Annual report financial statements - Meridian Energy

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Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2011 25. Financial Instruments (continued) c) Cash Flow Hedging Cash Flow Hedges – CFDs Meridian currently sells and purchases electricity at spot prices from the market exposing it to changes in the price of electricity. As described in note 24 – Financial Risk Management, it is Group policy to manage this risk on a net basis by entering into CFDs which swap receipt (payment) of spot electricity prices based on a specified volume of electricity with fixed electricity payments (receipts) for an equivalent volume. Cash settlements are made on these instruments on a monthly basis and impact income on an accrual basis. As discussed in Note 24 – Financial Risk Management, for accounting purposes, from 1 January 2009 all of the CFDs are classified as held for trading with movements in fair value recognised in the income statement. Upon cessation of hedge accounting the balance in the cash flow hedge reserve is amortised as contract volumes expire over the remaining life of the respective contracts. Cash Flow Hedges – FECs Meridian hedges highly probable forecast capital expenditures through a combination of forward exchange contracts and foreign currency options. The cash flows associated with these contracts are timed to mature when payment for the capital expenditure is made. The contracts range in maturity from 0 to 36 months. For contracts designated as hedges for accounting purposes, when the cash flows occur Meridian adjusts the carrying value of the asset acquired. Cash Flow Hedges – CCIRSs Meridian hedges its foreign currency exposure on foreign currency denominated debt using CCIRSs in a combination of cash flow and fair value hedges. The cash flow hedge component represents the expected foreign currency cash flows on the debt relating to the credit margin paid by Meridian on the borrowings. Cash flows relating to the debt and the CCIRSs are settled quarterly for the NZ cash flows and semi-annually for the foreign currency (US and Australian dollars). Income is affected by these settlements on an accrual basis. The table below shows the movements in the cash flow hedge (‘CFH’) reserve for the period. GROUP AND PARENT FECs $’000 DEBT – CFH OF MARGIN $’000 CFDs $’000 TAX $’000 TOTAL $’000 Opening Balance at 1 July 2009 (9,094) 4,024 (2,823) 2,368 (5,525) Amount Recognised in Equity (29,449) (1,429) - 9,150 (21,728) Amount Removed from Equity: - Amortised to Profit or Loss 1 - - 1,625 (455) 1,170 - Included in Initial Cost of Assets 4,974 - - (1,393) 3,581 - Reclassified to Profit or Loss 2 33,087 - - (9,926) 23,161 Closing Balance at 30 June 2010 (482) 2,595 (1,198) (256) 659 Ineffectiveness Recognised in the Income Statement from Cash Flow Hedges - (304) - - - GROUP AND PARENT FECs $’000 DEBT – CFH OF MARGIN $’000 CFDs $’000 TAX $’000 TOTAL $’000 Opening Balance at 1 July 2010 (482) 2,595 (1,198) (256) 659 Amount Recognised in Equity 6,419 (4,558) - (521) 1,340 Amount Removed from Equity: - Amortised to Profit or Loss 1 - - 1,518 (425) 1,093 - Included in Initial Cost of Assets (4,596) - - 1,287 (3,309) Closing Balance at 30 June 2011 1,341 (1,963) 320 85 (217) Ineffectiveness Recognised in the Income Statement from Cash Flow Hedges - - - - - 1 Included in Net Change in Fair Value of Financial Instruments. 2 Includes losses on FECs not expected to be recovered in one or more future periods. 54 MERIDIAN ENERGY LIMITED
Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2011 25. Financial Instruments (continued) The table below shows when the amounts held in the cash flow hedge reserve are expected to impact the income statement (CFDs and CCIRSs) or the Statement of Financial Position (FECs). LESS THAN 1 YEAR $’000 GROUP AND PARENT 2011 1–2 YEARS $’000 2–5 YEARS $’000 GREATER THAN 5 YEARS $’000 CfDs (754) 1,065 8 - CCIRSs (122) - (755) (1,086) FECs 1,438 (92) (5) - Total 562 973 (752) (1,086) LESS THAN 1 YEAR $’000 GROUP AND PARENT 2010 1–2 YEARS $’000 2–5 YEARS $’000 GREATER THAN 5 YEARS $’000 CfDs (1,518) (754) 1,074 - CCIRSs - (112) 109 2,598 FECs (430) (45) (3) (4) Total (1,948) (911) 1,180 2,594 MERIDIAN ENERGY LIMITED 55
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Meridian Energy Financial Statement
Page 3 and 4:
Income Statement FOR THE YEAR ENDED
Page 5 and 6: Statement of Financial Position AS
Page 7 and 8: Statement of Changes in Equity FOR
Page 9 and 10: Notes to the Financial Statements F
Page 55: Notes to the Financial Statements F
Page 63 and 64: Auditor’s Report Independent Audi
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Annual report financial statements - Meridian Energy

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