(b) Credit risk
Credit risk is managed on a Group basis. Credit risk
arises from cash and cash equivalents and deposits
with banks and financial institutions, as well as
trade and other receivables. The Group’s exposure
to credit risk arises from potential default of the
counter party, with a maximum exposure equal to
the carrying amount of these instruments. Exposure
at balance date is addressed in each applicable note.
The Group does not hold any credit derivatives to
offset its credit exposure.
The Group has a Treasury Policy as approved
by the Board that manages the level of risk in
relation to cash investments with banks and
third parties through the commercial paper
market. The policy provides a number of criteria
to manage and spread the level of risk such as:
investing in third parties with a minimum rating
of A2, 50% of investments must be rated A1 and
above and no more than $50m can be invested in
commercial papers with any one third party.
The Group trades only with recognised, credit
worthy third parties, and as such collateral is not
requested nor is it the Group’s policy to securitise
its trade and other receivables.
It is the Group’s policy that all customers enter
into access agreements meeting the terms and
conditions as set out in the agreement before
entering the Group’s rail network and receiving
any trade credit facilities.
The Group’s exposure to bad debts is not significant,
although the Group has a significant concentration
of credit risk associatedwith its major customer
providing a high proportion of access revenue.
The receivable balances aremonitored on an
ongoing basis and constant dialogue is maintained
withmajor customers. Outstanding queries and
administrative delays are followed up promptly.
Conditions for customers accessing the East West
rail network, allow for interest to be charged on late
payments and security can be taken on default of
payment. Typically, for the remaining rail network,
the contract allows the raising of formal disputes on
late payments, with a favourable outcome resulting
in interest being charged as well as the ability to
seek upfront security, where required.
(c) Liquidity risk
Prudent liquidity riskmanagement implies main-
taining sufficient cash andmarketable securities, the
availability of funding through an adequate amount
of committed credit facilities and the ability to close
out market positions. The Groupmanages liquidity
risk by continuouslymonitoring forecast and actual
cash flows andmatching thematurity profiles
of financial assets and liabilities. Group Treasury
maintains flexibility in its investments by spreading
its investments and investing in instruments that
are tradeable in highly liquidmarkets.
Financing arrangements
During July 2011, the Group received an equity
injection of $409.3m as a part of the Nation
Building Rail Investment initiative announced in
the 2010 Commonwealth Budget. In the prior
year in July 2010, the Group received an equity
injection of $558.2m as a part of the Nation
Building Rail Investment initiative.
In January 2010, ARTC established
A$550 million three year Syndicated Debt
Facility Agreement with a consortium of major
Australian Banks. As at 30 June 2012, $20m of
the funds have been utilised.
In December 2010, ARTC established A$750million
Australian Dollar Domestic Note programme under
which short andmedium termnotes may be issued
from time to time up to the programme limit.
On 20 December 2010 ARTC executed the initial
bond issuance of $200m with a maturity date of
20 December 2017.
On 9 and 14 of December ARTC executed the
second bond issuance in two tranches of $200m
and $100m respectively with a maturity date of
9 December 2014.
Note 02
Financial risk management (continued)
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