4012 NEW ZEALAND GAZETTE No. 168

The company places its cash deposits with high credit quality financial institutions. Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers. The company holds hire purchase contracts over home appliances sold on the basis of time payment.

With respect to electricity price hedging contracts, the Company’s exposure is on any potential difference between the spot price and the hedge price where, on maturity of these contracts, the spot price is greater than the hedge price. The company does not anticipate any non performance of any obligations by generators which may exist on maturity of these contracts.

16.2 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 deposits are at fixed interest rates and mature within one year. Interest rates on non current borrowings are linked to the 90 day bank bill rate (National Bank buy rate).

16.3 CURRENCY RISK

Currency risk is the risk that amounts payable in foreign currencies will change due to movements in exchange rates. The company enters into foreign currency forward exchange contracts in order to manage its exposure to fluctuations in foreign currency exchange rates on the purchase of specific plant and equipment items from overseas suppliers. Total cover under forward exchange contracts at balance date was $Nil. (1997-$241,920)

16.4 ELECTRICITY PURCHASING

The company has entered into electricity price hedging contracts with supplying Generators.
Under these contracts the company agrees with the generator a fixed (hedge) price for a percentage of its estimated electricity needs. The company does not enter into any speculative position in relation to electricity price hedging contracts. On maturity of these agreements any difference between the hedge price and the spot price is settled between the parties. Settlement occurs irrespective of the amount of electricity supplied. If the spot market price is greater than the hedge price the generator must settle the difference with the Company. Alternatively if the spot price is less than the hedge price the Company must settle the difference with the generator.
The total value of electricity price hedging contracts at balance date was $35,288m (1997 $44.119m).

16.5 FAIR VALUES

The carrying amount of cash, short term deposits and trade receivables reflect their fair values.
The fair value of electricity price hedging contracts will 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 to obtain a reliable measure of the fair value of the Company’s hedging contracts.
The fair value of foreign currency forward exchange contracts represents the estimated amount the company would receive on termination of the contract at balance date, thereby taking into account the unrealised gain of open contracts.

17. RELATED PARTIES

17.1 SHAREHOLDERS

The Trustees of the Marlborough Electric Power Trust hold all the Company’s shares.
The company may from time to time advance funds of a short term nature to the Marlborough Electric Power Trust. The company dividend is also paid to the same trust.

| Year End | Year End |
| 31 March 1998 | 31 March 1997 |
|--------------------------|--------------|
| $ | $ |
| Dividends paid to the trust | 1,570,000 | 1,425,000 |
| Secretarial costs charged to the trust | 6,500 | 6,750 |
| Amounts owed by the trust to the company as at 31 March | 22,907 | 18,270 |

17.2 PARTIES ASSOCIATED WITH DIRECTORS

The company contracted with parties associated with certain directors of Marlborough Electric Ltd.
These transactions involve the provision of legal and consulting services. All transactions were at commercial rates.

| Year End | Year End |
| 31 March 1998 | 31 March 1997 |
|--------------------------|--------------|
| $ | $ |
| PJ Radich (Radich Dwyer Hardy-Jones Clark) | 81,890 | 63,117 |
| SL Maier (Maier Inc) | Nil | 3,750 |

18. EVENTS SUBSEQUENT TO BALANCE DATE

There were no events subsequent to balance date requiring reporting.