Corporate Report for the year ended 30 June 2022
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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
B15 Derivatives and financial risk management (continued) Market risk (continued) Interest rate risk (continued) As at the reporting date, the Group had the following cash balances, variable rate borrowings and interest rate swap contracts outstanding:
2022
2021
$M
$M
2,020
Cash and cash equivalents Floating rate borrowings
4,285
(3,241)
(3,343)
3,226 2,005
Interest rate swaps (notional principal amount)
3,345 4,287
Net exposure to interest rate risk
Sensitivity to interest rate movements based on variable rate cash balances, variable rate borrowings and interest rate swap contracts is as follows:
Movement in post-tax profit 2022 2021 $M $M
Interest rates +100bps Interest rates –100bps
20
43
(20)
(43)
Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss. The Group has no significant concentrations of credit risk from operating activities, and has policies in place to ensure that transactions are made with commercial customers with an appropriate credit history. However, as an operator of large infrastructure assets, the Group is exposed to credit risk with its financial counterparties through entering into financial transactions in the ordinary course of business. These include funds held on deposit, cash investments and the market value of derivative transactions. The Group assesses the credit strength of potential financial counterparties using objective ratings provided by multiple independent rating agencies. The Board approved policies ensure that higher limits are granted to higher rated counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only dealing with credit worthy entities, limiting the exposure to any one counterparty, minimising the size of the exposure where possible through netting offsetting exposures, diversifying exposures across counterparties, closely monitoring changes in total credit exposures and changes in credit status, and taking mitigating action when necessary. Credit exposures and compliance with internal credit limits are monitored daily. An International Swaps and Derivatives Association (ISDA) agreement must be in place between the Transurban dealing entity and the counterparty prior to executing any derivatives and netting provisions are included. Liquidity risk The Group maintains sufficient cash and undrawn facilities to maintain short term flexibility and enable the Group to meet financial commitments in a timely manner. The Group assesses liquidity over the short term (up to 12 months) and medium term (1 to 5 years) by maintaining accurate forecasts of operating expenses, committed capital expenditure, debt maturities and payments to security holders. Long term liquidity requirements are reviewed as part of the annual strategic planning process. Short term liquidity is managed by maintaining a strategic level of liquidity at the corporate level of the Group. This reserve is based on the Group’s forecast annual operating costs and certain risk exposure scenarios as maintained by the Group’s strategic risk register, and is maintained as cash and undrawn facilities. Forecasting is performed frequently to ensure the strategic liquidity reserve is being maintained to adequate levels. Medium term liquidity forecasting is maintained on a rolling five year horizon. Existing cash reserves are sufficient to cover periods of negative cash flows, however some subsidiary assets adopted a conservative position on paying distributions to retain sufficient asset level liquidity. Transurban Finance Company Pty Ltd, Transurban’s corporate borrowing entity is currently forecast to maintain all required liquidity buffers for the Group as required under the Group’s Treasury Policy. Financing arrangements The Group has access to the following undrawn borrowing facilities at the end of the reporting period:
2022
2021
$M
$M
Floating rate Expiring beyond one year
2,790 2,790
2,853 2,853
As at 30 June 2022, the Group has letter of credit facilities and general credit facilities in place with an undrawn capacity of $234 million (2021: $151 million). The facilities are committed for the duration of the facility and the undrawn portion cannot be withdrawn by the lenders.
162 162
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