NEW ZEALAND GAZETTE

1 SEPTEMBER

POWERCO LIMITED - ENERGY BUSINESS

NOTES TO THE ACCOUNTS

STATEMENT OF ACCOUNTING POLICIES

REPORTING ENTITY
Powerco Limited is a public company registered under the Companies Act 1955.

The financial statements of Powerco Limited have been prepared in accordance with the Companies Act 1955 as amended and the Financial Reporting Act 1993, they have also been prepared to comply with the Electricity (Information Disclosure) Regulations 1994.

MEASUREMENT BASE
The accounting principles recognised as appropriate for the measurement and reporting of earnings and financial position on a historical cost basis are followed.

BASIS OF ALLOCATIONS TO BUSINESS UNITS
Expense Allocation
Meter reading, billing and all associated costs are charged to Powerco’s energy business on a per account basis, this is a variation to the guidelines which state these costs are fully chargeable to the energy business.

Electricity Sales and Cost of Sales Allocation
Electricity sales for the energy business is the energy component of the total sales while the line business sales are the total of fixed distribution and transmission charges.

The cost of sales for each business unit is on the same basis.

SPECIFIC ACCOUNTING POLICIES
The following specific accounting policies which materially affect the measurement of financial performance and the financial position have been applied:

HIRE PURCHASE INTEREST
Hire purchase interest is apportioned monthly as earned.

VALUATION OF FIXED ASSETS
All fixed assets are valued at cost less accumulated depreciation with the exception of land which is valued at cost.

DEPRECIATION
Depreciation has been calculated to allocate the cost of the assets over their estimated useful lives at the following rates:

| Generating plant | 10% to 12.5% | DV |

DEBTORS
Debtors are stated at their estimated net realisable value after making a general provision for doubtful debts.
All known bad debts have been written off during the year.
Hire Purchase debtors are debited with the full finance charge at the time of the sale.

INVESTMENTS
Although Powerco participates in the commercial and financial policy decisions of Energy Brokers, it cannot exercise significant influence. The long term investment is therefore stated at cost.

Effective from the 1 April 1995, Powerco Appliances Limited is an associate company. The financial results of Powerco Appliances Limited will be reflected in Powerco’s financial statements on an equity accounting basis commencing in the 1995/1996 year.

ACCRUED ELECTRICITY REVENUE
Electricity revenue includes an estimate for electricity used but not billed as at year end.

INCOME TAX
The income tax expense charged against the profit for the year is the estimated liability in respect of that profit and is calculated after allowance for permanent differences. The company uses the liability method of accounting for deferred taxation and applies this on a comprehensive basis. Future tax benefits attributable to tax losses or timing differences are only recognised where there is virtual certainty of realisation.

CHANGES IN ACCOUNTING POLICIES
There have been no changes of accounting policies. All policies have been applied on bases consistent with those used in previous years.