✨ Financial Statements and Performance Measures
Notes to and Forming Part of the Financial Statements
For the year ended 31 March 2007
ELECTRICITY DIVISION
9 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 | 2007 | 2006 | 2005 | 2004 |
|---|---|---|---|---|
| (i) Return on Funds | 9.47% | 10.81% | 10.02% | 12.50% |
| (ii) Return on Equity | 11.97% | 11.44% | 8.51% | 10.52% |
| (iii) Return on Investment including revaluation | 7.72% | 8.75% | 6.71% | 37.94% |
| (iv) Return on Investment excluding revaluation | 7.72% | 8.75% | 6.71% | 6.77% |
| Efficiency Performance Measures | 2007 | 2006 | 2005 | 2004 |
|---|---|---|---|---|
| (v) Direct Line Cost per Kilometre | $1,056.76 | $1,072.79 | $1,080.45 | $1,117.21 |
| (vi) Indirect Line Cost per Electricity Customer (including non-recurring costs) | $67.30 | $82.81 | $95.78 | $65.87 |
| (vii) Indirect Line Cost per Electricity Customer (excluding non-recurring costs) | $65.94 | $80.59 | $87.82 | $65.86 |
10 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 Transpower Limited. The plaintiffs allege various breaches of the Commerce Act 1986 and claim various declarations and injunctions together with damages. The damages amount is presently unquantified. The claim is being defended by Powerco, which contends 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 $5.3 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) CentralPower and former Powerco's assets in 2000; (2) AGL's Hutt Valley 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, 2005 and 2006 tax years are correct.
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 the foregoing and this dispute is not 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 adjustment. 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 by 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.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2008, No 46
Gazette.govt.nz —
NZ Gazette 2008, No 46
✨ LLM interpretation of page content
🏭 Disclosure of Performance Measures for Electricity Division
🏭 Trade, Customs & IndustryFinancial Performance, Efficiency Measures, Electricity Division, Return on Funds, Return on Equity, Return on Investment, Direct Line Cost, Indirect Line Cost
🏭 Contingent Liabilities and Commitments
🏭 Trade, Customs & IndustryLegal Claims, Taxation Risk, Contracts, Powerco Limited, Todd Energy Limited, Transpower Limited, IRD, Tenix Alliance New Zealand Limited