✨ Financial Statements
29 NOVEMBER 2010
NEW ZEALAND GAZETTE, No. 159
4027
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
(d) Maximum Credit Risk Exposure
The maximum credit exposure in respect of non-derivative assets is best represented by their carrying value. For derivative financial instruments the maximum credit exposure is best represented by the net mark to market valuation by counterparty where the valuation is positive, as follows:
| 2010 | 2009 | |
|---|---|---|
| $'000 | $'000 | |
| Cross currency interest rate swaps | 122,912 | 136,937 |
| Interest rate swaps | 17,557 | 21,170 |
| Basis swaps | - | 240 |
| Interest rate options | - | - |
| Foreign exchange forward contracts | 657 | 34 |
| Total | 141,126 | 158,381 |
The credit risk arising from the use of derivative products is minimised by the netting and set-off provisions contained in Transpower’s ISDA agreements. Transpower further manages this risk by only entering into transactions with counterparties that fall within The Transpower Lines Business’s credit risk management policy as outlined in section (b) Financial Risk Management Policies, of this note.
(e) Fair Value and Classifications
All financial instruments, except for accounts payable and receivables, are carried at fair value in the Balance Sheet. Refer to Note 10 Financial Instrument Categorisation for the category of the above instruments.
Fair value represents the amount which would, in the course of the normal operation of the financial markets, extinguish all current and future contractual obligations arising in respect of a particular financial instrument.
The Transpower Lines Business used discounted cash flow techniques to calculate the market value of its investments, debt and financial instruments. The interest rate used for discounting is based on the applicable swap curve. For foreign exchange forward contracts, The Transpower Lines Business calculates the fair value by reference to current forward exchange rates. These market valuations are the level 2 category as discussed in NZ IFRS 7.
For cash and cash equivalents, accounts payable and receivables the fair value is materially similar to their cost due to the short term nature of the balance.
(f) Interest Rate Repricing Analysis
The following table covers The Transpower Lines Business’s total debt portfolio, including the effect of derivative financial instruments, when interest rates will be repriced and the current weighted average interest rate of each maturity. The Transpower Lines Business will transact further interest rate derivatives in advance of the repricing date to fix interest rates on The Transpower Lines Business debt portfolio within the policy parameters adopted by the Board.
Trade receivables/payables, other receivables and other liabilities have not been included in the table below as they are not interest rate sensitive.
For the purpose of repricing, debt denominated in foreign currencies is stated after applying cross currency 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 Swaps, Basis Swaps, Interest Rate Options, Foreign Exchange Forward Contracts, Notional Gross Contract Amounts, Maturity Banding, Currency Risk, Hedging, Financial Instruments