✨ Financial Statements Notes
30 NOVEMBER
NEW ZEALAND GAZETTE
3987
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2001
21. FINANCIAL INSTRUMENTS (continued)
(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 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’s 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. 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 Shareholder’s 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$ 40 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 2001 (2000 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 cumulative anticipated financing and operating cash flow requirements (excluding long term debt) 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 —
NZ Gazette 2001, No 163
Gazette.govt.nz —
NZ Gazette 2001, No 163
✨ LLM interpretation of page content
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Transpower New Zealand Limited Lines Business Financial Position
(continued from previous page)
🏭 Trade, Customs & IndustryFinancial Statements, Financial Risks, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk