NEW ZEALAND GAZETTE

No. 94

Horowhenua Energy Limited Line and Energy Businesses - Annual Report 1997

Notes to the financial statement

for the year ended 31 March 1997

1. Statement

of accounting policies

Accounting entity

The Financial Statements are those of the Line and Energy Businesses of Horowhenua Energy Limited. Information in respect of subsidiaries is included in the financial statements to the extent required by Regulation 6(5) of the Electricity (Information Disclosure) Regulations 1994. Horowhenua Energy Limited and it’s subsidiary, Linework Limited, are in a “Prescribed Business Relationship” as defined by Regulation 3(1)(a)(iii) of the Electricity (Information Disclosure) Regulations 1994.

The period reported is 1 April 1996 to 31 March 1997.

These Financial Statements are prepared in accordance with Regulations 6(2) and 6(3) of the Electricity (Information Disclosure) Regulations 1994. The Financial Statements have not been prepared for the purpose of the Financial Reporting Act 1993, or the Energy Companies Act 1992.

Principal activities

The Line Business operates a line business activity, as defined by regulation 2 of the Electricity (Information Disclosures) Regulations 1994, in and around the Horowhenua and Kapiti Coast area.

The Energy Business operates a retail electricity business activity, as defined by the regulation 2 of the Electricity (Information Disclosure) Regulations 1994, in and around the Horowhenua and Kapiti Coast area.

Methodology of separation of business

Horowhenua Energy Limited has generally followed the Electricity Disclosure Guidelines as issued by the Ministry of Commerce dated 23 June 1994 with the exceptions noted below.

The Guidelines were issued by the Energy Policy Group of the Ministry of Commerce as guidance to assist Electricity Companies to comply with the Electricity (Information Disclosure) Regulations 1994.

Exceptions to the guidelines are noted in the Allocation Methodologies Disclosure which will be publicly disclosed.

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 by the company, with the exception that certain fixed assets have been re-valued.

Specific accounting policies

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

a) Fixed assets

The company has five classes of fixed assets:

1. Freehold land and buildings
2. Network assets
3. Plant and equipment
4. Vehicles
5. Capital work in progress

The Company uses Optimised Deprival Value (“ODV”) methodology in valuing network assets. This methodology recognises the economic value of network assets based on the earnings of segments of the network to the Company. The ODV of network assets is updated every two years to reflect network extensions and the earnings derived. The ODV was updated at 31 March, 1997 and the result reflected in these financial statements.

All fixed assets, excluding land and infrastructure assets, are recorded at cost or valuation less accumulated depreciation.

Freehold land is stated at market valuation (refer note 5).

b) Infrastructure asset

Infrastructure assets consist of the individual asset components which form the Company’s electricity network, excluding zone substations.