Annual Report 2023

Notes to the Consolidated Financial Statements For the year ended 31 December 2023 182 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED 35. FINANCIAL RISK MANAGEMENT (CONTINUED) 35.1 Financial risk factors (continued) (iv) Interest rate benchmark reform Several of the Group’s LIBOR bank loans will or may be subject to the interest rate benchmark reform. The Group is closely monitoring the market and managing the transition to new benchmark interest rates, including announcements made by the relevant IBOR regulators and acknowledgements from the banks. LIBOR As at 31 December 2022, all LIBOR settings have been either ceased to be provided by any administrator or no longer be representative, except for United States dollar settings (other than the 1-week and 2-month settings) which will be ceased immediately after 30 June 2023. Risks arising from the interest rate benchmark reform The following are the key risks for the Group arising from the transition: Interest rate related risks For contracts which have not been transitioned to the relevant alternative benchmark rates and without detailed fallback clauses, if the bilateral negotiations with the Group’s counterparties are not successfully concluded before the cessation of LIBORs, there are significant uncertainties with regard to the interest rate that would apply. This gives rise to additional interest rate risk that was not anticipated when the contracts were entered into, but the Group is working closely with all counterparties to avoid a huge increase of the interest rate. There are fundamental differences between IBORs and the various alternative benchmark rates. IBORs are forward looking term rates published for a period (e.g. 3 months) at the beginning of that period and include an inter-bank credit spread, whereas alternative benchmark rates are typically risk-free overnight rates published at the end of the overnight period with no embedded credit spread. These differences will result in additional uncertainty regarding floating rate interest payments.