EirGrid plc Annual Report 2011

EirGrid plc Annual Report & Accounts 2011
5. Other Operating Costs
Year to
Year to
30 Sep 2011 30 Sep 2010
€ ’000 € ’000
Employee costs (note 4) 31,287 31,522
Depreciation of non-current assets 20,473 18,668
Operations and maintenance 22,221 23,441
Section 75 pension expense - 6,449
Loss/(gain) on derivative financial instruments 33 (784)
Impairment of intangible assets (note 10) 3,453 1,939
Total 77,467 81,235
The loss on derivative financial instruments in 2011 arose from purchases of foreign exchange rate forward
contracts. These contracts were used to mitigate the foreign currency exchange risk on Sterling VAT
receivables, which arose as a result of the East-West Interconnector project. The purchases of foreign
exchange rate forward contracts were non-speculative.
The gain on derivative financial instruments in 2010 arose from an increase in the fair value of a copper
option held by the Group. This option was acquired by the Group in 2009 in connection with the East West
Interconnector project. The Group acquired this option to manage the commodity price risk arising from
its commitment to the project. The Group’s call position on copper was offset to €nil during the year to
30 September 2010, as final notice to proceed on the project was granted. The transaction was
non-speculative.
6. Interest and Other Income, and Finance Costs
Year to
Year to
30 Sep 2011 30 Sep 2010
€ ’000 € ’000
Interest income:
Interest income on deposits 1,161 1,358
Other income in respect of transmission projects 3,063 -
Total 4,224 1,358
Finance costs:
Interest on borrowings and related interest rate swaps 3,051 3,148
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. The risk is managed by
the Group by maintaining an appropriate mix between fixed and floating rate borrowings through the use of
interest rate swap contracts.
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