3480

NEW ZEALAND GAZETTE, No. 133

30 NOVEMBER 2007

Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2007

POWERCO

GAS DIVISION

c) US dollar private placement

$294.266 million of US dollar private placement notes were issued on 25 November 2003 to private US investors by Powerco Limited, of which $63.793 million has been allocated to the Powerco gas division (2006: $63.793 million). The coupon payments are semi-annual and the note issue expires 25 November 2014 (11 year), 25 November 2015 (12 year), and 25 November 2016 (13 year). The notes are secured against the network assets of Powerco Ltd through the Security Trust Deed.

The interest rates on the notes are fixed until maturity.

d) Commercial paper facility

Powerco Limited has established a commercial paper facility to enable Powerco Limited to borrow money from the capital market. The programme is supported by a cash advance facility of $200 million with a syndicate of banks made up of the Commonwealth Bank of Australia, Westpac Banking Corporation and ANZ National Bank. This facility was due to expire in August 2007 but has been extended until August 2009. The facility has the benefit of the Security Trust Deed dated 10 March 2005 as a Senior Secured Debtor Facility, and as such the principal is secured against the network assets of Powerco Limited. At 30 June 2007 a sum of $150,000,000, which includes an interest portion of $3,017,076 of 90 day bills at a weighted average interest rate of 8.15%, with varying maturity dates, had been drawn down under the commercial paper programme (2006: $150,000,000 was drawn down under the commercial paper programme which included an interest portion of $2,759,645 at a weighted average interest rate of 7.52%). No amount has been drawn on the standby facility. As at year end the carrying value approximates the fair value.

At year end the amount of the commercial paper facility allocated to the Powerco gas division was $32.521 million (2006: $32.519 million).

e) Commercial bank debt

A $160 million 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 8.71%. 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 2007 a sum of $160 million had been drawn (2006: $160 million with an interest rate of 8.12%).

During the period Powerco Limited added a revolving cash advances tranche of $30 million to the existing $200 million standby facility (refer commercial paper note). The purpose of this facility is the short-term funding of development capital expenditure, and the facility will be drawn down and repaid as funding is required. This additional amount of the facility is jointly provided by Westpac, ANZ National Bank and Commonwealth Bank of Australia and is due to expire on 3 August 2009. As at 30 June 2007 the interest on this facility was 8.59%.

At year end the amount of the term liabilities allocated to the gas division was $34.689 million (2006: $34.687 million) and current liabilities of $5.799 million (2006: $Nil).

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 assets and liabilities

The following tables detail the fair value of financial liabilities

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.