✨ Financial Instruments Disclosure
NEW ZEALAND GAZETTE, No. 119
14 SEPTEMBER 2004
GAS DIVISION
14 Financial Instruments
As Powerco is an integrated business, this disclosure relates to the business as a whole.
(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 2003 comprise 62.2% (2002: 53.2%) 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 6.6% 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 and the issue of US dollar private placement notes. There is currently no hedging against the risk of foreign currency exchange variations in relation to the independent foreign subsidiaries. The Company has put in place a cross-currency swap to hedge against the cost of the US dollar private placement interest costs.
(iv) Fair Value
As at 31 March 2004
Financial assets and liabilities (excluding Bonds referred to in Note 3, 4, 5 and 6 above) are considered to be at their fair value with the exception of the following items,
| Maturities | Notional Values 31 March 2004 $000 | National Values Current 31 March 2004 $000 | Notional Values Forward rate 31 March 2004 $000 | Mark to Market Adjustment 31 March 2004 $000 |
|---|---|---|---|---|
| Interest rate swaps (Powerco pays fixed / receives floating) | 2004 - 2012 | 878,000 | - | 7,070 |
| Forward rate swaps (Powerco pays fixed / receives floating) | 2006 - 2010 | - | 340,000 | (1,294) |
| Swaps (Fixed to floating for Bonds) (Powerco receives fixed / pays floating plus margin) | 2006 - 2016 | 822,266 | - | (25,094) |
| Total | (19,318) |
As at 31 March 2003
Financial assets and liabilities (excluding Bonds referred to in Note 3, 4, 5 and 6 above) are considered to be at their fair value with the exception of the following items,
| Maturities | Notional Values 31 March 2003 $000 | National 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) | 2002-2010 | 1,416,000 | - | (19,188) |
| Forward rate swaps (Powerco pays fixed / receives floating) | 2005-2011 | - | 25,000 | (1,234) |
| Swaps (Fixed to floating for Bonds) (Powerco receives fixed / pays floating plus margin) | 2006-2008 | 420,000 | - | (4,715) |
| Total | (25,137) |
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2004, No 119
Gazette.govt.nz —
NZ Gazette 2004, No 119
✨ LLM interpretation of page content
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Notes to the Financial Statements of Powerco Limited
(continued from previous page)
🏭 Trade, Customs & IndustryFinancial Instruments, Credit Risk, Interest Rate Risk, Foreign Exchange Risk, Fair Value, Powerco Limited