Notes to the Financial Statements
Borrowing Facilities
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31 March 2015 were as follows:
2015
£’000
Expiring in one year or less
Expiring in more than one year but not more than two years
Expiring in more than two years but not more than five years
13,500
—
29,237
2014
£’000
—
8,200
29,237
42,737 37,437
Financial Risks
The Group’s activities result in it being subject to a limited number of financial risks, principally credit risk as the Group has financial assets receivable
from third parties. Management of financial risks focuses on reducing the likely impact of risks to a level that is considered acceptable. The Group has
formal principles for overall risk management as well as specific procedures to manage individual risks.
1) Interest rate risk
Interest rate risk arises from borrowings issued at floating rates, including those linked to LIBOR and the Retail Price Index (RPI), that expose the Group’s
cash flows to changes in LIBOR and RPI. Risks of increases in LIBOR are managed by limiting the value and proportion of Group borrowings that are
linked to this variable rate and by entering into an appropriate value of floating to fixed interest rate swap contracts. Risks associated with increases in
RPI are effectively managed by hedging against the revenues and the Regulatory Asset Value of South Staffs Water, both of which are also linked to RPI.
2) Credit risk
As is market practice, the Group grants certain customers credit on amounts due for the services it supplies, leading to limited risk over the recovery of
amounts receivable from these customers. Full details of the way this risk is managed are provided below. Credit risk also includes the risk over recovery
of loans receivable. This risk is managed by ensuring that loans are only made to entities with sufficient financial resources to service the interest due on
the loans. The total carrying value of financial assets subject to credit risk, net of provisions, at 31 March 2015 was £142,465,000 (2014: £139,262,000).
3) Liquidity risk
Liquidity risk represents the risk of the Group having insufficient liquid resources to meet its obligations as they fall due. The Group manages this risk by
regularly monitoring the maturity of credit facilities, actual and forecast cash flows and ensuring that the payment of its obligations are matched with
cash inflows and availability of free cash and adequate credit facilities. The table above details the undrawn committed borrowing facilities available to
the Group to manage this risk.
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