✨ Financial Statements Continuation
VECTOR LIMITED
ELECTRICITY LINES BUSINESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2007
17. FINANCIAL INSTRUMENTS
A comprehensive treasury policy approved by the Vector Limited 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.
A detailed disclosure of the Vector group’s financial instruments is available under Note 30 of Vector group’s annual report for the year ended 30 June 2007.
INTEREST RATE RISK
Interest rate exposures are 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.
FOREIGN EXCHANGE RISK
In this reporting period transactions in foreign currencies have been conducted for the purpose of protecting the NZ$ value of capital expenditure.
There are outstanding forward exchange contracts. At balance date there is no significant exposure to foreign exchange risk.
CREDIT RISK
In the normal course of business, there is exposure to credit risks from energy retailers, financial institutions and trade debtors. There are credit policies, 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 Vector 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. There is no anticipation of non-performance by any of these financial institutions.
There are some concentration of credit exposures with a few large energy retailers and large energy customers. To minimise this risk, credit evaluations on all energy retailers and large energy customers are undertaken and a requirement for a bond or other form of security where deemed necessary is placed.
Cash deposits with a small number of banking institutions are placed and limits are set for the amount deposited with each institution.
The maximum exposure to credit risk is represented by the carrying value of each financial asset.
| 2007 CARRYING AMOUNT $000 | 2006 CARRYING AMOUNT $000 | |
|---|---|---|
| Trade receivables | 62,235 | 53,948 |
LIQUIDITY RISK
Liquidity risk is the risk of encountering 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 un-drawn committed lines of credit has been established.
18. 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 (31 March 2006: nil).
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2008, No 39
Gazette.govt.nz —
NZ Gazette 2008, No 39
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Notes to the Financial Statements for Vector Limited
(continued from previous page)
🏭 Trade, Customs & IndustryFinancial Statements, Financial Instruments, Risk Management, Vector Limited