✨ Financial Risk Management
29 NOVEMBER 2010 NEW ZEALAND GAZETTE, No. 159 4025
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
Liquidity risk policy
To ensure Transpower has adequate funding facilities in place to support future operations, The Transpower Lines Business’s liquidity policy requires The Transpower Lines Business to have access to committed funding facilities (i.e. guaranteed funds), to cover the sum of all debt which matures over the next six months plus peak cumulative anticipated operating cash flow requirements over the next six months.
To smooth Transpower’s refinancing requirements in future periods, committed debt facilities maturing in any 12 month period are not to exceed $500,000,000. No more than 50% of long term debt can mature within the next three years and at least 30% of long term debt must mature after five years.
(c) Financial Instruments That Manage Currency, Interest Rate and Liquidity Risk
The Directors have authorised the use of the following financial instruments to manage currency risk, interest rate risk and liquidity risk:
Term debt
Transpower has six active debt facilities; a European Commercial Paper programme, a Euro Medium Term Note programme, a Domestic Medium Term Note programme, an Australian Medium Term Note programme, a Domestic Multi-option Facility and a Revolving Cash Advance Facility. Transpower uses these facilities to issue debt securities into different markets.
In the event Transpower is unable to utilise these facilities Transpower has established committed credit facilities.
There is:
- a three year Standby Facility for $250,000,000, effective 2 July 2008. This was not in use at 30 June 2010 or 30 June 2009.
- a three year Standby Facility for $250,000,000, effective 26 May 2010. This was not in use at 30 June 2010 or 30 June 2009.
Term investments
Transpower from time to time invests surplus cash arising from its core operations and from active liquidity management in wholesale bank deposits and securities for periods of up to one year.
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 interest payments and final principal exchange at the time of entering into the contract.
The notional gross contract amounts of cross currency interest rate swaps outstanding at balance date, by maturity banding, are:
| 2010 | 2009 | |
|---|---|---|
| $000 | $000 | |
| Pay leg | ||
| Within one year | - | - |
| One to two years | 251,963 | - |
| Two to five years | 343,908 | 251,963 |
| Greater than five years | 237,588 | 508,382 |
| 833,459 | 760,345 | |
| Receive leg | ||
| Within one year | - | - |
| One to two years | (252,686) | - |
| Two to five years | (400,125) | (245,761) |
| Greater than five years | (218,369) | (578,369) |
| (871,180) | (824,130) |
Interest rate swaps
Interest rate swaps are used to change the interest rate structure on physical debt or cross currency interest rate swaps issued by Transpower. The interest rate on debt is either converted from floating rate to fixed rate or vice versa through entering into interest rate swaps.
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NZ Gazette 2010, No 159
✨ LLM interpretation of page content
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Transpower New Zealand Limited Financial Statements
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🏭 Trade, Customs & IndustryFinancial Risks, Interest Rate Risk, Currency Risk, Credit Risk, Liquidity Risk, Financial Instruments, Risk Management Policies, Debt Portfolio, Hedging, Derivatives, Credit Evaluations