Deloitte

REPORT OF THE AUDITOR-GENERAL

TO THE READERS OF THE FINANCIAL STATEMENTS OF THE LINES COMPANY LIMITED ELECTRICITY DIVISION FOR THE YEAR ENDED 31 MARCH 2007

We have audited the financial statements of The Lines Company Limited Electricity Division ("the Electricity Division") on pages 5 to 18. The financial statements provide information about the past financial performance of the Electricity Division and its financial position as at 31 March 2007. This information is stated in accordance with the accounting policies set out on pages 8 to 11.

Directors’ Responsibilities

The Commerce Commission’s Electricity Information Disclosure Requirements 2004 made under section 57T of the Commerce Act 1986 require the Directors to prepare financial statements which give a true and fair view of the financial position of the Electricity Division as at 31 March 2007, and the results of its operations and cash flows for the year ended on that date.

Auditor’s Responsibilities

Section 15 of the Public Audit Act 2001 and Requirement 30 of the Electricity Information Disclosure Requirements 2004 require the Auditor-General to audit the financial statements. It is the responsibility of the Auditor-General to express an independent opinion on the financial statements and report that opinion to you.

The Auditor-General has appointed Graham Naylor of Deloitte to undertake the audit.

Basis of Opinion

An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing:

• the significant estimates and judgements made by the Directors in the preparation of the financial statements; and

• whether the accounting policies are appropriate to the Electricity Division’s circumstances, consistently applied and adequately disclosed.

We conducted the audit in accordance with the Auditing Standards issued by the Institute of Chartered Accountants of New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.

Basis of Preparation of Financial Statements

As described in the basis of preparation set out on pages 8 to 11, the financial statements of the Electricity Division have been prepared using Generally Accepted Accounting Practice in New Zealand existing prior to the adoption of New Zealand Equivalents to International Financial Reporting Standards. However, the statutory annual financial statements for The Lines Company Limited (the company) for the year ended 31 March 2007 were prepared using New Zealand Equivalents to International Financial Reporting Standards.

Other than in our capacity as auditor acting on behalf of the Auditor-General, partners and employees of our firm may also deal with the company on normal terms within the ordinary course of trading activities of the company. The firm has no other relation with, or interests in the Electricity Division.