40 Financial instruments
a) Financial Risk Management Objectives and Policies
Financial instruments held by the PTA are cash and cash equivalents, foreign exchange contracts borrowings, finance lease, receivables and payables. The PTA has exposure to a variety of financial risks. The PTA’s overall risk management program focuses on managing the risks identified below.
Credit risk
The PTA trades only with recognised, creditworthy third parties. The PTA has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. In addition, receivable balances are monitored on an ongoing basis with the result that the PTA’s exposure to bad debt is minimal. There are no significant concentrations of credit risk.
Liquidity risk
The PTA has appropriate procedures to manage cash flows including drawdowns of appropriations by monitoring forecast cash flows to ensure that sufficient funds are available to meet its commitments.
The PTA has a short-term liquidity facility of $200 million on which it can draw down to fund temporary cash shortfall.
Cash flow interest rate risk
The PTA’s exposure to market risk for changes in interest relates primarily to the long-term debt obligations. The PTA’s borrowings are all obtained through Western Australian Treasury Corporation (WATC) and are at fixed rates with varying maturities. The risk is managed by WATC through portfolio diversification and variation in maturity dates. The PTA earns interest on the daily balance of its bank account.
Foreign exchange risks
The PTA is exposed to foreign exchange risk arising from currency exposure to the Euro and Swiss Francs.
Forward contracts transacted with WATC are used to manage these risks. The purpose of the foreign currency contracts is to protect against the risk that eventual dollar outflows in respect of purchases in foreign currency may be adversely affected by changes in exchange rates.
b) Financial Instrument disclosures
Interest Rate Risk Exposure
The following table details the PTA’s exposure to interest risk as at the balance sheet date:
2007 |
Notes |
Weighted average effective interest rate % |
Variable interest rate (i) |
Fixed interest rate maturity |
Non-interest bearing |
Total |
||
1 or less than 1 year |
1 to 5 years |
more than 5 years |
||||||
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|||
Financial Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
36 |
5.98 |
52,182 |
0 |
0 |
0 |
0 |
52,182 |
Restricted cash and cash equivalents |
36 |
5.98 |
638 |
0 |
0 |
0 |
0 |
638 |
Receivables |
23 |
|
0 |
0 |
0 |
0 |
14,270 |
14,270 |
Amounts receivable for services |
24 |
|
0 |
0 |
0 |
0 |
311,338 |
311,338 |
|
|
|
52,820 |
0 |
0 |
0 |
325,608 |
378,428 |
|
|
|
|
|
|
|
|
|
Financial Liabilities |
|
|
|
|
|
|
|
|
Payables |
29 |
|
0 |
0 |
0 |
0 |
64,652 |
64,652 |
Other current liabilities |
32 |
|
0 |
0 |
0 |
0 |
727 |
727 |
Derivatives |
33 |
|
0 |
0 |
0 |
0 |
1,294 |
1,294 |
WATC Loans |
30 |
6.39 |
0 |
222,440 |
374,783 |
257,068 |
0 |
854,291 |
Commonwealth Loans |
30 |
5.93 |
0 |
383 |
1,525 |
1,967 |
0 |
3,875 |
|
|
|
0 |
222,823 |
376,308 |
259,035 |
66,673 |
924,839 |
2006 |
Notes
|
Weighted average effective interest rate % |
Variable interest rate (i) |
Fixed interest rate maturity |
Non-interest bearing |
Total |
||
1 or less than 1 year |
1 to 5 years |
more than 5 years |
||||||
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|||
Financial Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
36 |
5.55 |
1,146 |
0 |
0 |
0 |
0 |
1,146 |
Restricted cash and cash equivalents |
36 |
5.55 |
694 |
0 |
0 |
0 |
0 |
694 |
Receivables |
23 |
|
0 |
0 |
0 |
0 |
12,584 |
12,584 |
Amounts receivable for services |
24 |
|
0 |
0 |
0 |
0 |
224,040 |
224,040 |
|
|
|
1,840 |
0 |
0 |
0 |
236,624 |
238,464 |
|
|
|
|
|
|
|
|
|
Financial Liabilities |
|
|
|
|
|
|
|
|
Payables |
29 |
|
0 |
0 |
0 |
0 |
98,877 |
98,877 |
Other current liabilities |
32 |
|
0 |
0 |
0 |
0 |
753 |
753 |
Derivatives |
33 |
|
0 |
0 |
0 |
0 |
996 |
996 |
WATC Loans |
30 |
6.05 |
0 |
1,119,396 |
324,783 |
270,137 |
0 |
1,714,316 |
Commonwealth Loans |
30 |
5.93 |
0 |
383 |
1,542 |
2,332 |
0 |
4,257 |
Lease Liabilities |
30 |
6.35 |
0 |
2,899 |
0 |
0 |
0 |
2,899 |
|
|
|
0 |
1,122,678 |
326,325 |
272,469 |
100,626 |
1,822,098 |
i) Variable interest rates represent the most recently determined rate applicable to the instrument at balance sheet date.
Fair Values
All financial assets and liabilities recognised in the balance sheet, whether they are carried at cost or fair value, are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated in the applicable notes.
Credit Risk Exposure
The PTA’s credit risk on financial assets, which have been recognised in the Balance Sheet, is generally the carrying amount, net of any provision for doubtful debts.
Concentrations of credit risk on financial assets are primarily related to property rental agreements and other miscellaneous revenue.
Except for securities held to ensure the performance of contractor guarantees or warrantees, amounts due from major debtors are not normally secured by collateral. However the creditworthiness of debtors is regularly monitored. Securities held to ensure the performance of contractor guarantees or warrantees include Bank Guarantees, Personal (Directors) Guarantees or cash. The value of securities held is dependant on the nature, including the complexity and risk, of the contract.