31 AUGUST NEW ZEALAND GAZETTE 3143

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 March 1998:

| Feasibility Studies* | 218,539 | 134,181 |
| Option to Lease Land | 80,000 | |
| Total expenditure capitalised | 218,539 | 134,181 |

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.

*This is net of discounts totalling $35,000, which may become payable if the project is terminated.

Note 11: Capital Commitments and Contingent Liabilities

As at 31 March 1998, the company had no contingent liabilities (1996/97 also Nil).

SCANPOWER has not entered into any contracts to purchase or install equipment of a capital nature (1996/97 also Nil).

Note 12: Analysis of non-cancellable operating lease commitments

| Payable not later than one year | 33,504 |
| Payable later than one year, not later than two years | 33,504 |
| Payable later than two years, not later than five years | 80,968 |
| Payable later than five years | 147,976 |

Lease payments started on 1 September 1997.

Note 13: 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 14: 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 15: 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 up to 105% of its electricity needs. 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...