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## Note 53 – Financial instruments (continued) 

The following table details the fair value of electricity derivatives outstanding at the end of the reporting period: 

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## Electricity derivatives – cash flow hedges 

Derivative financial instruments are used by the consolidated entity in the normal course of business in order to hedge exposure to fluctuations in electricity prices. The aggregate notional volumes of the outstanding electricity derivatives at 30 June 2012 were 43.8 million MWh (2011: 101.3 million MWh). Electricity derivatives are either designated in cash flow hedge relationships or remain non-designated. 

The hedged anticipated electricity purchase and sale transactions are expected to occur continuously over the next five years from the end of the reporting period consistent with the forecast demand from customers over this period. 

The effective portion of changes in the fair value of electricity derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion of the hedge is recognised immediately in profit or loss as part of gain/(loss) in fair value of electricity derivatives. Amounts previously recognised in other comprehensive income and accumulated in equity in the hedging reserve are reclassified to profit or loss and included in cost of sales in each period in which the underlying purchase or sale transactions are recognised. 

When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately to profit or loss. During the year, no hedges were de-designated and all underlying forecast transactions remain highly probable to occur as originally forecast. 

## Electricity derivatives – economic hedges 

The consolidated entity has entered into certain derivative instruments for economic hedging purposes under the Board-approved risk management policies, which do not satisfy the requirements for hedge accounting under AASB 139 Financial Instruments: Recognition and Measurement . These derivatives are therefore required to be categorised as held for trading and are classified in the statement of financial position as economic hedges. Changes in the fair value of derivative instruments that do not qualify for hedge accounting are recognised immediately in profit or loss as part of gain/(loss) in fair value of electricity derivatives. 

During the year a net fair value loss of $304.6 million (2011: gain of $219.1 million) was recognised in profit or loss by the consolidated entity. 

The following table details the movements in the hedging reserve from electricity derivatives: 

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