2011-2012 Annual Report - Full Version - PDF - Palmerston North ...

PNCC’s maximum credit exposure for each class of financial instrument is as follows:CouncilGroupActual Actual Actual Actual2012 2011 2012 2011$000 $000 $000 $000Cash and cash equivalents and bank deposits 369 112 2,123 2,140Trade and other receivables 7,742 8,106 8,197 8,830Financial guarantees 32 59 32 59Derivative financial instruments 2,338 2,557 2,338 2,557Other advances 395 248 395 248Securities, stocks, bonds and shares 19,735 22,039 19,735 22,039The credit quality of financial assets that are neither past due nor impaired can be assessed by reference toStandard and Poor’s credit ratings (if available) or to historical information about counterparty default rates:CouncilGroupActual Actual Actual Actual2012 2011 2012 2011$000 $000 $000 $000COUNTERPARTIES WITH CREDIT RATINGSCash and cash equivalentsAA - 112 626 2,140AA- 369 - 1,497 -NZ bondsAA- or better 2,010 2,641 2,010 2,641A+ 1,022 1,048 1,022 1,048A 322 600 322 600BBB+ 1,838 1,821 1,838 1,821BBB 1,720 1,890 1,720 1,890BBB- - 1,024 - 1,024Derivative financial instrument assetsAA- 2,338 2,557 2,338 2,557COUNTERPARTIES WITHOUT CREDIT RATingsOther advancesExisting counterparty with no defaults in the past 395 248 395 248Investments of long term investment fundExisting counterparty with no defaults in the past 12,823 13,015 12,823 13,015Financial Statements Note 34Trade and other receivables mainly arise fromPNCC’s statutory functions, therefore there areno procedures in place to monitor or report thecredit quality of debtors and other receivables withreference to internal or external credit ratings. PNCChas no significant concentrations of credit risk inrelation to receivables as it has a large number ofcredit customers, mainly ratepayers, and PNCC haspowers under the Local Government (Rating) Act2002 to recover outstanding debts from ratepayers.Palmerston North Airport Limited is exposed tocredit risk as there is a limited base of customers forthe services provided by the Company. Althoughconsidered fully recoverable 71% of receivables at 30June 2012 are from 11 customers.PNCC manages its borrowings in accordance withits funding and financial policies, which includes aLiability Management policy. These policies havebeen adopted as part of PNCC’s Treasury Policy.Liquidity riskLiquidity risk is the risk that PNCC will encounterdifficulty raising liquid funds to meet commitmentsas they fall due. Prudent liquidity risk managementimplies maintaining sufficient cash, the availability offunding through an adequate amount of committedcredit facilities and the ability to close out marketpositions. PNCC aims to maintain flexibility infunding by keeping committed credit lines available.Palmerston North City Council Annual Report 2011/12183