Notes to the financial statements (continued) Section 4: Debt and equity (continued) 18. Borrowings (continued) D. Fair value of borrowings As at 30 June 2025, the fair value of borrowings is $8,017 million (30 June 2024: $7,410 million). This is calculated by discounting the expected future principal and interest cash flows using the interest rates shown in table 44 below. The fair value of domestic currency loans is classified as level 2 in the fair value hierarchy (as defined in note 21(a)) because either the inputs are based on observable market data or the valuation is independently calculated by the provider of the borrowings.
• payments under extension options if it is reasonably certain the extension will be exercised • the exercise price of a purchase option if it is reasonably certain the option will be exercised • payments of penalties for terminating the lease, if the lease term reflects exercising that option. Lease payments are discounted using the interest rate implicit in the lease. Where this rate is not readily determined an incremental borrowing rate is used. Western Power’s incremental borrowing rate is provided by the WATC, being the provider of Western Power’s borrowings. Lease payments are allocated between principal and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Variable lease payments Variable lease payments can be exposed to potential future increases based on an index or rate. Any increases are not included in the lease liability until they take effect, at which point they are adjusted against the right-of-use asset. Extension and termination options Leases can include extension and termination options. This is to maximise operational and asset management flexibility. Periods covered by these options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. Short-term and low-value leases
19. Lease liabilities
A. Accounting policy Western Power leases fleet and other equipment (including properties and information technology) required for the operation of the business. The lease contracts are negotiated on an individual basis and contain a wide range of different terms and conditions. Where the contracts contain both lease and associated non-lease components, Western Power elects not to separate and instead accounts for as single lease components. At the commencement of a lease, the lease liability is measured at the present value of outstanding payments. These payments include: • fixed lease payments (including in-substance fixed payments) less any lease incentives receivables • variable lease payments based on an index or a rate, initially measured using the index or rate as at the lease commencement date • amounts expected to be payable under residual value guarantees
Refer to note 5(c)(ii) for details of Western Power’s ‘short term and low-value leases’ accounting policy.
Table 44: Fair value of borrowings
2024/25
2023/24
WATC yield curve Bank bill swap ( BBSW ) reference rate Australian dollar ( AUD ) interest rate swap curve
3.8% - 5.8% 3.7% 3.2% - 3.5%
4.4% - 5.8% 4.5% 4.5% - 4.4%
Western Power Annual Report 2025
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