✨ Financial Statements Notes
27 AUGUST NEW ZEALAND GAZETTE 3269
2.5 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued)
FINANCIAL INSTRUMENTS (continued)
Foreign exchange risk
The company has, in this reporting period, conducted transactions in foreign currencies for the purposes of protecting the New Zealand dollar value of capital expenditure and for the issuance of Australian Bonds which have been hedged with cross currency swaps.
At balance date the company has no significant exposure to foreign currency risk.
Credit Risk
In the normal course of its business, the company incurs credit risk from energy retailers, financial institutions and trade debtors. The company has a credit policy which is used to manage this exposure to credit risk.
As part of this policy, the company can only have exposures to financial institutions having at least a credit rating of A- long term and A1 short term from Standard & Poors (or equivalent rating). In addition, limits on exposures to financial institutions have been set by the board of directors and are monitored on a regular basis. In this respect, the company minimises its credit risk by spreading such exposures across a range of institutions. The company does not anticipate non-performance by any of these financial institutions.
The company has a concentration of credit exposures to a few large energy retailers. To minimise this risk, the company performs credit evaluations on all energy retailers and other electricity customers and requires a bond or other form of security where deemed necessary.
The maximum exposure to credit risk is represented by the carrying value of each financial asset in the statement of financial position.
Fair values
The estimated fair value of financial instruments at balance date is:
| 2002 | 2001 | |||
|---|---|---|---|---|
| Carrying amount | Fair value | Carrying amount | Fair value | |
| ($000) | ($000) | ($000) | ($000) | |
| Cash and bank overdraft | (745) | (745) | (735) | (735) |
| Bank loans | 74,025 | 74,025 | 719,800 | 719,800 |
| Commercial paper | 183,262 | 183,692 | 119,499 | 119,487 |
| Medium term notes – | ||||
| fixed rate NZ$ | 108,918 | 106,261 | - | - |
| Medium term notes – | ||||
| floating rate A$ | 312,013 | 308,007 | - | - |
| Interest rate swaps | - | (1,703) | - | (22,493) |
| Cross currency swaps | - | (1,971) | - | - |
The following methods and assumptions were used to estimate the fair value of each class of financial instrument where it is practical to estimate that value:
Cash and short term deposits, short term loans
The carrying amount of these items is equivalent to the fair value. Bank overdrafts are set off against cash balances pursuant to right of set off.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2002, No 122
Gazette.govt.nz —
NZ Gazette 2002, No 122
✨ LLM interpretation of page content
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Notes to Financial Statements for the year ended 31 March 2002
(continued from previous page)
💰 Finance & RevenueFinancial Statements, Foreign Exchange Risk, Credit Risk, Fair Values