EDC PR 2016 (FS section)
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
The table below shows the derivative financial instruments of the Company:<br />
Derivative<br />
Assets<br />
Derivatives Not Designated as Accounting Hedges<br />
Foreign Currency Swap Contracts<br />
A foreign currency swap is an agreement to exchange amounts in different currencies based on the<br />
spot rate at trade date and to re-exchange the same currencies at a future date based on an agreed<br />
rate.<br />
In 2013, the Company entered into a total of 22 foreign currency swap contracts with aggregate<br />
notional amount of US$105.6 million and an average forward rate of ₱44 per US$1.<br />
The Company settled these foreign currency swap contracts in 2014 resulting to a ₱15.1 million<br />
gain that was recorded under “Derivative gains (losses)” in the profit or loss.<br />
In 2014, the Company recognized ₱7.5 million gain from the fair value changes of the foreign<br />
currency swap contracts. This is recorded under “Derivative gains (losses)” in the profit or loss.<br />
The Company did not enter into any foreign currency swap transaction in <strong>2016</strong> and 2015.<br />
Derivatives Designated as Accounting Hedges<br />
<strong>2016</strong> 2015<br />
Derivative Derivative<br />
Liabilities Assets<br />
Derivative<br />
Liabilities<br />
Derivatives designated as<br />
accounting hedges<br />
Cross-currency swaps ₱467,863,313 ₱– ₱351,612,199 ₱–<br />
Interest rate swaps 59,259,408 101,746,629 – 202,469,437<br />
Call spread swaps 60,158,654 – – –<br />
Total derivatives ₱587,281,375 ₱101,746,629 ₱351,612,199 ₱202,469,437<br />
Presented as:<br />
Current ₱470,398,475 ₱4,352,797 ₱58,602,033 ₱4,943,539<br />
Noncurrent 116,882,900 97,393,832 293,010,166 197,525,898<br />
Total derivatives ₱587,281,375 ₱101,746,629 ₱351,612,199 ₱202,469,437<br />
A. Cross Currency Swap Contracts<br />
In 2012, the Parent Company entered into six (6) non-deliverable cross-currency swap (NDCCS)<br />
agreements with an aggregate notional amount of US$65.00 million. These derivative contracts<br />
are designed to partially hedge the foreign currency and interest rate risks on the Parent<br />
Company’s Refinanced Syndicated Term Loan (Hedged Loan) that is benchmarked against US<br />
LIBOR and with flexible interest reset feature that allows the Parent Company to select what<br />
interest reset frequency to apply (i.e., monthly, quarterly or semi-annually) [see Note 17]. As it is<br />
the Parent Company’s intention to reprice the interest rate on the Hedged Loan quarterly, the<br />
Parent Company utilizes NDCCS with quarterly interest payments and receipts.<br />
In 2014, the Parent Company entered into additional six (6) NDCCS with aggregate notional<br />
amount of US$45.0 million to further hedge its foreign currency risks and interest rate risks<br />
arising from the Hedged Loan.<br />
Effectively, the 12 NDCCS converted 62.86% of Hedged Loan into a fixed-rate peso loan.<br />
Under the NDCCS agreements, the Parent Company receives floating interest based on 3-month<br />
US LIBOR plus 175 basis points and pays fixed peso interest. On specified dates, the Parent<br />
278<br />
I Energy Development Corporation Performance Report <strong>2016</strong>
Change language