2022 Corporate Report

Corporate Report for the year ended 30 June 2022

Introduction and overview

Business performance

Governance and risk

Directors’ report

Remuneration report

Financial statements

Sustainability supplement

Security holder information

Section B: Notes to the Group financial statements for the year ended 30 June 2022

Section B: Notes to the Group financial statements for the year ended 30 June 2022

B13 Net finance costs

2022

2021

Note

$M

$M

Finance income Income from concession financial asset

B18

23 37 11

23 19

Interest income on financial assets at amortised cost Interest income on bank deposits held at amortised cost

8

Net unrealised remeasurement gain attributable to derivative financial instruments Unwind of discount and remeasurement of financial assets at amortised cost Unwind of discount and remeasurement of liabilities—promissory and concession notes

153 117

— 16 —

2

Movement in impairment provisions on financial assets at amortised cost

3

Total finance income

343

69

Finance costs Interest and finance charges paid/payable

(727)

(758)

Net unrealised remeasurement loss attributable to derivative financial instruments Unwind of discount and remeasurement of liabilities—maintenance provision Unwind of discount and remeasurement of liabilities—construction obligation liability Unwind of discount and remeasurement of liabilities—promissory and concession notes

(54) (34) (41) (23)

(33) (22)

B20

Unwind of discount and remeasurement of liabilities—lease liabilities Unwind of discount and remeasurement of liabilities—other liabilities Movement in impairment provisions on financial assets at amortised cost

B31

(6) (3) (1)

(6) (6)

Net foreign exchange losses

(17)

(17)

Total finance costs

(809)

(939)

Net finance costs from continuing operations

(466)

(870)

Borrowing costs capitalised to assets under construction In addition to the net finance costs from continuing operations (shown above) that are included in the profit and loss, $69 million (2021: $55 million) of financing costs have been capitalised and included in the carrying value of assets under construction. Unrealised remeasurement gain attributable to derivative financial instruments The Group uses derivative financial instruments in the normal course of business to hedge exposures to fluctuations in interest rates and foreign exchange rates in accordance with the Group’s financial risk management policies. Excluding borrowings held in foreign currencies that hedge the Group’s investment in US and Canadian operations, the Group has entered into cross-currency interest rate swaps that hedge 100% of its economic exposure to borrowings raised in foreign currencies. The cross-currency interest rate swap contracts hedge the risk of unfavourable foreign exchange rate movements on borrowings denominated in foreign currencies. Under the swap contracts, the Group receives foreign currency at fixed rates and pays AUD at fixed rates. At the end of each reporting period the Group remeasures the cross-currency interest rate swap contracts at fair value and applies hedge accounting. The periodic remeasurement of the cross-currency interest rate swap contracts to fair value includes an element of foreign currency basis spread. For those cross-currency interest rate swap contracts that designate the entire fair value of the cross-currency interest swap contract as the hedging instrument (including the foreign currency basis spread component), this can result in ineffectiveness in the hedging relationship that is recognised in the profit and loss. During the year ended 30 June 2022 the Group observed an upward shift in the AUD basis curve relative to other foreign currencies, which resulted in a change in the fair value of these cross-currency interest rate swaps as outlined at Note B15. While the Group has removed the cash flow risk of unfavourable exchange rate movements through the use of these swaps, hedge accounting ineffectiveness is one of the primary drivers of the net unrealised remeasurement gain attributable to these derivative financial instruments for the year ended 30 June 2022. The balance of the unrealised remeasurement gain for the reporting period relates to changes in the fair value of interest rate swap contracts that do not qualify for hedge accounting. The Group observed an increase in the interest rate curve during the period, which resulted in a change in the fair value of these interest rate swap contracts. Unwind of discount and remeasurement of financial assets at amortised cost The movement in the unwind of discount and remeasurement of financial assets at amortised cost is primarily due to the revision of the estimated repayment cash flows on the shareholder loan notes (SLNs) with STP JV and NWRG during the financial year, which had the effect of bringing forward the repayment of the SLNs (refer to Note B32). Unwind of discount and remeasurement of construction obligation liability The movement in the unwind of discount and remeasurement of the construction obligation liability has been influenced by the change in the expected completion date of the West Gate Tunnel Project and the timing of CityLink funding source payments (refer to Note B20).

149 149

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