✨ Financial Statements Notes
28 NOVEMBER 2008 NEW ZEALAND GAZETTE, No. 185 4839
NGC HOLDINGS LIMITED
GAS TRANSMISSION ACTIVITIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
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 is made where deemed necessary.
| 2008 CARRYING AMOUNT $'000 | 2007 CARRYING AMOUNT $'000 | |
|---|---|---|
| Cash | 730 | - |
| Receivables and prepayments | 8,135 | 5,901 |
LIQUIDITY RISK
Liquidity risk is the risk of difficulty in raising funds at short notice to meet financial commitments as they fall due. In order to reduce the exposure to liquidity risk, access to undrawn committed lines of credit is maintained. Cash flow reporting systems are maintained to monitor the forecast liquidity position over an outlook of five years.
The day-to-day liquidity exposure is managed by ensuring that sufficient levels of liquid assets and committed facilities are maintained for the next four to five weeks based on daily rolling operational cash flow forecasts. Short term liquidity crisis management is managed by ensuring sufficient borrowing capacity and liquid assets are available as determined from a monthly rolling 18 month cash flow forecast.
The long term liquidity exposure is managed by ensuring estimated deficits in net cash flow are able to be met as determined by the yearly rolling five year cash flow forecast.
A detailed disclosure of the financial instruments is available under Note 27 of Vector group’s annual report for the year ended 30 June 2008.
14. CONTINGENT LIABILITIES
The directors are aware of claims against entities within the Vector group and, where appropriate, have recognised provisions for these within the financial statements. No other material contingencies requiring disclosure have been identified (30 June 2007: nil).
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NZ Gazette 2008, No 185
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NGC Holdings Limited Financial Statements for Gas Transmission Activities
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🏭 Trade, Customs & IndustryFinancial statements, Financial instruments, Risk management, Foreign exchange risk, Credit risk, Liquidity risk, Contingent liabilities