4892

NEW ZEALAND GAZETTE, No. 169

12 DECEMBER 2006

Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2006

POWERCO

ELECTRICITY DIVISION

e) Commercial Bank Debt

As at 30 June 2005 the balance of Commercial Bank Debt of Powerco Limited was $\$160$ million which relates to a Term Loan Facility agreed and drawn in August 2004, expiring August 2009, which was used to refinance the remaining tranche of the Asset Purchase Facility used to fund the acquisition by Powerco Limited of United Networks Limited (UNL) assets. The Term Loan Facility is jointly provided through Commonwealth Bank of Australia, Westpac Banking Corporation and ANZ National Bank, each with an equal share. The interest rate on the $\$160$ million Term Loan Facility is currently 8.12%. The Term Loan Facility has the benefit of the Security Trust Deed, for the purposes of which it is designated as a Senior Secured Debt Facility and thus secured against the Network assets of Powerco Limited. As at 30 June 2005 a sum of $\$160$ million had been drawn. In the previous year the Group had $\$180$ million commercial bank debt which had an interest rate of 7.24%.

At year end the amount of the commercial bank debt facility allocated to the electricity division was $\$89.256$ million (2005: $\$160.695$ million).

As at the reporting date the carrying value approximates the fair value as interest rates are reset each quarter.

f) Covenants

Powerco Limited has covenanted with all counterparties to ensure certain financial criteria are met throughout the term of the debt agreements. There have been no covenant breaches to date.

g) Financial liabilities

The following tables detail the fair value of financial liabilities

| Financial Liabilities | 30 June 06 NZ$000 | | 30 June 05 NZ$000 | |
| | Carrying Amount | Fair Value | Carrying Amount | Fair Value |
|--------------------------------------------|------------------|----------------|------------------|----------------|
| Subordinated bonds | 53,896 | 53,896 | 45,576 | 45,576 |
| Guaranteed bonds | 227,550 | 227,550 | 114,621 | 114,621 |
| US Dollar Private Placement Notes | 141,591 | 141,591 | 137,949 | 137,949 |
| Commercial Paper Facilities | 83,678 | 83,678 | 69,803 | 69,803 |
| Commercial Bank Debt | 89,256 | 89,256 | 160,695 | 160,695 |
| US Cross Currency Interest Rate Swap | 21,357 | 21,357 | - | 28,906 |
| Interest Rate Swap | 4,268 | 8,268 | - | 14,100 |
| | 625,596 | 625,596 | 528,644 | 571,710 |

The fair value of financial assets and financial liabilities are determined as follows:

• For floating rate debt carrying value approximates fair value due to continuing interest rate reset
• For fixed rate debt opposing floating rate derivative instruments matching tenor and term are used in offset position to calculate fair values. The movements in these derivatives approximate movements in market values
• For derivative instruments fair value is based on quoted prices.