BRINGING POWER TO LIFE

UNISON NETWORKS LIMITED ANNUAL REPORT 2009 PATHWAY • • 05 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 03 Sponsorship of Unison Hawke’s bay Rescue Arena at Energy Events • Helicopter Trust 09 Centre in Rotorua ‘Unison - Hawke’s Bay Rugby’s greatest supporter’ sponsorship launched •99 sponsorship campaign launched Company name change from Hawke’s •98 Bay Power limited to Hawke’s Bay Electricity Industry Network Limited Reform Act (EIRA) requiring • • 92 full ownership separation 05 Energy Companies Act 1992 between lines and supply commencement of comes into effect, facilitating businesses •03 Overhead to underground the corporatisation of Establishment of facilities (OHUG) lines programme electricity supply • management service (Centralines authorities (ESAs) 93 Limited, Waipukurau) Hawke’s bay electric Power • • 08 board becomes Hawke’s bay 03 Acquisition of the power distribution limited Acquisition and integration of Taupo Rotorua-Taupo regional and Rotorua electricity networks contracting activities from United Networks Limited from Siemens Energy •09 • Services Limited 05 Unison Taupo Lakers win TV2’s Top Town Lake Safety sponsorship programme launched at Rotorua Aquatic Centre •97 Hawke’s bay power distribution limited becomes Hawke’s bay power limited

•93 Hawke’s bay Power •03 •09 Consumers’ Trust formed Re-branding to Unison •06 acquisition of Networks Limited, Titiokura-Te Waka Windfarm Etel limited reflecting the new project initiated direction and growth of

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 09

02 ABOUT US 08 annual rePORT 42 financial statements ABOUT US UNISON NETWORKS LIMITED ANNUAL REPORT 2009 03 02 about us

Rotorua District

NUMBER OF ICPs: 31,923 TOTAL GWh SUPPLIED: 454 Unison Networks Limited (trading as SYSTEM LENGTH: 2,759km Unison) is the electricity distribution UNDERGROUND: 27%

company that owns, manages and operates the electricity network that serves the Hawke’s Bay, Rotorua and Taupo regions.

Taupo District

NUMBER OF ICPs: 14,429 TOTAL GWh SUPPLIED: 233 SYSTEM LENGTH: 1,212 km UNDERGROUND: 39%

Our electricity network comprises some $500 million worth of assets, is close to 10,000 km in length (approximately 37% of this is underground) and supplies over 107,000 connected customers with approximately

1,550 GWh of electricity conveyed annually, making Hawke’s Bay

NUMBER OF ICPs: 60,960 Unison one of the larger electricity distribution TOTAL GWh SUPPLIED: 968 Central Hawke’s Bay* SYSTEM LENGTH: 5,539 km UNDERGROUND: 44% businesses in New Zealand. NUMBER OF ICPs: 7,936 TOTAL GWh SUPPLIED: 116 SYSTEM LENGTH: 1,769 km UNDERGROUND: 4%

*Centralines Limited, under management contract

UNISON IS WHOLLY OWNED BY THE HAWKE’S BAY POWER CONSUMERS’ TRUST ON BEHALF OF HAWKE’S BAY ELECTRICITY CONSUMERS. ABOUT US 04 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 05 ABOUT US

After a decade of government reforms designed to improve the performance and accountability of the public sector, the electricity industry has been largely transformed through the adoption of commercial structures and incentives modelled on those in the private sector.

Where we’ve come from DIVERSIFICATION

When the Electricity Industry Reform Act (1998) forced the corporate The lines company went through a name change (Hawke’s Bay In addition to owning and operating electricity networks Unison has Unison Contracting Services Limited (UCSL), a fully owned subsidiary of separation of lines and energy businesses, the previously integrated Network Limited) before settling on the Unison Networks Limited diversified its operations in recent years to include: Unison which provides network contracting services to Unison as well electricity distributor and retailer Hawke’s Bay Power Limited divested name which accommodated and re-branded the expanded as to other network companies operating in other regions. itself of the retail energy sales division. geographic operations after the acquisition of the Taupo and ETEL Limited, a distribution transformer manufacturing and sales Rotorua networks. business in Auckland.

Facility management contract services to Centralines Limited, the electricity distribution business that supplies customers in the Central Hawke’s Bay. ABOUT US 06 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 07 ABOUT US

The future Diversification through investmentin other compatible Unison continues to seek greater efficiencies in its core business activity through advanced information systems, automated network functions and the use of smart technology. sector businesses opens up new and exciting There are also opportunities for growth in both core business activities opportunities while contributing towards long term through network expansion, as well as contract facilities management for other distribution companies. substance and stability. UNISON ANNUAL REPORT UNISON NETWORKS LIMITED ANNUAL REPORT 2009 09 08 unison networks limited annual report

The Directors are pleased to present the Annual Report including the Financial Statements of Unison Networks Limited. The Annual Report has been prepared in accordance with Section 211 of the Companies Act 1993 and is signed on behalf of the Board of Directors by:

B J Martin CHAIRMAN J R Palairet DIRECTOR Dated: 19 June 2009

10 chairman’s annual review

20 chief executive’s annual review

30 corporate governance statement

34 director profiles

36 statutory information 40 trustees’ statement

42 financial statements CHAIRMAN’S ANNUAL REVIEW UNISON NETWORKS LIMITED ANNUAL REPORT 2009 11

CHAIRMAN’S 10 ANNUAL REVIEW UNISON NETWORKS LIMITED ANNUAL REPORT 2009

On behalf of the Board, I am pleased to report on a productive year which saw Unison continue to invest in network improvement while maintaining a high level of service to customers. Three aspects of the year in review are worth particular mention.

AHURIRI, NAPIER, FROM BLUFF HILL LOOKOUT

Firstly, Unison has continued to find further operational And finally, Unison fulfilled all of its undertakings to the efficiencies and performance gains.T hese have been Commerce Commission by meeting the performance achieved through a progressive asset improvement targets set for pricing and capital expenditure in the 2006 programme which has focused on astute capital investment, administrative settlement agreement. pro-active maintenance and smart technology. It is particularly pleasing to report that under close regulatory Secondly, Unison has continued to consolidate its long term scrutiny over the past year, the Company has performed well stability and security through business diversification and and returned another sound financial result. growth, including the acquisition of a leading New Zealand distribution transformer manufacturing company.

BRIAN MARTIN CHAIRMAN CHAIRMAN’S ANNUAL REVIEW CHAIRMAN’S ANNUAL REVIEW 12 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 13

Financial Performance Advanced asset management: making the most of what we have Unison recorded a net profit before tax of $17.5 million for the year ended 31 March 2009 (2008 $18.4 million). Unison has continued to develop its Asset Management Plan to promote and focus on enhancing our in depth knowledge and This year’s Group results include the first two establishment months of understanding of our business assets and operations and the the new wholly owned subsidiary company, ETEL Limited’s, operations. consequent opportunities for improvement. This means direct comparisons of group revenue and costs with last year’s are of limited value. The Asset Management Plan links to our other corporate and operational plans and encourages a continual improvement feedback Although line network revenue showed continued growth, the and discipline loop between operational, tactical and governance slowdown in new subdivision and other customer driven projects decision levels within the Company. resulted in reduced income from capital contributions. This was expected in the context of the overall general slowdown in All aspects of the Company’s operations can be optimised, from the economic activity. planning, designing and analysis of distribution systems, to budget management and the trade offs (balance) between capital and Operating costs were well controlled and in line with expectations. operating expenditure. Technical accounting adjustments for income tax have made after tax comparisons of net profit meaningless. Last year’s income tax expense At an operational level, the Company has made notable advances was converted into a “credit” of $2.4 million after being offset by an in asset inspection and network maintenance, improving network accounting adjustment to reflect a lower deferred tax liability on the performance from both business and consumer points of view. Balance Sheet resulting from the reduction in the corporate tax rate Unison uses a number of models to assist with the decisions from 33% to 30%. This year, the income tax expense is a charge of to optimise the lifecycle and to prioritise the maintenance and $3.6 million. On an after tax basis, the net profit is affected to the replacement of its assets. These provide the decision support extent of $6.0 million between the two years, simply by the difference framework to help management assess and prioritise the wide range in income tax adjustments. of network investment projects considered each year. In addition, they Unison has undertaken a substantial programme of capital expenditure help align capital investment with Unison’s strategic intent, customer over the last few years and this year a further $35 million was needs and regulatory thresholds and maximise the long-term value expended. This, along with the acquisition of the ETEL business and creation and financial return from capital. funding of the dividend, resulted in an increase in borrowings of $48.5 million. However, the ratio of interest bearing debt of $220.6 million to total assets of $583.4 million still maintains Unison’s gearing at a comfortable level.

EBITDA INVESTMENT SPEND TOTAL EQUITY At an operational level, the Company has made Earnings before interest, tax, depreciation & amortisation Millions $ Millions $ Millions $

37,6 300 notable advances in asset inspection and network 60 30 34,9

50 25 250 305 29,4 53 271 267 52 50 49 253 40 48 200 maintenance, improving network performance from 20 24,8 30 15 150 216 18,7 both business and customer points of view. 20 10 100 10 5 50 0 0 0

2005 2006 2007* 2008 2009 2005 2006 2007* 2008 2009 2005 2006 2007* 2008 2009 * 2007 has been restated under NZIFRS CHAIRMAN’S ANNUAL REVIEW CHAIRMAN’S ANNUAL REVIEW 14 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 15

Capital investment and operational ETEL Limited is a well established business and has performed cost efficiencies solidly in the New Zealand market; its customers include electricity distribution networks, private industry and wind farm generators. It has Since 1999, Unison has invested in excess of $200 million of capital also demonstrated steady export growth to Australia and the Pacific expenditure in its networks. At the same time, Unison’s prices to Islands and has the production capability to cater for further growth in customers have been held to the middle band on an industry-wide these markets. comparison, while business (operational cost) efficiency targets, measured by cost per ICP,* are below the industry median. Importantly, Keeping our promises: the regulatory reset the quality and reliability of supply service levels to customers have been significantly enhanced. Over the past three years, Unison has been working within the regulatory constraints agreed in the administrative settlement made (*an Installation Connection Point represents each property receiving an electricity supply). with the Commerce Commission. This has necessarily exposed Unison’s business operations to a high level of scrutiny. Business diversification: finding further revenue opportunities It is testament to the professionalism of our management and staff that Unison has met all of the targets set under this agreement. In January, Unison acquired a leading New Zealand distribution transformer manufacturer, ETEL Limited. The acquisition transaction was As well as demonstrating the resilience of our own business endorsed by the shareholder, Hawke’s Bay Power Consumers’ Trust. operations, the experience gained has given our team a unique knowledge and understanding of the detail of the practical application This is an important move that reflects Unison’s strategy of energy of the regulatory regime and further underwrites our capacity for sector related diversification and growth and provides the platform for future initiatives to provide facilities management services to other an ongoing development programme based on smart technologies to lines companies. enhance network performance. Through this exercise, Unison has proven itself to be a responsible While the business will continue to operate under the ETEL guardian and manager of a vital community asset, balancing the needs name, Unison will benefit from the synergies between the two of individual customers, through pricing measures and with timely companies; opening up a new source of income, while providing investment in vital infrastructure required to deliver long term security a direct interface for network focused product development of supply to our community as a whole. and enhancement.

The acquisition will help drive improvements in transformer design, ultimately producing a better product offering for the industry and bolstering Unison’s market position in terms of depth and dimension when it comes to offering asset management services to other lines companies.

< > The acquisition of leading New Zealand DISTRIBUTION transformer manufacturer, ETEL Limited, reflects Unison’s strategy of energy sector related diversification and growth.

CHAIRMAN’S ANNUAL REVIEW CHAIRMAN’S ANNUAL REVIEW 16 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 17

Overhead to underground conversions (OHUG) We are indeed fortunate to have had the quality of leadership of our management and administrative team to back up the first class skills, Each year, as a component of the shareholder/consumer dividend commitment and loyalty of our frontline staff. I would like to especially return model, the Hawke’s Bay Power Consumers’ Trust initiates acknowledge Ken Sutherland who, as our Chief Executive, has been several overhead to underground conversion (OHUG) projects in urban truly inspirational in terms of leading our growth and direction over the areas of Hawke’s Bay. last six years. The Hawke’s Bay Power Consumers’ Trust requests Unison to provide At times the demands of the regulated market have presented recommendations to prioritise OHUG projects to ensure the outcomes are significant challenges; to the Board in its governance role, to our optimised in the context of the overall asset renewal programme. This management in their leadership role and in turn it has tested the arrangement results in the completion of about four OHUG projects per loyalty and commitment of our staff. On behalf of the Board, I would annum. The total amount applied to OHUG projects in this context during like to formally thank everyone at Unison, both past and present, for the year ended 31 March 2009 amounted to $1.3 million. their commitment, loyalty and support over the years; they have all Dividend contributed to the development of the invaluable community asset and robust business operation that Unison is today. A $5.5 million dividend was paid in July 2008 to the shareholder, As always, my fellow Directors have been very generous with their the Hawke’s Bay Power Consumers’ Trust, in respect of the 2007/08 time in dealing with the governance issues of the day and I personally financial year. acknowledge and thank them for their commitment and contribution. The Directors have declared a dividend of $6.2 million in respect of the The support of the Hawke’s Bay Power Consumers’ Trust, as the year ended 31 March 2009. owner of the Company, has also been a significant factor in ensuring The dividend will be paid to the Hawke’s Bay Power Consumers’ Trust Unison’s ongoing stability and success. The Trustees, now under on 24 July 2009. the chairmanship of John Newland, have continued to show a great appreciation of the need to balance capital investment in infrastructure Acknowledgements along with the service expectations of customers. This will be my last review as Chairman of the Unison Board as I will be retiring on completion of my current term in July this year. This will complete ten years as a Director of the Company.

During my time on the Board, the electricity industry has seen a great deal of change; in particular the industry regulation initiated by the Electricity Industry Reform Act of 1998. Unison as a company has grown, not just in scale of assets but in terms of the quality of our people and systems.

Unison’s commitment to an improved visual amenity and improved security of supply resulted in $1.3 million expenditure on overhead to underground projects during the financial year. > UNISON PROVIDES A CABLE LOCATION SERVICE THROUGHOUT napier, hastings, TAUPO AND ROTORUA. CHAIRMAN’S ANNUAL REVIEW CHAIRMAN’S ANNUAL REVIEW 18 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 19

UNISON BECAME ‘HAWKE’S BAY RUGBY’S GREATEST SUPPORTER’ IN 2009. THIS THREE YEAR SPONSORSHIP INITIATIVE INCLUDES ‘UNISON LEGENDS OF THE GAME’, ‘UNISON FOOTY WEEK’ AND THE ‘UNISON MEDAL’.

% Conclusion NET SURPLUS AS 9

Electricity has become the lifeblood of so many of the things that The Company has excellent asset management systems which are I have full confidence that the prudent management and sound 9.2 A PERCENTAGE 8 underpin our modern day existence as a community. This places being continuously improved. It has also invested wisely in additional decision making at Unison will maintain the Company in a strong OF AVERAGE 7 Unison, as the owner and operator of significant regional electricity revenue streams as it strengthens its own operation and builds its position to meet the challenges and to respond to the opportunities SHAREHOLDERS’

6 6.8 distribution networks, in a vital role in terms of underpinning future service delivery capability. that undoubtedly lie ahead. FUNDS 5

regional growth and development. I am pleased to report that Unison, 5.4

Now, with the prospect of a more pragmatic regulatory framework for 5.1 as the owner and operator of the delivery system for that resource, 4 4.8 the energy sector through the proposed Commerce Act changes, we is well placed to respond to the challenges and opportunities of 3 can all expect and aspire to a period of greater certainty and stability the future. 2 for the industry. BRIAN MARTIN CHAIRMAN 1

0

2005 2006 2007* 2008 2009 * 2007 has been restated under NZIFRS CHIEF EXECUTIVE’S ANNUAL REVIEW UNISON NETWORKS LIMITED ANNUAL REPORT 2009 21

CHIEF EXECUTIVE’S 20 ANNUAL REVIEW UNISON NETWORKS LIMITED ANNUAL REPORT 2009

Unison’s past dedication to the improvement of its systems, processes and performance has meant this year has been one of significant achievement with advances in our network operation, regulatory challenges being met and an enhanced customer experience. The results contained in this report are testimony to these gains and the commitment of our people who consistently strive to make Unison the industry leader it has become.

NETWORK PERFORMANCE

The year under review saw ongoing network expansion. The total amount of electricity conveyed to customers Total system length was extended to 9,510 kilometres (after transmission losses) was 1,552 GWh. Maximum from 9,452 kilometres the previous year, and transformer demand peaked at 304 MW, compared with 313 MW capacity grew by 1% to 1019 MVA. the previous year. This lower figure can be attributed to the much publicised dry winter and promotion of energy Network connections rose to 107,484 by the end of the savings to consumers. financial year, compared with 106,672 the previous year.

KEN SUTHERLAND CHIEF EXECUTIVE CHIEF EXECUTIVE’S ANNUAL REVIEW CHIEF EXECUTIVE’S ANNUAL REVIEW 22 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 23

Network Reliability The $6 million electricity zone substation in Biak Street is now nearing completion and will greatly improve the reliability of the network within Electricity networks are compared and benchmarked on reliability the Rotorua CBD. measures known as SAIFI (System Average Interruption Frequency index) and SAIDI (System Average Interruption Duration index). In other Towards a similar end, construction is also underway on the new words, how often and for how long (on average) consumers connected substation in Fleet Street, Taupo, with the construction of an innovative to our network experience interruptions to supply. “trough” system used to house cabling.

These measures form part of the quality targets applied by the The installation of two new transformers marked the completion of Commerce Commission in judging the performance of all electricity phase two of the Faraday Street substation upgrade in Napier. network businesses in New Zealand. These projects represent a $12.6 million investment and are indicative This year we out performed the regulatory threshold of 2.39 SAIFI of Unison’s commitment towards meeting the energy requirements of interruptions per consumer with an average of 2.1 interruptions. our customers both now and in the future.

Our threshold for the average duration a consumer is without power ETEL Limited: the dual benefits of per year (SAIDI) was 152.7 minutes - we achieved an average of a “perfect match” 129.3 minutes. Our strategy for business growth saw the acquisition of transformer These results are driven by an ongoing maintenance programme which manufacturer, ETEL Limited, in January 2009. As a subsidiary includes aerial surveys, infra red camera fault detection, the clearing company, ETEL presents Unison with a range of operating synergies. and pruning of trees close to power lines, a programme of insulator We can now focus our resources and expertise on improvements replacements, and network asset monitoring and management through to transformer design whilst creating an expansion of business Unison’s Geographic Information System (GIS). opportunities, as well as benefiting from a secure source of This strong performance against the regulatory thresholds is tangible componentry for both our own network and those we are contracted evidence of the sustained quality improvement Unison is seeking over to manage. time and is driven by the advanced methods and technology prescribed In terms of network maintenance, the acquisition of ETEL also by Unison’s Asset Management Plan. strengthens Unison’s ability to develop its “plug and play” capability, where we can seamlessly replace assets across our network where it Supply improvements: keeping pace with is appropriate to do so. community demand

Unison listens to what its customers are saying - this year has seen a number of initiatives taken to improve supply to customers as well as boost capacity to meet their future demands: in particular, the construction of two new substations in the Rotorua and Taupo regions is underway and an upgrade was carried out at the Faraday Street substation which supplies the Napier CBD.

^ Construction on a new substation in TOTAL GWh DISTRIBUTED NETWORK RELATED OUTAGE TIME (SAIDI) OPERATIONAL COST PER CONSUMER Fleet Street, Taupo, is underway, with OutageOutage minutes minutes per annum per annum $ $ the laying of an innovative trough to 272.1 house the cabling system. 1.600 272.1 233.0 233.0 233.0 240 240 240 240 233.0 210.0 210.0 1.400 1607 220 220 1593 1581 1569 1562 195.0 1.200 190 200 200 195.0 190 211.8 211.8 210.7 210.7 177.0 1.000 180 180 177.0 155.3 155.3 152.7 152.7 204.5 204.5 192.1 192.1 202.5 202.5 188.0 800 140 140 160 160 188.0 175.0 600 UNISONUNISON UNISONUNISON 140 140 175.0 144.7 144.7 138.0 138.0 129.3 134.0 120 129.3 400 90 90 134.0 120 INDUSTRYINDUSTRY INDUSTRYINDUSTRY 117.8 200 UNWEIGHTEDUNWEIGHTED 117.8 MEDIANMEDIAN 100 100 AVERAGEAVERAGE AVERAGEAVERAGE 0 40 40 80 80

2005 20072006 2008 2009 2005 2005200620062007200720082008 20092009 2005200520062006200720072008200820092009 * 2008* industry 2008 industry average average calculated calculated as an averageas an average of previous of previous 2 years 2 years * 2009* industry2009 industry median median assumed assumed to be sameto be sameas 2008 as 2008

20082008 CHIEF EXECUTIVE’S ANNUAL REVIEW CHIEF EXECUTIVE’S ANNUAL REVIEW 24 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 25

Technological developments Unison to help control room operators handle customer demand for information. DAVOS provides an automated voice response to callers Unison continues to actively research emerging technologies that affected by outages, reassuring them that Unison is aware of the support our future energy service offering. Advances which have been problem while providing estimated resolution times. As a result, control the focus of this year include: room staff can focus on managing the fault instead of answering • Dynamic monitoring of cables (DTS) To maximise current phones, while our customers are provided with information and carrying capacity of underground cables, Unison employs Distributed reassurance, with no calls unanswered. Temperature Sensing systems. DTS uses highly accurate optical fibre • TVDS Call and Dispatch TVDS Call and Dispatch is a real time to measure soil temperature along the length of underground cables. automatic routing and scheduling system which logs calls from both Cable installation data, load and DTS-recorded temperature over a customers and retailers. This allows an operator to create and send a period of time are used to establish cable temperatures under both call report to Unison’s area managers. normal and overloading conditions, enabling hot spots to be accurately Because the system integrates with GPS transmitters in the Unison identified, located and resolved. fleet in the field, we are able to quickly identify the personnel nearest • New pole testing technology In addition to our existing ultrasound to an affected network location. Linesman can then log a completed equipment, Unison is currently trialling new partial load mechanical job directly from the computerised GPS tablet in their vehicle. Outside pole testing technology. This system places a controlled mechanical of scheduled inspections, mobile staff can also log any maintenance tension on the pole and the consequent deflection in pole profile is issues they notice en route. The TVDS system provides a high level of measured by an inclinometer. data integrity and greatly improves reporting for regulatory purposes.

An on-site computerised analysis of these measurements provides our Network developments asset management team with an accurate assessment of the wooden pole’s remaining service life. This technology not only represents a Unison has continued to demonstrate its ability to understand and notable advancement in pole testing accuracy and integrity of field data, respond to individual industry customers, finding effective solutions to the it ensures greater efficiency in asset replacement and associated spend. unique challenges. Two significant projects progressed in conjunction with major customers this year were with Solid Energy and Contact Energy. • Automation switching Remote control switching is used on the overhead network at strategic locations to control outage times and • Solid Energy Unison was contracted by Solid Energy to extend improve network performance. These switches are operated remotely their 11kV network in Waikato and provide a connection to Unison’s by a VHF radio link and provide Unison with the means to ensure network. This has enabled the state-owned coal mining company to improvements to its outage management. establish a plant to produce clean burning wood pellets from surplus pine wood waste otherwise destined for landfill. • DAVOS In the event of a major network outage, our Hastings control room can be flooded with calls from anxious customers. Depending • Contact Energy Binary Plant Unison has been contracted to build a on the scale of the outages 10 to 50 calls may be received in one 33kV circuit for Contact Energy to connect their binary geothermal plant in night. DAVOS Storm Call Management is new software developed by Centennial Drive, Taupo, through to the Wairakei grid exit point. This plant will generate enough clean, renewable electricity to power up to 20,000 homes.

> GPS transmitters in the Unison fleet enables quick identification of the nearest personnel to an affected network location. < The $6 million zone substation in Biak Street, Rotorua is nearing completion. This, in conjunction with the recently completed sub- transmission cable installation project, will greatly improve the security of electricity supply within the CBD.

CHIEF EXECUTIVE’S ANNUAL REVIEW CHIEF EXECUTIVE’S ANNUAL REVIEW 26 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 27

Building awareness and support IN TAUPO • Taupo Amphitheatre in partnership with the Taupo District Council Over the past year Unison has continued to promote a culture targeted at ensuring our service is connected to customers’ needs and • Learn to Sail programme in association with Taupo Yacht Club expectations. By investing heavily back into a vital community asset • The Top Town national competition* and aligning our sponsor partnership activity with our own business • Town Centre Taupo Business Excellence Awards

objectives, Unison has been better able to engage with the regions * Deserving special mention are the Unison Taupo Lakers, who won the televised it serves. national Top Town challenge.

Although not represented on the Balance Sheet, community goodwill Employee Development represents an intangible asset that supports business operations at many levels and, guided by regional surveys, sponsorship Unison promotes a culture of high performance. We recognise activity has been directed to projects to help build Unison brand however that “performance matters – and so do people!” To this end awareness, particularly in areas of low recognition. Our commercial we understand that healthy and challenged employees are more sponsorships include: productive and satisfied in their work.

IN HAWKE’S BAY The “Switched on to Health” wellbeing programme launched last year is designed to encourage staff to increase their energy levels and • Hawke’s Bay Rescue Helicopter outputs through physical activity and improved health and wellbeing. • ‘Tunutunu’ late night mobile BBQ trailer with the Te Aranga community Marae Appreciating the challenges presented by an aging workforce and • ‘Unison – Hawke’s Bay Rugby’s Greatest Supporter’ overseas competition for its skilled resources, Unison has also looked • Hawke’s Bay Opera House (including the Unison Dress Circle) to secure its future through the development of cadet programmes, with Hastings District Council graduate scholarships and through its subsidiary company, Unison Contracting Services Limited, the recruitment of record numbers of • Hawke’s Bay Chamber of Commerce Business Excellence Awards trainee line mechanics and electrical trades staff. • Learn to Sail programme in association with the Napier Sailing Club It was also extremely pleasing to see recognition for Unison’s ongoing • Hawke’s Bay Sports Awards in association with Sport Hawke’s Bay dedication to the safety of its people. The past year also saw the • Unison Hall of Fame at the Pettigrew Green Arena Company attain its tertiary level ACC Workplace Safety Management Practices certification, the highest level obtainable for workplace health IN ROTORUA and safety systems in New Zealand. • Unison Arena in the Rotorua Energy Events Centre • Rotorua Chamber of Commerce Business Excellence Awards • Lake Safety Programme in association with the Rotorua District Council and Rotorua Aquatic Centre

> INSTALLATION OF POLE MOUNTED REMOTE CONTROLLED SWITCHES AT STRATEGIC LOCATIONS CONTRIBUTES TO IMPROVED NETWORK PERFORMANCE IN THE ROTORUA/TAUPO REGION. < Unison Taupo Lakers, winners of TV2’s national Top Town challenge.

CHIEF EXECUTIVE’S ANNUAL REVIEW CHIEF EXECUTIVE’S ANNUAL REVIEW 28 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 29

In February, Unison and Te Aranga Community Marae came together to launch ‘Tunutunu’, a custom- built mobile barbecue, which will tour Flaxmere and the Hastings District to spread the anti-violence message. Pictured at the launch with Ken Sutherland is Hastings District Councillor and project instigator, Henare O’Keefe.

Developing the Network Conclusion

With an eye to the future Unison has been investigating the viability of I believe that the future holds great opportunities for Unison as Furthermore, we envisage real time communication between It is an exciting prospect and one I look forward to delivering on the establishment of a local back-bone fibre optic telecommunications we move towards a true “smart network” through the further provider and consumer, offering greater customer choice and together with the people of Unison. carrier network throughout the Hawke’s Bay, Taupo and Rotorua application of computer intelligence and automated systems, control of energy use, as well as greater demand side areas. Our desire to introduce ‘smart network’ technologies requires supported by the expertise of our personnel. management solutions. advances in our internal communications capabilities and in meeting Our vision is an electricity distribution system where all the We have already begun to move towards it; components which can this requirement we have identified the potential for other users to also components, from transformers to power lines, to home electricity both receive and transmit information will be installed; the next stage of benefit from and operate off such additions to our networks. KEN SUTHERLAND CHIEF EXECUTIVE meters, can be individually identified and are capable of two-way network development is to introduce the connectivity required to create communication. a self monitoring and “self healing” system, which will dramatically improve operations, maintenance and planning. 30 UNISON NETWORKS LIMITED ANNUAL REPORT 2009

CORPORATE GOVERNANCE STATEMENT

Role of the Board of Directors Board Committees Remuneration Committee Other Committees The Board promotes remuneration of Directors and Executives that is In addition, the Board establishes other committees on an “as required” this statement provides an overview of the Company’s Audit & Risk Committee transparent, fair and reasonable in a competitive market for the skills, basis to consider matters such as due diligence reviews of acquisitions main corporate governance policies, practices and Unison has a formally constituted Audit & Risk Committee, knowledge and experience required by the Company. and other major transactions. processes adopted or followed by the Board responsible for reviewing the Company’s accounting policies, financial management, financial statements, management of information The Committee makes recommendations to the Board regarding The Board of Directors (the “Board”) is appointed by the shareholders’ systems and systems of internal control, external and internal risk the appointment of the Chief Executive and annually reviews the representatives, the Trustees of Hawke’s Bay Power Consumers’ management functions and the treasury policy. The Committee also remuneration packages of executive managers, including the Chief Trust. The Board is responsible for setting and monitoring the strategic considers internal risk assessments and external audit reports as Executive, as well as reviewing the performance of the Chief Executive. direction, policies and control of the Company’s activities, with day-to- well as appointment of the external auditor, audit relationship matters External advice may be sought as part of its review. day management delegated to the Chief Executive. and fees. The Committee also periodically reviews and makes recommendations The Board has a formal charter that outlines the responsibilities of the The Committee meets an average of four times a year, with additional to the Board regarding general remuneration policy. Board and the Chief Executive and that provides a code of ethics to meetings being convened when required. guide Directors and the Chief Executive in carrying out their duties and responsibilities. This is available on the Company’s website.

The Board meets on a monthly basis during the financial year, with additional full meetings and sub-committee meetings being convened when required. 32 UNISON NETWORKS LIMITED ANNUAL REPORT 2009

CORPORATE GOVERNANCE STATEMENT

Risk Management Treasury Policy Statement of Corporate Intent Directors’ Interests Register The Board has adopted a formal risk policy and risk management Exposure to treasury-related financial risks is managed in accordance In accordance with Section 39 of the Energy Companies Act 1992, The Company maintains and reviews on a monthly basis an framework that is consistent with the Australian and New Zealand with the Company’s treasury policy. This policy sets out financial and the Directors annually submit a Statement of Corporate Intent for the Interests Register to record particulars of transactions or matters standard for risk management AS/NZ 4360:2004. treasury management objectives, specific responsibilities, limits on coming financial year to the Hawke’sB ay Power Consumers’ Trust for involving Directors. management authority, permissible financial instruments, counterparty endorsement. This document outlines the Company’s overall objectives, The Board is responsible for reviewing and ratifying systems of risk credit limits and reporting and monitoring requirements. intentions and financial performance targets and is available on the management and the Company’s system of internal controls. Company’s website. Under the treasury policy the Board is responsible for approving all The Board monitors the operational and financial aspects of the treasury and interest rate strategies and any changes to Company’s activities and, principally through the Audit and Risk those strategies. Committee, the Board considers the recommendations and advice of external and internal auditors and other external advisors on the operational and financial risks that face the Company.

The Board ensures that recommendations made by the external and internal auditors and other external advisers are investigated and appropriate action is taken to ensure that the Company has an appropriate internal control environment in place to manage the key risks identified. 34 UNISON NETWORKS LIMITED ANNUAL REPORT 2009

DIRECTOR PROFILES

Brian Martin JOHN PALAIRET HELEN WALKER DAVE FROW KEVIN ATKINSON KEN GILLIGAN CHAIRMAN AudiT & Risk Committee CHAIRMAN Audit & Risk Committee DEPUTY CHAIRMAN Remuneration Committee and Audit Audit & Risk Committee Remuneration Committee and Audit John Palairet is a Chartered Accountant Helen Walker has held governance Remuneration Committee and Audit & Risk Committee Ken was General Manager and Managing & Risk Committee and Consultant with BDO Spicers positions for a range of community-based & Risk Committee Kevin Atkinson is a Hawke’s Bay-born Director of the Port of Napier from 1983 Brian Martin was appointed a Director in specialising in financial and general organisations including being Musical Dave Frow has an extensive background Director who has spent the majority of his to 1999. Prior to this he was CEO of the December 1998 and became Chairman in business advice and business valuations. Director of operas and musical theatre in the energy industry and was the working life in the technology sector. He is New Zealand Ports Authority and had a January 2004. He is a professional company He is a Director of the Hawke’s Bay Airport productions. Helen was a Director of the former Chief Executive of the state owned the Principal and Managing Director of the 20 year career in a variety of government director and business consultant and Authority and Chairman of Anglican Care Hawke’s Bay District Health Board from enterprise ECNZ. He is a member of the software company, Information Management departments. He has recently completed advisor. Brian is a Fellow of the College of Limited. John is an accredited member of 2001 to 2007 and Chairman of the Central Telecom Independent Oversight Group and is Services Limited. nine years as Chairman of the Hawke’s Bay Chartered Accountants and a member of the Institute of Directors. Hawke’s Bay Consumers’ Power Trust until Executive Chairman of International Housing Kevin is currently a member of the Power Consumers’ Trust and was Chairman the Institute of Directors. He is a Director of John has served on the Board since 2003. She has a BSc (Massey) majoring in Solutions Limited (Hong Kong). Governance Board of the Hawke’s Bay of the Energy Trusts of New Zealand Physiology and is a member of the Institute Incorporated from 2003 to 2008. Wakefield Health Limited and Mission Estate June 1998 and is Chairman of the Audit & Dave provides strategic consulting and District Health Board, Director of Hawke’s of Directors. Winery and a number of other privately Risk Committee. He has also served executive mentoring advice to a wide range Bay Rugby and a Trustee of the Hawke’s Bay Ken is currently in his fifth year as a board controlled companies. on the Remuneration and Contract Helen was appointed to the Board in of companies. He has a BSc Engineering Medical Research Foundation. member of the Crown entity, Maritime Brian has served as a member of the Audit Tender committees. January 2004 and is a member of the from Natal University in South Africa and Kevin was appointed to the Board in June New Zealand. He is a Director of Napier & Risk, Remuneration, and Property and Audit & Risk Committee. successfully completed the Advanced 1998 and has served on the Audit & Risk, company, City Medical Limited, and a Acquisition committees. Management Programme at Harvard Remuneration and Property committees Trustee of the Napier Family Centre Financial Business School in Boston. during his tenure. Trust. Ken was appointed to the Board in September 2008. Dave was appointed to the Board in April 2004, was elected Deputy Chairman in August 2004 and is a member of the Audit & Risk and Remuneration committees. 36 UNISON NETWORKS LIMITED ANNUAL REPORT 2009

STATUTORY INFORMATION

The directors are pleased to present the Annual Report Financial Results Dividend Directors’ Remuneration and Other Benefits and accompanying Financial Statements in respect of The trading surplus for the twelve months under review was A fully imputed dividend of $5,500,000 ($8,208,955 inclusive of Directors’ remuneration from the Company in the year to Unison Networks Limited’s operations for the twelve $31.2 million, compared with $31.5 million for the previous imputation credits) was declared during the year and paid to the 31 March 2009 was: months to 31 March 2009. twelve months. The net surplus for 2009 was $13.8 million Hawke’s Bay Power Consumers’ Trust. Parent Subsidiary (2008: $20.8 million). $ $ On 19 June 2009, the Directors declared a fully imputed dividend B J Martin 79,301 Principal Activities of $6,200,000 ($9,253,731 inclusive of imputation credits) in D J Frow 60,694 9,000 During the period, the Company was engaged principally in the respect of the 2008/09 financial year. This dividend will be paid J R Palairet 47,580 operation of an electricity distribution network, and the provision to the Trust on 24 July 2009. K H Atkinson 39,650 9,000 of related services. Directors H E Walker 39,650 Company’s Affairs At the Annual General Meeting held on 24 July 2008 Mr Palairet K R Valentine 13,021 18,000 The Directors consider the state of the Company’s affairs to be was re-elected to the Board. Mr Valentine, having retired by K J Gilligan 22,103 satisfactory. Details of the year under review are included in rotation, did not offer himself for re-election. Mr Gilligan was the Annual Report and the Financial Statements accompanying appointed as a Director on 24 September 2008. this report. 38 UNISON NETWORKS LIMITED ANNUAL REPORT 2009 w STATUTORY Employee Remuneration Details of remuneration and benefits received by employees INFORMATION and former employees in their capacity as employees, during the year were:

Remuneration Range Number of Current employees employees

$100,000- $110,000 8 $111,000- $120,000 3 $121,000 - $130,000 3 $131,000 - $140,000 1 $150,000 - $160,000 1 $161,000 - $170,000 1 $171,000 - $180,000 2 $190,000 - $200,000 1 $220,000 - $230,000 1 $231,000 - $240,000 1 $280,000 - $290,000 1 $680,000 - $690,000 1

Remuneration Range Number of FORMER employees employees

$150,000- $160,000 1

Directors’ Interests K H Atkinson ETEL Limited Auditors Some Directors have an interest in transactions with the A Mr Atkinson declared that he no longer held the position of The Directors of Unison Networks Limited, being Messrs. Frow In accordance with Section 45 of the Energy Companies Act 1992, Company involving the supply of services on standard terms and Chairman of the Hawke’s Bay District Health Board and therefore and Palairet, are also Directors of the wholly-owned subsidiary and Section 15 of the Public Audit Act 2001, the Auditor-General conditions to premises in which they have interests. The interest his previous general interest regarding the ongoing provision of company, ETEL Limited, and are considered to have a general continues as Auditor. which these Directors may have in such transactions is no interest in dealings between the two companies. back-up gensets by Unison to the HB District Health Board is no The amount payable by the Company to Audit New Zealand is different in kind, quality, benefit or obligation from transactions longer applicable; Directors’ Indemnity and Insurance $132,425. This is made up of: which the Company has with other consumers. B Mr Atkinson advised that he no longer has an interest in the Parks The Company provides cover to its Directors and certain Unison Networks Limited $72,820 The following Directors have declared interests in the entities Business Unit (a unit of the Hastings District Council) and therefore executives for personal loss caused by wrongful acts in the Unison Contracting Services Limited $10,900 listed during the accounting period. The declaration serves his previous general interest relating to this is no longer applicable. course of their duties where indemnity is not available from Unison Energy Limited $815 as notice that the Director may benefit from any transactions C Mr Atkinson declared a general interest relating to his appointment the Company. ETEL Limited $30,000 between the Company and the identified entity. to the Board of the Hawke’s Bay Rugby Union; Information Used by Directors For other services $17,890 D Mr Atkinson declared a general interest regarding his appointment There were no notices from Directors requesting the use of as a Board Member of the Hawke’s Bay District Health Board. company information received in their capacity as Directors,

K J Gilligan which would not otherwise have been available to them. Mr Gilligan advised that he had the following general interests: Donations A Director, Quality Roading & Services (Wairoa) Limited – a roading No donations were made during the period. and infrastructure company based in Wairoa; B Director, City Medical Limited; Napier; C Member, Maritime New Zealand – Crown Entity; and D trustee, Napier Family Centre Financial Trust. Mr Gilligan subsequently advised that effective 28 February 2009 he was no longer a Director of Quality Roading & Services (Wairoa) Limited. 40 UNISON NETWORKS LIMITED ANNUAL REPORT 2009

ACTUAL TRUSTEES’ TARGETS RESULTS STATEMENT 2009 2009 Performance Targets FIN ANCIAL Unison’s 2009 Statement Surplus before interest, tax and depreciation as a percentage of Corporate Intent sets of average assets employed. 9.8 % 9.5 % targets for both financial and Net Surplus as a percentage of average shareholders’ funds. 4.8 % 4.8 % network performance. Total line operating costs per consumer: Compliance: Trustees are • Direct line costs $104 $105 pleased to record that in nearly • Indirect line costs $89 $92 all respects the Company has met, or exceeded, the 2009 NETWORK PERFORMANCE performance targets. In areas SAIDI - System Average Interruption Duration Index (Minutes) where targets were not met the • Planned 38.2 50.9 variance was minor. We make • Unplanned 114.5 78.4 particular reference to the following outcomes: SAIFI - System Average Interruption Frequency Index • Planned 0.2 0.3 • Unplanned 2.2 1.8

FAULTS - Per 100 km of line • Underground 6.2 6.5 • Overhead 9.7 7.0 Details of all performance targets and outcomes are contained elsewhere in the Company’s Annual Report.

On the compliance by Unison Networks Limited with the THE 2009 STATEMENT OF Ratio of Consolidated Shareholders’ Summary Statement of Corporate Intent for Funds to Total Assets We restate the observation made last year that significant gains the year ended 31 March 2009. CORPORATE INTENT in network reliability and security of supply have resulted from • The minimum target ratio of consolidated shareholders’ Unison’s ongoing programme of asset renewal, development All of the shares in Unison Networks Limited are held Key Objective funds to total assets is set at not less than 40%; and maintenance. This reliability and security of supply is the by the Hawke’s Bay Power Consumers’ Trust, on behalf To operate as a successful and sustainable business, • Target goal for 2009 – 51%. most important preference of consumers and it is pleasing the of consumers who are connected to Unison’s network through enhanced shareholder value and meeting the needs of Company’s performance in this area continues to lift year after year. in Hawke’s Bay. its consumers in terms of quality and efficiency. Compliance: Both the minimum target ratio and the target goal were achieved. The actual ratio met the target goal of 51%. We commend the Directors, management and all employees As the Trust is the majority shareholder, the Trustees Compliance: Trustees are of the opinion the Company for their achievements over the past year. The Company is are required to prepare a statement, for inclusion in achieved the stated key objective. Increased operational activity Compliance with other matters responding very capably in changing times and conditions within Unison’s annual report, commenting on the Company’s is evidenced by increased revenues and another solid financial The Statement of Corporate Intent also details matters relating the electricity sector and there will be ongoing challenges and compliance with the Statement of Corporate Intent. result with profit before income tax of $17.478 million, compared to the Company’s scope of activities, dividend distributions, opportunities ahead. The Trustees will continue to support to a profit last year of $18.423 million. Shareholder value has accounting policies, information to be provided to shareholders initiatives that will improve Unison’s business to the extent increased and the Company achieved a very good level of and administrative matters relating to procedures and necessary to meet the needs of consumers and which also performance across the network, through increased investment communications with the Trust, as the sole shareholder. We are enhance the value returns to the shareholders. that provides greater security of supply, reliability and quality satisfied that in all these matters the Company has complied with to consumers. the Statement of Corporate Intent. Shareholder value improved to $271.3 million, an increase of $4.1 million, or 1.5% over last year. JOHN NEWLAND CHAIRMAN

For and on behalf of Trustees of the Hawke’s Bay Power Consumers’ Trust Trustees ARCH BUNTAIN DIANA KIRTON JOHN GEOGHEGAN JAMES PALMER JOHN NEWLAND 11

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2009 43 42 FINANCIAL STATEMENTS unison networks limited

44 statement of performance

45 INCOME STATEMENT 46 balance sheet

47 statement of changes in equity

48 cash flow statement 49 notes to the financial stateMENTS 76 audit report

STATEMENT OF PERFORMANCE INCOME STATEMENT 44 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 45

Statement of Performance Income Statement

consolidated GROUP PARENT Statement of Corporate Intent 31 March 31 March 2009 2008 2009 2008 2008/09 Targets 2009 2008 Notes $ 000 $ 000 $ 000 $ 000

Including: Unison Networks Limited Revenue from continuing operations 3 106,967 98,723 97,406 98,723 Unison Contracting Services Limited Expenses, excluding finance costs 4 75,762 67,229 67,282 62,843 Financial Measures Finance costs 5 13,727 13,071 13,130 13,071 Profit before interest, taxation, depreciation, amortisation Total expenses 89,489 80,300 80,412 75,914 and impairment as a percentage of average assets employed 9.8% 9.5% 10.3% Profit before interest and taxation as a percentage of average assets employed 5.9% 5.9% 6.2% Profit before income tax 17,478 18,423 16,994 22,809 Profit as a percentage of average shareholder funds 4.8% 4.8% 5.1% Ratio of shareholders’ funds to total assets 51% 51% 51% Income tax expense/(benefit) 6 3,630 (2,360) 3,478 (1,515) Profit for the eary 13,848 20,783 13,516 24,324 Note: ETEL Limited is not included in the above ratios.

Operating Cost Comparison The above income statement should be read in conjunction with the accompanying notes. Consumer Numbers 107,648 107,484 106,672 System Length (km’s) 9,550 9,496 9,452

Total line business operating costs per consumer Direct line costs per consumer $104 $105 $112 Indirect costs per consumer $89 $92 $85 $193 $197 $198

Regulatory costs per consumer $8 $6 $7 Total line business costs per consumer $201 $203 $205

Total line business costs per km $2,267 $2,292 $2,308

Network Performance SAIDI - System Average Interruption Duration Index This represents the number of minutes the average consumer was without power during the reporting period. SAIDI planned 38.2 50.9 39.2 SAIDI unplanned 114.5 78.4 78.6 Total Unison SAIDI 152.7 129.3 117.8

SAIFI - System Average Interruption Frequency Index This represents the number of interruptions experienced by the average consumer during the reporting period SAIFI planned 0.2 0.3 0.3 SAIFI unplanned 2.2 1.8 1.7 Total Unison SAIFI 2.4 2.1 2.0

Faults per 100km of line Underground 6.2 6.5 5.3 Overhead 9.7 7.0 8.1 Total System 9.2 7.0 7.7 BALANCE SHEET STATEMENT OF CHANGES IN EQUITY 46 AS AT 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 47

Balance Sheet Statement of Changes in Equity

GROUP PARENT Contributed Retained Total 2009 2008 2009 2008 Equity Reserves Earnings Equity Notes $ 000 $ 000 $ 000 $ 000 Notes $ 000 $ 000 $ 000 $ 000

ASSETS Group: COMPARATIVE YEAR Current assets Cash and cash equivalents 8 1,937 3,502 1,918 3,501 Opening balance at 1 April 2007 66,661 4,684 182,067 253,412 Receivables 9 19,063 10,439 11,045 10,300 Derivative financial instruments 19 - 154 - 154 Dividend paid 21 - - (7,209) (7,209) Inventories 10 15,707 3,837 3,575 3,837 Cash flow hedge reserve movement 21 - 189 - 189 Total current assets 36,707 17,932 16,538 17,792 Profit for the year - - 20,783 20,783 Closing balance at 31 March 2008 66,661 4,873 195,641 267,175 Non current assets Property, plant and equipment 11 500,781 483,833 496,500 483,336 Group: CURRENT YEAR Intangible assets 12 42,688 15,293 14,920 15,256 Investment in subsidiaries 27 - - 26,070 - Opening balance at 1 April 2008 66,661 4,873 195,641 267,175 Derivative financial instruments 19 3,192 2,846 3,192 2,846 Related party advances 26 - - 22,591 3,046 Dividend paid 21 - - (5,500) (5,500) Total non current assets 546,661 501,972 563,273 504,484 Cash flow hedge reserve movement 21 - (4,200) - (4,200) Total assets 583,368 519,904 579,811 522,276 Profit for the year - - 13,848 13,848 Closing balance at 31 March 2009 66,661 673 203,989 271,323 LIABILITIES Current liabilities Payables 13 14,435 10,923 9,246 10,262 Parent: cOMPARATIVE YEAR Current tax payables 6 903 750 652 750 Employee provisions 14 2,996 2,036 1,791 1,722 Opening balance at 1 April 2007 66,661 4,684 182,067 253,412 Derivative financial instruments 19 532 - 420 - Deferred income 2,101 - 1,475 - Dividend paid 21 - - (7,209) (7,209) Total current liabilities 20,967 13,709 13,584 12,734 Cash flow hedge reserve movement 21 - 189 - 189 Profit for the year - - 24,324 24,324 Non current liabilities Closing balance as at 31 March 2008 66,661 4,873 199,182 270,716 Borrowings 16 220,600 172,100 220,600 172,100 Employee provisions 15 1,123 1,054 710 683 PARENT: CURRENT YEAR Derivative financial instruments 19 5,443 - 5,443 - Deferred tax liabilities 18 63,912 65,866 64,130 66,043 Opening balance at 1 April 2008 66,661 4,873 199,182 270,716 Related party payables 26 - - 812 - Total non current liabilities 291,078 239,020 291,695 238,826 Dividend paid 21 - - (5,500) (5,500) Total liabilities 312,045 252,729 305,279 251,560 Cash flow hedge reserve movement 21 - (4,200) - (4,200) Net assets 271,323 267,175 274,532 270,716 Profit for the year - - 13,516 13,516

EQUITY Closing balance as at 31 March 2009 66,661 673 207,198 274,532 Contributed equity 20 66,661 66,661 66,661 66,661 Reserves 21 673 4,873 673 4,873 Retained earnings 21 203,989 195,641 207,198 199,182 The above statement of changes in equity should be read in conjunction with the accompanying notes. Total equity 271,323 267,175 274,532 270,716

For and on behalf of the board

Director ______Director ______Date: 19 June 2009

The above balance sheet should be read in conjunction with the accompanying notes. CASH FLOW STATEMENT NOTES TO THE FINANCIAL STATEMENTS 48 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 49

Cash Flow Statement Notes to the Financial Statements

GROUP PARENT 1e G neral information 2009 2008 2009 2008 Notes $ 000 $ 000 $ 000 $ 000 Unison Networks Limited and its subsidiaries (together the Group) provide electricity distribution and line function services to consumers and businesses throughout the Hawke’s Bay, Rotorua and Taupo regions. The Group also manufactures electrical products for the Asia Pacific market. Cash flows from operating activities Unison Networks Limited is a limited liability company incorporated and domiciled in New Zealand. The address of its registered office is 1101 Omahu Road, Receipts from customers 98,406 88,721 90,471 88,721 Hastings, New Zealand. It is registered under the Companies Act 1993 and is an energy company in terms of the Energy Companies Act 1992. Contributions for capital works 6,097 8,947 6,097 8,947 Interest received 93 140 93 140 These consolidated financial statements have been approved for issue by the company’sB oard of Directors on 19 June 2009. 104,596 97,808 96,661 97,808 Payments to suppliers and employees (52,502) (49,395) (44,726) (46,926) Interest paid on loans (12,925) (12,780) (12,925) (12,780) Income taxes paid (3,847) (2,213) (3,847) (2,213) 2 Summary of significant accounting policies Net cash inflow / (outflow) from operating activities 30 35,322 33,420 35,163 35,889 (a) Basis of preparation The financial statements of the Group have been prepared in accordance with New Zealand generally accepted accounting practice (NZ GAAP). They comply Cash flows from investing activities with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and other applicable New Zealand Financial Reporting Standards, as Proceeds from sale of property, plant and equipment - 50 - 50 appropriate for profit orientated entities. Purchase and construction of property, plant and equipment (34,944) (37,647) (34,943) (37,071) Amounts repaid by related party - - 3,046 - Entities reporting The financial statements presented areU nison Networks Limited (the parent) and subsidiaries comprising of Unison Energy Limited (UEL), Amounts advanced to related party - - (22,591) (3,046) Unison Contracting Services Limited (UCSL) and ETEL Limited. Amounts payable to related party - - 812 - Purchase of subsidiary share equity - - (26,070) - Statutory base The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993, Companies Act 1993 Investment in subsidiary (44,943) - - - and Energy Companies Act 1992. Net cash inflow / (outflow) from investing activities (79,887) (37,597) (79,746) (40,067) The financial statements have been prepared on the basis of historical cost, except for the revaluation of certain financial instruments and property, plant and equipment. Cost is based on the fair value of the consideration given in exchange for assets. Cash flows from financing activities Proceeds from borrowings 48,500 14,500 48,500 14,500 The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000) Payment of dividends 21 (5,500) (7,209) (5,500) (7,209) Net cash inflow / (outflow) from financing activities 43,000 7,291 43,000 7,291 (b) Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Unison Networks Limited as at 31 March 2009 Net increase (decrease) in cash and cash equivalents (1,565) 3,114 (1,583) 3,113 and the results of all subsidiaries for the year then ended. Unison Networks Limited and its subsidiaries together are referred to in these financial statements as Cash and cash equivalents at the start of year 3,502 388 3,501 388 the Group or the consolidated entity. Cash and cash equivalents at end of year 8 1,937 3,502 1,918 3,501 Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently The above cash flow statement should be read in conjunction with the accompanying notes. exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de consolidated from the date that control ceases.

(c) Critical judgements in applying accounting policies All critical judgements applied to accounting policies have been included in the applicable notes to the financial statements.

(d) Critical accounting estimates and assumptions All critical accounting estimates and assumptions have been included in the applicable notes to the financial statements.

(e) Property, plant and equipment Electrical Distribution Network An election was made to use the electrical distribution network revaluation as at 31 March 2006 as deemed cost on the date of transition (i.e. 1 April 2006) to New Zealand’s equivalent to IFRS.

Subsequent additions are recognised at cost and are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 50 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 51

Land and buildings (f) Intangible assets Land and buildings are stated at fair value based on periodic, but at least five yearly, valuations determined by an independent registered valuation company, (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired and are adjusted for additions at cost and depreciation at appropriate rates. entity at the date of acquisition. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash revalued amount of the asset. generating units that are expected to benefit from the business combination in which the goodwill arose. Increases in the carrying amounts arising on revaluation of land and buildings are credited to other reserves in shareholders’ equity. To the extent that the (ii) Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific increase reverses a decrease previously recognised in the income statement, the increase is first recognised in the income statement. Decreases that reverse software. These costs are amortised over their estimated useful lives (three to five years). previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the income statement. Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated Other Property, Plant and Equipment with the production of identifiable and unique software products controlled by the company, and that will probably generate economic benefits exceeding costs All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant acquisition of the items. overheads.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic Computer software development costs recognised as assets are amortised using the straight line method over their estimated useful lives (not exceeding three benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the years). income statement during the financial period in which they are incurred. (iii) Easements Easements are initially recorded at its cost plus the cost of registering the easement and any other directly attributable costs of preparing the Work in Progress easement for its intended use. Easements with a definite life are amortised over that period. The cost of work in progress includes direct materials, labour and an allocation of overheads that directly relate to the work performed. (g) Impairment of non financial assets Disposal of Property, Plant and Equipment The carrying amount of the group’s assets, other than inventories and derivative financial instruments, are reviewed at each reporting date to determine whether When an item of property, plant or equipment is disposed of, any gain or loss is recognised in the income statement and is calculated as the difference between there is any indication of impairment. If any such indication exists, the recoverable amount of assets is estimated to determine the extent of any impairment loss. the sale price and the carrying value of the asset. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the Income Statement except impairment losses on revalued assets are first taken to the revaluation reserve if there is a surplus in respect of that asset. On disposal of an item of property, plant or equipment, any revaluation surplus in respect of that class of asset is transferred to retained earnings. Irrespective of any indications of impairment, goodwill acquired in a business combination and intangible assets that have an indefinite useful life are tested Depreciation Electrical Distribution Network Land is not depreciated. Depreciation is provided on a straight line basis on all tangible items or property, plant and annually for impairment. equipment other than freehold land, at rates calculated to allocate the assets’ cost or valuation less any residual value, over their estimated useful life. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Manufacturing Depreciation is provided on a diminishing value basis for all tangible items of property, plant and equipment, using the relevant tax The recoverable amount is the higher of an asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted depreciation rates. Diminishing value is more appropriate than the straight line method in a manufacturing environment, for allocating the assets cost or to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. valuation less any residual value, over their useful life. Non financial assets other than goodwill which suffered impairment are reviewed for possible reversal of the impairment at each reporting date. The estimated useful lives of property, plant and equipment are as follows: (h) Revenue recognition Electrical Distribution Network Revenue comprises the fair value for the sale of goods and services, (net of Goods and Services Tax), rebates and discounts and after eliminating sales within 33kv sub transmission 45 - 80 years the company. Revenue is recognised as follows: Zone substations, structures and equipment 16 - 60 years Distribution transformers 45 - 55 years (i) Sales of goods Sales of goods are recognised when a Group entity has delivered products to the customer, the customer has accepted the products and Distribution switchgear 35 - 45 years collectability of the related receivables is reasonably assured. Overhead Lines 35 - 80 years Underground cables 30 - 70 years (ii) Capital contributions Where the Group constructs assets at its own cost and receives a cash payment from a third party as part, or full, payment for the Other distribution equipment 30 - 70 years development of such assets, the Group recognises the asset at the cost incurred to construct the asset and recognises the cash received as revenue.

Other Property, Plant and Equipment (iii) Sales of services Sales of services are recognised in the accounting period in which the services are rendered, based upon usage or volume through put Freehold buildings 60 - 100 years during that period. Land Indefinite Motor vehicles 5 - 10 years (iv) Interest income Interest income is recognised on a time proportion basis using the effective interest method. Plant and equipment 5 - 10 years (v) Rental Income Rental income is recognised on an accruals basis in accordance with the substance of the relevant agreements. Office furniture and equipment 4 - 10 years Information technology 3 - 10 years (i) Trade receivables Trade receivable are stated at cost less impairment losses. Manufacturing Plant and equipment 5 - 25 years Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful Motor vehicles 5 - 16 years receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of Office furniture and equipment 7 years receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, Information technology 3 - 10 years discounted at the effective interest rate. The amount of the provision is recognised in the income statement. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 52 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 53

(j) Inventories (o) Cash and cash equivalents Inventories held for sale or use in the production of goods and services on a commercial basis are valued at the lower of cost and net realisable value. The cost Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original of purchased inventory is determined using the weighted average cost method. maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. The write down from cost to current replacement cost or net realisable value is recognised in the statement of financial performance in the period when the write down occurs. (p) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non monetary benefits, annual leave and accumulating (k) Income tax sick leave expected to be settled within 12 months of the reporting date are recognised in employee provisions in respect of employees’ services up to the Income tax expense in relation to the surplus or deficit for the period comprises current tax and deferred tax. reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Current tax is the amount of income tax payable based on the taxable profit for the current year, plus any adjustments to income tax payable in respect of prior years. Current tax is calculated using rates that have been enacted or substantively enacted by balance date. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date based on net present value. Consideration is given to Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market taxable profits will be available against which the deductible temporary differences or tax losses can be utilised. Deferred tax is not recognised if the temporary yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash difference arises from the initial recognition of goodwill or from the initial recognition of an asset and liability in a transaction that is not a business combination, outflows. and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, using tax rates that have been enacted or substantively enacted by balance date. (iii) Retirement benefit obligations Participating employees of the Group are entitled to benefits on retirement, disability or death from the Defined Benefit Plan Contributors Schemes as part of the National Provident Fund and entitled to retirement benefits from AMP. The schemes are multi employer defined benefit Current tax and deferred tax is charged or credited to the income statement, except when it related to items charged or credited directly to equity, in which case plan which provides a defined lump sum benefit based on years of service and final average salary. However, sufficient information is not available to use the tax is dealt with in equity. defined benefit accounting. Therefore the Group accounts for the scheme as if it were a defined contribution plan. (l) Contributed Equity Accounting for defined contribution plans requires that an expense is recognised for the contributions paid/payable during the year and any outstanding Ordinary shares are classified as equity. contributions are recognised as a liability. (m) Dividends (iv) Bonus plans The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. Dividend distributions to the Company’s shareholders are recognised in the period in which the dividends are distributed to the Company’s shareholders. (q) Goods and Services Tax (GST) (n) Accounting for derivative financial instruments and hedging activities The income statement has been prepared so that all components are stated exclusive of GST. All items in the balance sheet are stated net of GST, with the Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method exception of receivables and payables, which include GST invoiced. of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast (r) Leases transaction cash flow. (i) Financial leases Leases in which the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, obligations, net of finance charges are included in other long term payables. The interest element of the finance cost is charged to the income statement over of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment flows of hedged items. acquired under a finance lease are depreciated over the shorter of the asset’s useful life and the lease term. The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 19. Movements in the cash flow hedging reserve in (ii) Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. shareholders’ equity are shown in note 21. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the The full fair value of hedging derivatives is classified as a non current asset or liability if the remaining maturity of the hedged item is more than 12 months, and period of the lease. as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. (s) Provisions The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. For derivatives that are not hedged, the gain or embodying economic benefits will be required to settle the obligation and a realisable estimate can be made of the amount of the obligation. The expense loss on changes in fair value is recognised in the income statement. relating to any provision is presented in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a discount rate that reflects current forecast sale that is hedged takes place). However, when the forecast interest payments that are hedged results in the recognition of a non financial asset (for market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised in example, property, plant and equipment) or a non financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the income statement. the measurement of the initial cost or carrying amount of the asset or liability. (t) Trade and other payables When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a unsecured and are usually paid within 30 days of recognition. forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 54 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 55

(u) Borrowing costs 4e exp nsES Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. GROUP PARENT (v) Investments in subsidiaries 2009 2008 2009 2008 Investments in subsidiaries and associates in Parent financial statements are stated at cost less impairment. $ 000 $ 000 $ 000 $ 000 (w) Foreign currency translation Expenses, excluding finance costs, included in the income Transactions in foreign currencies are translated at the New Zealand rate of exchange at the date of the transaction. At balance date foreign monetary statement classified yb nature assets and liabilities not hedged by foreign currency derivative instruments are translated at the closing rate, and exchange variances arising included in the Depreciation and amortisation expense 19,525 18,992 18,995 18,950 income statement. Audit New Zealand - audit services 115 93 74 82 Monetary assets and liabilities in foreign currencies at balance date hedged by foreign currency derivative instruments are translated at the contract rates. Audit New Zealand - NZ IFRS audit fee - 12 - 12 Audit New Zealand - Electricity Information Disclosure 18 7 18 7 (x) Changes in accounting policies Directors fees 338 322 302 295 There have been no significant changes in accounting policies during the current year. Accounting policies have been applied on a basis consistent with Operating lease payments 689 527 86 35 prior year. Increase/(decrease) in provision for doubtful debts (14) 70 35 21 Loss on sale of property, plant and equipment 559 1,070 537 1,070 3u reven e Bad debt expense 294 80 245 80 Inventory write downs 17 13 17 13 Other expenses 54,221 44,234 46,973 42,278 GROUP PARENT Impairment of goodwill - 1,809 - - 75,762 67,229 67,282 62,843 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 Profit before income tax includes the following specific expenses: From continuing operations Sales revenue Depreciation Line revenue 90,000 86,519 90,000 86,519 Buildings 96 93 96 93 Capital contributions 6,079 8,947 6,079 8,947 Plant and equipment 304 181 11 160 Miscellaneous revenue 10,787 3,110 1,226 3,110 Fixtures & fittings 92 75 91 75 106,866 98,576 97,305 98,576 Motor vehicles 348 306 140 300 Computer hardware 564 625 549 617 Other revenue Power generation 11 11 11 11 Interest received 93 140 93 140 Electrical distribution network 17,517 17,113 17,517 17,113 Recovery of debt previously written off 8 7 8 7 Total depreciation 18,932 18,404 18,415 18,369 101 147 101 147 106,967 98,723 97,406 98,723 Amortisation Computer software 593 588 580 581 Total amortisation 593 588 580 581

Total depreciation and amortisation 19,525 18,992 18,995 18,950 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 56 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 57

5i f nance income and expenses 7i imputat on credits

GROUP PARENT GROUP PARENT

2009 2008 2009 2008 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000

Finance costs Imputation credit account Interest and finance charges paid/payable 13,910 12,946 13,909 12,946 Opening balance 4,181 5,518 4,181 5,518 Bank charges 101 125 97 125 Tax payments, net of refunds 3,847 2,214 3,847 2,214 Capitalised interest (8.10% pa) (284) - (284) - Credits attached to dividend distributions (2,709) (3,551) (2,709) (3,551) Total finance costs 13,727 13,071 13,722 13,071 Adjustment to correct prior years (541) - (541) - Closing balance 4,778 4,181 4,778 4,181 Finance income Intercompany funding charge - - (592) - Total finance income - - (592) - 8a current ssets - cash and cash equivalents Net finance costs 13,727 13,071 13,130 13,071 GROUP PARENT

6 income tax expense 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 GROUP PARENT Cash at bank and on hand 1,429 3,502 1,918 3,501 2009 2008 2009 2008 AUD account 450 - - - $ 000 $ 000 $ 000 $ 000 USD account 58 - - - 1,937 3,502 1,918 3,501 (a) Income tax expense/(benefit) Current tax 2,824 2,973 2,573 3,624 The Group has a $3m overdraft facility available on the Group’s operational bank accounts. Deferred tax associated with timing differences 812 1,242 783 1,436 Deferred tax associated with tax rate changes - (7,440) - (7,440) Prior period tax expense adjustment 1,189 865 1,176 865 9a current ssets - Receivables Prior period deferred tax adjustment (1,195) - (1,054) - 3,630 (2,360) 3,478 (1,515) GROUP PARENT

(b) The prima facie income tax expense/(benefit) on pre tax accounting 2009 2008 2009 2008 profit reconciles to the income tax expense in the financial statements $ 000 $ 000 $ 000 $ 000 as follows: Trade receivables 16,821 10,191 9,065 10,052 Profit from continuing operations before income tax expense 17,478 18,423 16,994 22,809 Other receivables 120 49 - - Prima facie tax at 30% (2008: 33%) 5,243 6,080 5,098 7,527 Provision for doubtful debts (101) (115) (101) (66) Non assessable income (1,802) (2,660) (1,883) (2,660) Related party receivables 1,701 314 1,701 314 Non deductible expenses 154 801 141 204 Prepayments 522 - 380 - Deferred tax associated with tax rate changes - (7,440) - (7,440) 19,063 10,439 11,045 10,300 Other deductible (non assessable) items - (6) - (11) Prior period tax expense adjustment 1,189 865 1,176 865 Prior period deferred tax adjustment (1,154) - (1,054) - 10 CurrENT ASSETS - INVENTORIES Income tax expense/(benefit) 3,630 (2,360) 3,478 (1,515)

GROUP PARENT

(c) Taxation payable/(refund) 2009 2008 2009 2008 Opening balance 750 (874) 750 (874) $ 000 $ 000 $ 000 $ 000 Current year taxation expense 2,824 2,973 2,573 3,624 Prior year adjustment 1,176 865 1,176 865 Raw materials 11,887 3,837 3,725 3,837 Taxation paid (3,847) (2,214) (3,847) (2,214) Finished goods 3,970 - - - Transfer of tax refund from subsidiary - - - (651) Provision for obsolescence (150) - (150) - Closing balance 903 750 652 750 15,707 3,837 3,575 3,837 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 58 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 59

11 Non Current ASSETS - PROPERTY PLANT AND EQUIPMENT

Distribution 33kV Zone switchgear Other subtrans- substation & substation 11kV lines LV lines network Land & Motor Plant & Furniture Information Power Work in mission equipment transformers & cables & cables assets buildings vehicles equipment & fittings technology generation progress Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000

Group: comparative year

At 1 April 2007 Cost 22,081 31,479 116,115 157,638 82,351 41,643 - 3,095 2,395 1,245 4,645 681 19,235 482,603 Valuation ------8,337 ------8,337 Accumulated depreciation (688) (1,488) (3,978) (5,253) (3,343) (1,764) - (2,012) (1,616) (881) (3,027) (16) - (24,066) Net book amount 21,393 29,991 112,137 152,385 79,008 39,879 8,337 1,083 779 364 1,618 665 19,235 466,874

Year ended 31 March 2008 Opening net book amount 21,393 29,991 112,137 152,385 79,008 39,879 8,337 1,083 779 364 1,618 665 19,235 466,874 Depreciation charge (713) (1,513) (4,135) (5,472) (3,494) (1,786) (93) (306) (181) (75) (625) (11) - (18,404) Additions 1,839 389 6,065 7,955 4,183 1,915 - 509 522 151 358 - 12,547 36,433 Disposals - (295) (766) - - - - (9) - - - - - (1,070) Capitalisation of work in progress 2,102 1,266 4,159 4,601 4,301 359 159 41 15 9 82 - (17,094) - Closing net book amount 24,621 29,838 117,460 159,469 83,998 40,367 8,403 1,318 1,135 449 1,433 654 14,688 483,833

Valuation Cost 26,023 32,840 125,575 170,115 90,835 43,918 159 3,272 2,933 1,405 5,085 681 14,688 517,529 Valuation ------8,337 ------8,337 Accumulated depreciation (1,402) (3,002) (8,115) (10,646) (6,837) (3,551) (93) (1,954) (1,798) (956) (3,652) (27) - (42,033) Net book amount 24,621 29,838 117,460 159,469 83,998 40,367 8,403 1,318 1,135 449 1,433 654 14,688 483,833

Group: current year

Year ended 31 March 2009 Opening net book amount 24,621 29,838 117,460 159,469 83,998 40,367 8,403 1,318 1,135 449 1,433 654 14,688 483,833 Depreciation charge (795) (1,573) (4,238) (5,461) (3,636) (1,815) (95) (347) (304) (91) (565) (12) - (18,932) Additions 1,341 2,346 5,913 8,337 4,027 910 210 208 2,742 175 459 - 9,771 36,439 Disposals - (44) (515) ------(559) Capitalisation of work in progress 1,778 1,634 2,494 1,770 1,318 786 (67) - - (7) - - (9,706) - Closing net book amount 26,945 32,201 121,114 164,115 85,707 40,248 8,451 1,179 3,573 526 1,327 642 14,753 500,781

At 31 March 2009 Cost 29,141 36,713 133,556 180,222 96,180 45,613 273 1,902 3,922 1,574 5,543 681 14,753 550,073 Valuation ------8,337 ------8,337 Accumulated depreciation (2,196) (4,512) (12,442) (16,107) (10,473) (5,365) (159) (723) (349) (1,048) (4,216) (39) - (57,629) Net book amount 26,945 32,201 121,114 164,115 85,707 40,248 8,451 1,179 3,573 526 1,327 642 14,753 500,781

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 60 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 61

11 Non Current ASSETS - PROPERTY PLANT AND EQUIPMENT

Distribution 33kV Zone switchgear Other subtrans- substation & substation 11kV lines LV lines network Land & Motor Plant & Furniture Information Power Work in mission equipment transformers & cables & cables assets buildings vehicles equipment & fittings technology generation progress Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000

Parent: Comparative year

At 1 April 2007 Cost 22,081 31,479 116,115 157,638 82,351 41,643 - 3,095 2,395 1,245 4,645 681 19,235 482,603 Valuation ------8,337 ------8,337 Accumulated depreciation (688) (1,488) (3,978) (5,253) (3,343) (1,764) - (2,012) (1,616) (881) (3,027) (16) - (24,066) Net book amount 21,393 29,991 112,137 152,385 79,008 39,879 8,337 1,083 779 364 1,618 665 19,235 466,874

Year ended 31 March 2008 Opening net book amount 21,393 29,991 112,137 152,385 79,008 39,879 8,337 1,083 779 364 1,618 665 19,235 466,874 Depreciation charge (713) (1,513) (4,135) (5,472) (3,494) (1,786) (93) (300) (160) (75) (617) (11) - (18,369) Additions 1,839 389 6,065 7,955 4,183 1,915 - 453 111 144 300 - 12,547 35,901 Disposals - (295) (766) - - - - (9) - - - - - (1,070) Capitalisation of work in progress 2,102 1,266 4,159 4,601 4,301 359 159 41 13 11 82 - (17,094) - Closing net book amount 24,621 29,838 117,460 159,469 83,998 40,367 8,403 1,268 743 444 1,383 654 14,688 483,336

At 31 March 2008 Cost 26,023 32,840 125,575 170,115 90,835 43,918 159 3,217 2,519 1,400 5,027 681 14,688 516,997 Valuation ------8,337 ------8,337 Accumulated depreciation (1,402) (3,002) (8,115) (10,646) (6,837) (3,551) (93) (1,949) (1,776) (956) (3,644) (27) - (41,998) Net book amount 24,621 29,838 117,460 159,469 83,998 40,367 8,403 1,268 743 444 1,383 654 14,688 483,336

Parent: current year

Year ended 31 March 2009 Opening net book amount 24,621 29,838 117,460 159,469 83,998 40,367 8,403 1,268 743 444 1,383 654 14,688 483,336 Revaluation movement ------Depreciation charge (795) (1,573) (4,238) (5,461) (3,636) (1,813) (95) (141) (11) (91) (549) (12) - (18,415) Additions 1,341 2,346 5,891 8,337 4,027 908 210 165 82 165 450 - 9,768 33,690 Disposals - (44) (493) ------(537) Capitalisation of work in progress 1,778 1,634 2,494 1,770 1,318 786 (67) - - (7) - - (9,706) - Transfer of assets to subsidiary ------(856) (718) - - - - (1,574) Closing net book amount 26,945 32,201 121,114 164,115 85,707 40,248 8,451 436 96 511 1,284 642 14,750 496,500

At 31 March 2009 Cost 29,141 36,713 133,556 180,222 96,180 45,613 273 945 131 1,558 5,477 681 14,750 545,240 Valuation ------8,337 ------8,337 Accumulated depreciation (2,196) (4,512) (12,442) (16,107) (10,473) (5,365) (159) (509) (35) (1,047) (4,193) (39) - (57,077) Net book amount 26,945 32,201 121,114 164,115 85,707 40,248 8,451 436 96 511 1,284 642 14,750 496,500

(a) Valuations of land and buildings Land and buildings in Omahu Road, Hastings were independently valued by a registered valuer Telfer Young Ltd, as at 31 March 2007.

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 62 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 63

12 Non current assets - Intangible assets 12 Non current assets - Intangible assets

Other Other Computer intangible Computer intangible Goodwill Software assets Total Goodwill Software assets Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group: comparative year Parent: comparative year

At 1 April 2007 At 1 April 2007 Cost 89,888 3,155 77 93,120 Cost 89,888 3,155 77 93,120 Restatement of goodwill (60,559) - - (60,559) Restatement of goodwill (60,559) - - (60,559) Accumulated amortisation and impairment (15,329) (1,917) - (17,246) Accumulated amortisation and impairment (15,329) (1,917) - (17,246) Net book amount 14,000 1,238 77 15,315 Net book amount 14,000 1,238 77 15,315

Year ended 31 March 2008 Year ended 31 March 2008 Opening net book amount 14,000 1,238 77 15,315 Opening net book amount 14,000 1,238 77 15,315 Additions 1,809 566 - 2,375 Additions - 522 - 522 Impairment charge (1,809) - - (1,809) Amortisation charge - (581) - (581) Amortisation charge - (588) - (588) Closing net book amount 14,000 1,179 77 15,256 Closing net book amount 14,000 1,216 77 15,293 At 31 March 2008 At 31 March 2008 Cost 89,888 3,676 77 93,641 Cost 91,697 3,721 77 95,495 Restatement of goodwill (60,559) - - (60,559) Restatement of goodwill (60,559) - - (60,559) Accumulated amortisation and impairment (15,329) (2,497) - (17,826) Accumulated amortisation and impairment (17,138) (2,505) - (19,643) Net book amount 14,000 1,179 77 15,256 Net book amount 14,000 1,216 77 15,293 Parent: current year

Group: current year Year ended 31 March 2009 Opening net book amount 14,000 1,179 77 15,256 Year ended 31 March 2009 Additions - 244 - 244 Opening net book amount 14,000 1,216 77 15,293 Amortisation charge - (580) - (580) Additions - 259 - 259 Closing net book amount 14,000 843 77 14,920 Goodwill on acquisition 27,729 - - 27,729 Amortisation charge - (593) - (593) At 31 March 2009 Closing net book amount 41,729 882 77 42,688 Cost 89,888 3,920 77 93,885 Restatement of goodwill (60,559) - - (60,559) Cost 117,617 3,979 77 121,673 Accumulated amortisation and impairment (15,329) (3,077) - (18,406) Valuation (60,559) - - (60,559) Net book amount 14,000 843 77 14,920 Accumulated amortisation and impairment (15,329) (3,097) - (18,426) Net book amount 41,729 882 77 42,688 (a) Impairment test for goodwill For the purposes of impairment testing, goodwill has been allocated to those cash generating units expected to benefit from the business combination in which the goodwill arose. Goodwill impairment has been assessed by comparing the present value of forecasted cash flows (discounted cash flows) to be generated from the cash generating units to the carrying value of the assets including goodwill. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 64 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 65

13l current iabilities - payable 15 Non current liabilities - Employee provisions

GROUP PARENT GROUP PARENT

2009 2008 2009 2008 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000

Trade payables 10,332 8,225 6,185 7,593 Holiday pay 80 - - - Accrued expenses 1,186 506 466 506 Retirement gratuities 612 605 422 402 Interest payable 1,896 1,691 1,896 1,691 Sick leave 286 164 154 153 Other payables 1021 501 699 472 Long service leave 145 285 134 128 14,435 10,923 9,246 10,262 1,123 1,054 710 683

14 l Current iabilities - Employee provisions Long GROUP PARENT Retirement Sick Service Holiday Pay Gratuities Leave Leave Total $ 000 $ 000 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group - 2009 Opening balance - 605 164 285 1,054 Accrued pay 1,524 1,119 1,175 1,009 Increase/(decrease) in provision during the year 80 7 122 (140) 69 Sick leave 77 18 14 14 Closing balance 80 612 286 145 1,123 Annual leave 1,395 899 602 699

2,996 2,036 1,791 1,722 Group - 2008 Opening balance - 508 164 127 799 Increase/(decrease) in provision during the year - 97 - 158 255 Closing balance - 605 164 285 1,054

Accrued Sick Annual Pay Leave Leave Total Parent - 2009 $ 000 $ 000 $ 000 $ 000 Opening balance - 402 153 128 683 Increase/(decrease) in provision during the year - 20 1 6 27 Group - 2009 Closing balance - 422 154 134 710 Opening balance 1,119 18 899 2,036

Increase/(decrease) in provision during the year 405 59 496 960 Parent - 2008 Closing balance 1,524 77 1,395 2,996 Opening balance - 508 164 127 799

Increase/(decrease) in provision during the year - (106) (11) 1 (116) Group - 2008 Closing balance - 402 153 128 683 Opening balance 632 18 732 1,382 Increase/(decrease) in provision during the year 487 - 167 654 Closing balance 1,119 18 899 2,036

Parent - 2009 Opening balance 1,009 14 699 1,722 Increase/(decrease) in provision during the year 166 - (97) 69 Closing balance 1,175 14 602 1,791

Parent - 2008 Opening balance 632 18 732 1,382 Increase/(decrease) in provision during the year 377 (4) (33) 340 Closing balance 1,009 14 699 1,722 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 66 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 67

16 Non current liabilities - Borrowings 17 Financial instruments

The Group has a comprehensive treasury policy approved by the board of directors to manage the risks of financial instruments. The policy outlines the GROUP PARENT objectives and approach that the Group will adopt in the treasury management process. The policy covers management of interest rate, funding, liquidity, currency and operational risks. 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 (a) Credit risk T erm Borrowings Financial instruments which potentially subject the Group to credit risk principally consist of bank balances and accounts receivable. No collateral is held on Maturing within 1 year - 30,500 - 30,500 these amounts (2008: nil). Maturing between 1 2 years 60,000 60,000 60,000 60,000 Maturing between 2 and 3 years 79,000 80,000 79,000 80,000 Concentration of Credit Exposure The Group has exposure to six electricity retailers that account for 67% of accounts receivable. To minimise this risk, Maturing between 3 and 4 years 80,000 - 80,000 - the Company performs credit evaluations on all energy retailers in conjunction with the contractual requirements contained within the use of system agreements 219,000 170,500 219,000 170,500 operating with these parties. A loan or bank undertaking may be required where deemed necessary. At balance date a bank guarantee of up to $5.4 million is Related Party Borrowings currently held in respect of one retailer. As at 31 March 2009 and 2008, all overdue receivables have been assessed for impairment and appropriate provisions Maturing between 4 and 5 years 1,600 1,600 1,600 1,600 applied. Total non current interest bearing liabilities 220,600 172,100 220,600 172,100

All term borrowings are bank loans and interest rates for these borrowings are based on the bank bill rate plus a margin. The Group utilises a multi tranche bank GROUP PARENT facility arrangement for a total of $260 million. Components of this facility will be routinely renewed on maturity date. For this reason all borrowings under this facility are reported as term borrowings. 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 The bank facility is unsecured and has the benefit of a negative pledge and cross guarantee. The facility is subject to various covenants such as limitations on long term indebtedness, leverage and other ratios. The Group complied with all covenants for the 2009 and 2008 financial years. 0 - 30 days 15,932 9,281 10,425 9,191 Past due 31 - 60 days 2,197 1,088 544 1,088 The related party loan is from the Hawke’s Bay Power Consumers’ Trust and is unsecured. This loan is repayable on 01 June 2013. Past due more than 60 days 934 70 76 21 19,063 10,439 11,045 10,300 (a) Interest rate risk exposures The Group manages interest rate exposure in accordance with its treasury policy by hedging no less than 60% of all borrowings with interest rate hedge Provision for doubtful debts instruments. Opening balance (115) (45) (66) (45) The weighted average rates on interest rate swaps and options are as follows: (Increase)/decrease in provision during the year 14 (70) (35) (21) Closing Balance (101) (115) (101) (66)

The impairment provision has been calculated based on expected losses from the Group’s pool of debtors. Expected losses have been determined based on analysis of specific debtors. 2009 2009 2008 2008 % $ 000 % $ 000 (b) Liquidity risk Liquidity risk represents the risk that the company may not have the financial ability to meet its contractual obligations. The company evaluates its liquidity Interest rate swaps requirements on an ongoing basis. Overall the company generates sufficient cash flows from its operating activities to meet its obligations arising from its Maturing in less than 1 year 6.45 22,000 6.48 12,000 financial liabilities and has funding in place to cover potential shortfalls. Maturing between 1 and 2 years 7.02 35,000 6.45 22,000 Maturing between 2 and 5 years 6.65 12,000 6.90 47,000 (c) Foreign currency risk Maturing after 5 years 5.60 113,000 6.19 6,000 Foreign currency risk is the risk that the value of the Group’s assets and liabilities or revenues and expenditure will fluctuate due to changes in foreign exchange 182,000 87,000 rates. The Group is exposed to currency risk as a result of transactions that are denominated in a currency other than New Zealand dollars. The Group policy is Interest rate options to hedge material foreign currency exposure by entering into foreign exchange forward contracts. Maturing between 2 and 5 years 7.30 30,000 - - Maturing after 5 years - - 7.30 30,000 (d) Cash flow interest rate risk 30,000 30,000 Cash flow interest rate risk is the risk that the cash flows from a financial instrument will fluctuate because of changes in market interest rates. Derivatives and borrowings issued at variable interest rates expose the Group to cash flow interest rate risk. The Group manages its cash flow interest rate risk on borrowings by using floating to fixed interest rate swaps and options. Such interest rate swaps have the economic effect of converting borrowings at floating rates and swaps them into fixed rates that are generally lower than those available if the Group borrowed at fixed rates directly.U nder the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 68 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 69

(e) Fair value estimation 18 Non current liabilities - deferred tax liabilities The methods and assumptions used are that carrying amounts in the Financial Statements reflect the estimated fair value of the financial instruments including receivables, bank and investments, accounts payable and term debt. There were no material investments at balance date. GROUP PARENT

Classification of financial instruments 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000

GROUP PARENT The balance comprises temporary differences attributable to: 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 Property, plant and equipment 65,741 65,608 65,716 65,598 Derivative financial instruments (801) 841 (801) 841 Employee provisions (870) (550) (629) (377) Loans and receivables Provision for doubtful debts (30) (33) (30) (19) Cash and cash equivalents 1,937 3,502 1,918 3,501 Other provisions (128) - (126) - Trade receivables and other receivables 19,063 10,439 11,045 10,300 Net deferred tax liabilities 63,912 65,866 64,130 66,043 Related party receivables 22,591 3,046 - - - - Movements: Designated fair value through equity Derivative financial instruments (2,783) 3,000 (2,671) 3,000 Opening balance 65,866 72,078 66,043 72,078 Property, plant and equipment 132 (6,371) 117 (6,382) Financial liabilities measured at amortised costs Derivative financial instrument (1,642) (31) (1,642) (31) Payables (14,435) (10,923) (9,246) (10,262) Employee provisions (304) 210 (251) 383 Employee provisions (4,119) (3,090) (2,501) (2,405) Provision for doubtful debts 5 (20) (11) (5) Related party payables - - (812) - Other provisions (145) - (126) - Borrowings (220,600) (172,100) (220,600) (172,100) Closing balance 63,912 65,866 64,130 66,043

Total financial instruments (220,937) (169,172) (200,276) (164,920) The deferred tax movements noted above in relation to derivatives have been recognised in equity.

(f) Sensitivity Analysis 19eai D riv t ve financial instruments In managing interest rate risks the Group aims to reduce the impact of short term fluctuations on the Group’s earnings. Over the longer term, however, permanent changes in interest rates will have an impact on profit. GROUP PARENT If interest rates on borrowings at 31 March 2009 had fluctuated by plus or minus 0.5%, the effect would have been to increase/decrease the surplus before tax by $320,000 (2008: $267,500) as a result of a higher/lower interest expense on floating rate borrowings. 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000

Assets Current derivative financial instrument 154 154 Non current derivative financial instrument 3,192 2,846 3,192 2,846 Total derivative financial instrument assets 3,192 3,000 3,192 3,000

Liabilities Current forward foreign currency contracts - held for trading 125 13 Current derivative financial instrument 407 407 Non current derivative financial instrument 5,443 5,443 Total derivative financial instrument liabilities 5,975 5,863 (2,783) 3,000 (2,671) 3,000 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 70 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 71

20nu Co trib ted equity 23 t Commi ments

(i) Operating leases GROUP PARENT Lease payments under operating leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased property, plant and equipment are expensed to the statement of financial performance in equal instalments over the lease term. 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000

Share capital GROUP PARENT Issued and paid up value 66,661 66,661 66,661 66,661 66,661 66,661 66,661 66,661 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000

Commitments for minimum lease payments in relation to non cancellable operating leases are payable as follows: 21 vs reSEr e and retained earnings Within one year 1,708 461 59 25 Later than one year but not later than two years 1,388 578 18 29 GROUP PARENT Later than two years 6,745 186 1 9 9,841 1,225 78 63 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 (ii) Finance leases

(a) Reserves (a) Capital and operations commitments Land and building revaluation reserve 2,910 2,910 2,910 2,910 The value of contractual capital commitments as at 31 March 2009 is estimated at $6,382,740 (2008: $3,744,957) Hedging reserve - cash flow hedges (2,237) 1,963 (2,237) 1,963 The value of contractual operating commitments as at 31 March 2009 is estimated at $297,714 (2008: $178,573) 673 4,873 673 4,873 Asset revaluation reserve Land and Buildings 24nig Co t n encies Opening balance 2,910 2,910 2,910 2,910 Closing balance 2,910 2,910 2,910 2,910 As at 31 March 2009 the Group had no contingent liabilities or assets (2008:$Nil).

Hedging reserve - cash flow hedges 25 CapITal Management Opening balance 1,963 1,774 1,963 1,774 Fair value gains recognised to cash flow hedge reserve 3,490 440 3,490 440 The Group’s capital is its equity, which comprises accumulated funds and other reserves. Equity is represented by net assets. Fair value losses recognised to cash flow hedge reserve (7,690) (251) (7,690) (251) Closing balance (2,237) 1,963 (2,237) 1,963 The Group manages it equity as a by product of prudently managing revenues, expenses, assets and liabilities to ensure the Group effectively achieves it’s objectives and purpose, whilst remaining a going concern. (b) Retained earnings Movements in retained earnings were as follows:

Opening balance 195,641 182,067 199,182 182,067 Profit for the year 13,848 20,783 13,516 24,324 Dividends (5,500) (7,209) (5,500) (7,209) Closing balance 203,989 195,641 207,198 199,182

22id D viden s

During the financial year a fully imputed dividend of $5,500,000 ($8,208,955 inclusive of imputation credits) was paid in respect of the 2007/08 financial year (2008: $10,759,710 fully imputed dividend). NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 72 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 73

26ea R l t d party transactions (d) Transactions with directors, key management and their immediate family During the year the following entities, in which directors had an interest, provided services to the Group under normal commercial terms. (a) Group Structure Group Structure Unison Networks Limited operates a power lines business that owns, manages and operates an electricity distribution network serving the Hawke’s Bay, Taupo GROUP PARENT and Rotorua regions. On behalf of electricity retailers it distributes electrical energy that has been brought to points of supply by the National Grid operator or produced by embedded generators, to over 107,000 connected consumers. Unison Contracting Services Limited along with other third party contractors 2009 2008 2009 2008 provides contract services to maintain, develop and service the network. Unison Networks Limited provides management services to Unison Contracting Services $ 000 $ 000 $ 000 $ 000 Limited. Etel Limited manufactures transformers and other electrical components for the Asia Pacific market. Transactions Related parties include: Information Management Services Ltd/K Atkinson 4 35 4 35 Subsidiaries Vectek Electronics Ltd/K Valentine - 4 - 4 Hawke’s Bay Power Consumers’ Trust Information Management Services Vectek Electronics Limited (E) OTHER RELATED PARTIES Centralines Limited The Hawke’s Bay Power Consumers’ Trust holds the shares of the Group on behalf of the consumers in their capacity as owners. The Group has issued a debt The Group’s key management personnel security to the Trust of $1,600,000 repayable on 1 June 2013. The debt security carries a fixed interest rate of 6% per annum. During the year the Group paid $96,000 in interest to the Hawke’s Bay Power Consumers’ Trust. (b) Key management personnel compensation Key management personnel compensation for the years ended 31 March 2009 and 31 March 2008 is set out below. The key management personnel are all An operating lease agreement to supply backup generation facilities was entered into in December 2005 under normal commercial terms between the Group the directors of the company and the five executives with the greatest authority for the strategic direction and management of the company. and the Hawke’s Bay District Health Board, of which Mr K Atkinson was a director during the year.

The Group operates a management contract for Centralines Limited, an electricity lines company based in Waipukurau. This contract provides for executive, financial and technical managerial services for Centralines Limited. For commercial reasons the value of this contract is not disclosed. GROUP PARENT There were no other related party transactions. 2009 2008 2009 2008 $ 000 $ 000 $ 000 $ 000 27 InveSTments in subsidiaries Short term benefits 2,187 2,047 1,749 1,794 The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries. Post employment benefits - - - - Other long term benefits - - - - Termination benefits - - - - equity holding Share based payments - - - - Name of Country of Class of 2009 2008 (c) Transactions with subsidiaries ENTITY Incorporation Shares % % The following transactions occurred between the parent and Unison Contracting Services Limited (UCSL) and Etel Limited: Unison Contracting Services Limited New Zealand Ordinary 100 100 Unison Energy Limited New Zealand Ordinary 100 100 ETEL Limited New Zealand Ordinary 100 - PARENT

2009 2008 $ 000 $ 000 Interests in subsidiaries

Value of contracting services provided by UCSL 14,932 10,221 PARENT Value of electrical products purchased from ETEL 141 - Interest paid by UCSL 296 2009 2008 Interest paid by ETEL 296 - $ 000 $ 000 Value of services provided by parent to UCSL (1,722) (3,766) Shares in subsidiaries 26,070 - Loans advanced to subsidiaries 22,591 3,046 Amounts payable to subsidiaries (812) - The number of ordinary fully paid shares on issue for Unison Networks Limited is 64,000,000 (2008: 64,000,000) The number of ordinary fully paid shares on issue for Unison Contracting Services Limited is 3,720,000 (2008: 100) The number of ordinary fully paid shares on issue for Unison Energy Limited is 100 (2008: 100) The number of ordinary fully paid shares on issue for Etel Limited is 22,350,000. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 74 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 75

28i Bus neSS Combinations 30e R conciliation of profit for the year to net cash flows from operating activities

On the 15 December 2008 Unison Networks Limited set up a 100% owned subsidiary called Unison Transformers Limited with paid up share capital of 100 ordinary $1 shares. Unison Transformers Limited acquired the operating assets and liabilities, including goodwill, of Lyncroft Properties Limited (formally ETEL GROUP PARENT Limited) on the 30 January 2009. On the 2 February 2009 Unison Transformers Limited changed its name to ETEL Limited (the Company). The fair value of 2009 2008 2009 2008 assets and liabilities acquired by the Company can be summarised as follows. $ 000 $ 000 $ 000 $ 000

Profit for the year 13,848 20,783 13,516 24,324 PARENT Non cash items impacting net surplus 2009 2008 Depreciation 18,932 18,404 18,415 18,369 $ 000 $ 000 Amortisation 593 588 580 581 Net (Gain)/loss on sale of property, plant & equipment 559 1,070 537 1,070 Assets and Liabilities: Deferred Tax 1,471 (6,198) 1,471 (6,004) Working capital (including trade receivables and payables, inventories and employee provisions) 13,879 - Fair value movement in financial instruments recognised Fixed assets 2,713 - via the income statement (646) (195) (646) (195) Other net assets acquired including derivative financial instruments 321 - Deferred tax liability (74) - Movement in working capital 16,839 - (Increase)/decrease in receivables and prepayments (6,921) (890) (745) (840) Contingent liabilities Increase/(decrease) in payables (excluding capital items), Operating leases 60 - accruals and employee provisions 7,333 (1,767) 2,133 (3,041) Contractual operating commitments 3,740 - Increase/(decrease) in income taxes payable 153 1,625 (98) 1,625 3,800 - Net cash inflow from operating activities 35,322 33,420 35,163 35,889

The fair value of goodwill amounting to $27.7 million was derived in conjunction with external consultants and the due diligence programme that was carried out prior to the purchase.

Net profit for the Company for the period from 30 January to 31 March 2009 amounted to $49,000 and this has been included in the Consolidated Group accounts for Unison Networks.

29n Sig iFIcant events occurring after balance date

On 19 June 2009 the Unison Board declared a fully imputed dividend of $6.2 million to the Hawke’s Bay Power Consumers Trust in respect of the 2009 financial year. There have been no other significant reporting events subsequent to balance date. AUDIT REPORT A UDIT REPORT 76 FOR THE YEAR ENDED 31 MARCH 2009 FOR THE YEAR ENDED 31 MARCH 2009 77

AUD PR IT RE O T We evaluated the overall adequacy of the presentation of information in the financial statements and statement of service performance. We obtained all the information and explanations we required to support our opinion above. TO THE READERS OF UNISON NETWORKS LIMITED AND GROUP’S FINANCIAL STATEMENTS AND STATEMENT OF SERVICE PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2009 RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE AUDITOR

The Auditor-General is the auditor of Unison Networks Limited (the company) and group. The Auditor-General has appointed me, Mark Maloney, using the staff The Board of Directors is responsible for preparing the financial statements in accordance with generally accepted accounting practice in New Zealand. The and resources of Audit New Zealand, to carry out the audit of the financial statements and statement of service performance of the company and group, on his financial statements must give a true and fair view of the financial position of the company and group as at 31 March 2009. They must also give a true and behalf, for the year ended 31 March 2009. fair view of the results of its operations and cash flows for the year ended on that date. TheB oard of Directors is also responsible for preparing the statement of service performance that gives a true and fair view of service performance achievements for the year ended 31 March 2009. The Board of Directors’ UNQUALIFIED OPINION responsibilities arise from the Energy Companies Act 1992 and the Financial Reporting Act 1993.

In our opinion: We are responsible for expressing an independent opinion on the financial statements and statement of service performance and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and section 45(1) of the Energy Companies Act 1992. • The financial statements of the company and group on pages 44 to 75: INDEPENDENCE • comply with generally accepted accounting practice in New Zealand; When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the • give a true and fair view of: Institute of Chartered Accountants of New Zealand.

• the company and group’s financial position as at 31 March 2009; In addition to the audit of the annual financial statement, we have carried out another audit assignment for the company. This involved issuing certificates pursuant to the Electricity Distribution (Information Disclosure) Requirements 2008 (distribution requirements); and the Electricity Information Disclosure • the results of its operations and cash flows for the year ended on that date. Requirements consolidating all amendments to 31 October (original requirements). This assignment is compatible with those independence requirements. Other • The statement of service performance of the company and group on page 44 gives a true and fair view of the achievements measured against the than this assignment we have no relationship with or interests in the company. performance targets adopted for the year ended 31 March 2009.

• Based on our examination the company and group kept proper accounting records.

The audit was completed on 19 June 2009, and is the date at which our opinion is expressed.

The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and the Auditor, and explain our independence.

BASIS OF OPINION MJ MALONEY AUDIT NEW ZEALAND We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing Standards. On behalf of the Auditor-General, We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the Palmerston North, New Zealand financial statements and statement of service performance did not have material misstatements, whether caused by fraud or error.

Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements and statement of service performance. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

The audit involved performing procedures to test the information presented in the financial statements and statement of service performance.W e assessed the results of those procedures in forming our opinion.

Audit procedures generally include:

• determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;

• verifying samples of transactions and account balances;

• performing analyses to identify anomalies in the reported data;

• reviewing significant estimates and judgements made by the Board of Directors;

• confirming year-end balances;

• determining whether accounting policies are appropriate and consistently applied; and

• determining whether all financial statement and statement of service performance disclosures are adequate.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and statement of service performance. DIRECTORY

Re giSTEred Office 1101 Omahu Road PO Box 555 Hastings 4156, New Zealand

Telephone: +64 6 873 9300 Facsimile: +64 6 873 9311 Faults: +64 6 873 9333 Freephone: 0800 286 476 www.unison.co.nz

Board of Directors Chairman Brian Martin Deputy Chairman Dave Frow Kevin Atkinson John Palairet Helen Walker Ken Gilligan

group Chief Executive Ken Sutherland

Unison Networks Limited Executive Management Chief Financial Officer Greg Morgan General Manager Networks & Operations André Botha General Manager Operations Support Wendie Harvey

Unison Contracting Services Limited Executive Management General Manager Contracting Charles Kaka

ETEL Limited Executive Management Chief Executive Peter Bingley General Manager Operations & Marketing Peter Leece

Auditors Audit New Zealand, on behalf of the Auditor-General www.unison.co.nz