Financial statements | Contents
Section B: Notes to the Group financial statements for the year ended 30 June 2025
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Financial risk management and derivatives (continued)
Fair value measurements Financial instruments are measured either at fair value or their carrying amount approximates fair value, except for borrowings and financial
assets (including shareholder loan notes) which are subsequently measured at amortised cost. All financial instruments for which fair value is measured are categorised within the fair value hierarchy.
Fair value measurements accounting policy In determining fair value, the Group uses both observable and unobservable inputs and classifies the inputs according to a three level hierarchy under which the inputs to the valuation method used are categorised based on the lowest level input that is significant to the fair value measurement as a whole: • Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2—inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and • Level 3—inputs for the asset or liability that are not based on observable market data (unobservable inputs). For financial instruments that are measured at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the fair value hierarchy by reassessing categorisation at the end of each reporting period. Financial instruments measured at fair value The table below summarises the methods used to estimate the fair value of financial instruments measured at fair value and the level within the fair value hierarchy they are categorised in. As at 30 June 2025 and 30 June 2024 there were no financial instruments measured using level 1 inputs. All of the Group’s financial instruments measured at fair value are valued using market observable inputs (level 2), except for the Financial PPAs which include CfD derivatives (level 3). There has been no change in the valuation techniques applied and there were no transfers between levels within the fair value hierarchy during the current or prior year reporting period.
Fair value hierarchy level
Financial instrument
Valuation method
Level 2: the lowest level input observable that is significant to the fair value measurement is directly (as prices) or indirectly (derived from prices) observable
Cross-currency interest rate swaps and interest rate swaps
Present value of estimated future cash flows based on observable market yield curves. The fair value estimate is subject to a credit risk adjustment that reflects the credit risk of the counterparties. Present value of estimated future cash flows based on the quoted forward exchange rates at the reporting date for contracts with similar maturity profiles. Present value of estimated future cash flows based on forecast electricity volumes, unobservable electricity forward spot prices, the contract period, the discount rate and CPI.
Foreign currency forward contracts
Level 3: one or more key inputs for the instrument are not based on observable market data (unobservable inputs)
Financial PPAs
The following table presents the changes in the Financial PPAs level 3 instruments for FY25:
Level 3 Instruments 2025 2024 $M $M
Opening balance at 1 July
23
24
Loss recognised in the profit and loss¹
(2)
(1)
Closing balance at 30 June
21
23
1. Comprises unrealised losses recognised in the profit and loss (road operating costs) attributable to balances held at the end of the reporting period. The following table summarises the impact of changes to the key unobservable inputs on the fair value of the Financial PPAs level 3 instruments for FY25:
Range of inputs
Key unobservable inputs
Relationship of key unobservable inputs to fair value
Electricity price
+/-20% A change in the electricity price by 20% would increase/decrease the fair value by $14 million.
KEY ACCOUNTING ESTIMATE AND JUDGEMENT The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses its judgement to select valuation techniques which where possible use observable market inputs based on market conditions existing at each reporting date. These valuation techniques are outlined in the fair value hierarchy table above.
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