10 DECEMBER NEW ZEALAND GAZETTE 4525

TRANSPOWER NEW ZEALAND LINES BUSINESS

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 1999

19. CONTINGENT LIABILITIES

(i) Guarantees

Cross Border Lease

Transpower has entered into two cross border leases in respect of certain HVDC converter stations and the submarine cables. The nature of these transactions is described in Note 12. Transpower has given guarantees and certain undertakings in accordance with a limited guarantee dated 24 October 1996 in respect of certain HVDC converter stations and a limited guarantee dated 31 May 1996 in respect of the submarine cables.

The likelihood of losses in respect of these matters is considered to be remote.

Debt

Transpower has provided guarantees in respect of loan arrangements for the Bonds and Euro medium term notes as described in Note 13.

The maximum exposure under each of these guarantees is as follows:

                                            LINES BUSINESS    GROUP
                                            1999            1998
                                            $000            $000

Bonds 674,918 633,879
Euro medium term notes 474,105 690,023

The likelihood of losses in respect of these matters is considered to be remote.

(ii) Contingencies

Transpower has an agreement with a generator which requires payment by Transpower if the generator is constrained by Transpower under given circumstances from injecting electricity into the National Grid. Given the uncertainty of future events no reasonable quantification of any payment under the agreement can be made.

(iii) Vector Limited Claim (formerly Mercury Energy Limited)

Vector Limited (Vector) has commenced a claim against Transpower concerning Transpower's pricing methodologies under common law and a claim under the Commerce Act.

The amount claimed under common law cannot be quantified at present. The amount claimed under the Commerce Act is for $18 million.

In relation to the common law claim one cause of action was struck out and Vector ordered to replead the other. Vector is repleading that cause of action and has appealed the High Court's decision in relation to the cause of action that was struck out.

Transpower believes it is in a strong position.

(iv) Todd Energy and Kiwi Co-operative Dairies Claim

Todd Energy Limited and Kiwi Co-operative Dairies Limited have commenced a claim against both Transpower and Powerco Limited alleging breaches of the Commerce Act. The damages claimed total $20 million. Transpower has filed a statement of defence and believes that it has not breached the Commerce Act in any respect.

There are no other material contingent liabilities for Transpower or the Transpower Lines Business as at balance date (1998: nil).

20. SEGMENTAL INFORMATION

The Transpower Lines Business operates predominantly in one industry, the transmission of high voltage electricity. Transpower's operations are carried out in New Zealand and are therefore within one geographical segment for reporting purposes.