WWU Regulatory Accounts to 31st March 2006 - Our Home Page

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NOTES TO THE REGULATORY ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2006 13 Financial instruments and risk management (continued) (e) Fair values of financial instruments In the table below, the fair value of short term borrowings, current asset investments, cash at bank and in hand and bank loans approximates to book values due to the short maturity of these instruments. The fair values of long term instruments have been determined by reference to prices available from the financial markets on which these borrowings are traded. The fair values fundamentally represent the change in anticipated future interest rates, to the dates of maturity of the borrowings, between the date on which those long term borrowings were raised and the year end. This increased liability will only materialise if the Company ceases trading and future anticipated interest rates remain at year end levels. Book value Fair value Transportation business De-minimis business Metering activities Other activities Total Transportation business De-minimis business Metering activities Other activities Total £m £m £m £m £m £m £m £m £m £m Primary financial instruments held or issued to finance the Company’s operations: Short term borrowings (2.1) - - - (2.1) (2.1) - - - (2.1) Long term borrowings (879.0) - - - (879.0) (879.0) - - - (879.0) Cash at bank and in hand 29.9 - - - 29.9 29.9 - - - 29.9 (851.2) - - - (851.2) (851.2) - - - (851.2) Derivative financial instruments held to manage the interest rate profile and matched by primary financial instruments: Interest rate swaps (45.9) - - - (45.9) (50.3) - - - (50.3) (897.1) - - - (897.1) (901.5) - - - (901.5) The fair value of derivative financial instruments matched to primary financial instruments relates to long term borrowings with a book value of £1,041m which have been included within the primary financial instruments issued to finance the Company’s operations at a fair value of £879m, which is the redemption value of those borrowings. Wales & West Utilities Ltd (Formerly Blackwater 2 Ltd) 38
NOTES TO THE REGULATORY ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2006 13 Financial instruments and risk management (continued) (f) Losses on derivative financial instruments The fair value of losses on derivative financial instruments since their acquisition is not recognised in the financial statements. These instruments are held to manage the Company’s interest rate exposures and the resultant fixed interest charges are made in the accounting periods to which they relate. The table below analyses the composition of the fair value losses (note 13(e)). Of these losses £50.3m would only materialise if the Company were to cease trading. Total losses Transportation business De-minimis business Metering activities Other activities Total £m £m £m £m £m At 1 April 2005 - - - - - Acquired in the period (50.4) - - - (50.4) Movement in fair value 0.1 - - - 0.1 At 31 March 2006 (50.3) - - - (50.3) Of which: Losses expected to be included in 2006/07 (7.0) - - - (7.0) Losses expected to be included in 2007/08 or later years (43.3) - - - (43.3) Losses not expected to be included in 2007/08 or later years - - - - - (50.3) - - - (50.3) 14 Capital commitments 2006 2005 Transportation business De-minimis business Metering activities Other activities Total £m £m £m £m £m £m Contracted for but not provided in the financial statements 4.8 - - - 4.8 - In order to meet regulatory and service standards, the Company has longer term capital expenditure obligations within the regulated gas distribution business, which include investments to meet shortfalls in performance and condition, and to provide for new demands and growth. The current regulatory review period is due to end on 31 March 2007. Ofgem has opted to introduce a one year regulatory period followed by a five year regulatory period. Currently determinations of investment for these two regulatory periods have not been set. Wales & West Utilities Ltd (Formerly Blackwater 2 Ltd) 39
Page 1 and 2: Wales & West Utilities Limited REGU
Page 3 and 4: IMPORTANT INFORMATION Wales & West
Page 5 and 6: OPERATING & FINANCIAL REVIEW IN RES
Page 7 and 8: The Company was allocated a regulat
Page 9 and 10: Financial review Basis of accountin
Page 11 and 12: FINANCIAL RISK MANAGEMENT (continue
Page 13 and 14: DIRECTORS’ INTERESTS There were n
Page 15 and 16: CORPORATE GOVERNANCE STATEMENT STAT
Page 17 and 18: DIRECTORS' RESPONSIBILITIES FOR PRE
Page 19 and 20: Basis of audit opinion We conducted
Page 21 and 22: STATEMENT OF TOTAL RECOGNISED GAINS
Page 23 and 24: CASHFLOW STATEMENT FOR THE ELEVEN M
Page 25 and 26: TURNOVER Turnover represents the sa
Page 27 and 28: DECOMMISSIONING AND ENVIRONMENTAL C
Page 29 and 30: NOTES TO THE REGULATORY ACCOUNTS FO
Page 39: NOTES TO THE REGULATORY ACCOUNTS FO

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