Gazette 1998, No 139
NZLII —
NZ Gazette 1998, No 139
✨ LLM interpretation of page content
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Certification of Financial Statements for Northpower Ltd
(continued from previous page)
🏭 Trade, Customs & Industry20 August 1998
Electricity, Information Disclosure, Financial Statements, Northpower Ltd