Notes to the Financial Statements

For the Year ended 30 June 2009

1. Statement of Accounting Policies

Entity Statement

Wanganui Gas Limited (the Company) and its subsidiaries (the Group) is a company formed in accordance with the Energy Companies Act 1992 and registered under the Companies Act 1993. Wanganui Gas Limited and its subsidiaries are incorporated in New Zealand and domiciled in Wanganui, New Zealand. Wanganui Gas Limited’s parent entity is Wanganui District Council Holdings Limited, a Council Controlled Organisation of Wanganui District Council.

With effect from 1 July 2008 the two independent trading divisions of Wanganui Gas Limited, GasNet and Energy Direct NZ Limited, were established as separate companies. Both companies are 100% owned by Wanganui Gas Limited. The two new companies, GasNet Limited and Energy Direct NZ Limited have their own Board of Directors and General Managers. The personnel and assets that were employees in the respective trading divisions have been allocated as appropriate to each of the new companies. Wanganui Gas Limited as the Parent entity has a focus on strategic issues and planning for the group.

For the purpose of preparing Disclosure accounts, in accordance with the Gas (Information Disclosure) Regulations 1997, the annual accounts of GasNet Limited (Distribution) and Energy Direct NZ Limited (Retail) have been used to prepare these accounts. Energy Direct NZ Limited’s trading activities in relation to electricity and appliance sales have not been disclosed.

As required by the Gas (Information Disclosure) Regulations 1997, ‘Distribution’ involves the ownership, operation and maintenance of a gas distribution system, and conveyance of gas via the system. ‘Retail’ involves supply of gas to consumers.

The gas information disclosure and financial statements of Wanganui Gas Limited and Group have been prepared in accordance with the Gas (Information Disclosure) Regulations 1997.

The financial statements are for the year ended 30 June 2009 and were authorised for issue by the Board of Directors on 3 December 2009.

Methodology of Separation of Business

The Methodology used in relation to the allocation of costs, revenue, assets and liabilities between Retail and Distribution businesses will be available for public inspection no later than 30 November 2009.

Statement of Compliance and Basis of Preparation

These financial statements have been prepared in accordance with the requirements of the Companies Act 1993, the Financial Reporting Act 1993 and the Energy Companies Act 1992. The financial statements have also been prepared in accordance with Generally Accepted Accounting Practice in New Zealand and therefore comply with the New Zealand equivalent of the International Financial Reporting Standards. For this purpose the Group has defined itself as profit orientated.

The financial statements are prepared using the historical cost basis except where modified by the revaluation of certain assets and liabilities which are recorded at fair value. These are detailed in the specific policies below. The financial statements are presented in New Zealand dollars, which is the Group’s functional currency.

Significant Accounting Policies

The following particular accounting policies which materially affect the measurement of results and financial position have been applied.

Capital Contributions

Capital contributions received from customers are netted from the cost of the asset.

Revenue

Revenue is derived from the Sale of Energy and Distribution Services. Such revenue is recognised when earned and is reported in the financial period to which it relates. Energy sales include an accrual for energy supplied but not billed at the end of the financial period.

Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.

Dividends are recognised when the shareholder’s right to receive payment has been established and are recognised net of imputation credits.

Goods and Service Tax

All items in the financial statements are exclusive of GST, with the exception of accounts receivable and accounts payable which are stated with GST included. Where GST is not recoverable as input tax then it is recognised as part of the related asset or expense.