NEW ZEALAND GAZETTE

No. 80

1966

These financial statements are to be read in conjunction with the notes on pages 3 to 6 and the Auditors' Report on page 1.

Counties Power Limited and Subsidiary

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

For the Year Ended 31 March 1997

1. STATEMENT OF ACCOUNTING POLICIES

These financial statements are presented in accordance with the Companies Act 1993 and have been prepared in accordance with the Financial Reporting Act 1993, except that a Statement of Cash Flows has not been presented.

The parent company's financial statements are for Counties Power Limited as a separate entity and the consolidated financial statements for the Counties Power Group, which include the dormant subsidiary as disclosed in Note 16.

GENERAL ACCOUNTING POLICIES

The general accounting policies recognised as appropriate for the measurement and reporting of results and the financial position based on historical cost, have been followed. Accrual accounting is used to match expenses and revenues.

Reliance is placed on the fact that the Group is a going concern.

PARTICULAR ACCOUNTING POLICIES

The following particular accounting policies which materially affect the measurement of profit and financial position are consistently applied:

Sales

Sales shown in the statement of financial performance comprise the amounts received and receivable by the company for goods supplied to customers in the ordinary course of business. The sales are shown exclusive of Goods and Services tax collected from customers.

Electricity Sales

Electricity sales are read on the basis of constant cycles each year. Interim assessed monthly bills are issued for most customers. Unbilled sales at the financial year end have been accrued.

Accounts Receivable

Accounts receivable are stated at expected net realisable value after providing against debts where collection is doubtful.

Financial Instruments

Counties Power Limited has financial instruments with off-balance sheet risk for the primary purpose of reducing its exposure to fluctuations in electricity spot market prices. While these financial instruments are subject to risk that market rates may change subsequent to acquisition, such changes would generally be offset by opposite effects on the items being hedged.

The Company has entered into electricity price hedging contracts with electricity generators in order to minimise the risk of price fluctuations on the electricity spot market. Assets, liabilities, and any unrealised revenues and expenses associated with these instruments as at balance date are not recognised in the financial statements. Realised revenues and expenses are recognised in the statement of financial performance on maturity of the hedging contracts and are incorporated as part of the cost of wholesale electricity.

Full disclosure of information about electricity price hedging contracts to which the Company is a party is provided in note 14.

Inventories

Inventories are stated at the lower of cost or net realisable value.

Cost is determined at average in store prices. Allowance for obsolescence is made when necessary.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation, less any amount written off for permanent impairment in value.

The cost of fixed assets created or enhanced by the Company (self-constructed assets) is direct expenses incurred and an appropriate proportion of indirect expenses.

The cost of purchased fixed assets is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended service.

Depreciation

Fixed assets have been depreciated, so as to write off cost less estimated residual value over their estimated useful lives, on the following basis:

| Distribution System | 4% straight line |
| Buildings | 2% straight line for majority of buildings (some at 1% straight line) |
| Plant & Equipment | 40% DV for computer hardware and software |
| | 20% and 25% DV for other items |
| Motor Vehicles | 20% and 25% DV for majority of vehicles |

Investments

Investment in subsidiary is recorded at cost as described in Note 16.

Taxation

The statements of financial performance and movements in equity include taxation expense on operating results.

The income tax expense charged to earnings includes both the income tax payable on assessable income in the period and the income tax effects of timing differences calculated using the liability method.

Tax effect accounting is applied on a comprehensive basis to all timing differences. A debit balance in the deferred tax account, arising from timing differences or income tax benefits from income tax losses, is only recognised if there is virtual certainty of realisation.

Principles of Consolidation

The consolidated financial statements are prepared from the financial statements of the parent and its subsidiary (as disclosed in Note 16) at 31 March 1997 using the purchase method.

CHANGES IN ACCOUNTING POLICY

During the period there have been no changes in accounting policies.

2. OPERATING REVENUE

External sales to customers included: