1318 NEW ZEALAND GAZETTE, No. 46 3 MARCH 2008

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

POWERCO

ELECTRICITY DIVISION

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 8.32%. 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 31 March 2007 a sum of $160 million had been drawn (30 June 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 31 March 2007 $26 million was drawn on the facility and the interest on this facility was 8.15%.

At year end the amount of the commercial bank debt facility allocated to the electricity division was $102.219 million (30 June 2006: $89.256 million).

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 assets and liabilities:

| | 31 March 2007 | | 30 June 2006 |
|---------------------------------------|-------------------------------|-------------------------------|
| | Carrying | Fair | Carrying | Fair |
| | Amount | Value | Amount | Value |
| | NZ$000 | NZ$000 | NZ$000 | NZ$000 |
| Financial assets: | | | |
| Interest rate swaps | 14,177 | 14,177 | 4,422 | 4,422 |
| | | | | |
| Financial liabilities: | | | |
| Subordinated bonds | 52,957 | 52,957 | 53,896 | 53,896 |
| Guaranteed bonds | 225,766 | 218,503 | 227,550 | 227,550 |
| US dollar private placement notes | 133,383 | 133,383 | 141,591 | 141,591 |
| Commercial paper facilities | 83,729 | 83,729 | 83,678 | 83,678 |
| Commercial bank debt | 102,219 | 102,219 | 89,256 | 89,256 |
| US cross currency interest rate swaps | 29,766 | 29,766 | 21,361 | 21,361 |
| Interest rate swaps | 12,887 | 12,887 | 12,295 | 12,295 |
| |----------- |----------- |----------- |----------- |
| | 640,707 | 633,549 | 629,627 | 629,627 |

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.
• The fair value of financial derivatives and fixed rate debt are determined by reference to the market quoted rates input into valuation models.