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
B32 Related party transactions (continued) Transactions with related parties Other revenue Other revenue relates to tolling and management services provided to related parties. Interest income Interest income relates to the interest recorded on financial assets at amortised costs as noted below. Financial assets at amortised cost
Debt financial assets carried at amortised cost relate to TC loan receivable and NorthConnex and STP JV shareholder loan notes. The Group intends to hold the assets to maturity and to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. The SLNs are not classified as an investment for equity accounting purposes, and therefore have not been affected by equity accounting losses from the associate. The NorthConnex and STP JV SLNs are denominated in AUD. The TC loan receivable is denominated in USD. The movement of the NorthConnex and STP JV SLNs and TC loan receivable is set out below:
NorthConnex
STP JV 2021 $'000
TC
Total 2021 $'000
2022 $'000
2021 $'000
2022 $'000
2022 $'000 1,728
2021 $'000
2022 $'000
Opening balance at 1 July
724,240
705,583 27,168
627,450 699,214
646,497
—
1,353,418 715,749 (215,419)
1,352,080
SLNs and loan issued SLNs and loan repaid
—
—
16,535 (16,707)
1,728
28,896 (61,082)
(181,654)
(59,350)
(17,058)
(1,732)
—
Fair value adjustment on issuance of SLNs issued and TC loan receivable 1
—
—
672
—
(1,406)
— — — —
(734)
—
Capitalisation of accrued interest
3,045
3,102
22,818 57,093 (1,625)
10,954 (31,166)
— — —
25,863 117,403
14,056 16,370
Unwind of discount and remeasurement of SLNs 2
60,310
47,536
Change in expected credit losses
163
201
2,897
(1,462)
3,098
Foreign exchange movements and other adjustments
—
—
—
—
1,739 1,889
—
1,739
—
Closing balance at 30 June
606,104
724,240
1,388,564
627,450
1,728
1,996,557
1,353,418
1. During the year, interest bearing facilities with STP JV and TC were issued. The loans were recorded at fair value on initial recognition and the difference between the nominal value of the loans and the fair value was treated as a contribution to the equity accounted investment in STP JV and TC, respectively. 2. Includes adjustments from updating the expected timing of cash repayments from the SLNs. Accounting policy The Group measures the SLNs and loan receivable at fair value on initial recognition and subsequently they are measured at amortised cost using the effective interest method. Any difference between the nominal value of the SLNs and loan receivable, and their fair value at initial recognition is treated as a contribution to the relevant equity accounted investment. The SLNs and loan receivable are presented within non-current financial assets in the consolidated balance sheet. NorthConnex shareholder loan notes The NorthConnex SLNs consist of an interest-bearing SLN facility with a fixed rate of 5.9% and a maturity date of June 2048 and one non-interest bearing facility with a maturity date of June 2048. As at 30 June 2022, the repayment profile for these SLNs have been updated to reflect an uplift in forecast toll revenue due to an increase in CPI assumptions in the short-term which has brought forward the SLN repayments. The nominal value of the NorthConnex SLNs as at 30 June 2022 is $777,358 thousand (2021: $955,967 thousand). STP JV shareholder loan notes The STP JV SLNs earn interest at a rate equivalent to the weighted average of the interest rate applicable to WestConnex’s senior secured debt plus a margin. The agreement includes a mechanism to capitalise interest should funds not be available to settle accrued interest. The SLNs have a maturity date of September 2028. As at 30 June 2022, the repayment profile for these SLNs has been updated to reflect higher interest rate assumptions and repayments. The nominal value of the STP JV SLNs as at 30 June 2022 is $1,426,350 thousand (2021: $721,376 thousand). TC loan receivable The TC loan receivable consists of an interest-bearing facility with a fixed rate of 0.13% and a maturity date of December 2023. The nominal value of the TC loan receivable as at 30 June 2022 is US$1,300 thousand ($1,889 thousand) (2021: US$1,300 thousand ($1,728 thousand)). Expected credit loss As at 30 June 2022, having assessed the impacts from the economic uncertainty relating to COVID-19, near-term interest rates and inflation, management do not consider there to be evidence of a significant increase in credit risk since the initial recognition of these balances. This is mainly due to there being no significant change in the nature of or the collectability of these balances. The loss allowance for these financial assets at amortised cost continues to be limited to 12 months of expected losses. These balances continue to have low credit risk as they have a low risk of default and the counterparties have a strong capacity to meet their contractual cash flow obligations in the near-term. As at 30 June 2022 loss allowance was $3,802 thousand (2021: $2,340 thousand), reflecting management's updated estimate of the collectability of these balances.
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