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The FortisBC Energy companies may be exposed to credit risk in the event of non-performance by counterparties to derivative instruments. The Company uses netting arrangements to reduce credit risk and net settles payments with counterparties where net settlement provisions exist. The following table summarizes the FortisBC Energy companies' net credit risk exposure to its counterparties, as well as credit risk exposure to counterparties accounting for greater than 10% net credit exposure, as it relates to its natural gas swaps and options.
As at March 31, December 31,($ millions, except for number of counterparties) 2013 2012----------------------------------------------------------------------------Gross credit exposure before credit collateral (1) 33 51Credit collateral - -----------------------------------------------------------------------------Net credit exposure (2) 33 51----------------------------------------------------------------------------Number of counterparties greater than 10% 4 4Net exposure to counterparties greater than 10% 30 45----------------------------------------------------------------------------(1) Gross credit exposure equals mark-to-market value on physically and financially settled contracts, notes receivable and net receivables (payables) where netting is contractually allowed. Gross and net credit exposure amounts reported do not include adjustments for time value or liquidity.(2) Net credit exposure is the gross credit exposure collateral minus credit collateral (cash deposits and letters of credit).
The Corporation is exposed to credit risk associated with the amount and timing of fair value compensation that Fortis is entitled to receive from the Government of Belize ("GOB") as a result of the expropriation of the Corporation's investment in Belize Electricity by the GOB on June 20, 2011. As at March 31, 2013, the Corporation had a long-term other asset of $106 million (December 31, 2012 - $104 million), including foreign exchange impacts, recognized on the consolidated balance sheet related to its expropriated investment in Belize Electricity (Notes 17 and 20).
Additionally, as at March 31, 2013, Belize Electricity owed Belize Electric Company Limited ("BECOL") approximately US$6 million for energy purchases of which US$4 million was overdue. In accordance with long-standing agreements, the GOB guarantees the payment of Belize Electricity's obligations to BECOL.
Liquidity Risk
The Corporation's consolidated financial position could be adversely affected if it, or one of its subsidiaries, fails to arrange sufficient and cost-effective financing to fund, among other things, capital expenditures and the repayment of maturing debt. The ability to arrange sufficient and cost-effective financing is subject to numerous factors, including the consolidated results of operations and financial position of the Corporation and its subsidiaries, conditions in capital and bank credit markets, ratings assigned by rating agencies and general economic conditions.
