3 MARCH 2008 NEW ZEALAND GAZETTE, No. 46 1317

Notes to and Forming Part of the Financial Statements
For the year ended 31 March 2007

POWERCO

ELECTRICITY DIVISION

(b) Guaranteed bonds

$250 million of guaranteed bonds were issued on 29 March 2004 as unsecured debt obligations of Powerco Limited (of which $139.548 million was allocated to the electricity division). The scheduled payments by Powerco Limited of interest and principal are guaranteed on an unsecured basis by US-based XL Capital Assurance Inc, a specialist financial guaranty organisation. The bonds expire on 29 March 2011 (7 year bonds), 29 March 2013 (9 year bonds) and 29 June 2015 (11 year bonds). The interest rates on the bonds are fixed until maturity.

On 28 September 2005 a $180 million issue of guaranteed bonds took place (of which $100.477 million was allocated to the electricity division), as secured unsubordinated obligations of Powerco Limited. The scheduled payments of interest and principal payable by Powerco Limited were again guaranteed on an unsecured basis by XL Capital Assurance. The bonds expire on 28 September 2012 (7 year bonds) and 28 September 2017 (12 year bonds). The interest rates on the bonds are fixed until maturity.

Under the trust documents constituting the Guaranteed Bonds, Powerco Limited has covenanted to ensure that, if XLCA defaults on its obligations under the financial guaranty, Powerco Limited will procure sufficient of its subsidiaries to guarantee its obligations under the Guaranteed Bonds by signing a Subsidiary Guarantee so that at all times the total tangible assets of the Company and all guaranteeing subsidiaries exceeds 85% of the total tangible assets of the Group. As at 31 March 2007, no Subsidiary Guarantee had been executed.

The guaranteed bonds are secured against the network assets of Powerco Limited through the Security Trust Deed.

(c) US dollar private placement

$294.266 million US dollar private placement note issue took place on 25 November 2003 to private US investors (of which $164.257 million was allocated to the electricity division). The USD Private Placement notes are debt obligations of Powerco Limited. 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.

(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 31 March 2007 a sum of $150,000,000, which includes an interest portion of $2.811 million of 90 day bills at a weighted average interest rate of 7.67%, with varying maturity dates, had been drawn down under the commercial paper programme (30 June 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 electricity division was $83.729 million (30 June 2006: $83.678 million).