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21. Financial risk management continued 21.3 Liquidity risk
Contractual cash flows
The above table shows the timing of non–discounted cash flows for all f inancial instrument liabilities and derivatives. The cash flows for bank facilities, included in borrowings, are disclosed on the basis of their contractual repayment terms for the individual drawdowns. The cash flows for capital bonds, included in borrowings, are disclosed as payable within 1 – 2 years as the next election date set for the capital bonds is 15 June 2022 and the bonds have no contractual maturity date. Vector is exposed to liquidity risk where there is a risk that the group may encounter diff iculty in meeting its day to day obligations due to the timing of cash receipts and payments. The objective is to ensure that adequate liquid assets and funding sources are available at all times to meet both short-term and long–term commitments. The board has set a minimum headroom requirement for committed facilities over Vector’s anticipated 18–month peak borrowing requirement. At balance date, in addition to short–term deposits, Vector has access to undrawn funds of $955.0 million (2019: $585.0 million). Vector is exposed to foreign exchange risk through its borrowing activities, foreign currency denominated expenditure, and through our Australian subsidiaries. Foreign exchange exposure is primarily managed through entering into derivative contracts. The Board requires that all signif icant foreign currency borrowings and expenditure are hedged into NZD at the time of commitment to drawdown or when the exposure is highly probable. Hence, at balance date there is no signif icant exposure to foreign currency risk.
Policies
21.4 Foreign exchange risk Policies
21.5 Funding risk Policies
Funding risk is the risk that Vector will have difficulty refinancing or raising new debt on comparable terms to existing facilities. The objective is to spread the concentration of risk so that if an event occurs the overall cost of funding is not unnecessarily increased. Details of borrowings are shown in note 19. The Board has set the maximum amount of debt that may mature in any one financial year.
Notes to the Financial Statements
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