✨ Financial Statements
3482 NEW ZEALAND GAZETTE, No. 133 30 NOVEMBER 2007
Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2007
POWERCO
GAS DIVISION
7 Interest rate swaps
Historical swaps floating to fixed swaps which are cancelled by IAS 39 above on matched term and roll basis. Hedge accounting is not applied to these swaps.
The nominal value of the swap is $22,400,000 (2006: $22,400,000)
In line with NZ IAS39 these are not able to be designated as hedges for accounting purposes and thus movements in the mark to market value of these is passed through to the income statement.
The fair value of the swap is $824,853 (2006: $65,431)
Total notional principal of instruments recognised $583,394,484 (2006: 582,754,484)
Total fair value of instruments recognised -$15,850,585 (2006: -$11,360,643)
All cash flow hedges above are on matched terms. The maturities are the same as the financial liabilities recorded (note 2). The Group’s policy is to re-fix any floating rate debt, thus giving a totally floating portfolio, then re-hedge as per parameters in the treasury policy. This has the effect that some fixed rate hedges are applied against floating rate hedges.
In line with NZ IAS39 these are not able to be designated as hedges for accounting purposes and thus movements in the mark to market value of these is passed through to the income statement.
The Group’s NZD and foreign currency fixed rate debt is converted to floating NZD debt through the use of derivatives, with these exactly matching the term and nominal value of the debt. At the point of issue the nominal value of the bonds was equivalent to the fair value, and the fair value of the derivative was zero. The marking to market of the derivatives outlines movements in interest rates or currency rates.
Powerco bonds are able to be traded on the NZDX and an active secondary market exists. This valuation method assumes a constant credit rating.
The fair value of financial instruments is disclosed in the financial statements as follows:
| 30 June 2007 | 30 June 2006 | |
|---|---|---|
| NZ$000 | NZ$000 | |
| Other non-current financial assets | ||
| Interest rate swap | 8,634 | 1,719 |
| Other non-current financial liabilities | ||
| US cross currency interest rate swap | 18,407 | 8,305 |
| Interest rate swap | 6,078 | 4,775 |
| 24,485 | 13,080 | |
| Net fair value of assets / (liabilities) | (15,851) | (11,361) |
b) Currency swaps
Under currency swap contracts, the consolidated entity agrees to exchange specified principal and interest foreign currency amounts at an agreed future date at a specified exchange rate fixed for floating. Such contracts enable the consolidated entity to mitigate the risk of adverse movements in foreign exchange rates.
The following table details the currency swaps outstanding as at reporting date:
Outstanding contracts as at 30 June 2007
| Average interest rate | Average exchange rate | Contract Value | Fair Value |
|---|---|---|---|
| BKBM + 88 basis points | 0.5947 | NZ$000 | NZ$000 |
| 82,394 | (18,407) |
Over five years
Outstanding contracts as at 30 June 2006
| Average interest rate | Average exchange rate | Contract Value | Fair Value |
|---|---|---|---|
| BKBM + 88 basis points | 0.5947 | NZ$000 | NZ$000 |
| 82,394 | (8,305) |
Over five years
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2007, No 133
Gazette.govt.nz —
NZ Gazette 2007, No 133
✨ LLM interpretation of page content
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Powerco Gas Division Financial Statements for the year ended 30 June 2007
(continued from previous page)
💰 Finance & RevenueFinancial Statements, Powerco, Gas Division, Revenue, Expenditure, Taxation, Derivative Financial Instruments, Interest Rate Swaps, Cash Flow Hedges, Fair Value Hedges