New Zealand Gazette – 1998 – No. 161

Page 3882

✨ Financial Report Details

3882 NEW ZEALAND GAZETTE No. 161

Horowhenua Energy Limited Line and Energy Businesses - Annual Report 1998

6. Financial instruments

Credit risk

Financial instruments which potentially subject the Company to credit risk principally consist of bank balances, accounts receivable and financial guarantees.

The Company performs credit evaluations on all customers requiring credit. Where a satisfactory credit reference is obtained the Company generally does not require collateral.

Maximum exposures to credit risk as at balance date are:

	Line	Energy
	1998	1998
	$000	$000
Bank Balances	2,934	-
Receivables	2,030	1,294

The above maximum exposures are net of any recognised provision for losses on these financial instruments.

Investments in short term deposits are made with registered banks with satisfactory credit ratings. Exposure with any one financial institution is restricted in accordance with company policy.

Fair values

There were no differences between the fair value and carrying amounts of financial instruments as at 31 March 1998.

Electricity Hedge Contracts

Revenue - electricity price hedging contracts

The Company has entered into electricity price hedges with a number of generators. Under these agreements the company agrees a fixed price for around $45.7 million of its electricity needs over the next four years. The Company's policy is not to enter into any speculative position in relation to electricity hedge pricing 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 the electricity generator must settle the difference with the Company. Conversely if the spot market price is less than the hedge price, the Company must settle the difference with the electricity generator.

Credit risk - electricity price hedging contracts

With respect to electricity price hedges, the Company'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. The Company does not anticipate any non-performance of any obligations which may exist on maturity of these agreements.

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VUW Te Waharoa — NZ Gazette 1998, No 161

NZLII — NZ Gazette 1998, No 161

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✨ LLM interpretation of page content

🏭 Horowhenua Energy Limited Line and Energy Businesses - Annual Report 1998 (continued from previous page)

Domain🏭 Trade, Customs & Industry
Dated29 May 1998
KeywordsFinancial Instruments, Credit Risk, Electricity Hedge Contracts, Bank Balances, Receivables, Fair Values, Electricity Price Hedging, Credit Evaluations

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