3 DECEMBER 2010

NEW ZEALAND GAZETTE, No. 165

4129

Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2010

GAS DIVISION

Powerco

5 July 2010: US$300m of guaranteed bonds were issued on 29 March 2004 as unsecured subordinated obligations of Powerco Limited. The scheduled payments by Powerco Limited of interest and principal are guaranteed on a unsecured basis by US-based Syncora Guarantee Inc. (Syncora), a specialist financial guarantee organisation. The bonds mature on 29 March 2034 (7 year funds). 26 March 2013 (3 year bonds) and 29 June 2016 (11 year bonds). The interest rates on the bonds are as follows:

• Powerco
  • 3 year guaranteed bonds: 6.325%
  • 7 year guaranteed bonds: 6.75%
  • 11 year guaranteed bonds: 6.83%

A further US$190 million of guaranteed bonds were issued on 28 September 2005 as unsecured unsubordinated obligations of Powerco Limited. The scheduled payments of interest and principal payable by Powerco Limited were again guaranteed on an unsecured basis by Syncora and are repayable on 28 September 2022 (17 year bonds) and 28 September 2035 (30 year bonds). The interest rates on the bonds are as follows:

• 17 year guaranteed bonds: 6.59%
• 30 year guaranteed bonds: 6.74%

A total of US$490 million (2009: $632.2m) of these guaranteed bonds have been allocated to the gas division.

Under the trust deed documents constituting the guaranteed bonds, Powerco Limited has covenanted to ensure that:

1. Syncora defaults on its obligations under the Financial Guarantee;
2. Powerco Limited will procure sufficient numbers of its subsidiaries to guarantee those obligations under the guaranteed bonds by signing a subsidiary guarantee for no less than the total capital bases of the Company and all subsidiaries in subsidiaries' entities totalling 85% of the total tangible assets of the Company.

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

c) US dollar private placement

Carrying value of the US dollar private placement | 68,428 | 62,778 |

| Current portion | 657 | 489 |
| Non-current portion | 80,941 | 62,299 |
| Total | 81,598 | 62,778 |

The US dollar private placement notes issue took place on 25 November 2003 to private US investors. The US coupons of private placement notes are debt obligations of Powerco.

The repayment instalments are scheduled for the rule sales dates 28 November 2016 (11 years), 28 November 2015 (12 years), and 28 November 2016-20 (5 years). The notes are secured against the assets of the Company under the Common Security Deed.

The interest rates on the notes are fixed until maturity:

• 11 year US dollar private placement notes: 5.67%
• 12 year US dollar private placement notes: 5.87%
• 13 year US dollar private placement notes: 6.07%

US$562.6m (2009: $663.1m) of the US dollar private placement has been allocated to the gas division.

d) Commercial paper facility and bank debt drawn under standby facility as part of the commercial paper programme

Current portion | -
Non-current portion | -
Total | 32,155

| | - | 32,334 |

Powerco Limited had a commercial paper facility to enable Powerco to borrow money from the capital market. The acceptance was supported by a standby and cash advance facility of $260 million with a syndicate of banks, made up of Commonwealth Bank of Australia, Westpac Banking Corporation, and ANZ National Bank. The facility was repaid in November 2009 and thus there are no drawings as at 30 June 2010. At 30 June 2010 no money was drawn under the commercial paper programme (2009: Nil comparable amount relates to the amount allocated to the gas division which was drawn under the standby facility).