✨ Financial Risks and Commitments
27 NOVEMBER 2009 NEW ZEALAND GAZETTE, No. 172 4191
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
(h) Sensitivity Analysis
Currency risk
Lines Business policy (section b) is to hedge all foreign denominated debt and committed foreign purchases greater than $1 million (New Zealand dollar equivalent)
All foreign debt is transferred back into New Zealand Dollars through Cross Currency Interest Rate Swaps and foreign purchases in excess of $1m have forward exchange contracts.
Interest rate risk
The Lines Business policy is to hedge between 80% and 100% of debt in year 1 and reducing amounts out to 15 years. Movements in market interest rates would therefore impact through Fair Value movement risk (refer below).
Fair value movement risk
The Lines Business’s net debt is designated at fair value through profit or loss. As such, the Lines Business is subject to fair value gains or losses. The extent of the gains or losses is based on the Lines Business’s cash flow profile compared to the corresponding movement in the yield curve.
A parallel shift in the yield curve by 1% would create the following fair value movements based on net debt held at 30 June 2009.
- 1% parallel upward shift - fair value gain of $105.4 million (30 June 2008: $77.7 million)
- 1% parallel downward shift - fair value loss of $114.6 million (30 June 2008: $84.1 million)
Credit spread movement risk
The impact of movements in the credit spread on the fair value was a $70 million gain in 2009 (nil 2008). A 10 basis point increase (decrease) in credit spreads is estimated to result in a fair value gain (loss) of $5.8 million.
- Operating lease commitments
Commitments in respect of non-cancellable operating leases payable:
| LINES BUSINESS | ||
|---|---|---|
| 2009 | 2008 | |
| $'000 | $'000 | |
| Within one year | 6,407 | 7,061 |
| One to two years | 3,453 | 6,407 |
| Two to five years | 9,189 | 9,584 |
| Later than five years | 2,824 | 5,882 |
| Total operating lease commitments | 21,873 | 28,934 |
These lease commitments primarily relate to leases on Transpower office space.
- Capital commitments
Capital commitments in respect of contracts for capital expenditure:
| LINES BUSINESS | ||
|---|---|---|
| 2009 | 2008 | |
| $'000 | $'000 | |
| Within one year | 62,386 | 98,059 |
| One to two years | — | — |
| Total capital commitments | 62,386 | 98,059 |
Next Page →
NZ Gazette 2009, No 172
✨ LLM interpretation of page content
🏢
Financial Instruments and Risks for Transpower New Zealand Limited Lines Business
(continued from previous page)
🏢 State Enterprises & InsuranceFinancial Risks, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk, Financial Instruments, Interest Rate Swaps, Basis Swaps, Interest Rate Options, Foreign Exchange Forward Contracts, Sensitivity Analysis, Fair Value Movement Risk, Credit Spread Movement Risk