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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2017
48
31.
FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate risk management
The Group is exposed to interest rate risk as it has placed funds in interest-bearing time deposits with banks, but the
Group’s exposure to interest rate risk is not significant since in the current year the entities within the Group have
not borrowed funds at floating interest rates that could have an impact on the Group’s consolidated income
statement.
The Group’s exposure to interest rates on financial assets and liabilities are detailed in the liquidity risk management
section of this note.
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. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
During 2017 100% revenue (2016: 100%) was derived from sales to two customers (2016: two customer) whereby
each exceeded 10% of the Group’s revenue. Further details of the Group’s receivables are provided in note 17.
Credit risk on liquid funds 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 and non-financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
2017
2016
US$ 000’s
US$ 000’s
Trade and other receivables*
165,013
94,103
Cash and cash equivalents
65,594
58,311
230,607
152,414
*Prepaid expenses that have been excluded are US$0.8 million (2016: US$0.9 million).
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Egypt
69,314
58,102
Iraq
55,632
19,734
124,946
77,836
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.