KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2012
F-115
30.
FINANCIAL INSTRUMENTS (CONTINUED)
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of
mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst
approved counterparties. On-going credit evaluation is performed on the financial condition of accounts
receivable.
During the year, 74% of total revenue (2011:67%) was derived from the sales to the Group’s largest counterparty,
the Egyptian General Petroleum Corporation (2011: Egyptian General Petroleum Corporation). Further details of
the Group’s receivables with EGPC are provided in note 4 (“Debtor recoverability”). The Group defines
counterparties as having similar characteristics if they are related entities.
Credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks
with high credit ratings assigned by international credit rating agencies.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was:
2012
2011
USD 000’s
USD 000’s
Trade and other receivables
220,020
176,055
Bank balances
48,384
40,477
268,404
216,532
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
2012
2011
USD 000’s
USD 000’s
Egypt
163,891
131,039
Yemen
1,649
1,134
Ukraine
470
36
Oman
3,404
977
Russia
13
70
169,427
133,256
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses
or risking damage to the Group’s reputation.
Ultimate responsibility for liquidity risk management rests with the management, which has built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding
and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and
banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
