Notes to the Consolidated Financial Statements
Years ended December 31, 2008 and 2007 (In thousands of dollars, except per share amounts)
21. Financial instruments:
The Company has classified the significant impacts of its financial instruments as follows:
(a) Financial instruments – carrying values and fair values:
| December 31, 2008 | ||||||||||||||||
| Loans and receivables/ (other finanicial liabilities) |
||||||||||||||||
| Asset/ILiability) | Held for trading | |||||||||||||||
| Classified | Designated | Carrying amount | Fair value | |||||||||||||
| Cash and cash equivalents | $ | - | $ | 102,442 | $ | - | $ | 102,442 | $ | 102,442 | ||||||
| Marketable securities | - | 96,251 | - | 96,251 | 96,251 | |||||||||||
| Restricted cash | - | 1,454 | - | 1,454 | 1,454 | |||||||||||
| Accounts receivable - trade | - | - | 62,076 | 62,076 | 62,076 | |||||||||||
| Accounts receivable - other | - | - | 1,646 | 1,646 | 1,646 | |||||||||||
| Energy contracts receivable | - | - | 976,431 | 976,431 | 976,431 | |||||||||||
| Fair value of open energy | ||||||||||||||||
| contracts | - | 155,331 | - | 155,331 | 155,331 | |||||||||||
| Daily settlements and cash | ||||||||||||||||
| deposits | - | - | 497,312 | 497,312 | 497,312 | |||||||||||
| Option to acquire | ||||||||||||||||
| NetThruPut Inc. | 10,265 | - | - | 10,265 | 10,265 | |||||||||||
| Accounts payable and accrued | ||||||||||||||||
| liabilities | - | - | (53,619) | (53,619) | (53,619) | |||||||||||
| Total return swaps | (5,838) | - | - | (5,838) | (5,838) | |||||||||||
| Interest rate swaps | (12,477) | - | - | (12,477) | (12,477) | |||||||||||
| Energy contracts payable | - | - | (976,431) | (976,431) | (976,431) | |||||||||||
| Fair value of open energy | ||||||||||||||||
| contracts | - | (155,331) | - | (155,331) | (155,331) | |||||||||||
| Daily settlements and cash | ||||||||||||||||
| deposits | - | - | (497,312) | (497,312) | (497,312) | |||||||||||
| Term loan payable, net | - | - | (428,278) | (428,278) | (428,278) | |||||||||||
| December 31, 2007 | ||||||||||||||||
| Loans and receivables/ (other finanicial liabilities) |
||||||||||||||||
| Asset/ILiability) | Held for trading | |||||||||||||||
| Classified | Designated | Carrying amount | Fair value | |||||||||||||
| Cash and cash equivalents | $ | - | $ | 53,398 | $ | - | $ | 53,398 | $ | 53,398 | ||||||
| Marketable securities | - | 249,399 | - | 249,399 | 249,399 | |||||||||||
| Restricted cash | - | - | - | - | - | |||||||||||
| Accounts receivable - trade | - | - | 42,928 | 42,928 | 42,928 | |||||||||||
| Accounts receivable - other | - | - | 1,384 | 1,384 | 1,384 | |||||||||||
| Total return swaps | 4,126 | - | - | 4,126 | 4,126 | |||||||||||
| Interest rate swaps | - | - | - | - | - | |||||||||||
| Energy contracts receivable | - | - | 745,378 | 745,378 | 745,378 | |||||||||||
| Fair value of open energy | ||||||||||||||||
| contracts | - | 74,907 | - | 74,907 | 74,907 | |||||||||||
| Daily settlements and cash | ||||||||||||||||
| deposits | - | - | - | - | - | |||||||||||
| Option to acquire | ||||||||||||||||
| NetThruPut Inc. | 10,265 | - | - | 10,265 | 10,265 | |||||||||||
| Accounts payable and accrued | ||||||||||||||||
| liabilities | - | - | (48,175) | (48,175) | (48,175) | |||||||||||
| Energy contracts payable | - | - | (745,378) | (745,378) | (745,378) | |||||||||||
| Fair value of open energy | ||||||||||||||||
| contracts | - | (74,907) | - | (74,907) | (74,907) | |||||||||||
| Daily settlements and cash | ||||||||||||||||
| deposits | - | - | - | - | - | |||||||||||
| Term loan payable, net | - | - | - | - | - | |||||||||||
(b) Marketable securities:
The investment portfolio includes pooled fund investments, federal, provincial and corporate bonds, and bank-backed asset-backed debt securities, managed by external investment fund managers. Market values for securities held by the pooled funds are determined by reference to quoted market prices. There is no contracted maturity date for the investments.
The Company has designated its marketable securities as held-for-trading. At December 31, 2008, these investments have been measured at fair value and unrealized gains of $1,206 have been reflected in net income in the consolidated financial statements for the year ended December 31, 2008 (2007 – unrealized losses of $3,142).
(c) Total return swaps:
The Company has entered into a series of total return swaps (“TRSs”) which synthetically replicate the economics of the Company purchasing the Company’s shares as a partial fair value hedge to the share appreciation rights of restricted share units and deferred share units that are awarded to directors and employees of the Company and its designated subsidiaries. The Company marks to market the fair value of the TRSs as an adjustment to income, and simultaneously marks to market the liability to holders of the units as an adjustment to income. The fair value of the TRSs is based upon the excess or deficit of the volume weighted average price of the Company’s shares for the last five trading days of the year compared with the Company’s share price at the date of entering into the TRSs. The fair value of the TRSs and the obligation to unit holders are reflected on the balance sheet. The contracts are settled in cash upon maturity.
The following tables represent the TRSs which are outstanding:
| As at December 31, 2008: | ||||||
| Remaining term to maturity | ||||||
| (notional amount) | Fair Value | |||||
| Under 1 year | 1 to 3 years | Total | Gain | Loss | Net | |
| Equity Swap Contract #13 | $ 854 | $ - | $ 854. | - | $ (433) | $ (433) |
| Equity Swap Contract #17 | - | 407 | 407. | - | (135) | (135) |
| Equity Swap Contract #18 | 4,321 | - | 4,321 | - | (1,528) | (1,528) |
| Equity Swap Contract #19 | 5,516 | - | 5,516 | - | (2,241) | (2,241) |
| Equity Swap Contract #20 | 3,695 | - | 3,695. | - | (1,501) | (1,501) |
| $ 14,386 | $ 407 | $ 14,793 | - | $ (5,838) | $ (5,838) | |
| As at December 31, 2007: | ||||||
| Remaining term to maturity | ||||||
| (notional amount) | Fair Value | |||||
| Under 1 year | 1 to 3 years | Total | Gain | Loss | Net | |
| Equity Swap Contract #5 | $ 695 | $ - | $ 695 | $ 627 | - | $ 627 |
| Equity Swap Contract #10 | 664 | - | 664 | 82 | - | 82 |
| Equity Swap Contract #13 | - | 854 | 854 | 10 | - | 10 |
| Equity Swap Contract #14 | 5,310 | - | 5,310 | 422 | 422 | |
| Equity Swap Contract #15 | 2,453 | - | 2,453 | 563 | - | 563 |
| Equity Swap Contract #16 | 10,548 | - | 10,548 | 2,422 | - | 2,422 |
| $ 19,670 | $ 854 | $ 20,524 | $ 4,126 | - | $ 4,126 | |
Unrealized losses of $9,964 have been reflected in net income in the consolidated financial statements for the year ended December 31, 2008 (2007 – unrealized gains $3,008).
