4444 NEW ZEALAND GAZETTE No. 189

Electricity Corporation of New Zealand Limited

Notes to the Financial Statements

20. Transactions with related parties

The shareholder of ECNZ is the Crown. ECNZ undertakes many transactions with other state owned companies and Government Entities, all of which are carried out on a commercial and arms length basis.

During the year, ECNZ entered into material transactions with Transpower. Transpower operates the national electricity distribution grid. During the year ECNZ received $18 million (1997 $22 million) of revenue from Transpower, mainly for the provision of ancillary services such as spinning reserve and voltage control. ECNZ also paid Transpower transmission and connection fees amounting to $84 million (1997 $112 million).

EZNZ holds a 33 per cent share in EMCO Limited (EMCO) which functions as a clearing house for the wholesale electricity market. Electricity sales revenues received by ECNZ from EMCO acting in its role as a clearing house are not considered to be related party transactions. ECNZ paid service fees of $4 million (1997 $4 million) to EMCO during the year. The amount payable to EMCO at balance date is not material.

During the year, ECNZ paid professional engineering fees of $152,215 (1997 $86,264) to Beca Carter Hollings & Ferner Limited which is wholly owned by Beca Group Limited of which Sir R P Carter is the Executive Chairman and a minority shareholder. Sir R P Carter is a Director of ECNZ. Professional engineering services provided by Beca Carter Hollings & Ferner Limited were supplied on normal commercial terms. A balance of $18,874 (1997 $6,635) outstanding at balance date is included in accounts payable.

During the year ECNZ also paid professional engineering fees of $118,552 (1997 $79,103) to Kingston Morrison Limited, for whom Mr S C Gentry is Executive Chairman. Mr Gentry is a Director of ECNZ. Professional engineering services provided by Kingston Morrison Limited were supplied on normal commercial terms. A balance of $18,468 (1997 $998) outstanding at balance date is included in accounts payable.

21. Investments

• wholly owned by ECNZ

• 65% owned by ECNZ Energy Limited
  ^ 100% owned by Kupe Development Limited

  99% owned by ECNZ International Limited

  1% owned by ECNZ Limited

22. Segmental information

ECNZ operates predominantly in one industry, the generation and wholesale marketing of electricity. Its operations are carried out predominantly in New Zealand and are therefore within one geographical segment for reporting purposes.

23. Long term relationships

(a) ECNZ has entered into a contract with Contact Energy Limited under which ECNZ is entitled to purchase specified annual gas quantities from 1 October 1996 to 30 September 2006. The maximum amount payable under the contract up to 30 September 2006 is $236 million.

(b) ECNZ has entered into a contract with Solid Energy Limited to purchase specified quantities of coal up to 30 September 2001. The maximum amount payable under the contract up to 30 September 2001 is $26 million.

(c) ECNZ has entered into contracts with the Tuaropaki Power Company Limited with respect to the Mokai geothermal field. These interrelated contracts cover electricity price hedges, investment, and operations and maintenance.