New Zealand Gazette – 1998 – No. 193

Page 4552

✨ Financial Statements Notes



4552 NEW ZEALAND GAZETTE No. 193

TRANSPOWER NEW ZEALAND LIMITED GROUP

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 1998

21. FINANCIAL INSTRUMENTS (cont...)

(b) Risk management policies

The key risk management policies are as follows:

Interest rate risk management policy

Transpower’s policy is that floating rate debt is not to exceed 36.25 per cent of total debt and no more than 25 per cent of fixed rate debt is to re-price in any twelve month period. This policy ensures that Transpower’s cost of funds will be reasonably predictable from year to year. Transpower defines floating rate debt to include debt for which the next interest rate reset is due within 12 months.

Currency risk management policy

Transpower’s policy is to hedge all material foreign currency denominated purchases, arising from revenue and capital projects approved by the Board, within two days of committing to the purchase.

Foreign currency borrowings are converted into New Zealand dollars at the time of commitment to draw down by Transpower. Currency risk is eliminated using foreign exchange forward contracts and cross currency interest rate swaps.

Credit risk management policy

Transpower’s credit policy is to establish credit limits to a maximum of 15 per cent of Transpower Group shareholder’s funds with counterparties that are either a bank, a financial institution or special purpose derivatives products company. In addition the counterparty must have a minimum long term credit rating of A or above by Standard and Poors, or Moodys equivalent or a New Zealand corporate with a short term credit rating of A-1 or above, which the limit is capped at $20 million. Credit limits are monitored on a daily basis.

The concentration of credit risk with respect to trade receivables is high due to the small number of customers comprising Transpower’s customer base. It is the Company’s policy to perform credit evaluations on customers requiring credit and the Company may in some circumstances require collateral. No collateral is held at 30 June 1998 (1997: nil).

Liquidity risk policy

To ensure Transpower has adequate funding facilities in place to support future operations Transpower’s liquidity policy requires the Company to have access to committed debt facilities (i.e. guaranteed funds) that exceed the peak of the total monthly cumulative cash outflows over the next six months by 20 per cent. To smooth Transpower’s refinancing requirements in future periods, committed debt facilities maturing in any 12 month period are not to exceed 20 per cent of total debt.



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✨ LLM interpretation of page content

🏭 Transpower New Zealand Limited Notes to the Financial Statements (continued from previous page)

🏭 Trade, Customs & Industry
Financial Instruments, Risk Management Policies, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk, Debt Portfolio