✨ Financial Statements Notes
Notes to and Forming Part of the Financial Statements
For the Year Ended 31 March 2003
ELECTRICITY DIVISION
12 Financial Instruments
As Powerco is an integrated business, this disclosure relates to the business as a whole.
(i) Credit Risk
Financial receivables 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 2003 comprise 63.2% (2002: 11.49%) of total accounts receivable. These accounts are subject to a Board Prudential Supervision Policy which is used to manage the exposure to credit risk. As part of this policy, limits on exposures have been set and are monitored on a regular basis. Cash deposits are only made with registered banks.
(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. Non-current debt is funded by the fixed coupon bonds and Powerco’s commercial paper program based on 90 day Bank Bills.
Powerco has entered into interest rate swap agreements to reduce the impact of the changes in interest rates on its borrowings. As at 31 March 2003 the Company had interest rate swap agreements with registered banks. The maturities of these agreements are shown in Note 22 (iv). The weighted average of the interest rate swap agreements (excluding the reverse swap agreements) produce an interest rate of 6.74% p.a
(iii) Foreign Exchange Risk
The Company has exposure to foreign exchange risk as a result of the independent foreign subsidiary trading in their local currency. There is currently no hedging against the risk of foreign currency exchange variations.
(iv) Fair Value
As at 31 March 2003
Financial assets and liabilities (excluding Bonds referred to in Note 3 and 4 above) are considered to be at their fair value with the exception of the following items:
| Maturities | Notional Values Current 31 March 2003 $000 | Notional Values Forward rate 31 March 2003 $000 | Mark to Market Adjustment 31 March 2003 $000 |
|---|---|---|---|
| Interest rate swaps (Powerco pays fixed / receives floating) | 2003 - 2012 | 1,416,000 | - |
| Forward rate swaps (Powerco pays fixed / receives floating) | 2008 - 2010 | - | 25,000 |
| Swaps (Fixed to floating for Bonds) (Powerco receives fixed / pays floating plus margin) | 2003 - 2012 | 420,000 | - |
As at 31 March 2003 total mark to market adjustment = (25,137)
As at 31 March 2002
Financial assets and liabilities (excluding Bonds and investments referred to in Note 6 and 14 above) are considered to be at their fair value with the exception of the following items:
| Maturities | Notional Values Current 31 March 2002 $000 | Notional Values Forward rate 31 March 2002 $000 | Mark to Market Adjustment 31 March 2002 $000 |
|---|---|---|---|
| Interest rate swaps (Powerco pays fixed / receives floating) | 2002-2010 | 420,000 | - |
| Forward rate swaps (Powerco pays fixed / receives floating) | 2005-2011 | - | 305,000 |
| Swaps (Fixed to floating for bonds) (Powerco receives fixed / pays floating plus margin) | 2006-2008 | 178,000 | - |
As at 31 March 2002 total mark to market adjustment = (147)
Next Page →
Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2003, No 115
Gazette.govt.nz —
NZ Gazette 2003, No 115
✨ LLM interpretation of page content
🏭
Powerco Limited Financial Statements
(continued from previous page)
🏭 Trade, Customs & Industry21 August 2003
Electricity, Financial Statements, Taxation, Performance Measures, Contingent Liabilities, Capital Commitments, Financial Instruments, Credit Risk, Interest Rate Risk, Foreign Exchange Risk, Fair Value