NGC HOLDINGS LIMITED

GAS WHOLESALING ACTIVITIES

STATEMENT OF ACCOUNTING POLICIES

FOR THE YEAR ENDED 30 JUNE 2007

ENTITIES REPORTING

These financial information disclosure statements comprise the gas wholesaling business activities of NGC Holdings Limited and its subsidiaries. The gas wholesaling activities involves the sale of gas to persons for the purpose of resupply by the other persons (other than those wholesaling activities involving the supply of gas to retailers).

NGC Holdings Limited is a company registered under the Companies Act 1993. NGC Holdings Limited is a wholly owned subsidiary of Vector Limited. NGC Holdings Limited is yet to adopt New Zealand International Financial Reporting Standards, as such these financial information disclosure statements apply the same accounting policies as that of Vector Limited and comply with New Zealand Generally Accepted Accounting Practice. The accounting policies as they relate to the gas wholesaling business are detailed below.

These financial information disclosure statements for the gas wholesaling business activities of the Vector group are Special Purpose Financial Reports as defined in the New Zealand Institute of Chartered Accountants' "framework for differential reporting".

STATUTORY BASE

The financial information disclosure statements have been prepared in accordance with the requirements of the Gas (Information Disclosure) Regulations 1997.

MEASUREMENT BASE

The financial information disclosure statements are prepared on the basis of historical cost.

The Vector group has adopted a policy to apply the avoidable cost allocation methodology (ACAM) described in the Electricity Information Disclosure Handbook 31 March 2004, for the allocation of revenues, costs, assets and liabilities between the regulated businesses and other activities of the group. Under the Gas (Information Disclosure) Regulation 1997, there is no specific guidance provided on the cost allocation method to apply, thus the Vector group has followed the Electricity Information Disclosure Handbook in allocating costs.

The costs have been allocated on the following basis:

• Direct allocation of all components of financial statement items which are directly attributable to the specific businesses.
• For any components of financial statement items that are not directly attributable to a specific business:
  • By assessing the proportions of those components which are avoidable and non-avoidable; and
  • Allocating those components amongst the businesses on the basis of those proportions using an appropriate cost allocator.

The two main allocators used are the number of employees and the book value of property, plant and equipment. Some costs like integration costs, IT costs and non-system asset depreciation are separately analysed and are allocated using allocators specific to those costs.

In applying the principles of ACAM, businesses have been split into two categories – businesses potentially subject to limited or no competition and businesses that operate in a competitive market. ACAM is intended to show that no more than standalone costs have been allocated to the businesses in potentially non-competitive markets. The 'not directly attributable' costs are initially allocated to the businesses potentially subject to limited or no competition. Avoided costs are allocated to incremental businesses. The gas wholesaling activities are treated as an incremental business as this is a competitive market.

All costs not allocated to the gas wholesaling business, are allocated to other businesses within the Vector group. Other businesses are not disclosed within these financial information disclosure statements.

GOING CONCERN

The financial statements have been prepared on a going concern basis which the directors believe is appropriate.