Notes to Consolidated Financial Statements8

HOKURIKU ELECTRIC POWER COMPANY AND CONSOLIDATED SUBSIDIARIES
March 31, 2016

10. Financial Instruments

Overview

(1) Policy for financial instruments

 In consideration of plans for capital investment for the electricity business, the Group raise funds through corporate bonds and loans from bank. The Group manages temporary cash surpluses through short-term deposits.
 The Group uses derivatives for the purpose of reducing foreign currency exchange risk and interest rate fluctuation risk, and does not enter into derivatives for speculative or trading purposes.

(2) Types of financial instruments, related risk and risk management for financial instruments

 Long-term investments (other securities) are composed of mainly shares of common stock of other companies with which the Group has business relationships. Those securities are exposed to market risk. The Group periodically reviews the fair values of such financial instruments and the financial position of the issuers.
 The fund for reprocessing of irradiated nuclear fuel is made in accordance with the "Spent Nuclear Fuel Reprocessing Fund Act" (Act No.48 of 2005). The Group allocates the reserved amount as notified by the Minister of Economy, Trade and Industry, to the fund management corporation authorized in the act.
 Trade notes and accounts receivable are composed of mainly electricity charges and power charges. Those receivables are exposed to credit risk in relation to customers. In accordance with the Rules for Supply of Electricity and other regulations for managing credit risk arising from receivables, each related division monitors credit worthiness of their main customers periodically, and monitors due dates and outstanding balances by individual customer.
 Interest-bearing liabilities are exposed to interest rate fluctuation risk.
However, those liabilities are composed of mainly bonds payable and long-term loans payable, of which the interest rates are fixed in the medium and long term.
 Substantially all trade notes and accounts payable have payment due dates within one year. Although the Group is exposed to foreign currency exchange risk arising from those payables denominated in foreign currencies, forward foreign exchange contracts are arranged to reduce the risk.
 The financial liabilities are exposed to liquidity risk. However, to reduce such risk, the Group sets the authorized limits of short-term corporate bonds,concludes the commitment-line contracts and keeps appropriate cash and cash deposits balances.
 Derivatives are exposed to credit risk of counterparties. However, to reduce such risk, transactions involving derivatives are conducted in compliance with its internal policies. In addition, the counterparties to derivatives positions are limited to major financial institutions with high credit ratings.

(3) Supplementary explanations of the estimated fair value of financial instruments

 The fair value of financial instruments is based on their quoted market prices, if available. When there is no quoted market price available, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in different fair values.

Fair value of financial instruments

 Carrying amount of financial instruments on the consolidated balance sheet and respective fair value as of March 31, 2016 and 2015 are shown in the following table. The following table does not include financial instruments whose fair values are not readily determinable (please refer to Note 2 below.)

Millions of yen

As of March 31, 2016Carrying amountFair valueDifference
Assets
<1>Long-term investments (other securities)¥14,420¥14,420¥ -
<2>Fund for reprocessing of irradiated nuclear fuel5,3695,369-
<3>Cash and deposits193,128193,128-
<4>Notes and accounts receivable-trade55,74555,745-
<5>Bonds payable (*)475,362493,19817,836
<6>Long-term loans payable (*)427,535453,07525,540
<7>Short-term loans payable16,12716,127-
<8>Notes and accounts payable-trade30,66430,664-

Millions of yen

As of March 31, 2015Carrying amountFair valueDifference
Assets
<1>Long-term investments (other securities)¥20,124¥20,124¥ -
<2>Fund for reprocessing of irradiated nuclear fuel9,4819,481-
<3>Cash and deposits174,379174,379-
<4>Notes and accounts receivable-trade53,99153,991-
<5>Bonds payable (*)465,355481,12115,765
<6>Long-term loans payable (*)392,715413,09620,380
<7>Short-term loans payable16,03516,035-
<8>Notes and accounts payable-trade37,84137,841-

Thousands of U.S. dollars

As of March 31, 2016Carrying amountFair valueDifference
Assets
<1>Long-term investments (other securities)$127,963$127,963$ -
<2>Fund for reprocessing of irradiated nuclear fuel47,64447,644-
<3>Cash and deposits1,713,8021,713,802-
<4>Notes and accounts receivable-trade494,676494,676-
<5>Bonds payable (*)4,218,3164,376,591158,274
<6>Long-term loans payable (*)3,793,9044,020,546226,641
<7>Short-term loans payablee143,110143,110-
<8>Notes and accounts payable-trade272,112272,112-

(*) Current portion of bonds payable and long-term loans payable is included in bonds payable and long-term loans payable.

(Note 1)

 Methods for estimating fair value of financial instruments and other matters related to securities and derivative transactions.

<1> Long-term investments (other securities)
 The fair value of stocks is based on quoted market prices. For information on securities classified by holding purpose, please refer to the Note 11. "Investment Securities."

<2> Fund for reprocessing of irradiated nuclear fuel
 The fund is made in accordance with the "Spent Nuclear Fuel Reprocessing Fund Act" (Act No.48 of 2005). For the redemption of the fund, it is necessary to comply with the redemption plan approved by the Minister of Economy, Trade and Industry. The carrying amount of the fund is based on the present value determined by redemption schedule of the plan.

<3> Cash and deposits and <4> Notes and accounts receivable-trade
 Since these items are settled in a short period of time, their carrying amount approximates fair value.

<5> Bonds payable
 The fair value of bonds is based on either the quoted market price when available or present value of the total of principal and interest discounted by an interest rate determined taking into account the remaining period of each bond and current credit risk.

<6> Long-term loans payable
 The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings were entered into.

<7> Short-term loans payable and <8> Notes and accounts payable-trade
 Since these items are settled in a short period of time, their carrying amount approximates fair value.

(Note 2)

 Financial instruments whose fair values are not readily determinable

Millions of yen / Millions of yen / Thousands of U.S. dollars

Carrying amount201620152016
Unlisted stocks¥36,277¥36,233$321,926
Investment securities6366375,651
Other5547
Total¥36,920¥36,877$327,625

 Because no quoted market price is available and their fair values are not readily determinable, the above financial instruments are not included in the preceding table.

(Note 3)

 Redemption schedule for receivables

Millions of yen

As of March 31, 2016Whithin one yearDue after one year
Fund for reprocessing of irradiated nuclear fuel (*)¥5,205¥ -
Cash and deposits193,128-
Notes and accounts receivable-trade55,745-
Total¥254,079¥ -

Millions of yen

As of March 31, 2015Whithin one year2017 and thereafter
Fund for reprocessing of irradiated nuclear fuel (*)¥4,981¥ -
Cash and deposits174,379-
Trade notes and accounts receivable53,991-
Total¥233,352¥ -

Thousands of U.S. dollars

As of March 31, 2016Within one yearDue after one year
Fund for reprocessing of irradiated nuclear fuel (*)$46,196$ -
Cash and deposits1,713,802-
Notes and accounts receivable-trade494,676-
Total$2,254,675$ -

(*) Regarding fund for reprocessing of irradiated nuclear fuel, only the amountdue in one year or less is disclosed.

(Note 4)

 The aggregate annual maturities of bonds, long-term loans, and other interest-bearing liabilities subsequent to March 31, 2016 and 2015 were summarized as follows:

Millions of yen

As of March 31, 2016Bonds payableLong-term loans payableShort-term loans payable
2017¥50,475¥37,275¥16,127
201850,00033,110-
201970,00031,215-
202069,90046,183-
202140,00043,001-
2022 and thereafter20,000236,748-

Millions of yen

As of March 31, 2015Bonds payableLong-term loans payableShort-term loans payable
2016¥60,000¥24,180¥16,035
201750,47537,275-
201850,00033,110-
201970,00031,215-
202059,90040,183-
2021 and thereafter175,000226,749-

Thousands of U.S. dollars

As of March 31, 2016Bonds payableLong-term loans payableShort-term loans payable
2017$447,910$330,780$143,110
2018443,695293,821-
2019621,173277,004-
2020620,285409,828-
2021354,956381,586-
2022 and thereafter177,4782,100,882-

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