✨ Financial Statements Notes
3660 NEW ZEALAND GAZETTE No. 151
Notes to and Forming Part of the Financial Statements
For the Year Ended 31 March 1998
15 FINANCIAL INSTRUMENTS
(i) Credit risk
Financial instruments which potentially subject the Company to credit risk principally consist of bank balances and accounts receivable. The five largest accounts receivable balances as at 31 March 1998 comprise 8.87% of total accounts receivable. Cash deposits are only made with registered banks, no specific concerns regarding credit risk exist.
The company performs credit evaluations on customers where possible. New customers with known high credit risk are required to pay a bond before energy is supplied to them.
(ii) Interest Rate Risk
Interest rate risk is the risk that interest rates will change, increasing or decreasing the cost of borrowing or lending. The company's short-term borrowings are on a floating daily interest rate. Long-term debt is funded via Powerco's Commercial Paper program based on the Bank bill rates every 90 days.
Powerco has entered into interest rate swap agreements to reduce the impact of the changes in interest rates on its Commercial Paper program. At 31 March 1998 the company had interest rate swap agreements outstanding with commercial banks. The total notional principal amount of these arrangements totalled $58.55 million with the last of these agreements maturing within 7yrs.
The weighted average of these swap agreements give an interest of 7.8%.
(iii) Wholesale electricity purchases
The company has exposure to wholesale electricity price fluctuations in respect of the purchase of electricity, in respect of commercial sales commitments at fixed prices over periods of one to two years through its associate company, and domestic sales at prices which may be changed by the company within commercial limits. The price fluctuation risks are minimised by entering into back to back electricity hedge contracts through its associate company, which are fixed forward supply agreements to ensure the supply of electricity at predetermined prices.
The balance of off Statement of Financial Position financial instruments of the company are as follows:
| 1998 | 1997 | |
|---|---|---|
| Contract Amount $'000 | Fair Value $'000 | |
| Electricity Purchase Contracts | 32,250 | 32,250 |
16 RELATED PARTY TRANSACTIONS
As an integrated company, Powerco's corporate function provides services to both the line and energy functions. These services include billing, meter reading, call centre services, in addition to other normal corporate activities. These costs have been allocated between the functions to reflect the costs incurred.
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VUW Te Waharoa —
NZ Gazette 1998, No 151
NZLII —
NZ Gazette 1998, No 151
✨ LLM interpretation of page content
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Powerco Limited Financial Statements Certification
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🏭 Trade, Customs & Industry11 May 1998
Powerco Limited, Financial Statements, Credit Risk, Interest Rate Risk, Electricity Purchases, Related Party Transactions