✨ Financial Statements Notes
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2002
28. FINANCIAL INSTRUMENTS continued
The notional gross contract amounts of interest rate swaps outstanding at balance date are:
| LINES BUSINESS 2002 | LINES BUSINESS 2001 | |
|---|---|---|
| $000 | $000 | |
| Interest rate swaps | 2,615,780 | 2,342,899 |
Cross currency interest rate swaps
Cross currency interest rate swaps are used to convert foreign currency denominated debt issued by Transpower into New Zealand dollar denominated debt. Cross currency interest rate swap contracts eliminate foreign currency risk on the underlying debt by determining the New Zealand dollar equivalent of the final principal exchange at the time of entering into the contract.
The principal amounts of cross currency interest rate swaps outstanding at balance date are:
| Cross currency interest rate swaps | |
|---|---|
| Principal receivable | 921,286 |
| Principal payable | (910,138) |
| LINES BUSINESS 2002 | LINES BUSINESS 2001 | |
|---|---|---|
| $000 | $000 | |
| Principal receivable | 921,286 | 948,170 |
| Principal payable | (910,138) | (889,380) |
Forward rate agreements
Forward rate agreements are used to fix interest rates on Transpower's underlying debt for periods commencing in the future. In the normal course of business Transpower enters into forward rate agreements to fix interest rates on floating rate debt for intervals of three months, which is indicated by a positive figure. A negative figure indicates that overall Transpower is a net investor of forward rate agreements rather than a net borrower. This indicates an intent to float part of the debt rather than fix with a view towards a downward trend in interest rates.
The notional contract amounts of forward rate agreements outstanding at balance date are:
| LINES BUSINESS 2002 | LINES BUSINESS 2001 | |
|---|---|---|
| $000 | $000 | |
| Forward rate agreements | 10,000 | 40,000 |
Interest rate options
Transpower enters into interest rate options to manage interest rate repricing risk. Transpower purchases interest rate options to minimize the impact on finance costs arising from floating rate debt if interest rates were to rise in the future. In the normal course of Transpower's interest rate risk management, the sale of interest rate options is restricted by the requirement to simultaneously purchase an interest rate option.
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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, Interest Rate Swaps, Cross Currency Swaps, Forward Rate Agreements, Interest Rate Options, Risk Management