2014 Financial Statement

EDC 2014 Performance Report
Credit Quality of Financial Assets
Financial assets are classified as high grade if the counterparties are not expected to default in
settling their obligations. Thus, the credit risk exposure is minimal. These counterparties
normally include customers, banks and related parties who pay on or before due date. Financial
assets are classified as a standard grade if the counterparties settle their obligation with the
Company with tolerable delays. Low grade accounts are accounts, which have probability of
impairment based on historical trend. These accounts show propensity of default in payment
despite regular follow-up actions and extended payment terms.
As of December 31, 2014 and 2013, financial assets categorized as neither past due nor impaired
are viewed by management as high grade, considering the collectibility of the receivables and the
credit history of the counterparties. Meanwhile, past due but not impaired financial assets are
classified as standard grade.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
The Company’s exposure to foreign currency risk is mainly from the financial assets and liabilities
that are denominated in US dollar (US$). This primarily arises from future payments of foreign
currency-denominated loans and other commercial transactions and the Company’s investment in
ROP Bonds.
The Company’s exposure to foreign currency risk to some degree is mitigated by some provisions
in the Company’s GRESCs, SSAs and PPAs. The service contracts allow full cost recovery while
the sales contracts include billing adjustments covering the movements in Philippine peso and the
US$ rates, US Price and Consumer Indices, and other inflation factors.
To mitigate further the effects of foreign currency risk, the Company will prepay, refinance or
hedge its foreign currency denominated loans, whenever deemed feasible. The Company also
enters into derivative contracts to mitigate foreign currency risk.
The Company’s foreign currency-denominated financial assets and liabilities (translated into
Philippine peso) as of December 31, 2014, and 2013, are as follows:
Japanese
yen (JP¥)
Sweden
kroner
(SEK
Original Currency
Chilean
Peso
(CH₱)
Peruvian
Sol
(PEN)
2014
Singapore
Dollar (SGD)
New Zealand
dollar (NZD)
Peso
Equivalent
US$
Financial Assets
Loans and receivables:
Cash equivalents 45,365,000 − − − − − − ₱2,028,722,800
Cash on hand and in
banks 7,115,870 − − 151,118,435 34,157 − − 329,890,847
AFS investments:
Debt investments 2,909,250 − − − − − − 130,101,660
Derivative assets
designated as cash
flow hedges 3,447,432 − − − − − − 154,169,159
Total financial assets 58,837,552 − − 151,118,435 34,157 − − ₱2,642,884,466
(Forward)
108