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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
37
29.
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 ended 31 December 2015, 94% of total revenue (2014:79
%) was derived from the sales to the Group’s
largest counterparty, EGPC and 6% of total revenue (2014: 18%) was derived from sales to Exxon Mobil. Further
details of the Group’s receivables with EGPC and Exxon
Mobil are provided in note 18. 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:
2015
2014
USD 000’s
USD 000’s
Trade and other receivables
47,785
115,334
Cash and cash equivalents
105,297
215,992
153,082
331,326
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
2015
2014
USD 000’s
USD 000’s
Egypt
30,167
66,249
Yemen
-
7,355
30,167
73,604
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
s 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.
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