NGC HOLDINGS LIMITED

GAS RETAILING ACTIVITIES

STATEMENT OF ACCOUNTING POLICIES

FOR THE YEAR ENDED 30 JUNE 2008

ENTITIES REPORTING

These financial information disclosure statements comprise the gas retailing business activities of NGC Holdings Limited and its subsidiaries. The gas retailing activities involve the supply of gas to gas customers.

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 has adopted New Zealand International Financial Reporting Standards, as such these financial information disclosure statements follow the same accounting policies as that of Vector Limited and comply with New Zealand equivalents to IFRS. The accounting policies as they relate to the gas retailing business are detailed below.

These financial information disclosure statements for the gas retailing business activities of the Vector group are Special Purpose Financial Reports.

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 and should be read in conjunction with the accounting policies in the Vector group annual report for the year ended 30 June 2008.

The policy to apply the avoidable cost allocation methodology (ACAM) described in the Electricity Information Disclosure Handbook 31 March 2004 has been adopted, for the allocation of revenues, costs, assets and liabilities between the regulated businesses and other activities of the company. Under the Gas (Information Disclosure) Regulation 1997, there is no specific requirement to apply the ACAM methodology, thus the Electricity Information Disclosure Handbook in allocating costs has been applied.

Allocations have been carried out 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 retailing activities are treated as an incremental business as it operates in a competitive market.

All financial statement items not allocated to the gas retailing 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.