National Grid 2008 Annual Report Download - page 681

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 19844
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 154
Description: EXHIBIT 15.1
0/4350.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/350/4*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 19844
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 154 Description: EXHIBIT 15.1
0/4350.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/350/4*
Table of Contents
162
Notes to the consolidated financial statements continued
National Grid plc
33. Financial risk continued
(b) Credit risk
Credit risk is managed on a portfolio basis. Credit risk arises from cash and cash equivalents, derivative financial
instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail
customers, including outstanding receivables and committed transactions.
Treasury related credit risk
Counterparty risk arises from the investment of surplus funds and from the use of derivative instruments. As at 31
March 2008 the following limits were in place for investments held with banks and financial institutions:
As at 31 March 2008 and 2007, we had a number of exposures to individual counterparties. In accordance with our treasury
policies and exposure management practices, counterparty credit exposure limits are continually monitored and no
individual exposure is considered significant in the ordinary course of treasury management activity. Management does not
expect any significant losses from non-performance by these counterparties.
The counterparty exposure under derivative financial contracts as shown in note 17 was £1,526m (2007: £657m), after
netting agreements it was £1,277m (2007: £364m). This exposure is further reduced by collateral received as shown in note
21.
Wholesale and retail credit risk
Our principal commercial exposure in the UK is governed by the credit rules within the regulated codes Uniform Network
Code and Connection and Use of System Code. These lay down the level of credit relative to the Regulatory Asset Value
(RAV) for each credit rating. In the US, we are required to supply electricity and gas under state regulations. Our credit
policies and practices are designed to limit credit exposure by collecting prepayments prior to providing utility services.
Collection activities are managed on a daily basis. The utilisation of credit limits is regularly monitored. Sales to retail
customers are usually settled in cash or using major credit cards. Management does not expect any significant losses of
receivables that have not been provided for as shown in note 19.
Maximum limit Long-term limit
£m £m
Rating
AAA rated G8 soverei
g
n entities Unlimited Unlimited
Tri
p
le ‘A’ vehicles 140 140
Tri
p
le ‘A’ ran
g
e institutions
(
AAA
)
620 to 965 310 to 505
Double ‘A’ range institutions (AA) 345 to 450 175 to 225
Sin
g
le ‘A’ ran
g
e institutions
(
A
)
80 to 140 40 to 70