New Zealand Gazette – 2005 – No. 27

Page 650

✨ Financial Statements



Vector Limited

Electricity Lines Business

Notes to the Financial Statements

For the year ended 31 March 2004

19. FINANCIAL INSTRUMENTS

The Vector group, of which the electricity lines business is the predominant activity, has a comprehensive treasury policy approved by the board of directors to manage the risks of financial instruments. The policy outlines the objectives and approach that the group will adopt in its treasury management processes. The policy covers, among other things, management of credit risk, interest rate risk, funding risk, liquidity risk, currency risk and operational risk.

Interest rate risk

The Vector group, of which the electricity lines business is the predominant activity, has long-term borrowings, which are used to fund ongoing activities. The Vector group, of which the electricity lines business is the predominant activity, actively manages interest rate exposures in accordance with treasury policy. In this respect, at least 40% of all term debt must be at fixed interest rates or effectively fixed using interest rate swaps, forward rate agreements, options and other derivative instruments.

Borrowings

2004 2004 2003 2003
Weighted average Face value Weighted average Face value
interest rate $'000 interest rate $'000
Bank loans 6.00% 567,387 6.31% 700,864
Working capital loan 5.62% 44,883 6.18% 4,000
Medium term notes -
fixed rate NZ$ 6.50% 168,647 6.50% 109,792
Medium term notes -
floating rate A$ 6.02% 481,871 5.33% 314,155
Capital bonds 9.75% 260,155 8.25% 288,010
Balance at end of
year 6.82% 1,522,943 6.34% 1,416,821

Interest rate swaps

2004 2004 2003 2003
Weighted average Face value Weighted average Face value
interest rate $'000 interest rate $'000
Maturing in less than
1 year 7.06% 135,431 7.16% 85,243
Maturing between 1 and
2 years 9.71% 105,806 6.97% 103,441
Maturing between 2 and
5 years 6.80% 622,136 6.94% 415,679
Maturing after 5 years 6.70% 237,005 6.69% 132,174
Balance at end of
year 7.09% 1,100,378 6.92% 736,537

Cross currency swaps

| | 6.02% | 481,871 | 5.33% | 314,155 |

Bank loans, working capital loans and A$ medium term notes are based on floating rates. A portion of the bank loans are hedged through interest rate swaps which convert the floating rate into a fixed rate. The A$ medium term notes are hedged through cross currency swaps (eliminating the foreign currency risk) and interest rate swaps. The NZ$ medium term notes are fixed notes.



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Online Sources for this page:

VUW Te Waharoa — PDF NZ Gazette 2005, No 27


Gazette.govt.nz — PDF NZ Gazette 2005, No 27




✨ LLM interpretation of page content

🏭 Notes to the Financial Statements for Vector Limited – Electricity Lines Business (continued from previous page)

🏭 Trade, Customs & Industry
Financial Instruments, Interest Rate Risk, Borrowings, Interest Rate Swaps, Cross Currency Swaps, Treasury Policy, Credit Risk, Funding Risk, Liquidity Risk, Currency Risk, Operational Risk