✨ Financial Statements Notes
NEW ZEALAND GAZETTE
29 NOVEMBER
4375
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2002
26. 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 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 to a maximum of 20 per cent of the Transpower Group shareholders funds with counterparties that are either a bank or financial institution or special purpose derivatives product counterparty and have a minimum long term credit rating of A or above by Standard and Poor’s, or Moody’s equivalent, or a New Zealand corporate with a short term credit rating of A-1 or above, for which the credit limit is capped at NZ $40 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 2002 (2001: 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 flows, excluding debt, over the next six months by 20 per cent. To smooth Transpower’s refinancing requirements in future periods, debt maturing in any 12 month period is not to exceed 25 per cent of total debt.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2002, No 173
Gazette.govt.nz —
NZ Gazette 2002, No 173
✨ LLM interpretation of page content
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Transpower New Zealand Limited Notes to Financial Statements
(continued from previous page)
🏭 Trade, Customs & IndustryFinancial Instruments, Risk Management Policies, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk, Debt Portfolio, Foreign Currency, Financial Risks