BRITISH COLUMBIA HYDRO AND POWER AUTHORITY
financial-information-act-return-march-31-2016 financial-information-act-return-march-31-2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2016 AND 2015 British Columbia Hydro and Power Authority will fluctuate because of changes in market interest rates. The Company is exposed to changes in interest rates primarily through its variable rate debt and the active management of its debt portfolio including its related sinking fund assets and temporary investments. The Company’s Boardapproved debt management strategies include maintaining a percentage of variable interest rate debt within a certain range. The Company may enter into interest rate swaps to achieve and maintain the target range of variable interest rate debt. (iii) Commodity Price Risk The Company is exposed to commodity price risk as fluctuations in electricity prices and natural gas prices could have a materially adverse effect on its financial condition. Prices for electricity and natural gas fluctuate in response to changes in supply and demand, market uncertainty, and other factors beyond the Company’s control. The Company enters into derivative contracts to manage commodity price risk. Risk management strategies, policies and limits are designed to ensure the Company’s risks and related exposures are aligned with the Company’s business objectives and risk tolerance. Risks are managed within defined limits that are regularly reviewed by the Board of Directors. Categories of Financial Instruments Finance charges, including interest income and expenses, for financial instruments disclosed in the following note, are prior to the application of regulatory accounting for the years ended March 31, 2016 and 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2016 AND 2015 British Columbia Hydro and Power Authority The following table provides a comparison of carrying values and fair values for non-derivative financial instruments as at March 31, 2016 and 2015. The non-derivative financial instruments, where carrying value differs from fair value, would be classified as Level 2 of the fair value hierarchy. Carrying Value 2016 Fair Value Carrying Value The carrying value of cash equivalents, loans and receivables, and accounts payable and accrued liabilities approximates fair value due to the short duration of these financial instruments. The fair value of derivative instruments designated and not designated as hedges, was as follows: The carrying value of derivative instruments designated and not designated as hedges was the same as the fair value. Fair Value 2016 2015 Interest Income Interest Income (Expense) recognized (Expense) recognized in Finance Charges in Finance Charges (in millions) Financial Assets and Liabilities at Fair Value Through Profit or Loss: Cash equivalents - short-term investments $ 11 $ 11 $ 11 $ 11 $ 1 $ 1 Loans and Receivables: Accounts receivable and accrued revenue 669 669 627 627 - - Non-current receivables 171 171 156 162 7 5 Cash 33 33 28 28 - - Held to Maturity: Sinking funds – US 167 194 155 184 8 7 Other Financial Liabilities: Accounts payable and accrued liabilities (1,816) (1,816) (1,708) (1,708) - - Revolving borrowings - CAD (1,605) (1,605) (2,623) (2,623) (14) (33) Revolving borrowings - US (771) (771) (924) (924) (2) - Long-term debt (including current portion due in one year) (15,837) (18,684) (13,329) (16,799) (701) (638) First Nations liabilities (non-current portion) (378) (547) (391) (758) (17) (9) Finance lease obligations (non-current portion) (219) (219) (240) (240) (21) (23) Other liabilities (147) (153) (81) (86) - - 2015 2016 2015 Fair Fair Value Value (in millions) Derivative Instruments Used to Hedge Risk Associated with Long-term Debt: Foreign currency contracts (cash flow hedges for $US denominated long-term debt) $ 57 $ 45 Foreign currency contracts (cash flow hedges for €Euro denominated long-term debt) (5) - 52 45 Non-Designated Derivative Instruments: Foreign currency contracts (34) 31 Commodity derivatives 41 50 7 81 Net asset $ 59 $ 126
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS<br />
FOR THE YEARS ENDED MARCH 31, 2016 <strong>AND</strong> 2015<br />
British Columbia Hydro and Power Authority<br />
will fluctuate because of changes in market interest rates. The Company is exposed to changes in<br />
interest rates primarily through its variable rate debt and the active management of its debt portfolio<br />
including its related sinking fund assets and temporary investments. The Company’s Boardapproved<br />
debt management strategies include maintaining a percentage of variable interest rate debt<br />
within a certain range. The Company may enter into interest rate swaps to achieve and maintain the<br />
target range of variable interest rate debt.<br />
(iii) Commodity Price Risk<br />
The Company is exposed to commodity price risk as fluctuations in electricity prices and natural<br />
gas prices could have a materially adverse effect on its financial condition. Prices for electricity and<br />
natural gas fluctuate in response to changes in supply and demand, market uncertainty, and other<br />
factors beyond the Company’s control.<br />
The Company enters into derivative contracts to manage commodity price risk. Risk management<br />
strategies, policies and limits are designed to ensure the Company’s risks and related exposures are<br />
aligned with the Company’s business objectives and risk tolerance. Risks are managed within<br />
defined limits that are regularly reviewed by the Board of Directors.<br />
Categories of Financial Instruments<br />
Finance charges, including interest income and expenses, for financial instruments disclosed in the<br />
following note, are prior to the application of regulatory accounting for the years ended March 31, 2016<br />
and 2015.
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