NEW ZEALAND GAZETTE

No. 37

Schedule 2

Assets and liabilities to be transferred to South Island SOE and associated terms and conditions

In this Schedule 2, except where the context requires otherwise:

Expressions defined in the Draft South Island Agreement have the same meanings in this Schedule 2;

References (by number) to clauses are to the clauses in the Draft South Island Agreement.

1. Assets and liabilities to be transferred to South Island SOE

The following assets and liabilities are to be transferred by ECNZ to South Island SOE:

Assets

The assets as defined in the Draft South Island Agreement including:

(a) these power stations:

• Tekapo A
• Tekapo B
• Ohau A
• Ohau B
• Ohau C
• Benmore
• Aviemore
• Waitaki
• Manapouri
• Cobb, and

all the land, plant and equipment, consents, and other assets which constitute part of ECNZ’s Southern Generation Group or the power station at Cobb, including those necessary for use in or at, or for operation of the power stations, but not any funds held;

(b) Intellectual property (subject to the Intellectual Property Agreement);

(c) the rights of ECNZ under all the material agreements (see item 6 of this Schedule) and the commercial contracts;

(d) the land and associated assets held for future development purposes:

(i) associated with any of the power stations or functions performed by the Southern Generation Group;

(ii) for the development of hydroelectric projects in the South Island; and

(iii) for the development of wind generation opportunities at Makara, North Manawatu Gorge or Tararua;

(e) any non-land assets associated with:

(i) the development of hydroelectric projects in the South Island; and

(ii) the development of wind generation at Makara, North Manawatu Gorge, Tararua, the Chatham Islands or Te Paki;

(f) assets, including equity and intellectual property, relating to Ceramic Fuel Cells Limited and Superlink joint venture arrangements;

(g) all the shares in South Island Energy Limited, Energy CHB Limited, Energy Scanpower Limited and Energy Waitaki Limited; and

(h) any other assets agreed in writing between ECNZ and South Island SOE.

Liabilities

The assumed obligations as defined in the Draft South Island Agreement being:

(a) the obligations of ECNZ under the agreements of ECNZ (including, without limitation, the agreements listed in item 6 of this Schedule) relating to the operation or anticipated operation of the Southern Generation Group, the power stations or relating to other assets to be transferred to South Island SOE; and

(b) all other liabilities relating to the assets to be transferred to South Island SOE or the operations or functions performed by the Southern Generation Group, arising or derived or caused by a transaction or event occurring during the period before the settlement time.

2. Risk

The assets are solely at ECNZ’s risk until the settlement time and thereafter solely at South Island SOE’s risk.

3. Settlement

Settlement is to occur on 1 April 1999 or such other time as ECNZ and South Island SOE may agree.

4. Consideration

The purchase price for the sale and transfer of the assets and liabilities is to be calculated according to the following clauses 4.1, 4.2, 4.3, 4.4 and 4.6 of the Draft South Island Agreement:

4.1 Consideration

The purchase price for the sale and transfer of the assets and the transfer or novation of the assumed obligations will be the book value of the net assets as shown in the settlement accounts. The purchase price will be allocated to the assets and the assumed obligations in the same amounts as the book values of those assets and assumed obligations. It is agreed that the purchase price equates to market value for the purpose of section EG19 of the Income Tax Act 1994.

4.2 Settlement Accounts

(a) Forthwith after the settlement date, ECNZ (with the assistance of such employees of [South Island SOE] as may be necessary) will procure the preparation of the settlement accounts. The settlement accounts will show the book value of the net assets at the settlement time and will be prepared in accordance with:

(i) the Companies Act 1993;

(ii) the Financial Reporting Act 1993;

(iii) the accounting policies and principles adopted for ECNZ’s audited published accounts for the year ended 30 June 1998 consistently applied; and

(iv) the transition rules.

(b) In the event of any inconsistency between the transition rules and this agreement, the terms of this agreement will prevail.

(c) ECNZ will ensure that it keeps [South Island SOE] (or its accounting advisers) reasonably informed as to the progress of the preparation of the settlement accounts and, from time to time but in any event on completion of each significant section of them, will provide [South Island SOE] with such information and papers (including working papers) as [South Island SOE] reasonably requests to support the conclusions reached in the settlement accounts as to the value of the net assets.

(d) [South Island SOE] (and its accounting advisers) will be permitted to conduct its own review (in accordance with the procedures agreed from time to time between [South Island SOE] and ECNZ, both parties acting reasonably) of the settlement accounts and, within 10 business days of the later of the date on which the final draft settlement accounts and the date of the certification by ECNZ’s external auditors referred to in the definition of “settlement accounts” are delivered to [South Island SOE] and the date on which the procedures referred to in this clause are agreed between