New Zealand Gazette – 2000 – No. 162

Page 4210

✨ Financial Statements Notes



NEW ZEALAND GAZETTE
No. 162

TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2000

  1. FINANCIAL INSTRUMENTS (cont...)

(h) 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 50 per cent of total debt and no more than 40 per cent of fixed rate debt is to re-price in any 12 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 service change expenditure unproved within a New Investment Agreement. Service integrity expenditure is paid at spot. Foreign currency borrowings are converted into New Zealand dollars at the time of commitment to drawdown 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 with counterparties that are either a bank, a financial institution or special purpose derivatives products company. These credit limits are not to exceed 20 per cent of Transpower Group shareholder's funds or 15 per cent of the Shareholders funds of the counterparty as shown in the most current annual report. If the counterparty is a New Zealand corporate, the credit limit is not to exceed NZ$ 20 million.

In addition the counterparty must have a minimum long term credit rating of A or above by Standard & Poor's, or Moody's equivalent, or if the counterparty is a New Zealand corporate a short term credit rating of A-1 or above. 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 2000 (1999: 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 25 per cent of total debt.



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Online Sources for this page:

VUW Te Waharoa — PDF NZ Gazette 2000, No 162


Gazette.govt.nz — PDF NZ Gazette 2000, No 162




✨ LLM interpretation of page content

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

🏭 Trade, Customs & Industry
Financial Instruments, Financial Risks, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk