✨ Financial Statements
22 DECEMBER 2004 NEW ZEALAND GAZETTE, No. 171 4277
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2004
20. 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 30 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 risk policy is to establish credit limits with counterparties that are entities rated by financial institutions or special purpose derivatives products providers. There are specific limits on the amount of credit risk permitted with individual counterparties. These credit limits are not to exceed 20 per cent of Transpower Group shareholders’ funds or 1.5 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 Corporation, 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 Corporation without long term credit rating of A- 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 at some circumstances require collateral. No collateral is held at 30 June 2004 (2003: 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 funding 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 must not exceed NZ$ 350,000,000.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2004, No 171
Gazette.govt.nz —
NZ Gazette 2004, No 171
✨ LLM interpretation of page content
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Financial Performance of Transpower New Zealand Limited Lines Business
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🏭 Trade, Customs & IndustryFinancial Statements, Financial Instruments, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk, Debt Portfolio, Foreign Currencies, Financial Risks