✨ Financial Statements
28 NOVEMBER 2008 NEW ZEALAND GAZETTE, No. 185 4807
VECTOR LIMITED & SUBSIDIARIES
GAS DISTRIBUTION ACTIVITIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
12. COMMITMENTS (continued)
| Finance lease commitments | 2008 | 2007 |
|---|---|---|
| One to five years | 938 | 872 |
| Total | 938 | 872 |
| Less: future finance charges | (114) | (147) |
| Present value of minimum lease payments | 824 | 725 |
| Present value of finance lease liability | 2008 | 2007 |
|---|---|---|
| One to five years | 824 | 725 |
| Present value of minimum lease payments | 824 | 725 |
Finance leases relate to motor vehicles with varying lease terms.
13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A comprehensive treasury policy approved by the board of directors is used to manage the risks of financial instruments. The policy outlines the objectives and approach that will be adopted in the treasury management processes. The policy covers, among other things, management of credit risk, interest rate risk, funding risk, liquidity risk, currency risk and operational risk.
INTEREST RATE RISK
The interest rate exposure is actively managed in accordance with treasury policy. In this respect, at least forty percent of all debt must be at fixed interest rates or effectively fixed using interest rate swaps, forward rate agreements, options and other derivative instruments. The main objectives are to minimise the cost of total debt, control variations in the interest expense of the debt portfolio from year to year and to match where practicable the interest rate risk profile of debt with the risk profile of the assets. The treasury policy sets parameters for managing the interest rate maturity profile. The parameters depend upon the Standard and Poor’s credit rating and the Reserve Bank of New Zealand continuing to implement monetary policy through adjustments to the official cash rate.
FOREIGN EXCHANGE RISK
Transactions are conducted in foreign currencies for the purpose of protecting the NZD value of capital expenditure. The outstanding forward exchange contracts are used to hedge forecasted foreign currency exposure arising out of the capital expenditure program. Hence at balance date no significant exposure to foreign currency risk exists.
CREDIT RISK
In the normal course of business, there is exposure to credit risks from energy retailers, financial institutions and customers. Credit policies are in place, which are used to manage the exposure to credit risks. As part of these policies, exposures are limited to financial institutions having at least a credit rating of A+ long term from Standard & Poor’s (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, credit risk is minimised by spreading such exposures across a range of institutions. Non-performance by any of these financial institutions is not anticipated.
There exists some concentration of credit exposures with a few large energy retailers and large energy customers. To minimise this risk, credit evaluations are performed on all energy retailers and large energy customers and requirement of a bond or other form of security where deemed necessary is made.
| 2008 | 2007 | |
|---|---|---|
| CARRYING | CARRYING | |
| AMOUNT | AMOUNT | |
| Cash | - | 2 |
| Receivables and prepayments | 10,870 | 10,078 |
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NZ Gazette 2008, No 185
✨ LLM interpretation of page content
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Vector Limited & Subsidiaries Gas Distribution Activities Notes to the Financial Statements
(continued from previous page)
🏭 Trade, Customs & IndustryFinancial statements, Commitments, Lease payments, Financial instruments, Risk management, Interest rate risk, Foreign exchange risk, Credit risk