Business performance
Directors' Report
Financial statements
Assurance statements
Security holder information
Introduction
Stakeholders Sustainability Governance and risk
Contents
Section B: Notes to the Group financial statements for the year ended 30 June 2026
B14 Financial risk management and derivative financial instruments (continued) Hedge accounting policy (continued) Net investment hedges Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument (for example, foreign currency denominated borrowings) relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in the foreign currency translation reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss, in net finance costs. Gains and losses accumulated in the foreign currency translation reserve in equity are included in the profit and loss when the foreign operation is disposed of or sold. Derivative financial instruments that do not qualify for hedge accounting Certain derivative financial instruments do not qualify for hedge accounting or are specifically not designated in a hedging relationship as a natural hedge offset achieves substantially the same accounting results. Changes in the fair value of any derivative financial instrument that does not qualify for hedge accounting are recognised immediately in the profit and loss. The Financial PPAs, discussed below, include a contract for difference (CfD) which are derivative financial instruments that do not qualify for hedge accounting. They are recorded on the balance sheet at fair value with movements recorded in the profit and loss.
Hedging strategy and instruments used by the Group Fair value hedges
The Group enters into cross-currency interest rate swaps or interest rate swaps to mitigate exposure to changes in the fair value of borrowings which are issued at fixed interest rates or denominated in a foreign currency, by converting to floating interest rate Australian dollar borrowings. The objective of the Group’s fair value hedges is to hedge the fair value exposure to movements in exchange rates and movements in interest rates. Cash flow hedges The Group enters into interest rate swaps, including cross-currency interest rate swaps to hedge exposure to changes in cash flows on borrowings that bear floating interest rates or are denominated in a foreign currency, by converting to fixed interest rate Australian dollar borrowings. The objective of the Group’s cash flow hedges is to hedge the cash flow exposure to movements in variable interest rates and movements in exchange rates. The Group's policy is to hedge the interest rate exposure on drawn borrowings to between 80% and 100% and to ensure compliance with any and all covenant requirements of its funding facilities by issuing fixed interest rate borrowings or by entering into interest rate swap contracts. Interest rate swap contracts currently in place swap floating interest rate commitments back to fixed interest rates. As at 30 June 2026, 85% (2025: 90%) of the Group’s interest rate exposure based on the carrying amount of drawn borrowings at reporting date (excluding letters of credit facilities) was hedged. The Group uses forward exchange contracts to protect against exchange rate movements between the AUD and foreign currencies on highly probable forecast transactions relating to operating expenditure. The fair value of forward exchange contracts held is not material to the Group in the current or prior financial year. Hedge of net investment in foreign entity A portion of the Group's USD denominated borrowings acts as a natural hedge against the exposure to foreign currency movements in Transurban's investment in its US based assets (TC in the US). Derivative financial instruments not in an accounting hedge relationship The Group uses forward exchange contracts to protect against exchange rate movements on a portion of its USD and CAD principal and interest commitments. The fair value of these forward exchange contracts held is not material to the Group in the current or prior financial year. Power Purchase Agreements As at 30 June 2026, the Group has two Financial PPAs. The Financial PPAs with the Sapphire Wind Farm and Bango Wind Farm are both for 9 years and 9 months and support the NSW and WestConnex operations (excluding WestConnex M4-M8 link) and expire in December 2030. The Financial PPA with the Coopers Gap Wind Farm was for 4 years and 6 months, expired in June 2026 and supported Transurban Queensland's operations. The Financial PPAs include a CfD which is a derivative financial instrument and is recorded on the balance sheet at fair value with movements recorded in the profit and loss.
151
Made with FlippingBook Digital Publishing Software