3814 NEW ZEALAND GAZETTE No. 158

TOP ENERGY LIMITED

SPECIAL PURPOSE FINANCIAL STATEMENTS

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS

FOR THE 12 MONTHS ENDED 31 MARCH 1998

20. EVENTS OCCURRING AFTER BALANCE DATE

The revolving credit facility with the Bank of New Zealand has been extended to 31 December 2000.

Industry Restructuring

The ODV Handbook issued under the Electricity Information Disclosure Regulations 1994 has been changed. This handbook affects the basis upon which the network asset is valued in relation to the "Lines Business", and is used for the disclosure regime required under the Electricity Act 1992. The directors resolved in 1996 to link the valuation of the company’s network asset to a percentage of the ODV value. Any change in the ODV value, as a result of a change in the valuation methodology, would need to be considered in relation to the carrying value of the network asset. Due to the timing of the change the company has not yet undertaken a full review of it’s ODV. The revaluation as at 31 March 1996 has been revised to reflect the changes in economic lives of assets in existence as at that time. A full revaluation will be undertaken as at 31 March 1999.

On 3 July 1998 Parliament passed a bill to restructure the electricity industry. The Act provides for a number of changes. It is required that the ownership of the monopoly network business be separated from the ownership of energy trading, generation and other activities. In implementing this split, a number of options are available. At the time of completion of these accounts the company has not made any decision as to which particular option it will use. Other affects on the business have not yet been determined.

A possible consequence of the industry restructuring may be to affect the value of hedges presently held by Top Energy Ltd (refer note 17d). Uncertainty arising from contractual terms, market trends and government intentions mean that the likely effect of these changes can not be reasonably quantified.

The allocation of assets and liabilities to business units in these accounts is made solely in compliance with the Electricity Information Disclosure Regulations 1994 and for no other purpose. The allocation of particular assets and liabilities, to put into effect, the requirements of the Electricity Industry Reform Act 1998 will be made by the directors of the company, based upon their judgment. This allocation could be quite different from the allocations made for the purposes of these accounts.

Renewals Accounting

The Institute of Chartered Accountants released exposure draft ED-82 in March 1998. This exposure draft is concerned with the treatment of fixed assets and depreciation thereof. In particular, it considers the accounting treatment called renewals accounting (alternatively infrastructure accounting). The discussion paper explicitly proposes that renewals accounting be disallowed, although the exposure draft does not set out this requirement. The directors are opposed to the proposed treatment of infrastructural assets. If this exposure draft is adopted by the Institute there will be a period of 2 years during which an entity can progress through the steps to achieve implementation.