OTHER INTANGIBLES

Gross carrying value
Balance at 30 June 2005
Additions
Disposals
Balance at 30 June 2006

Acquisition of plant & equipment assets from inter-division
Additions
Disposals
Balance at 30 June 2007

Accumulated amortisation
Balance at 30 June 2005
Disposals
Amortisation expense
Balance at 30 June 2006

Acquisition of plant & equipment assets from inter-division
Disposals
Amortisation expense
Balance at 30 June 2007

Net book value 30 June 2006

| | 471 | 471 |

Net book value 30 June 2007

| | 471 | 471 |

DISCLOSURE OF PERFORMANCE MEASURES PURSUANT TO REGULATION 15 AND PART II OF THE FIRST SCHEDULE OF THE GAS (INFORMATION DISCLOSURE) REGULATIONS 1997

Financial Performance Measures

Efficiency Performance Measures

Notes:
(a) This calculation excludes current borrowings from working capital because the borrowings do not relate to operational obligations.
(b) EBIT for the purposes of this calculation excludes the hedging gains of $5.350 million as shown in the Income Statement as Other Income, and the hedging gain of $3.091 million recognised in the Statement of Changes In Equity. This is because the hedge gain does not meet the definition of revenue in the Gas (Information Disclosure) Regulations 1997.

CONTINGENT LIABILITIES AND COMMITMENTS

As Powerco is an integrated business, this disclosure relates to the business as a whole.

Legal claims

Powerco Limited has been named as a second defendant in a claim issued by Todd Energy Limited against Taupo Electricity Limited. The plaintiffs allege various breaches of the Commerce Act 1986 and claim various declarations and injunctive relief until damages. The damages amount is presently unquantified. This claim is being defended by Powerco, when contents that it is not in breach of any of its obligations. No provision for the claim has been included in the financial statements.

Taxation risk

The IRD has issued a Notice of Proposed Adjustment dated 27 November 2006 which proposes to disallow depreciation calculated using the market value of former Powerco assets for the 2002, 2003, 2004 and 2005 income tax years. It proposes using the original cost of the former Powerco assets as the basis for calculating the tax depreciation. (The 2001 income tax year is statute barred).

Powerco, along with its tax advisors and senior legal counsel disagree with this treatment and has issued a Notice of Response on 26 January 2007, stating that no adjustment is required.

The potential liability arising from the IRD's argument could range from between $nil to $22.4 million (including $5.9 million use of money interest).

In addition, the IRD has raised an issue of whether the proportion of the price paid by Powerco for the purchase of: (1) Central Power and former Powerco's assets in 2000; (2) ACB's Huntly and Porirua Basin gas network in 2001; and (3) certain Bay of Plenty and Thames Valley electricity assets and lower North Island gas assets of United Networks Limited in 2002 attributed to fixed assets and goodwill is correct and as a consequence whether the value of depreciable property and depreciable loss for the 2002, 2003, 2004 and 2006 tax years are correct.\n
The Commissioner is currently investigating this issue further. If, following the Commissioner’s further investigations, there is a dispute between the Commissioner and Powerco with respect to this issue, it has not yet been resolved by agreement, the Commissioner may issue a Notice of Proposed Adjustment. If the Commissioner issues a notice of proposed adjustment, Powerco can challenge the assessment. The potential total liability arising from this dispute cannot be accurately estimated at this stage.

Contracts

Powerco Limited has a contract with Tenix Alliance New Zealand Limited (Tenix), who provide electricity and gas field services. There is a condition in the contract that states that a payment is made to Tenix for performing better than budgeted and a payment is made to Powerco if performance does not meet budget. The amount of the payment is determined by a predetermined calculation in the contract on an annual basis. At this time any future payment to or from Powerco cannot be quantified.