NEW ZEALAND GAZETTE

11 AUGUST

2069

Note 9: Loan Liability (Non Current)

Closing Balance ... 24,900 | 24,900

The loan liability is secured over the revenue of the company. The loan is due within two years and is borrowed at an interest rate of 10.50%.

Note 10: Wind Generation Project

SCANPOWER Limited is engaged in feasibility studies with regard to wind generation options within the distribution area of SCANPOWER. The directors are committed to the continuation of these studies.

Capitalised expenditure to 31/03/97:

Feasibility Studies* ... 134,181 | 7,239
Total expenditure capitalised ... 134,181 | 7,239

Although results are promising at this stage, the outcome of this project is not certain. In the event this project is terminated, the amount disclosed as capitalised above will be written off in the Statement of Financial Performance.

*In addition to this, there are discounts for fees totalling $32,173 so far that will have to be repaid.

Note 11: Capital Commitments and Contingent Liabilities

As at 31 March 1997, the company has no contingent liabilities (1995/96 also Nil).

SCANPOWER has not entered into any contracts to purchase or install equipment of a capital nature (1995/96 also Nil).

Note 12: Segment Information

SCANPOWER operates in one industry which is the supply and distribution of electricity. All of SCANPOWER's operations are carried out in New Zealand.

Note 13: Related Party Information

All transactions with related parties are made under normal terms and conditions of supply and sale. No related party debts were forgiven or written off during the year.

Note 14: Financial Instruments

The company has no off balance sheet financing, nor any foreign exchange exposure. All financial instruments are carried at fair value and take into account the company’s maximum exposure to credit risk.

Concentrations of credit risk with respect to receivables are limited due to a large customer base to whom the company supplies services.

Revenue - Electricity price hedging contracts

SCANPOWER has entered into electricity price hedges with its generators. Under these agreements SCANPOWER agrees with its electricity generators, a fixed price (hedge price) for a percentage of its estimated electricity needs. It is SCANPOWER Ltd’s current policy to hedge so that its exposure to spot market prices always falls within the Value at Risk (V.A.R) envelope set by the Directors.

It is SCANPOWER policy not to enter into any speculative position in relation to electricity price hedging contracts.

On maturity of the electricity price hedges any difference between the hedge price and the spot market price is settled between the parties. Settlement occurs irrespective of the amount of electricity actually supplied. If the spot market price is greater than the hedge price, electricity generators must settle the difference with SCANPOWER. Conversely if the spot market price is less than the hedge price, SCANPOWER must settle the difference with electricity generators.

Credit Risk - Electricity price hedging contracts

With respect to electricity price hedges, SCANPOWER exposure is on any potential difference between the spot price and the hedge price, where on maturity of these agreements the spot price is greater than the hedge price. SCANPOWER does not anticipate any non-performance of any obligations which may exist on maturity of these agreements.

Fair Value - Electricity price hedging contracts

The fair value of electricity price hedging contracts can vary from day to day as the spot market price for electricity varies. As at balance date the secondary market for electricity price hedging contracts was not sufficiently active in order to obtain a reliable measure of the fair value of SCANPOWER hedging contracts. On maturity of these agreements there is potentially an asset or liability in relation to the electricity price hedges which has not been recognised in the financial statements. As at balance date the contract amount of the electricity hedging activity amounted to $12,749,412 covering the period from October 1996 to September 2001.