page 142 EASTLAND GROUP ANNUAL REPORT 2020 Contents

Eastland Group performance overview 03

Chair and chief executive's report 05

Financial performance trends 09

Company structure 10

Trust Tair¯awhiti 11

People and performance 13

Community engagement 15

Climate leaders 17

Eastland Generation 19

Eastland Network 27

Eastland Port 39

Gisborne Airport 51

Corporate governance 59

Board of directors 61

Senior leadership team 65

Financial statements F-1

Auditor's report F-2

Notes to the financial statements F-10

Company information F-45

EASTLAND GROUP ANNUAL REPORT 2020 page 2 2020 Eastland Group overview

page 423 EASTLAND GROUP ANNUAL REPORT 2020 Returned a record $12.3 million to our shareholder Trust Taira¯whiti.

$18.5 million in profit.

$670.4 million asset value.

7.2% return on equity.

Joined the Climate Leaders Coalition.

Continued to explore sustainable energy generation options for Taira¯whiti.

Received the Wellbeing Award at the Deloitte Energy Excellence Awards.

Towards the end of the financial year, COVID-19 impacted all our businesses.

While the airport was closed and the forestry sector had stopped shipping through the port, 2020 our diversified portfolio meant we continued to earn revenue from our generation and Eastland Group network sectors. As we went to print, the sectors have recovered overview more strongly than we had forecast but the future remains uncertain.

Our returns to Trust Taira¯whiti will be used to support the region’s recovery efforts.

EASTLAND GROUP ANNUAL REPORT 2020 page 4 Chair and chief executive report

Matanuku Mahuika Matt Todd Chair Chief executive officer

Each year in Eastland Group’s annual report we recap We continued to operate essential regional infrastructure our successes and challenges, including the financial prudently, safely and efficiently. returns from our activities, the growth of our assets, But in this summary of the 2020 financial year, we would and our contribution towards supporting te Taira¯whiti’s also like to reflect on the resilience that the company and economic development. our region have shown over the past few months. And This annual report reflects that. Overall, we’ve had another consider what it might mean for the future. positive year. We met our financial budgets and returned This resilience is, in part, the result of the company’s a record $12.3 million to Trust Taira¯whiti to support their strategy over the years to achieve industry as well as activities within te Taira¯whiti. geographic diversity.

RETURNS MADE TO TRUST TAIRA¯WHITI (FORMERLY EASTLAND COMMUNITY TRUST)

14

12

10

8

6 $ Millions

4

2

0 2011 2017 2012 2015 2013 2018 2016 2019 2014 2010 2020

page 425 EASTLAND GROUP ANNUAL REPORT 2020 E nga mana, e nga reo, tena tatau katoa. Tangihia o tatau mate ka tika. Kotahi te korero ki a ratau; haere atu ra. Haere ki te tini me te mano ki te po. Haere ki te huinga o te kahurangi, ki reira oti atu ai. Ka hoki mai ki a tatau te hunga ora, nga iwi me nga hapori o te Tairawhiti whanui tonu, tena hoki tatau katoa.

OPERATING THROUGH A GLOBAL PANDEMIC A SUSTAINABLE FUTURE Eastland Group’s year, until early February, was tracking At the end of the last calendar year, at our stakeholder largely as planned. Despite various challenges, all sectors function, we said that it feels like a transformational – Eastland Generation, Eastland Port and Eastland time for te Taira¯whiti. Despite the global and national Network - were performing at or close to forecasts. uncertainties around COVID-19, this still holds true. If anything, COVID-19 has confirmed the need to continue By the end of March it was a very different world. with transformation to build further regional resilience. New Zealand was in lockdown. Working closely with stakeholders and the wider The port remained open for the small number of kiwifruit community, we all have the opportunity to effect and squash ships that called during lockdown, but there significant, positive, inter-generational change. were no logging ships. The airport, midway through the build of the new terminal, was shut and scheduled flights The new airport terminal is a project that captures that stopped. Eastland Network put all planned maintenance shared vision and collaboration. It has been a privilege and upgrades on hold and focused on keeping the power to partner on the design with Ngai T¯awhiri, who have on for the community. mana whenua over this area. Along with investment from Eastland Group, the project has been co-funded by Trust Eastland Generation continued to operate, albeit with Taira¯whiti and the Provincial Growth Fund. stringent new health and safety protocols in place, and with lower power prices reflective of the reduced demand Eastland Port has continued to progress plans to during COVID-19 Alert Level 4. refurbish and future-proof its infrastructure, diversifying the products it services. This includes exploring the Most of us worked from home, with the essential workers opportunities offered by containerisation. The port still turning up on site. We took steps to make sure our has also completed its wharfside storage yard, which staff, customers and community were kept informed as is another positive step in the development of wharf the situation and requirements on our businesses evolved. operations and improved water quality. We’ve come out of the lockdown to a much changed In our generation sector, the Te Ahi O Maui geothermal global environment. However, to date, the circumstances power plant had its first full year of operation, affecting the company’s business units have been supplying clean, renewable energy to New Zealand. positive, with forestry up and running again and power Our involvement in electricity generation, distribution prices recovered. and retail (through our investment in Flick Electric Co.) A RESILIENT REGION continues to create challenges but also offers enormous potential. What the pandemic has shown us is that as a company, and as a region, we have proven to be remarkably resilient. The Eastland Network, Business Development and Energy Solutions teams are investigating all the ways Taira¯whiti business and community leaders, iwi and that Taira¯whiti might be powered in the future. This council representatives have provided a united, robust includes exploring the feasibility of a local waste to response to this sudden global crisis. While COVID-19 energy or co-generation power plant, large scale solar continues to rage around the world, so far New Zealand and wind generation. seems to be well placed to survive; hopefully, in time, to thrive again. We’ve joined the Climate Leaders Coalition and are working to measure and reduce our emissions. As a large Eastland Group’s diversified portfolio helped us weather organisation in Taira¯whiti, we hope to encourage other the storm and will play an active role in supporting the local businesses to step up and join our efforts against regional recovery. climate change.

To support our businesses as they evolve, we have begun a vitally important project to implement new IT systems and processes. Known as “Project Highway”, this will

2011 enable us to be strategic and scalable for future growth. 2017 2012 2015 2013 2018 2016 2019 2014 2010 2020

EASTLAND GROUP ANNUAL REPORT 2020 page 6 FOCUS ON WELLBEING OUR PEOPLE There is a new, clearly defined focus on regional wellbeing, Eastland Network’s Brent Stewart stepped down after spearheaded by Trust Taira¯whiti. 17 years at the helm. We would like to thank him for his important and significant contributions to this company At Eastland Group we like to say we have a commercial and to the electricity industry as a whole. mind and a community heart. Our returns to Trust Taira¯whiti were a record $12.3 million this year alone, and have totalled Electric Village, our home of new energy, closed after three more than $128 million over the past 17 years. very successful years. Some of the many highlights included helping people better understand their power bills, offering Eastland Group will continue with a strong distribution home energy efficiency advice, engaging with students programme to Trust Taira¯whiti, to support the Trust’s on the possibilities of new energy technology and holding ongoing investments into regional wellbeing. electric vehicle test drives. Our thanks to both the Electric This model puts Taira¯whiti in a unique position to make Village team and to Trust Taira¯whiti for their support. meaningful progress, and it’s something that everyone In October we welcomed two new board members, who works for Eastland Group is incredibly proud of. Wendie Harvey and Jon Nichols. Eastland Group also supports wellbeing in other ways, In 2019 we lost our great friend and colleague, Grant such as the Mates of Taira¯whiti workplace suicide Donnell, who passed away suddenly. A big man with a big prevention programme. beard and an even bigger heart, he is deeply missed by all Our Mind Matters staff programme was recognised through who knew him. us winning the Wellbeing Award at the Deloitte Energy Finally, we would like to thank every single staff member Excellence Awards, which was a highlight of the year. for their hard work and adaptability during the past few months. It is great to see what a committed team we have.

Matanuku Mahuika Matt Todd

page 427 EASTLAND GROUP ANNUAL REPORT 2020 In late March, the Government announced a $23.8 million package to assist forestry workers displaced by COVID-19. The scope of the Taira¯whiti Economic Support Package Redeployment Programme was then broadened to include any workers in the region who had been affected by COVID-19. It encompasses five key projects and aims to provide work and training for several hundred people.

Eastland Group, Eastland Network and local arborists are collaborating on one of these projects. Eastland Network runs an ongoing, region-wide programme to clear trees from power lines. We're supporting the redeployment effort by accelerating and expanding this programme to create a range of new jobs. Displaced workers are learning new skills and gaining new qualifications as part of the Advanced Tree Solutions and Eastland Tree Care crews.

Watch video

EASTLAND GROUP ANNUAL REPORT 2020 page 8 Financial performance trends

Financial performance 2016 2017 2018 2019 2020 Income 73.9 76.2 84.7 97.0 111.7 Operating expenditure (31.7) (34.6) (37.6) (39.7) (48.2) Earnings before interest, income tax, depreciation and amortisation (EBITDA) 42.2 41.6 47.1 57.2 63.5 Depreciation and amortisation (14.8) (15.1) (15.7) (18.6) (22.2) Earnings before interest and income tax (EBIT)* 27.4 26.5 31.4 38.6 41.3 Net interest (8.4) (7.8) (7.2) (9.2) (13.4) Share of profit of joint venture 1.4 1.4 1.4 1.5 1.2 Share of loss of associate - - (1.5) (2.3) (1.4) Impairment of investment in associate - - - - (1.8) Profit before income tax 20.4 20.1 24.1 28.7 25.9 Income tax (5.2) (5.3) (6.5) (8.5) (7.3) Profit from continuing operations 15.2 14.8 17.6 20.1 18.5 Discontinued operations (0.1) - - - - Profit 15.2 14.8 17.6 20.1 18.5 Operating cashflows 28.6 25.9 29.9 37.7 33.2 *Referred to as operating profit

Financial position 2016 2017 2018 2019 2020 Total assets 422.2 481.0 547.3 587.4 670.4 Total liabilities 217.3 265.7 315.3 353.1 390.3 Bank debt 114.0 166.0 210.0 227.0 250.0 Capital notes 30.0 30.0 30.0 30.0 30.0 Other liabilities 73.3 69.7 75.3 96.1 110.3 Total equity 204.9 215.3 231.9 234.3 280.2 Bank debt % of assets 27.0% 34.5% 38.4% 38.6% 37.3%

Distributions to shareholder 2016 2017 2018 2019 2020 Interest on capital notes 2.1 2.1 2.1 2.1 2.1 Dividends to shareholder 5.6 7.8 8.0 10.0 10.1 Cumulative dividends paid (A) 54.1 61.9 69.9 79.9 90.0 Cumulative growth in equity (B) 156.0 166.4 183.0 185.4 231.3 Shareholder value (A+B) 210.1 228.3 252.9 265.3 321.3 Compound dividend return** 6.4% 6.5% 6.6% 6.7% 6.8% Compound shareholder value return** 12.2% 11.8% 11.5% 11.0% 11.0% **Calculated from 2003

HR 2016 2017 2018 2019 2020 Employee numbers 110 111 108 110 111

Electricity distribution 2016 2017 2018 2019 2020 Energy supplied (GWh) 309 302 307 306 311 Energy distributed (GWh) 279 273 279 281 283 Customer connections 25,410 25,455 25,513 25,597 25,732

Ports 2016 2017 2018 2019 2020 Total export volumes (mill tonnes) 2.3 2.5 3.0 3.0 3.0

Electricity generation 2016 2017 2018 2019 2020 Energy generated (GWh) 71.6 71.1 66.4 149.2 257.6

page 942 EASTLAND GROUP ANNUAL REPORT 2020 Company structure

20% shareholding

Eastland Debarking Eastech Te Ahi O Maui Geothermal Plant Northland Debarking Diesel Gensets Geothermal Gisborne Airport Developments Ltd Eastland Investment Properties Waihi Hydro

Cook Stores

Eastland Group revenue Eastland Group assets

4% 13% All other All other 33% segments 34% segments Ports Ports

27% 33% 36% Networks 20% Networks Generation Generation

EASTLAND GROUP ANNUAL REPORT 2020 page 10 Report from our shareholder

Eastland Group have grown their investments to the point COVID-19 SUPPORT where there are $670.4 million of assets. The proceeds February and March saw Taira¯whiti feel the unprecedented provide a sustainable pu¯tea that gives Trust Taira¯whiti the impact of the global COVID-19 pandemic. The regional means to fund its initiatives to improve the wellbeing of repercussions started in the forestry sector, then moved to our communities. affect the lives of each and every one of us.

CHALLENGES AND CHANGE Trust Taira¯whiti can be proud of the role they played, Last year, the Trust reported on a year of action. This year adapting to provide COVID-19-specific funding, and was a time of connection, change and challenges. surveying our communities to lobby government with the "real" impact on the ground. They also encouraged At their 2019 AGM, Eastland Community Trust signalled our communities to support local businesses, which are their intent to embark on a journey of change to connect the backbone of our economy. with our diverse communities with greater clarity, and to demonstrate a focus on regional wellbeing. Taira¯whiti THE YEAR AHEAD communities wanted the Trust to reflect shared pride, The year ahead is exciting for the Trust. They will move from shared prosperity and shared opportunity. engagement and framework development to embedding A significant brand project resulted in a new tohu, He Tohu Ora Taira¯whiti Wellbeing in their operations. name and identity for what is now Trust Taira¯whiti. COVID-19 and the ongoing economic impact will continue WELLBEING IN TAIRA¯WHITI to challenge us all. The Trust's role in Rau Tipu Rau Ora, the Taira¯whiti recovery plan, and TEAP will remain a high Trustees and Trust staff continued the journey towards priority. The Trust and Eastland Group must continue to understanding wellbeing in Taira¯whiti. They are now ready collaborate with other regional leaders to achieve the best to release He Rangitapu, He Tohu Ora - Taira¯whiti Wellbeing possible outcomes for our communities. Framework. The framework outlines how the Trust intends to make distribution decisions moving forward.

ECONOMIC ACTION The refreshed Taira¯whiti Economic Action Plan (TEAP), HIGHLIGHTS released in December, sees many changes made to the previous version. Significantly, the aspirations of all Over 1,200 people Taira¯whiti iwi are present in the one, inclusive plan. Trust consulted in the development of He Rangitapu, Taira¯whiti has committed to a collaborative approach with He Tohu Ora – Taira¯whiti Wellbeing Framework. regional leaders to develop and action the plan. The Trust is the lead organisation on 18 of the 59 actions. $9.8 million Trust Taira¯whiti continues to invest in local infrastructure in distributions to 85 Taira¯whiti organisations, and start-up wood processing businesses to catalyse including $5 million for the new Gisborne growth in the wood processing sector. This investment Airport terminal. demonstrates an active commitment to the goals set out in the TEAP. The industry continues to face short-term $5.6 million challenges. However, the medium to long-term outlook invested in economic development for the is positive, as the sector embraces new technologies and region (capital investment and operations). looks to develop more high-value products. $1.7 million invested in tourism operations.

The Huringa Pai Maunga to Moana Adventure Race and Te Taira¯whiti Arts Festival were two of the events supported by Trust Taira¯whiti.

page 11 EASTLAND GROUP ANNUAL REPORT 2020

Looking out for each other

STAFF WELLBEING

In 2018 we created and implemented Mind Matters, a four-step approach that focuses on our staff’s mental wellbeing and resilience. This has been delivering noticeably positive benefits across all our teams. They have truly embraced this work, are hugely supportive of it, and are showing that they really care about each other.

In August, Mind Matters received the Wellbeing Award at the Deloitte Energy Excellence Awards.

The People and Performance team have developed new staff benefits brochures, updated a number of health and safety policies, and introduced SALT: a Succession and Leadership Training programme for some of the organisation’s brightest young talent.

We are also continuing to support the Mates of Taira¯whiti workplace suicide prevention programme, which has now been delivered to more than 1,000 employees at businesses across the region.

COMPANY VALUES

Over 80% of staff took the opportunity to be involved and have a say in the establishment of our new company values. This exercise sparked very rewarding discussions, and resulted in a set of five values that we all stand by, believe in, and hold ourselves to.

page 4213 EASTLAND GROUP ANNUAL REPORT 2020 ANNUAL STAFF SURVEY SAFETY FIRST We now conduct an in-depth staff survey once a year, A culture of safety is embedded across our organisation, to hear directly from our staff on what’s going well and and our health and safety goal is ongoing harm where there are areas for improvement. reduction. There were two lost time injuries this year. Four harm-related injuries were reported, down from EMPLOYEE NUMBERS five in 2019, and these numbers continue to go down. As at 31 March, across all our business sectors, we It’s important to acknowledge an accident that happened employed a total of 111 people. on board a logging ship in April 2019. A crew member ENERGY SECTOR RESET was fatally injured while lashing logs to the deck, which was devastating for everyone involved. The subsequent A number of factors in the wider energy sector operating investigation and report provided a number of environment – from regulatory changes and pricing recommendations for the shipping company. impacts, to an ever-increasing focus on our customers and community – made it timely to review our staffing COVID-19 and business structures in these areas. At all COVID-19 alert levels, we made sure we complied We took the opportunity to look at Eastland Network, with all health and safety requirements, both with PPE Energy Solutions, Eastland Generation and the People for workers and on site. The port staff played an and Performance teams. Following a consultation instrumental role in developing policies that were process, we confirmed a number of changes across introduced at ports nationwide. the sector. We also provided regular updates via multiple channels After a highly successful three years, Electric Village, New to our customers. Ensuring the safety of our staff, Zealand’s first community-focused energy hub, reached wh¯anau, customers and community was our number the end of its funding. While it has closed, Eastland one priority. Network will continue much of its work engaging with the community on all aspects of energy.

EASTLAND GROUP ANNUAL REPORT 2020 page 14 In the community

page 1542 EASTLAND GROUP ANNUAL REPORT 2020 With an ethos of having “a commercial mind and a community heart”, Eastland Group is involved in all sorts of activities around the region each year. This ranges from providing sponsorship for organisations and events, through to all of our staff going out into the community and getting involved.

We sponsor a number of student initiatives that promote engineering challenges, scientific thinking and collaborative communication skills, such as the EPRo8 Challenge and Taira¯whiti House of Science. We also awarded five tertiary engineering scholarships again this year.

The annual Eastland Group Contestable Grants Scheme is a partnership with the Wairoa District Council. In 2019, a total of $15,000 was awarded to Wairoa Community Ngahere Nursery and Sport Hawke’s Bay Wairoa for projects focusing on the Wairoa River. These included a Matariki planting day.

We continued to wave the flag for one of Taira¯whiti’s most popular family events, Gisborne Speedway at the Eastland Group Raceway.

We supported the fundraising goals of Hospice Taira¯whiti, and the Hear4U charity auction that raised $50,000 for men’s health and the Movember Foundation.

Eastland Group’s Electric Village team shared energy-saving advice, partnered with Turanga Health, and helped locals across Taira¯whiti understand their power bills and save money.

And we all went to the A&P Show in Gisborne for the third year in a row, where we met and talked with hundreds of local families (and held the first ever Virtual EV Speedway competition).

EASTLAND GROUP ANNUAL REPORT 2020 page 16 Climate leaders

In November 2019, the New Zealand Government passed greatest responsibilities as an organisation to play our part the Climate Change Response (Zero Carbon) Amendment in reducing greenhouse gas emissions in the communities Act. This provides a framework for New Zealand to in which we operate. develop and implement clear and stable climate change In July 2019, Eastland Group and Trust Taira¯whiti joined policies that: the Climate Leaders Coalition. This includes some of • Contribute to the global effort under the Paris New Zealand’s largest businesses. Agreement to limit the global average temperature By signing up, we committed to: increase to 1.5° Celsius above pre-industrial levels. 1. Measuring our greenhouse gas emissions. • Allow New Zealand to prepare for, and adapt to, the effects of climate change. 2. Publicly reporting on these.

The goal is to reduce New Zealand’s net emissions of all 3. Setting an emissions reduction target. greenhouse gases (except biogenic methane) to zero 4. Working with suppliers to reduce emissions. by 2050. For Eastland Group to make a meaningful contribution, COMMITMENT TO GREENHOUSE GAS REDUCTION we first needed to robustly measure our emissions. Climate change is, inarguably, one of the greatest threats The project began this financial year, and is based on facing the world today. And it’s also one of Eastland Group’s our previous financial year ending 31 March 2019.

page 4217 EASTLAND GROUP ANNUAL REPORT 2020 SUPPORTING LONG-TERM SUSTAINABILITY

Together with Trust Taira¯whiti, Eastland Group already champions a variety of environmentally-focused projects that support sustainability within the Taira¯whiti region.

As part of the focus on sustainable and renewable energy, 90 percent of Eastland Group’s non-commercial vehicle fleet is electric.

With the support of Trust Taira¯whiti and the Energy Efficiency and Conservation Authority, we have established a region-wide electric vehicle fast charging network.

In February, Eastland Port received a grant of $298,000 from the Low Emission Vehicles Contestable Fund. This will go towards New Zealand’s first electric water truck. A 60kW fast charging station will also be installed on the port.

“We want to find out whether electric vehicles could be suitable for other operations within diesel-dominated industries like forestry, marine and logistics. We’ll be gathering data and sharing learnings with businesses and the wider community,” said Eastland Group chief executive Matt Todd when the grant was announced.

Eastland Group continues to explore options for local renewable energy generation, including solar PV, wind, and wood waste to energy.

Each sector — Eastland Port, Eastland Network and Eastland Generation, plus Gisborne Airport — is looking at smart ways to reduce the group’s overall greenhouse gas emissions.

We believe that we can be a leader in steering Taira¯whiti towards zero emissions through renewable energy and facilitating the transition to electric vehicles.

We hope to use our position within the region, and learnings from the Coalition, to encourage other local businesses to step up and join us in the fight against climate change.

EASTLAND GROUP ANNUAL REPORT 2020 page 18 2020 Eastland Generation overview

page 4219 EASTLAND GROUP ANNUAL REPORT 2020 Contributed 20% to Eastland Group revenue.

Now worth 36% of total Group assets.

Reinforced the importance of a diverse asset portfolio.

Te Ahi O Maui entered its second year of operation.

During COVID-19 alert levels 3 and 4, Eastland Generation experienced low spot prices as demand for electricity dropped nationwide.

Designated lifeline utilities, Te Ahi O Maui, GDL and Waihi continued operating to generate electricity through lockdown.

In the following months electricity demand and prices increased significantly.

EASTLAND GROUP ANNUAL REPORT 2020 page 20 FIRST FULL YEAR OF OPERATION Over the course of the financial year, the electricity price A diverse fluctuated from a low of $57/MWh in December to a high of $123/MWh in August. Non-traditional weather patterns driven by climate change and more intermittent renewable generation is likely to mean that this volatility in electricity portfolio price continues. This electricity price risk is mitigated by hedging some of Most of Eastland Group’s generation portfolio, unlike the the generation output. rest of our businesses, is situated outside the Taira¯whiti In September 2019 Te Ahi O Maui undertook its first major region. Our two geothermal power plants, Te Ahi O Maui planned shut after operating for a full year. A wide variety and Geothermal Developments Ltd (GDL) are in Kawerau; of work was completed on the power plant, steamfield, our Waihi Hydro Scheme is near Wairoa, in Hawke’s Bay. wells and electrical systems. Planned maintenance activities This gives us both geographic diversity and, crucially, will continue through the life cycle of the plant to maintain sector diversity across our investments. its safe, reliable and efficient operation.

As the generation plants are lifeline utilities and essential Eastland Generation continues to work with other resource services, they continued to operate during all COVID-19 consent holders to monitor and study the effects of using alert levels. The Pandemic Response Plans were geothermal energy on the Kawerau Reservoir. This work is implemented with strict health and safety protocols. undertaken with oversight from the Bay of Plenty Regional Council and will ensure the sustainable use of this taonga Although electricity prices dropped as people worked for generations to come. from home and companies temporarily closed, the sector continued to generate income for Eastland Group. This ELECTRICITY SALES was all the more important during a time when, back in Eastland Generation continues to actively market and sell Taira¯whiti, the port and airport were largely closed. electricity products to industry participants, to manage electricity price risk. Highlights for the year included the TE AHI O MAUI company’s first sale to an industrial user, Asaleo Care Te Ahi O Maui first synchronised to the national grid in Limited in Kawerau, and its first electricity futures sale on October 2018. It was New Zealand’s first major renewable the Australian Stock Exchange. power plant in almost four years, and is Eastland Group’s The company operates to an electricity sales policy largest ever infrastructure project, built from the ground up. approved by the board, which provides governance on The business case was modelled on a long-term lease how Eastland Generation manages price risk. agreement with landowners Kawerau A8D Ahu Whenua Trust. This approach enables the iwi landowners to A SUSTAINABLE FUTURE maximise the economic potential of their whenua, without With Eastland Generation, we have demonstrated both compromising their kaitiakitanga. operational expertise and a vision for a sustainable future.

Our strategy is to deliver strong financial returns to We continue to explore opportunities for new projects local communities, while contributing to New Zealand’s and partnerships, including options for developing a local renewable energy supply. electricity generation portfolio here in Taira¯whiti. We also continue to investigate how we can most effectively create a genuinely end-to-end energy model, from generation to distribution to retail.

page 21 EASTLAND GROUP ANNUAL REPORT 2020 EASTLAND GROUP ANNUAL REPORT 2020 page 22 page 4223 EASTLAND GROUP ANNUAL REPORT 2020 258 GWh in 12 months

GEOTHERMAL DEVELOPMENTS LTD (GDL) GDL was commissioned in 2008 and is nearing its half design life. During the financial year a wide range of maintenance activities were carried out to ensure it continues to perform for the next 12 years. During the annual shut in April 2019, cables in the generator needed replacing, which extended the shut.

Planning had begun to replace the turbine bearing during the next planned shut in April 2020. However this bearing failed prematurely, and was replaced in December 2019 instead.

The new reinjection well GDL-3 was commissioned in August 2019. It has excellent injectivity and is receiving 100% of GDL’s injection fluid, while improving the plant’s output.

A fuel supply arrangement between NTGA and GDL was agreed. Purchasing steam from NTGA has avoided the capital expenditure and risk involved in drilling a new production well, and is allowing the plant to run at full capacity, free of resource consent limits on fuel use.

DIESEL GENERATION The six one-megawatt diesel generators are based throughout the Eastland Network region. They help keep the power on for customers during planned and unplanned outages. One project the company is pursuing is how these generation assets, critical to maintaining the region's power supply, can be migrated from fossil fuel to some form of bio-fuel in the future.

WAIHI HYDRO SCHEME The Waihi Hydro Scheme is located at Lake Ruapapa on the Waihi River, 25km northwest of Wairoa in the Hawke’s Bay region. It holds approximately two million cubic metres of water. The plant catchment stretches up to the Panekiri range in the Te Urewera National Park.

The powerhouse contains two 2.5MWe turbines and supplies electricity into the local Wairoa network, providing sustainable, renewable energy.

In accordance with the NZ Dam Safety Guidelines for Large Dams, an Intermediate Dam Safety Review (IDSR) was completed on Waihi by independent assessors.

Specialist diving contractors completed an inspection of the Waihi flood gates, and removed debris and sediment as part of the maintenance schedule. These activities are undertaken to ensure the gates continue to operate correctly in response to high lake levels.

Waihi passed all inspections and the IDSR.

TOTAL GENERATION OUTPUT Across all generation assets, the total output for the year was 258 GWh, enough to power 34,000 homes.

EASTLAND GROUP ANNUAL REPORT 2020 page 24 Insetting with native plantings The Waihi Hydro Scheme is located within 59 hectares of land. The majority of this is planted in a mix of blackwoods, gums, natives and some scrub. There are around 15 hectares available for future plantings. We’ve identified several areas, like the one in this photo, which are above our high water line and will not affect our generation operations. We are planning to gradually regenerate the land with native seedlings. This remote and beautiful area of New Zealand will then contribute to "insetting" some of our company’s emissions, as part of our commitments as a member of the Climate Leaders Coalition. 2020 Eastland Network overview

page 4227 EASTLAND GROUP ANNUAL REPORT 2020 283 GWh distributed across the network.

25,732 total connections.

Full compliance with quality regulations.

Prepared for new industry-wide pricing reset.

Continue to investigate ways to ensure regional energy resilience.

During the COVID-19 Alert Level 4 lockdown, electricity usage shifted from the centre of Gisborne to the residential areas, as people stayed at home. Overall power consumption 2020 dropped slightly over this time. Maintaining a reliable power supply for Eastland Network everyone in the region was our top priority. We postponed all planned outages, while our overview faults crews and control room team remained on duty in case of unplanned outages and public safety issues.

EASTLAND GROUP ANNUAL REPORT 2020 page 28 The electricity industry is changing rapidly - and we’re facing considerable challenges - but Eastland Network continue to maintain excellent reliability standards.

We deliver power to 19,679 domestic consumers and 6,053 non-domestic consumers across a sparsely populated area covering 11,952 square kilometres. Total energy supplied into the region was 311 GWh and total energy distributed to customers was 283 GWh.

We achieved full compliance with service quality regulations: SAIDI (System Average Interruption Duration Index) and SAIFI (System Average Interruption Frequency Index).

REGULATED PRICING New Zealand’s electricity sector is heavily regulated, and any change in Eastland Network’s revenue needs to comply with the Commerce Commission’s Default Price-Quality Path Determination (DPP). The network reviews its pricing annually while the Commerce Commission reviews and sets the DPP every five years.

Eastland Network’s charges cover electricity transmission and distribution. From 1 April 2019 to 31 March 2020, there was a small decrease in Transpower (national grid operator) charges and a small increase in Eastland Network’s line charges.

For the average domestic customer, this meant an overall The community was kept up to date on progress via the increase of approximately 0.67 percent, or $1.31 including Eastland Network Facebook page. GST per month. Nearly 60 Network staff, lines crews and tree crews worked Eastland Network’s third five-year DPP came into effect on closely together for four days, in often difficult conditions, 1 April 2020. (See overleaf for details.) to make sure power was restored safely and was back to normal for everyone by Christmas Eve. STORM DAMAGE AND OUTAGES Each year, bad weather will inevitably cause power outages KEEPING THE LIGHTS ON across the network. This is Eastland Network’s main responsibility, and during the COVID-19 it was more important than ever. A short, sharp storm hit the Wairoa region in late December, with the wild winds ripping up trees and inflicting severe With the Taira¯whiti and Wairoa communities in lockdown at damage to power lines and conductors. Some of the most home for weeks, we postponed all planned works wherever serious faults were in remote, hard to access areas. possible. Ensuring people could rely on a continuous power supply while they were self-isolating was our key concern. We had to turn the power off to the Wairoa township so we could carry out urgent repairs. More than 1,200 people In line with protocols developed by electricity distribution were affected. As planned, the power was restored to most businesses across the country, we made sure all key people within a couple of hours, but around 240 customers operational staff were protected. The control room was remained without power overnight. a ‘clean room’ with no access.

page 29 EASTLAND GROUP ANNUAL REPORT 2020 As a lifeline business, we continued to provide our faults • Replacing the 11kV poles in the Te Puia Springs service and 24/7 0800 faults line. Fortunately, the weather township. was settled throughout this time, so there were very • Replacing a wide range of other assets across the few issues. region, in conjunction with the strategies within the asset management plan. A RELIABLE NETWORK Our ongoing, multi-million dollar programme of asset We also established an emergency backup supply and maintenance, renewal and upgrades is designed to maintain control room at the Gisborne substation, to increase the a safe and reliable supply of power for all our customers in resilience of our network in case of major disasters. Taira¯whiti and Wairoa. PLANNING FOR THE FUTURE Some of the significant projects we completed as part We are also planning for the future. Eastland Group’s of the programme included: energy sector reset in early 2020 has positioned us strongly • Upgrading the Matawhero power transformers to to adapt to electricity sector regulatory changes, pricing provide for load growth in the Dunstan Road and impacts, and new asset management processes. MacDonald Road area. We are investigating new opportunities to develop • Commissioning a new zone substation and renewable generation in Taira¯whiti, continuing our long transformer at Tuai. term solar trials, and further expanding the region’s electric vehicle charging network.

EASTLAND GROUP ANNUAL REPORT 2020 page 30 page 4231 EASTLAND GROUP ANNUAL REPORT 2020 Electricity sector reforms

The past year has seen the Government implement wide-ranging reviews and reforms in the electricity sector, across generators, distributors and retailers.

The Commerce Commission regulates the default price-quality paths (DPPs) which apply to 15 electricity distribution businesses (EDBs) around the country, including Eastland Network. The prices that Eastland Network and the other EDBs can charge for electricity transmission and distribution are set within strict regulatory limits.

These prices are reviewed every five years. In preparation for the new DPP, Eastland Network’s pricing team spent months planning and testing changes.

For the next regulatory period starting 1 April 2020, the Commerce Commission reduced Eastland Network’s allowable revenues by approximately 16% in the first year.

This decision will have a significant impact on what we can invest into asset management and emerging technologies for the region. It will also reduce the network’s contribution towards Eastland Group’s return to shareholder Trust Taira¯whiti.

The new pricing was reflected as a reduction in our line charges to all the electricity retailers in the region.

If retailers pass the savings on to their customers, everyone in Taira¯whiti stands to benefit.

Government research shows that people who switch retailers regularly enjoy the biggest savings on their power bill. If everyone in Taira¯whiti makes sure they’re on the best power deal for them, the region will collectively save millions of dollars every year.

CONSUMER EDUCATION CAMPAIGN

Electricity distribution businesses around the country are being called upon to improve their customer-facing capabilities. While members of the community are not direct customers of Eastland Network, they are the end users of the power we deliver. We must focus on customers’ requirements at the same time as maintaining the Network’s reliability, pricing and other regulatory requirements.

We took this opportunity to engage with the community and explain what the new DPP price path means for them.

We ran a multi-media education campaign highlighting what was happening and why. We encouraged people to make sure their power retailer was passing on the saving; check that they were on the best tariff for their needs; and compare options and consider switching retailers for a better deal.

EASTLAND GROUP ANNUAL REPORT 2020 page 32 Regional energy resilience

A SUSTAINABLE FUTURE Eastland Network continues to explore options that will ensure the region’s energy future is secure, and is based on renewable electricity resources. The existing transmission line has two 110kW circuits, and feeds the network from Transpower’s grid exit point at Tuai. There is a stated maximum of 60MW available from both circuits (this is based on having sufficient supply to continue powering the region if there is an outage on one circuit). There is adequate spare capacity to continue to supply ongoing traditional residential and commercial growth for decades to come. However, step increases in demand for electricity may be driven by major industrial investment into the region, in areas such as wood processing, along with new homes and businesses. The gradual shift towards an electrified transport fleet will also be significant. These developments will, in turn, create new jobs and regional economic growth. And with the move towards a carbon neutral future, the power must ideally come from renewable generation. We’re working with our shareholder and other local stakeholders to understand how we might, as a region, plan for this future. We’re looking at addressing current capacity constraints with smart targeted investment in upgraded network assets and local renewable energy initiatives such as waste to energy, solar PV and wind. Alongside Eastland Group’s investments in hydro and geothermal generation, these renewable energy opportunities will provide a pathway for Taira¯whiti to be self-sufficient with clean, renewable electricity.

page 33 EASTLAND GROUP ANNUAL REPORT 2020

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page 4235 EASTLAND GROUP ANNUAL REPORT 2020 Spotlight on solar

DOMESTIC SOLAR TRIAL Taira¯whiti is one of the first places in the world to see the sun each day. The region is also one of the sunniest in New Zealand. Is solar technology a viable renewable energy option for our community?

Eastland Network’s domestic solar PV trial began in November 2016. The trial ran for more than three years, and analysed data from nine Gisborne-based homes with rooftop solar PV systems.

The purpose of the trial was to gather “real world data” about solar technology, to help us assess the impacts that solar installations may have on our region’s electricity network. Just as importantly, we also wanted to help consumers understand more about solar, so they could make an informed decision about whether it could be a good option for them.

The results have now been independently analysed.

Some very useful information was discovered, especially when it comes to installing and maintaining a domestic solar PV system, the size of system required and the best ways to make solar power work effectively within the home. The findings and advice is all contained in a comprehensive guide, which is available to download on the Eastland Network website.

COMMERCIAL SOLAR TRIAL As electric vehicle uptake increases and commercial operations expand, there will be significant demand on existing network infrastructure. We want to understand whether solar is a practical choice for businesses, as well as for homes.

There is a lot of empty roof space around the region, and many businesses are open during daylight hours, when they’re drawing power — and could also be generating it.

So in 2019, we began a commercial solar trial in Taira¯whiti, using Eastland Network’s Carnarvon Street premises as a test case.

Our team assessed the standing daily load of our building during daylight hours. We have a large roof, the orientation towards the sun is reasonable, and — unless there are storms or other major events — our normal business operations largely take place during the day.

We then specified solar panels (a total of 15kW, or 5kW per phase) which we believe, based on our modelling, to be suitable to meet daytime power needs.

This is all part of the learning process. We’ll monitor and measure the usage of electricity in this building, and monitor the performance of the solar panels.

The results will show if solar is a practical option for commercial premises, as well as what conditions would make it economic.

The learnings could open up significant possibilities for Taira¯whiti businesses, and other organisations such as community groups and schools, that use most of their power during the day.

EASTLAND GROUP ANNUAL REPORT 2020 page 36 page 4237 EASTLAND GROUP ANNUAL REPORT 2020 Eastland Network Science Fair

Going strong for over 40 years, the Science and Technology Fair is now one of the largest in New Zealand for the size of our region. Thousands of local students have taken part in this Taira¯whiti institution, and it continues to grow.

The 2019 Science and Technology Fair, which Eastland Network sponsored for the second time, was the biggest in the fair’s history.

There were a record number of entries from students of all ages right across the region, including 15 in te reo Ma¯ori. There was a noticeably high standard of scientific investigation, with students encouraged to develop new ways of thinking and seeing the world.

More than 400 families attended the fair to see the entries. Dozens of the entries focused on finding solutions to problems in the community.

“This fair gives students the opportunity to realise their dreams as future scientists - not only of Taira¯whiti, but also Aotearoa,” said committee member Storm Dunn at the prizegiving.

Gisborne Intermediate student Te Aroha Whaanga-Smith won several awards, including Best in Fair for her project "Which of My Favourite Potato Chips are the Greasiest?"

Many of Eastland Network’s staff have a background in science, technology, engineering or maths. They are proud to help promote these areas of learning with the tamariki of Taira¯whiti.

We congratulate all the students who took part, and thank their families and teachers for encouraging their scientific spirit.

EASTLAND GROUP ANNUAL REPORT 2020 page 38 2020 Eastland Port overview

page 4239 EASTLAND GROUP ANNUAL REPORT 2020 2,890,730 tonnes of cargo exported.

129 cargo ships berthed.

New one-day cart-in and monthly export records set.

New Turanga walkway officially opened.

New wharfside storage yard completed.

Early in 2020, COVID-19 shut down the international forestry supply chain.

Taira¯whiti rapidly felt the impacts.

The port worked with industry and local stakeholders to help support those affected.

We implemented strict health and safety protocols.

2020 Since lockdown was lifted, Eastland Port exports have recovered strongly. overview

EASTLAND GROUP ANNUAL REPORT 2020 page 40 page 41 EASTLAND GROUP ANNUAL REPORT 2020 An unprecedented year

This was a year that no-one could have foreseen. NEW RECORDS SET Disruptive wave patterns and bad weather halted For our forestry customers, we aim to maintain our record shipping for more than 1,440 hours. as New Zealand’s most efficient log export port. ISO In February, the impacts of COVID-19 in China and other Limited was one of two stevedoring companies operating international markets caused the forestry supply chain to on the port, but from late last year they became our sole grind to a virtual halt, seemingly overnight. provider. In December, in ISO’s first full month managing all wharfside operations, Eastland Port hit a new export Yet despite the extreme unpredictability of the operating record of 322,000 tonnes in a single month. environment, the port’s overall results were still reliably solid, with 129 ships handling 2,890,730 tonnes of cargo. We also achieved a new cart-in record on 17 December, after 15,725 tonnes of wood arrived and were processed 2,873,621 tonnes of logs were exported on 118 ships (a in a single day. decrease from 2,940,418 tonnes in 2019). A record of a different kind was achieved with 21 cruise The quantities of other export goods increased from ships visiting during the season, before COVID-19 2019, with 11,264 tonnes of squash loaded on six ships, restrictions were put in place. 5,098 tonnes of kiwifruit on five ships, and a total of 747 tonnes of fish landed in the port. TUIA 250 The final results are a testament to our port and The Tuia 250 commemorations marked 250 years since debarking staff; the stevedores; the truck drivers; the the first onshore encounters between Ma¯ori and Pa¯keha¯. local forestry and horticulture and fishing industries; Two national opening ceremonies were held in Taira¯whiti and all the regional stakeholders. They have collaborated between October 5-10. Eastland Port coordinated with and worked so hard to get exports, port operations - the organisers, the harbourmaster and berth holders on and the Taira¯whiti economy - up and running in this new the logistics behind the scenes for the visiting vessels, COVID-19 reality. along with the open days in the inner harbour.

WEATHER-RELATED CLOSURES NATIONAL PORT ENGINEERS FORUM Our port operates in a highly variable environment. We We hosted more than 30 engineers from 13 ports across are exposed to the south, and weather events impacting the country for the annual New Zealand port engineers the port are well documented through history - from the forum. Highlights included a showcase of Eastland Port’s sinking of the Star of Canada off Kaiti Beach in 1912 to the industry-leading stormwater treatment system and grounding of the Jody F Millennium in 2002. presentations on environmental initiatives.

Given the port’s geography, it’s subject to disruptive STEAM TRAIN WA165 wave patterns throughout the year. But this year caused Eastland Port are long-time supporters of Gisborne unprecedented delays. City Vintage Railway and their historic Wa165 steam In July, stormy weather closed the logging berth for 24% locomotive, which is a popular attraction with locals and of the month. Ships were forced to stay out in the bay, tourists. We continue to contribute towards upgrades to waiting for calmer seas. the track in the inner harbour, to ensure it’s safe for the steam train and other trains to use. Swells impacted the Port’s channel depth, requiring the 3 dredge Kawatiri to remove 30,000m of sediment from SPORTING SPONSORSHIPS the navigation channel. We sponsor water-based young athletes including Taira¯whiti's Junior Sportswoman of the Year Briana Irving, Olivia Corrin and Josiah Ney.

We also sponsored the kayaking club and two major surf lifesaving competitions. The inaugural Eastland Port Ocean Warrior event saw four of New Zealand’s top competitors mentor young local athletes, while the Eastland Port 2020 Champion of the Bays attracted more than 200 competitors from Taira¯whiti and the Bay of Plenty.

EASTLAND GROUP ANNUAL REPORT 2020 page 42 Weathering a perfect storm

A single ship carrying 30,000 tonnes of logs injects over The pandemic had spread around the world. At 11.59pm on $3 million into the Taira¯whiti economy. With around one in 25 March 2020, New Zealand entered Level 4 lockdown. four households in the region linked to forestry, the global The logging ship Matakana received approval to finish loading effects of COVID-19 were shockingly rapid and widespread and sailed on 29 March for South Korea. in our region. It would be weeks before another logging ship was seen JANUARY 2020 in port. On 30 January this year, the World Health Organisation The port was designated an essential service as a transport reported 7,818 total confirmed cases of novel coronavirus and logistics-critical infrastructure operator. Like all New (2019-nCoV) worldwide, with the majority of these in China. Zealand ports, we remained open, but could only conduct Logs were piling up on wharves in China, our main export activities classed as essential. This meant that reefer ships market. Cheap imports from Europe and wood salvaged carrying kiwifruit and squash continued to be loaded. from the Australian bushfires were already affecting the log price and lowering demand. APRIL As of 20 April, 300,000 tonnes of harvested logs were FEBRUARY sitting at ports around New Zealand, and 106,000 tonnes of By the start of February, it was clear the local forestry that was at Eastland Port. industry, amongst many others, was facing a crisis. Work During the final days of Level 4 we were granted was stopping and lay-offs were starting. dispensation to start moving the wood, so we could get Local stakeholders acted swiftly. Business and iwi the port up and running as quickly and safely as possible at representatives, Gisborne District Council, social services, Level 3. The first logging ship arrived on 21 April. Trust Taira¯whiti, Eastland Port and Eastland Group, Eastland We worked closely with local and national stakeholders to Wood Council and others convened regular meetings. develop protocols around all aspects of working safely on These were to identify the issues being faced in Taira¯whiti, site. We’re proud that Eastland Port was able to play a part ensure wrap-around support was available to affected in the national return-to-work for the export industry. employers and employees, and provide a proactive, collaborative regional response. MAY By May, volumes were heading back towards pre-COVID-19 While some logs continued to be exported from Eastland normality. International demand and prices for logs were Port, they were not moving off the wharves overseas. once again on the rise. The efficiency and pace at which the MARCH recovery was achieved is a credit to the passion and drive of our industry, and all the local companies it serves. On 20 March, responding to calls from regional leaders, the Government allocated $23.8 million to Taira¯whiti to help However, the global trading outlook continues to remain redeploy workers impacted by COVID-19. uncertain so we are taking each month as it comes.

FUTURE-PROOFING THE PORT The lessons of COVID-19 reinforce the importance of diversifying the products that flow through the port. The long- planned Twin Berth development will expand the port’s marine infrastructure, ensure two vessels can berth at once, and open up other opportunities such as coastal container trade.

Taira¯whiti has been experiencing growth in produce volumes for export, particularly kiwifruit and apples, and is still anticipating growth in processed wood volumes. Currently export volumes can only leave Taira¯whiti as break bulk cargo, or by truck to another port. We want to help provide efficient container trade connected to international container routes for Taira¯whiti.

Prudent COVID-19 rebudgeting saw us put all major infrastructure expenditure on hold at the start of the financial year, but we are hopeful this project will be able to progress again soon.

For the port to successfully deliver community and commercial projects over the coming years, it’s essential for us to continue to strengthen our engagement with iwi and hapu¯, as well as the wider community. We are working with all our export customers, including the GONE FISHING forestry industry, to develop more resilient supply chains. The Gisborne Tatapouri Sports Fishing Club on Wharf 2 At the same time, we aim to enhance the facilities for our is one of the most popular spots in the region. They have commercial tenants. thousands of members and bring a real vibrancy to the INNER HARBOUR UPGRADES inner harbour precinct. We continued to support the Gisborne District Council’s Their current building needs extensive remedial work, upgrades of the inner harbour, to enhance the surroundings which opens up the opportunity to create a custom- for the whole community to enjoy. designed building for the club. Eastland Port and the club have signed an MOU to develop concepts together. Starting in 2018, we’ve given the inner harbour marina a facelift, to improve facilities for commercial and recreational In January, the club’s annual Bay Fishing Bonanza coincided fisherpeople and cruise ship passengers. We also built a with visits from two cruise ships and a logging ship. So we tailored berth for waka hourua Taira¯whiti. opened up our new wharfside storage yard for the boaties to park their trailers. In May, huge swells and a tidal surge damaged Pier 4 irreparably. Planning was already well underway to replace both Piers 4 and 5, including providing purpose-built berths for commercial fishing boats.

page 45 EASTLAND GROUP ANNUAL REPORT 2020 Collaborating with our customers

GROWING THE KIWIFRUIT INDUSTRY NZ Fruits managing director David Fox says that with Gisborne’s kiwifruit industry was given a boost when cool storage now an option at Eastland Port, the region Eastland Port handed over the second of two newly is strategically placed to export more kiwifruit than refurbished cool store facilities to tenant NZ Fruits. ever before. “By keeping the kiwifruit supply chain within our region, The new cool stores started life as one meat freezer in the this project creates local employment opportunities across 1970s. In 2018, we decided to re-purpose the facility. NZ the industry.” Fruits won the tender. Together, we worked to retrofit the building into a kiwifruit cool store with state-of-the-art Mr Fox adds that other fruit destined for smaller markets refrigeration facilities. has to be trucked to the Port of Tauranga and put in containers there. “Ultimately, NZ Fruits would prefer to be The first facility, known as the North Store, was ready just exporting via containers, through Eastland Port.” in time for the 2020 kiwifruit season. Stage two, the South Store, was handed over shortly after. Combined, both IMPROVED ACCESS facilities can store a total of 2,860 pallets of kiwifruit and As part of the Government’s Provincial Growth Fund enable potentially the shortest kiwifruit supply chain in investment into regional roading, the council completed New Zealand, from orchard to ship. a $4.5 million upgrade of Rakaiatane Road and the Gisborne’s kiwifruit crop is the earliest crop in New Zealand surrounding area. This has improved access to the port to be harvested, half of which is packed by NZ Fruits. and is supporting increasing freight volumes.

EASTLAND GROUP ANNUAL REPORT 2020 page 46 Ongoing environmental initiatives

page 4742 EASTLAND GROUP ANNUAL REPORT 2020 Based in the heart of Gisborne, bordered by rivers and the sea, we have a fundamental responsibility to respect and help care for the environment.

EXPANDED STORMWATER TREATMENT SYSTEM Our first, award-winning stormwater treatment system was installed in the upper log yard in 2018. The technology is more commonly used in processing town drinking water, and we’re leading the industry in applying this technology to storm water on our port.

The new wharfside storage yard includes a second of these world-class systems. The plant has two lamella clarifiers, which each treat up to fifty cubic metres of water an hour. The minute it starts raining, the water treatment system starts working. The plant will continue reticulating the water until it’s of drinking quality. Across these systems, we have a regime of testing to ensure our stormwater discharges not only meet, but exceed, the requirements of our resource consent.

CLEANER SEAS Taira¯whiti local Melissa Henry fundraised to buy Gisborne’s first seabin as a legacy and in memory of her father, Barry Henry. A seabin is a floating bin with a submersible pump that filters water to collect up to 20 kilograms of rubbish, oil and microplastics in places such as marinas and ports. We’ve ordered a second seabin and installed them both in the harbour.

NEW TURANGA WALKWAY As part of the Gisborne District Council’s Titirangi Restoration project, we sponsored and built a new walking track, named Turanga by Ngati Oneone. It runs from the Waikahua Cottage site, past archaeologically and historically significant areas, beneath ancient pohutukawa trees and on to Kaiti Beach.

We’re proud to have created this safe path for the community and visitors to take in the Puhi Kai Iti Cook Landing Site, visit the beach, see the working port from a secure vantage point, and connect to other tracks. Our staff and their wh¯anau teamed up to plant 1,000 natives to enhance the area.

SOLAR-POWERED PORT OFFICE At Eastland Port’s new office in the inner harbour, a 10kW array of solar panels was added to the roof. The 30 panels should be enough to power the office each day. As well as clean, green energy, the system provides analytics that allow us to monitor generation and change our energy consumption behaviours. We’ve also installed small electric vehicle charging stations in the carpark.

LONG-TERM PARTNERSHIPS Eastland Port staff continue to support the Enviroschools programme, which has helped encourage thousands of local students to think sustainably and care for the environment. We also have an ongoing partnership with Sustainable Coastlines, Plastic Bag Free Taira¯whiti and local schools on a range of litter monitoring projects at local beaches.

EASTLAND GROUP ANNUAL REPORT 2020 page 48 WharfWheels After five years of consultation, planning and construction, the port’s new $16 million wharfside storage yard was completed at the end of 2019. This 1.8 hectare project is a vital part of preparing the port for further expansion. Along with maximising the limited space available, we’re also further increasing efficiency and safety. Designed as a multi-purpose storage area, the yard is currently being used to store up to 15,000 tonnes of logs. It’s hoped that, in the near future, it will be the home for an increasing number of containers, which would be shipped via coastal vessels to Napier and Tauranga. By giving more companies more options for transporting their products to market, we will continue to help boost employment and economic development in Taira¯whiti. But first, we wanted to invite the community to enjoy a unique behind-the-screens look at the port, including our stormwater treatment system and some of ISO’s heavy machinery. On 23 November, hundreds of people joined us to cycle, skate, rollerblade, scooter and stroll all around our new wharfside yard.

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page 4942 EASTLAND GROUP ANNUAL REPORT 2020 EASTLAND GROUP ANNUAL REPORT 2020 page 50 2020 Gisborne Airport overview

page 4251 EASTLAND GROUP ANNUAL REPORT 2020 33,800 take offs and landings.

196,500 passenger movements, 2.5% up on last year.

Stage 1 of te Taira¯whiti’s iconic new airport terminal officially opened.

New terminal co-funded by Trust Taira¯whiti, the Provincial Growth Fund and Eastland Group, and developed in partnership with Ngai Ta¯whiri.

On 3 April 2020, all commercial flights to and from Gisborne Airport stopped for the duration of the COVID-19 Alert Level 4 lockdown.

2020 On 18 May, we were delighted to welcome the first Air New Zealand flights back to Gisborne Airport te Taira¯whiti. Air Gisborne, Air Napier and Sunair also restarted services. overview Ongoing demand has seen Air New Zealand’s flight numbers continue to rebound, increasing by July to around 74% of pre-lockdown frequency.

EASTLAND GROUP ANNUAL REPORT 2020 page 52 Vital gateway to the region Vital gateway to the region

Year on year growth and increasing passenger numbers stage opened in November; the second and final stage is confirmed the need for a new airport terminal. Now, due for completion later this year. to support the region’s recovery after COVID-19 and promote ongoing economic development, strong air A COLLABORATIVE APPROACH transport links to the rest of New Zealand are more The new terminal is funded by Eastland Group ($2 million), essential than ever. our shareholder Trust Taira¯whiti ($5 million) and the Provincial Growth Fund ($5.5 million). Eastland Group operates Gisborne Airport on behalf of owners Gisborne District Council. In March 2019, we “This is the single largest distribution in our history,” began construction on a new airport terminal. As well says Trust Taira¯whiti chairman Dr Paul Reynolds. as providing a future-proofed building that is at least 50 “Modernising our airport and ensuring it can serve our percent larger, it will also offer an internal baggage claim community into the future will not only help local people area, improved check-in facilities and more seating areas. stay connected, it will be a powerful enabler for economic The terminal is being developed in two stages. The first growth in the region.

page 5342 EASTLAND GROUP ANNUAL REPORT 2020 “This has been a great collaboration, on a project of regional and national significance. We now look forward to stage two and the completion of this fantastic terminal.”

The theme of collaboration is echoed by Thelma Karaitiana of Ngai Ta¯whiri, who hold mana whenua over the area.

“For the hapu¯ to be involved in such a major development is new. To achieve meaningful collaboration with Eastland Group has required layers of cultural responsiveness, very good communications and creativity.”

Others involved in this landmark project include Lardelli Arts; Tiopira Rauna and his students, who are creating carvings that will be installed later in the project; cultural consultant Karl Johnstone who facilitated the design process; Tennent Brown Architects and Architects 44; construction company McMillan and Lockwood; local subcontractors; and project managers Civil Project Solutions.

“We believe this will be an iconic building that everyone can be proud of,” says Eastland Group chief executive Matt Todd.

COVID-19 IMPACTS The pandemic has been nothing short of devastating for airlines, travel operators and the tourism sector. Gisborne Airport was an early focal point for the region’s response to COVID-19, with health protection staff from Hauora Taira¯whiti screening all arriving passengers in late March.

The COVID-19 Level 4 lockdown saw all planes stop flying to Gisborne, apart from emergency and essential services. The terminal was shut.

The terminal construction site closed down for several weeks but restarted again once the country moved to lower alert levels. The terminal will be completed towards the end of 2020, a few months later than originally planned.

Now that scheduled flights have resumed, there are fewer than before but demand and numbers are continuing to grow. We are cautiously optimistic that this will continue throughout 2021.

AIR TRAFFIC CONTROL CHANGES At the start of the new financial year, Airways NZ announced they were considering withdrawing air traffic control services at Gisborne Airport and six other regional aerodromes.

We are canvassing the views of everyone who uses air traffic control at Gisborne Airport and developing a safety case. We continue to work through options with Airways, the Civil Aviation Authority and other affected airports. While we’re open to different solutions, our priority is to ensure the ongoing safe operation of the airport.

COMMUNITY ENGAGEMENT Updates ranging from progress on the terminal construction to COVID-19 travel protocols are provided through notifications in the terminal and via the Gisborne Airport Facebook page: @GisborneAirport

Thank you to our airport tenants and the whole community for their patience and feedback over the past months.

NEW TE ARAROA AERODROME With just under $100,000 in funding from the Provincial Growth Fund’s Whenua Ma¯ori allocation, Eastland Group and Te Rimu Trust are developing an aerodrome at Te Araroa. As well as tourism and business potential, the aerodrome will improve access for medical flights and during civil defence emergencies. Eastland Group is providing its airport management expertise and managing the project at no charge to the community.

EASTLAND GROUP ANNUAL REPORT 2020 page 54 19 November, 2019

Terminal stage one opening

At 4.30am on Tuesday 19 November, beneath a magnificent tahuhu that tells the entwined stories of the people of te Taira¯whiti, a karakia was held to bless the first stage of Gisborne Airport’s new terminal. This was followed by an official opening ceremony later in the morning.

Guests included members of Ngai Ta¯whiri, Eastland Group, Trust Taira¯whiti, Gisborne District Council and other local stakeholders.

At 5am the doors opened to the public for the very first time.

"We are all one, all our ancestors connected to the earth, skies and land. The tahuhu represents Manaia, the mana of the people. It carries the aspirations of the people.”

The tahuhu concept was developed by lead terminal architects Tennent Brown, in partnership with consultant Karl Johnstone and Eastland Group. It was designed by Sir Derek Lardelli of Lardelli Arts and fabricated by Makers of Architecture, using CNC computer controlled carving on plywood panels.

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page 4255 EASTLAND GROUP ANNUAL REPORT 2020 EASTLAND GROUP ANNUAL REPORT 2020 page 56 page 42 EASTLAND GROUP ANNUAL REPORT 2020 Stories from beneath the surface

EASTLAND GROUP ANNUAL REPORT 2020 page 58 Corporate governance

THE BOARD’S ROLE The Eastland Group board is appointed by the trustees of the company’s sole shareholder, Trust Taira¯whiti. They are appointed as directors of Eastland Group Limited, Eastland Network Limited, Gisborne Airport Limited and Eastland Port Limited. Governance practices are prescribed in the Owner’s Expectation Manual.

Board members must have an appropriate range of proficiencies, skills and experience to provide informed leadership and direction for the company. This is detailed overleaf.

The board is responsible for setting and monitoring the strategic direction and policies of the company, while the day-to-day management is delegated to the group chief executive.

The full board meets with Eastland Group’s senior leadership team at least 10 times during each financial year. There are also scheduled committee meetings, and the chair and chief executive meet on a regular basis.

The shareholder and board endorse the principles set out in the NZX Corporate Governance Code and the Institute of Directors Code of Practice for Directors.

page 4259 EASTLAND GROUP ANNUAL REPORT 2020 BOARD COMMITTEES FINANCIAL POLICY The Audit, Finance and Risk Committee is responsible The directors’ policy is to maintain a strong capital base for reviewing the company’s accounting policies, financial so as to maintain investor, creditor and market confidence management and performance, budgets, internal and and to sustain future development of the business. The external risk management assessments and functions, directors monitor the return on capital on a regular basis. and the treasury policy. It oversees compliance with This involves the management of reserves and issued legal and regulatory requirements across all the capital. The directors also monitor the level of dividends business sectors the company operates in. It reviews the to ordinary shareholders. They seek to maintain a balance appointment of the external auditor, auditor relationship between the higher returns that might be possible with and fees. The committee also works with management to higher levels of borrowings and the advantages and create shareholder value. security afforded by a sound capital position.

The Remuneration Committee assists the board in ENVIRONMENT developing and reviewing the remuneration policy and The board endorses the company’s membership of packages of executive managers, including the group the Climate Leaders Coalition, and its commitment to chief executive. Impartial external advice is utilised as measuring and reducing greenhouse gas emissions part of this process. The board promotes remuneration across the business sectors. This commitment will help of directors and executives that is transparent, fair inform future strategic decisions about investments, and reasonable in a competitive market for the skills, new projects and business expansion. knowledge and experience required by the company. STATEMENT OF CORPORATE INTENT RISK MANAGEMENT A Statement of Corporate Intent for the coming financial The board oversees a formal risk management policy year is submitted annually to the shareholder, Trust and framework, and is responsible for reviewing and Taira¯whiti,. This outlines the company’s overall and sector- ratifying the company’s risk management practices and specific objectives, intentions and financial performance internal controls. The company has programmes in place targets. This is also used to keep staff informed of the which ensure that key operational and financial risks are company’s strategic direction and goals for the year. identified, considered and mitigated. Detailed risk reports are provided to the Audit, Finance and Risk Committee, INDEMNIFICATION AND INSURANCE and external advice is sought where required. The companies are entitled to indemnify directors and HEALTH AND SAFETY officers and to effect insurance for them in respect of certain liabilities arising from their positions. This must The health and safety of every employee, contractor, be in accordance with the Companies Act. supplier, customer and the wider community is of paramount importance. The company has a goal of INFORMATION USED BY DIRECTORS “zero harm” and has Public Safety Management Systems Information relating to items to be discussed by the in place that are specific to each business sector. directors at a meeting is provided to the directors The board receives comprehensive health and safety beforehand. Directors must not use the information reports at every board meeting. These include all received in their capacity as director, which would not incidents, accidents, and serious near-miss events. otherwise be available to them, without the prior Together with the senior leadership team, the board consent of the board. seeks to continuously improve the company’s performance, with health and safety systems, COVID-19 IMPACTS processes and protocols regularly updated. An ongoing The directors are of the view that the value of Eastland staff wellbeing programme has been implemented by Group’s infrastructure assets, which are predominantly the company. essential assets by government definition, will be maintained. This view takes into consideration the long- COMPLIANCE term investment horizon of both the individual assets Eastland Group’s infrastructure businesses operate in and Eastland Group. complex environments, each with its own regulations, legislation and compliance requirements. The board reviews compliance on an ongoing basis across all aspects of the company.

EASTLAND GROUP ANNUAL REPORT 2020 page 60 Board of directors

Matanuku Mahuika Chair Remuneration Committee Member Matanuku is a lawyer and a founding partner of the law firm Kahui Legal. He has also held a wide variety of board roles. These include being the former deputy chair of Aotearoa Fisheries Limited and chairman of Sealord Group Limited. He is the current Chairman of Ngati Porou Holding Company Limited, the company that oversees Ngati Porou’s commercial interests. He is also a director of the NZ Merino Company Limited, a member of the board of Callaghan Innovation, and a former Trustee of Trust Taira¯whiti.

Wendie Harvey Director Remuneration Committee Chair Wendie was appointed as a director to Eastland Group in October 2019. She has wide-ranging experience as a director, trustee, lawyer, executive manager and business consultant. Her governance experience encompasses the public and private sectors, local government and not for profit organisations. Her current governance roles include board appointments to Aurora Energy Limited, Fire and Emergency New Zealand, Hawke’s Bay Airport, chair of Hawke’s Bay Airport Construction, the Electrical Training Company and Centralines. She was a director of Port of Napier for six years and Wairoa-based Quality Roading and Services (QRS) for seven years.

page 4261 EASTLAND GROUP ANNUAL REPORT 2020 Tony Gray Director Audit, Finance and Risk Committee Chair Currently executive project advisor to the Hastings District Council, Tony was previously chief financial officer at Hastings District Council. Prior to that, Tony held the senior finance role at Te Ru¯nanga o Nga¯i Tahu (two years), the CFO role at Mighty River Power (seven years), and the same position at TVNZ (12 years). He has been on the boards of various companies including CLEAR Communications and Sky Network Television Limited. Tony is currently a director of Civic Financial Services Limited, Artemis Nominees Limited, Quality Roading and Services (Wairoa) Limited, chair of Nga¯ti Pu¯kenga Investments Limited and chair of Ta¯tau Ta¯tau o Te Wairoa Commercial Limited.

John Rae Director Audit, Finance and Risk Committee Member John has a broad range of CEO, management and directorial experience in a variety of different business sectors including banking, investment, venture capital, technology, infrastructure, construction and engineering. He has had wide-ranging global experience with responsibility for operations in New Zealand, Australia, Asia and Europe. In addition to being an Independent Advisory Panel Member of the Provincial Growth Fund, John is also currently a director or chairman of a number of other boards across many sectors. In the region, he is chair of the Corson group of companies and chair of Trust Taira¯whiti’s Independent Investment Committee.

Jon Nichols Director Audit, Finance and Risk Committee Member Jon was appointed as a director to Eastland Group in October 2019. Jon is an experienced director and business consultant involved in a number of strategic growth, regulatory and performance-based initiatives for infrastructure-related businesses in New Zealand and the Pacific Islands. He also serves on the board of Palmerston North Airport Ltd where he chairs the Audit and Risk Committee. Additionally, Jon is the independent chair of the Audit and Risk Committee for Hastings District Council and Maungaharuru Tangitu¯ Trust. He also chairs Centralines Limited. He is a Fellow Member of the Chartered Accountants Australia and New Zealand.

EASTLAND GROUP ANNUAL REPORT 2020 page 62 Board meeting attendance register for 1 April 2019 to 31 March 2020

BOARD AUDIT, FINANCE AND RISK COMMITTEE

Meetings1 Attended Meetings1 Attended

Matanuku Mahuika* 10 10

Tony Gray** 10 9 3 3

John Rae 10 8 3 3

Wendie Harvey 5 3

Jon Nichols 5 5 2 2

1 The number of meetings for which the director was a member * Chair for nine board meetings ** Chair for Audit, Finance and Risk Committee meetings

Directors' information

Matanuku Mahuika Tony Gray John Rae Wendie Harvey Jon Nichols

QUALIFICATIONS LLB (Hons) FCA LLB, BCom, CMinstD LLB FCA Eastland specific skills Portfolio management Electricity distribution Electricity generation Port Airport Other infrastructure and property Generic skills Executive leadership and strategy Governance Financial Risk and compliance Legal and regulation People Geographical location Gisborne Hawkes Bay Auckland Hawkes Bay Hawkes Bay Tenure years 3.5 6.6 9.2 0.5 0.5 Date of appointment 14.10.2016 01.09.2013 01.02.2011 16.10.2019 16.10.2019 Date last re-elected 01.07.2019 01.07.2019* 01.07.2019* - - Gender M M M F M Rotation 2022 2020 2021 2022 2022

The company maintains and reviews monthly an interests register to record the particulars of transactions and other matters involving directors. For more details, please refer to the financial section from page F-41.

page 4263 EASTLAND GROUP ANNUAL REPORT 2020 EASTLAND GROUP ANNUAL REPORT 2020 page 64 Senior leadership team

Matt Todd Aaron Snodgrass Steferl Gordon Group Chief Executive Chief Financial Officer Executive Assistant Matt moved to Gisborne when he was Aaron is responsible for the finance, Steferl joined Eastland Group in 2011. appointed as chief executive of Eastland shared services, legal and company Prior to this, her varied work experience Group in 2003. He has more than 30 secretary functions of Eastland Group. ranged from 25 years in the graphic years’ experience in the utilities and He supports the group chief executive, design industry to real estate sales. She infrastructure sectors. Originally studying the board of directors, the businesses combines her diverse skills in a varied as an engineer, he has augmented this within the group, and the company's role that encompasses all sectors of with post graduate business qualifications growth initiatives. Aaron has 30 years' the business. She is also involved with from University of Auckland, University of experience in finance working for PwC many volunteer organisations, revolving Otago and Harvard Business School. Matt and Deutsche Bank in New Zealand, around her passion for mountain biking. has worked in New Zealand, Australia, the Asia, the USA and Europe. United Kingdom, Southeast Asia, South America, the USA and the Pacific Islands.

Andrew Gaddum Alice Pettigrew Jarred Moroney Chief Operating Officer General Manager Business Development General Manager Networks Born on the East Coast, Andrew has Alice began her career in finance roles Jarred has spent more than 15 years been involved in the local forestry across Australia and in London before specialising in health and safety industry from an early age. He worked returning to New Zealand and her management and business systems, offshore in various project management home town of Gisborne. Alice joined with a focus on the forestry industry positions before returning home to Eastland Group in 2007, where she and, more recently, the energy New Zealand to complete a Masters in spent seven years in finance. In 2014 sector. This included establishing and Engineering Management. He started Alice was seconded to assist with operating Integrated Safety Solutions, with Eastland Group in 2004. After the establishment and operations of an occupational health and safety being general manager ports for a Activate Taira¯whiti Limited and then company. Following his previous number of years, in mid-2019 he was returned to Eastland Group’s business role as general manager people and promoted to the role of chief operating development division. Alice undertakes performance at Eastland Group, Jarred officer. This encompasses the ports valuation modelling and analysis, was appointed general manager of sector and all non-energy related project management, and investment Eastland Network this year. infrastructure projects and businesses. due diligence and negotiations.

page 6542 EASTLAND GROUP ANNUAL REPORT 2020 Steven Follows Debbie Anstis Ben Gibson General Manager Energy Solutions General Manager General Manager Generation Steven is an international specialist in People and Performance Ben joined Eastland Group in 2004 emerging technologies, with a particular Debbie has a wide-ranging background following time in the UK in commercial focus on renewables, power storage in strategic, operational and procedural roles in the public transport sector. and power markets. He has established human resources management, and In 2011 Ben took the role of project large scale geothermal, solar and wind health and safety. She has worked in manager for the Te Ahi O Maui projects across Asia and the Middle New Zealand and Australia in various Geothermal project. In 2017 he East. He previously worked at Saudi industries, including banking, finance, became general manager for the Aramco, where he led the development agriculture, transport, software growing generation sector. of renewable energy projects for Saudi development and education. Debbie Arabia’s 9.5 GW by 2023 National believes people are the most important Renewable Energy Program. asset a business has, and this is her primary focus at Eastland Group.

Suzanne Winterflood Phil Wallingford General Manager Marketing and Group Technology Manager Communications Phil has spent over 20 years leading Suzanne grew up in Gisborne and IT transformation and digital change has more than 25 years’ experience in within the corporate sector in advertising, marketing, public relations New Zealand and abroad. Phil joined and journalism. She was a creative Eastland Group in 2018 as group director at Publicis Worldwide in technology manager. He is responsible London, Sydney and Auckland, and for delivering on IT strategy as well has created award-winning campaigns as all aspects of information and for clients including Air New Zealand communications technology. and Mercury Energy. Suzanne has also consulted to economic development agency Activate Tair¯awhiti.

EASTLAND GROUP ANNUAL REPORT 2020 page 66

EASTLAND GROUP • ANNUAL REPORT 2019 EASTLAND GROUP • ANNUAL REPORT 2020

Eastland Group Limited Consolidated Financial Statements For the year ended 31 March 2020

The directors are pleased to present the consolidated financial statements of Eastland Group Limited for the year ended 31 March 2020.

For and on behalf of the Board of Directors.

Matanuku Mahuika Tony Gray Director Director Chair Chair of Audit, Finance and Risk Committee 27 May 2020

PAGE F - 1 EASTLAND GROUP • ANNUAL REPORT 2020

Independent Auditor’s Report To the Shareholder of Eastland Group Limited

Opinion We have audited the consolidated financial statements of Eastland Group Limited and its subsidiaries (the ‘Group’), which comprise the Consolidated Statement of Financial Position as at 31 March 2020, and the Consolidated Statement of Financial Performance, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements, on pages F - 5 to F44, present fairly, in all material respects, the consolidated financial position of the Group as at 31 March 2020, and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Other than in our capacity as auditor and the provision of assurance services related to regulatory disclosure statements, we have no relationship with or interests in the Company or any of its subsidiaries. These services have not impaired our independence as auditor of the Company and Group.

Audit materiality We consider materiality primarily in terms of the magnitude of misstatement in the financial statements of the Group that in our judgement would make it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced (the ‘quantitative’ materiality). In addition, we also assess whether other matters that come to our attention during the audit would in our judgement change or influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

PAGE F - 2 EASTLAND GROUP • ANNUAL REPORT 2020

Key audit matter How our audit addressed the key audit matter

Valuation of property, plant and equipment Applicable to the electricity generation equipment:

As disclosed in note 5 of the consolidated financial statements, Our audit procedures included the following: the Group has a policy of revaluing land and buildings, electricity • We read the valuation reports for the assets subject to distribution equipment, electricity generation equipment (excluding revaluation at year end in order to understand the changes wells) and port wharves, walls and surfaces. All other assets are in key assumptions, and considered the Group’s process carried at historic cost. for challenging the valuation reports to ensure they reflect Land and building revaluations are carried out on a cyclical basis individual characteristics of the particular assets. that does not exceed three years while electricity distribution • We assessed the competence, capabilities and objectivity equipment, electricity generation equipment and wharves, walls of the Group’s independent valuers. and surfaces revaluations are carried out on a cyclical basis not exceeding five years. All valuations are performed by external • We assessed the valuation methodology used and valuers. challenged the appropriateness of the key assumptions to current performance and historical trends as applicable; and As at 31 March 2020, the Group has revalued the electricity generation equipment (excluding the wells) to $174.5 million, with • We used our internal Corporate Finance Energy $47.6 million recognised through other comprehensive income in Specialists to: the revaluation reserve. – Challenge the forecast wholesale energy price path; and The electricity generation equipment has been valued by an – Assess the reasonableness of the discount rate applied. independent valuer using a discounted cash flow valuation method. The key assumptions applied in the valuations are: Applicable to all other revalued assets:

• Electricity Price path; Our audit procedures included the following:

• Plant output and revenues; • We considered the Group’s assessment as to whether there had been any material changes that would impact on • Discount rate; and valuation inputs this year. • Forecast capital expenditure. • We compared the key assumptions used in prior year At each reporting period the Group considers whether there valuations to current market data and other sources are any changes to economic or business conditions that may of evidence. impact key assumptions used in previous asset valuations and other circumstances that might indicate that property, plant and equipment is not held at fair value.

As disclosed in note (e) on page F - 13 of the consolidated financial statements, these valuation assessments of assets are based on the information available at the time of approving the financial statements and include this year assessments of the potential impacts of the Group’s response to Novel Coronavirus 19 (“Covid-19).

The valuation of property, plant and equipment is considered to be a key audit matter due to the significance of the assets to the Group’s consolidated results and due to the judgement involved in the assessment of the fair value and useful lives of these assets.

PAGE F - 3 EASTLAND GROUP • ANNUAL REPORT 2020

Directors’ responsibilities for the The directors are responsible on behalf of the Group for the preparation consolidated financial statements and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of Our objectives are to obtain reasonable assurance about whether the the consolidated financial statements consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located on the External Reporting Board’s website at:

https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors- responsibilities/audit-report-3/

This description forms part of our auditor’s report.

Restriction on use This report is made solely to the Company’s shareholder, as a body, in accordance with Section 207B of the Companies Act 1993. Our audit has been undertaken so that we might state to the Company’s shareholder those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company’s shareholder as a body, for our audit work, for this report, or for the opinions we have formed.

Wellington, New Zealand 27 May 2020

PAGE F - 4

EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Statement of Financial Performance FOR THE YEAR ENDED 31 MARCH 2020

2020 2019 Notes $’000 $’000

Operating revenue 2 111,744 97,030 Operating expenditure 1 (48,210) (39,790) Earnings before interest, income tax, depreciation and amortisation (EBITDA) 63,534 57,240 Depreciation and amortisation 5, 7, 20 (22,225) (18,627) Earnings before interest and income tax (EBIT) 41,309 38,613 Net finance expenses 14 (13,443) (9,160) Share of profit of joint venture 12 1,242 1,467 Share of loss of associate 11 (1,431) (2,264) Impairment of investment in associate 11 (1,812) - Profit before income tax 25,865 28,656 Income tax expense 4 (7,331) (8,533)

Profit 18,534 20,123

Attributable to: Equity holders of the parent 18,772 19,959 Non-controlling interest (238) 164 18,534 20,123

Consolidated Statement of Comprehensive Income FOR THE YEAR ENDED 31 MARCH 2020

2020 2019 $’000 $’000

Profit 18,534 20,123

Other comprehensive income

Items that will not be reclassified subsequently to profit or loss: Revaluation of property, plant and equipment 47,477 (3,849) Tax on revaluation of property, plant and equipment (13,294) 1,200 34,183 (2,649) Items that will be reclassified subsequently to profit or loss: Revaluation of cash flow hedges 5,444 (7,678) Tax on revaluation of cashflow hedges (1,524) 2,150 3,920 (5,528) Share of associate other comprehensive income (1,083) 450 Tax on share of associate other comprehensive income 303 (126) (780) 324 Other comprehensive income, net of income tax 37,323 (7,853) Total comprehensive income 55,857 12,270

Attributable to: Equity holders of the parent 54,129 12,106 Non-controlling interest 1,728 164 55,857 12,270

These financial statements should be read in conjunction with notes and accounting policies on pages F-11 to F-44

PAGE F - 5 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Statement of Financial Position AS AT 31 MARCH 2020

2020 2019 Notes $’000 $’000

ASSETS Current assets Cash and cash equivalents 9,049 3,491 Trade and other receivables 8 11,527 12,127 Inventory 84 32 Derivative financial instruments 17 3,166 75 Total current assets 23,826 15,725

Non-current assets Property, plant and equipment 5 591,463 532,046 Right of use assets 20 11,778 - Investment properties 6 25,361 22,020 Intangible assets 7 10,392 6,277 Derivative financial instruments 17 659 116 Investment in joint venture 12 1,095 1,317 Investment in associate 11 5,864 9,887 Total non-current assets 646,612 571,663 TOTAL ASSETS 670,438 587,388

LIABILITIES Current liabilities Payables and accruals 9 10,625 18,885 Income tax 333 4,218 Employee entitlements 25 2,350 2,130 Lease liabilities 20 246 - Derivatives financial instruments 17 772 4,990 Total current liabilities 14,326 30,223

Non-current liabilities Loans 13 250,000 227,000 Capital notes 21 30,000 30,000 Deferred tax 4 65,491 48,029 Derivative financial instruments 17 15,428 13,018 Employee entitlements 25 1,313 - Income in advance 276 321 Lease liabilities 20 11,875 - Restoration costs 5 1,560 4,500 Total non-current liabilities 375,943 322,868 TOTAL LIABILITIES 390,269 353,091 NET ASSETS 280,169 234,297

EQUITY Equity holders of the parent 277,846 233,702 Non-controlling interest 2,323 595 TOTAL EQUITY 280,169 234,297

These financial statements should be read in conjunction with notes and accounting policies on pages F-11 to F-44

PAGE F - 6 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 31 MARCH 2020

2020

Asset Non- Issued Hedge revaluation Retained controlling Total capital reserve reserve earnings interest equity $’000 $’000 $’000 $’000 $’000 $’000

Balance at beginning of period - 1 April 2019 15,400 (12,726) 135,098 95,930 595 234,297 Profit - - - 18,772 (238) 18,534 Other comprehensive income: Net change in fair value of cash flow hedges - 5,444 - (780) - 4,664 Disposals of property, plant and equipment - - (135) - - (135) Revaluation of property, plant and equipment - - 44,881 - 2,731 47,612 Income tax relating to components of other comprehensive income - (1,524) (12,529) - (765) (14,818) Total comprehensive income - 3,920 32,217 17,992 1,728 55,857

Transactions with owners De-recognition of asset revaluation reserves - - - 135 - 135 Dividend - - - (8,150) - (8,150) Dividend - subvention payment - - - (1,970) - (1,970) Total transactions with owners - - - (9,985) - (9,985) Balance at end of period - 31 March 2020 15,400 (8,806) 167,315 103,937 2,323 280,169

2019

Asset Non- Issued Hedge revaluation Retained controlling Total capital reserve reserve earnings interest equity $’000 $’000 $’000 $’000 $’000 $’000

Balance at beginning of period - 1 April 2018 15,400 (7,198) 137,747 85,567 431 231,947 Profit - - - 19,959 164 20,123 Other comprehensive income: Net change in fair value of cash flow hedges - (7,678) - 324 - (7,354) Disposals of property, plant and equipment - - (30) - - (30) Revaluation of property, plant and equipment - - (3,819) - - (3,819) Income tax relating to components of other comprehensive income - 2,150 1,200 - - 3,350 Total comprehensive income - (5,528) (2,649) 20,283 164 12,270

Transactions with owners De-recognition of asset revaluation reserves - - - 30 - 30 Dividend - - - (9,950) - (9,950) Total transactions with owners - - - (9,920) - (9,920) Balance at end of period - 31 March 2019 15,400 (12,726) 135,098 95,930 595 234,297

These financial statements should be read in conjunction with notes and accounting policies on pages F-11 to F-44

PAGE F - 7 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Statement of Cash Flows FOR THE YEAR ENDED 31 MARCH 2020

2020 2019 Cash flows from operating activities: $’000 $’000 Cash provided from: Receipts from customers 103,620 95,888 Interest received 12 45 103,632 95,933 Cash applied to: Payments to suppliers and employees (47,882) (39,471) Interest paid (13,227) (12,890) Interest paid on leases (720) Income tax paid (8,570) (5,891) (70,399) (58,252)

Net cash flows from operating activities 33,233 37,681

Cash flows from investing activities: Cash provided from: Proceeds from government grants 5,400 - Proceeds from trust grant 5,000 - Proceeds from sale of property, plant and equipment 32 462 Distributions from joint venture 1,348 1,289 11,780 1,751 Cash applied to: Purchase of intangibles (2,153) (149) Purchase of property, plant and equipment (47,681) (44,301) Purchase of investments - (357) Purchase of investment properties (2,268) (923) (52,102) (45,730)

Net cash flows used in investing activities (40,322) (43,979)

Cash flows from financing activities: Cash provided from: Proceeds from bank borrowings 28,000 17,000 28,000 17,000 Cash applied to: Repayment of bank borrowings (5,000) - Dividend paid (8,150) (9,950) Dividend paid - subvention payment (1,970) - Lease principal payments (233) - (15,353) (9,950)

Net cash flows from financing activities 12,647 7,050

Net cash flows from continuing operations 5,558 752

Net increase in cash and cash equivalents 5,558 752 Cash and cash equivalents at beginning of period 3,491 2,739 Cash and cash equivalents at end of period 9,049 3,491

These financial statements should be read in conjunction with notes and accounting policies on pages F-11 to F-44

PAGE F - 8 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Statement of Cash Flows FOR THE YEAR ENDED 31 MARCH 2020

Reconciliation of the profit for the period with net cash from operating activities 2020 2019 $’000 $’000

Profit 18,534 20,123 Adjustments for: Depreciation and amortisation 21,647 18,627 Depreciation on ROU assets 578 - Vested assets (1,338) (783) Bad debts written off 62 23 Loss on sale or disposal of property, plant and equipment 428 291 Capital contribution (5,000) - Income from joint venture (1,126) (1,348) Change in fair value of investment property (2,293) (277) Losses and impairment in associate 3,243 2,264 Accrued interest - (127) Tax on interest on convertible note - 59 Gain on conversion of Flick shares - (788) Interest capitalised to fixed assets (456) (3,607) Deferred tax expense 2,643 981 18,388 15,315

Movement in working capital: Decrease/(increase) in trade and other receivables 538 (2,443) (Increase)/decrease in inventory (52) 36 Increase in employee entitlements 1,533 443 (Decrease)/increase in income tax payable (3,883) 1,602 (Decrease) in income in advance (46) (46) (Decrease)/increase in payables and accruals (1,779) 2,651 (3,689) 2,243 Net cash from operating activities 33,233 37,681

π Statement of Cash Flows The following terms are used in the Statement of Cash Flows: • Cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. • Operating activities are the principal revenue producing activities of Eastland Group and other activities that are not investing or financing activities. • Investing activities are the acquisition and disposal of long term assets and other investments not including cash equivalents. • Financing activities are those that result in change in the size and composition of the contributed equity and borrowings of the entity. • GST is combined with applicable transactions and borrowings repaid and increased are netted.

These financial statements should be read in conjunction with notes and accounting policies on pages F-11 to F-44

PAGE F - 9 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements FOR THE YEAR ENDED 31 MARCH 2020

Table of Contents Financial performance

Our financial statements F - 11 Significant transactions and events F - 12 1. Segments F - 14 2. Revenue F - 18 3. Specific expenses F - 19 4. Taxation F - 19

Operating assets and liabilities

5. Property, plant and equipment F - 21 6. Investment properties F - 27 7. Intangible assets F - 27 8. Trade and other receivables F - 28 9. Payables and accruals F - 28

Group structure

10. Investment in subsidiaries F - 29 11. Investment in associate F - 29 12. Investment in joint venture F - 30

Funding and risk

13. Loans F - 31 14. Finance expense F - 32 15. Financial assets and liabilities F - 33 16. Interest rate and electricity price risk F - 34 17. Liquidity risk F - 36 18. Credit risk F - 37 19. Captial management F - 37 20. Leases F - 38

Governance

21. Our shareholder F - 41 22. Directors’ information F - 41 23. Management compensation F - 43 24. Other related party transactions F - 43 25. Employee entitlements F - 44 26. Subsequent events F - 44

PAGE F - 10 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

Our financial statements

a) General information

Eastland Group Limited is a company domiciled in New Zealand and registered under the Companies Act 1993. The address of Eastland Group Limited’s registered office is 37 Gladstone Road, Gisborne. Eastland Group Limited and its subsidiaries, associate and joint venture consolidated (“Eastland Group”), is a Tier 1 reporting entity for the purposes of the Financial Reporting Act 2013 and the Companies Act 1993. These financial statements have been prepared in accordance with and comply with the requirements of these Acts. The financial statements of Eastland Group are for the year ended 31 March 2020 and were authorised for issue by the directors on 27 May 2020.

Eastland Group is a profit-oriented entity whose primary operations include electricity distribution and generation, the operation of Gisborne’s port and airport and the ownership of strategically located investment property. Eastland Group is wholly owned by Trust Taira¯whiti.

Our financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice as appropriate for-profit oriented entities. They comply with the New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”), and International Financial Reporting Standards.

Our financial statements have been prepared on the historical cost basis modified by the revaluation of property, plant and equipment, investment property and financial instruments.

These financial statements are presented in New Zealand dollars ($), which is Eastland Group’s functional currency, and have been rounded to the nearest thousand unless otherwise stated.

b) Use of estimates and judgments

The preparation of financial statements requires management to make judgments that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.

Estimates and underlying assumptions are reviewed on an on-going basis. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Outcomes in the next financial period may be different to the assumptions made. It is impracticable to quantify the impact should assumptions be materially different to actual outcomes, which may result in material adjustments to the carrying amounts of property, plant and equipment and financial instruments reported in these financial statements.

Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies are designated by an π symbol within the following notes:

• Note 5 Property plant and equipment (Estimates and Judgment)

• Note 15 Financial assets and liabilities (Estimates)

• Note 16 Interest rate and electricity price risk (Estimates)

c) Significant accounting policies

Accounting policies are disclosed within each of the applicable notes to these financial statements and are designated by a π symbol. The principal accounting policies have been applied consistently to all periods. IFRS 16 – Leases has been applied effective from 1 April 2019, this has resulted in a change to Eastland Group’s accounting policy for leases, refer to Note 20.

PAGE F - 11 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

d) Standards not yet effective

Eastland Group has elected to early adopt all applicable NZ IFRSs and Interpretations issued by the New Zealand Accounting Standards Board.

The following amendments will come into effect for periods commencing after 1 January 2020:

• NZ IFRS 3 Business Combinations - Amendment to the definition of a business. This clarifies what is required at a minimum to be considered a business. It provides guidance and examples to assist users. This is not expected to impact Eastland Group.

• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies – Definition of materiality. This amendment is to clarify the definition of materiality and align the definition used in the Conceptual Framework and the standards. This is not expected to significantly impact Eastland Group.

• IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. The amendment clarifies that entities would continue to apply certain hedge requirements assuming the interest rate benchmark on which the hedged cashflows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform. This is not expected to impact Eastland Group.

• 2019 Omnibus amendments to IFRS – editorial corrections, deferral of amendment re the sale and contribution of assets between an investor and its Associate or Joint Venture to be effective from 1 January 2025 and amendments to FRS 44 New Zealand Additional Disclosures. This is not expected to impact Eastland Group.

Significant transactions and events in the financial year

The following significant transactions and events affected the financial performance and position of Eastland Group for the year ended 31 March 2020.

a) Airport terminal

Gisborne Airport Limited commenced construction of an airport terminal with an estimated cost of $12.5 million. Contributions from the Provincial Growth Fund of $5.5 million and our shareholder Trust Taira¯whiti of $5 million were received for the project. The contribution from the Provincial Growth Fund has been recognised as a government grant, reducing the asset cost, the contribution from Trust Taira¯whiti, being a beneficiary distribution, is recognised as income. At year end the construction continues and costs are reported as work in progress in note 5.

b) Flick Energy Limited

Eastland Group, through its wholly owned subsidiary Eastland Energy Solutions Limited, owns 20.63% of Flick Energy Limited, which is recognised as an Investment in Associate. Flick Energy Limited is a development stage electricity retailer whose product offering is based on a digital platform and continues to build its business to profitability. Eastland Group has recognised $1.4 million as its share of Flick Energy Limited’s losses.

Further, the directors have impaired the value of the investment in Flick Energy Limited by $1.8 million, reducing the carrying value of the investment to $5.9 million. Refer to note 11.

c) Generation property, plant and equipment

Generation property, plant and equipment were revalued at 31 March 2020 in accordance with Eastland Group’s accounting policy of cyclical revaluation of generation assets every five years. Refer to Note 5.

d) Geothermal project

Eastland Generation has signed a project agreement to investigate the development of a geothermal power plant. On signing the project agreement consideration was paid for development rights. Eastland Group has a policy of recognising development rights as an intangible asset.

PAGE F - 12 EASTLAND GROUP • ANNUAL REPORT 2020 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

e) Novel coronavirus Covid-19

The outbreak of novel coronavirus (Covid-19) pandemic in January 2020 has impacted business and economic activity around the world. Effective 23 March 2020 the New Zealand government mandated restrictions on the operations of our businesses and required certain employees to work from home. Our businesses have been directly impacted in the following ways:

• Eastland Port, which is dependent on log exports to China and India, has experienced a significant decline in volume during the months of March and April 2020.

• Gisborne Airport, which is dependent upon Air New Zealand flights, has experienced a decline in revenues as a result of national restrictions on travel, which are likely to continue in some form in 2020.

• Eastland Generation has been exposed to price declines as demand for electricity has reduced during periods of business closure.

• Investment properties, since the government restricted business operations, our rents from commercial properties have declined.

At the time of approving the financial statements it is unclear what continuing impact government policies and the global economic impacts of Covid-19 will have on our businesses and the enduring operational effects. Shorter term asset assessments such as receivables and investment properties may be impacted by counterparty credit risk from an economic downturn and greater market uncertainty. Valuation of our assets are based on information available at the time of approving the financial statements and reasonable assessments of the potential impacts of Eastland Group’s response to this event. The directors are of the view the value of Eastland Group’s infrastructure assets, which are predominantly essential assets by government definition, will be maintained when considering the long-term investment horizon of both the individual assets and Eastland Group.

PAGE F - 13 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

1. Segments

Eastland Group’s operating segments reported to the Board and Group Chief Executive (“GCE”), consist of:

Networks – Ownership and management of electricity line distribution and contracting business, Eastech, Waihi hydro- generation and diesel gensets.

Generation – Ownership and management of geothermal electricity generation at Kawerau.

Ports – Ownership or management of port, airport, cool store, investment property and debarker operations.

All other segments – Corporate activities, business development and energy solutions. All other revenues and costs (including corporate costs), are included in All other segments.

The segment results disclosed are based on management’s judgment as to the classification of the products and services reported to the GCE and Board. Our management reporting focuses on the above businesses which are the Group’s operating segments reported in accordance with NZ IFRS 8 Operating Segments. Revenue and expenses are reported before intersegment eliminations, which differs from external financial reporting.

The segments are grouped according to the management of the business units and the provision of related services.

Intersegment transactions, included in the operating revenues and expenditures for each segment, are on an arm's length basis. All segment information presented is prepared in accordance with Eastland Group's accounting policies.

Monthly segment results are reported to the GCE and Board at NPAT level. All financing costs and finance income are incorporated within Corporate activities and are not allocated to the segments.

PAGE F - 14 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

NETWORKS GENERATION PORTS ALL OTHER

NETWORKS GENERATION PORTS ALL OTHER

NETWORKS GENERATION PORTS ALL OTHER

PAGE F - 15 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

2020

All other Inter- Networks Generation Ports segments segment Total Statement of Financial Performance $’000 $’000 $’000 $’000 $’000 $’000 External revenue: Operating revenue 41,170 22,856 39,337 384 - 103,747 Other income 209 - 7,599 189 - 7,997 Intersegment revenue 3,737 4,814 508 7,324 (16,383) - Intersegment dividend received - - - 10,120 (10,120) - Segment revenue 45,116 27,670 47,444 18,017 (26,503) 111,744 External expenditure: Operating expenditure (10,781) (5,422) (3,788) - - (19,991) Personnel expenditure (3,006) (1,184) (4,887) (5,330) - (14,407) Administrative expenditure (1,480) (3,580) (4,376) (4,376) - (13,812) Intersegment expenditure (6,232) (6,375) (2,913) (673) 16,193 - Operating expenditure (21,499) (16,561) (15,964) (10,379) 16,193 (48,210)

Earnings before interest, income tax, depreciation and amortisation (EBITDA) 23,617 11,109 31,480 7,638 (10,310) 63,534 Depreciation and amortisation (7,123) (8,107) (6,202) (793) - (22,225)

Segment earnings before interest and income tax (EBIT) 16,494 3,002 25,278 6,845 (10,310) 41,309 Share of profit from joint venture - - 1,126 - 116 1,242 Share of loss from associate - - - (1,431) - (1,431) Impairment in investment in associate - - - (1,812) - (1,812) Dividend paid (4,455) (1,615) (4,050) (10,120) 10,120 (10,120)

Statement of Financial Position Assets 179,865 240,535 220,814 29,224 - 670,438 Liabilities 32,815 27,566 29,907 299,983 - 390,271 Borrowings 82,759 93,253 92,449 (18,461) - 250,000 Capital notes - - - 30,000 - 30,000 Segment capital expenditure 12,064 4,855 22,068 2,041 - 41,028

PAGE F - 16 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

2019

All other Inter- Networks Generation Ports segments segment Total Statement of Financial Performance $’000 $’000 $’000 $’000 $’000 $’000 External revenue: Operating revenue 39,635 16,841 38,986 297 - 95,759 Other income (52) 7 382 934 - 1,271 Intersegment revenue 3,725 2,662 373 6,113 (12,873) - Intersegment dividend received - - - 126,950 (126,950) - Segment revenue 43,308 19,510 39,741 134,294 (139,823) 97,030 External expenditure: Operating expenditure (11,417) (2,946) (3,384) - - (17,747) Personnel expenditure (2,420) (946) (4,741) (3,422) - (11,529) Administrative expenditure (895) (2,040) (3,841) (3,738) - (10,514) Intersegment expenditure (6,049) (3,138) (2,902) (550) 12,639 - Operating expenditure (20,781) (9,070) (14,868) (7,710) 12,639 (39,790)

Earnings before interest, income tax, depreciation and amortisation (EBITDA) 22,527 10,440 24,873 126,584 (127,184) 57,240 Depreciation and amortisation (7,219) (5,248) (5,681) (479) - (18,627)

Segment earnings before interest and income tax (EBIT) 15,308 5,192 19,192 126,105 (127,184) 38,613 Share of profit from joint venture - - 1,348 - 119 1,467 Share of loss from associate - - - (2,264) - (2,264) Dividend paid (39,177) (1,593) (86,180) (9,950) 126,950 (9,950)

Statement of Financial Position Assets 179,222 186,748 197,989 23,429 - 587,388 Liabilities 31,765 23,035 25,953 272,338 - 353,091 Borrowings 17,464 149,732 85,497 (25,693) - 227,000 Capital notes - - - 30,000 - 30,000 Segment capital expenditure 11,825 32,747 14,862 802 - 60,236

PAGE F - 17 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

2. Revenue 2020 2019 $’000 $’000

Electricity distribution revenue 37,683 36,678 Logistics revenue 37,003 36,669 Electricity generation 23,750 18,011 Rental income 2,421 2,255 Management fees 313 297 Customer contributions 52 264 Other revenue 2,525 1,585 Total revenue 103,747 95,759

Other Income Other income 312 988 Grant from Trust Taira¯whiti 5,000 - Insurance proceeds 391 3 Impairment losses recovered 1 3 Increase in fair value of investment property 2,293 277 Total other income 7,997 1,271

Operating revenue 111,744 97,030

π Revenue Revenue is measured based on the consideration to which Eastland Group expects to be entitled in a contract with a customer and exclude amounts collected on behalf of third parties. Revenue is recognised when all performance obligations have been satisfied by transfer of goods or services to the customer and for the consideration that is probable to be collected. i. Regulated electricity distribution and electricity generation sales Revenue from electricity distributed and generated is recognised in the Statement of Financial Performance when the electricity has been distributed or sold to customers. ii. Logistics revenue Revenue from the sales of logistics services is recognised in the Statement of Financial Performance in the accounting period in which the services are rendered, by reference to completion of the specific transfer of goods or service. iii. Rental income Rental income is recognised in the Statement of Financial Performance on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. iv. Customer contributions Revenue from customer contributions is recognised in the Statement of Financial Performance as revenue when all obligations to the customer are satisfied. v. Grants Grants are recognised as revenue when the performance criteria for receiving the grant have been fulfilled. Grants received from Trust Tairawhiti¯ are recognised as revenue when the judgment is that receipt by Eastland Group is in the capacity as a beneficiary of the Trust. vi. Other revenue Other forms of revenue outside of those detailed in this policy that are not material as an individual transaction.

PAGE F - 18 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

3. Specific expenses 2020 2019 $’000 $’000

Bad debt write-offs on trade receivables 62 23 Direct operating expenditure arising on investment properties that generated rental income 894 866 Auditor’s remuneration to Deloitte comprises: audit of financial statements 282 224 audit reporting to the Commerce Commission 79 48 Loss on sale or disposal of property, plant and equipment 428 291

4. Taxation 2020 2019 $’000 $’000 Income Tax Expense

Current tax expense Current period 4,838 7,894 Adjustment for prior periods (150) (342) Total current tax expense 4,688 7,552

Deferred tax expense Temporary differences for the year 2,517 689 Adjustment for prior periods 126 292 Total deferred tax expense 2,643 981 Total income tax expense 7,331 8,533

PAGE F - 19 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

A reconciliation of income tax expense to the statutory income tax rate, is as follows:

2020 2019

$’000 % $’000 %

Accounting profit before income tax 25,865 28,656

At the statutory income tax rate of 28% (7,242) (28.0%) (8,024) (28.0%) Adjustments in respect of current income tax of previous years 22 0.1% 49 0.2% Subvention payment 552 2.1% - 0.0% Non-deductible expenses (991) (3.8%) (146) (0.5%) Non assessable income 729 2.8% - 0.0% Share of net profit and loss of associate and joint venture (401) (1.6%) (412) (1.4%) (7,331) (28.3%) (8,533) (29.8%)

Deferred Tax Assets and Liabilities 2020

Property, plant and Provisions Investment Hedge equipment and accruals property reserve Other Total $’000 $’000 $’000 $’000 $’000 $’000

Balance at beginning of the period (53,636) 675 133 4,874 (75) (48,029) Amounts recognised in the statement of financial performance: Relating to the current period (2,949) 432 - - - (2,517) Prior period adjustments recognised in the current period (126) - - - - (126) Amounts recognised directly in other comprehensive income (13,294) - - (1,524) - (14,818) Net deferred tax liabilities (70,005) 1,107 133 3,350 (75) (65,491)

2019

Property, plant and Provisions Investment Hedge equipment and accruals property reserve Other Total $’000 $’000 $’000 $’000 $’000 $’000

Balance at beginning of the period (53,714) 534 133 2,724 (75) (50,398) Amounts recognised in the statement of financial performance: Relating to the current period (830) 141 - - - (689) Prior period adjustments recognised in the current period (292) - - - - (292) Amounts recognised directly in other comprehensive income 1,200 - - 2,150 - 3,350 Net deferred tax liabilities (53,636) 675 133 4,874 (75) (48,029)

Group deferred tax net liability

The $65.5 million (2019: $48.0 million) net deferred tax liability includes $70.0 million (2019: $53.6 million) that relates to accounting depreciation on property, plant and equipment that has been revalued, with the remaining relating to differences between accounting and tax depreciation rates. As the network and port assets are held for the long term, it is the view of the directors that this liability is unlikely to be realised.

PAGE F - 20

EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

5. Property, plant and equipment 2020 Electricity Other Electricity Wharves Other Land and distribution assets generation walls and Floating plant and Work in buildings equipment at cost equipment surfaces plant equipment progress Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 As at 1 April 2019, Cost or fair value 48,822 153,354 6,500 201,967 110,068 18,039 25,093 19,717 583,560 Additions 4,868 9,166 5,945 5,324 15,584 674 2,890 (5,691) 38,760 Disposals (11) (326) (113) (4,500) (513) (14) (281) - (5,758) Revaluation - - - 35,498 - - - - 35,498 Transfers 1,220 - 60,508 (62,293) - - - - (565) As at 31 March 2020, Cost or fair value 54,899 162,194 72,840 175,996 125,139 18,699 27,702 14,026 651,495

As at 1 April 2019 Accumulated depreciation 635 7,369 1,900 14,531 10,701 5,242 11,136 - 51,514 Depreciation charge for the year 643 5,671 448 8,222 3,361 910 2,169 - 21,424 Disposals - (33) (90) - (471) (14) (120) - (728) Revaluation - - - (12,114) - - - - (12,114) Transfers - - 9,107 (9,171) - - - - (64) As at 31 March 2020, accumulated depreciation 1,278 13,007 11,365 1,468 13,591 6,138 13,185 - 60,032

As at 31 March 2020, net of accumulated depreciation 53,621 149,187 61,475 174,528 111,548 12,561 14,517 14,026 591,463

2019 Electricity Other Electricity Wharves Other Land and distribution assets generation walls and Floating plant and Work in buildings equipment at cost equipment surfaces plant equipment progress Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 As at 1 April 2018, Cost or fair value 47,701 142,949 6,377 77,580 108,687 18,039 22,239 109,495 533,067 Additions 1,468 10,728 123 131,580 1,386 - 3,806 (89,778) 59,313 Disposals (235) (296) - - (5) - (952) - (1,488) Impairment - - - (7,193) - - - - (7,193) Revaluation (139) ------(139) Transfers 27 (27) ------As at 31 March 2019, Cost or fair value 48,822 153,354 6,500 201,967 110,068 18,039 25,093 19,717 583,360

As at 1 April 2018 Accumulated depreciation 613 1,797 1,514 11,615 7,435 4,362 9,921 - 37,257 Depreciation charge for the year 516 5,589 386 5,938 3,267 880 1,950 - 18,526 Disposals (4) (16) - - (1) - (735) - (756) Impairment - - - (3,022) - - - - (3,022) Revaluation (491) ------(491) Transfers 1 (1) ------As at 31 March 2019, accumulated depreciation 635 7,369 1,900 14,531 10,701 5,242 11,136 - 51,514

As at 31 March 2019, net of accumulated depreciation 48,187 145,985 4,600 187,436 99,367 12,797 13,957 19,717 532,046

PAGE F - 21 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

Other assets at cost include airport assets, geothermal wells and other land and leasehold improvements. These assets are not revalued. The current year value includes $53 million of geothermal well costs, $7.4 million of airport asset costs and $1 million of other leasehold improvements (2019: $4.6 million total)

Property, plant and equipment that has been revalued is categorised as level 3 in the NZIFRS 13 fair value hierarchy. There have been no transfers between levels.

In the year to 31 March 2020 $0.5 million (2019: $3.6 million) of interest has been capitalised. The weighted average capitalisation rate on funds borrowed was 4.31% (2019: 4.83%).

π Land and buildings, electricity distribution, electricity generation equipment (excluding wells) and walls, wharves and surfaces are recognised at cost and are subsequently stated at revalued amounts, less any subsequent accumulated depreciation and impairment losses. Land and buildings, electricity distribution, electricity generation equipment (excluding wells) and walls wharves and surfaces are revalued with sufficient regularity to ensure that the carrying amount of these items does not significantly differ from that which would be determined using fair value at the date of the financial statements. The directors review the assumptions annually to ensure that fair value is being stated for these assets.

Property, plant and equipment is revalued on a cyclical basis. Valuations are performed by registered valuers. For electricity distribution and electricity generation equipment assets and wharves, walls and surfaces, revaluations are carried out on a cyclical basis not exceeding five years, by independent valuers. Land and buildings revaluations are carried out on a cyclical basis not exceeding three years. Any movement on revaluation is reflected through equity reserves for that class of asset unless there is insufficient reserve in which case that would flow through to the Statement of Financial Performance.

All other plant and equipment including geothermal wells is valued at historical cost. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items or components of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised in 'other income' or 'other administrative expenses', depending on whether there is a gain or a loss respectively. When revalued assets are sold, the amounts included in the equity reserve are transferred to retained earnings and recognised through other comprehensive income.

Government Grants received for the construction or purchase of an asset are deducted from the asset value recognised. As the project is near completion the only remaining obligations are regarding reporting until a specified time post completion of the terminal building.

Exploration and evaluation expenditure Exploration and evaluation expenditure in relation to geothermal sites is accounted for in accordance with the area of interest method. The cost of drilling wells on an established geothermal field are capitalised on the basis that it is expected the expenditure will be recovered through future energy sales, or alternatively, by sale of the assets. Depreciation commences once the wells are put into productive use.

All exploration and evaluation costs, including directly attributable overheads, general permit activity, resource consents, geological testing, geophysical testing and drilling are initially capitalised as work in progress, pending the determination of the success of the area. Costs are expensed where the area of interest does not result in a successful discovery.

Exploration and evaluation expenditure is partially or fully capitalised where either: • the expenditure is expected to be recovered through the successful development and exploration of the area of interest (or alternatively by its sale); or • the exploration and evaluation activities in the area of interest have not, at the end of each reporting period, reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Capitalised costs are reviewed at the end of each reporting period to determine whether economic quantities of reserves have been found or whether further exploration and evaluation work is underway or planned to support the continued carry forward of the capitalised costs. Exploration and evaluation expenditure is impaired in the Statement of Financial Performance under the successful efforts method of accounting in the period that exploration work demonstrates that an area of interest is no longer prospective for economically recoverable reserves or when the decision to abandon an area of interest is made.

Land access rights for exploration activities are amortised over the life of the right.

PAGE F - 22 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

π i. Classification of expenditure in relation to property, plant and equipment On initial recognition of items of property, plant and equipment, judgments must be made about whether costs incurred relate to bringing the items to working condition for their intended use, and therefore are appropriate for capitalisation as part of the cost of the item, or whether they should be expensed as incurred. As required by NZ IAS 16, Property, Plant and Equipment, management must exercise their judgment to assess the amount of overhead costs which can be reasonably directly attributed to the construction or acquisition of items of property, plant and equipment. For example, employee costs arising directly from such activities are capitalised within the initial cost of property, plant and equipment. Thereafter, judgment is also required to assess whether subsequent expenditure increases the future economic benefits to be obtained from that asset and is therefore also appropriate for capitalisation or whether such expenditure should be treated as maintenance and expensed.

ii. Valuation and impairment of property, plant and equipment

Management must also consider whether any indicators of impairment have occurred which might require impairment testing of the current carrying values of property, plant and equipment. Assessing whether individual assets or a grouping of related assets (which generate cash flows co-dependently) are impaired may involve estimating the future cash flows that those assets are expected to generate. This will in turn involve assumptions, including rates of expected revenue growth or decline, expected future margins and the selection of an appropriate discount rate (Weighted average cost of capital – WACC) for discounting future cash flows. The standard assumptions across all valuations are inflation of 2% and a tax rate of 28%.

Valuation technique Fair value measurement sensitivity to Valuations affected significant unobservable input by input change

Discounted cash flow model

Price path An estimated 1% change in price path would Generation equipment result in a material change in the fair value.

Weighted Average Cost of Capital An estimated 1% (multiplicative) change in WACC Generation equipment (“WACC”) would result in a material change in the fair value.

Plant outputs/Revenue An estimated 1% change in output or revenue Distribution, would result in a material change in the fair value. Generation equipment

Optimised Depreciated replacement cost

Cost of construction An estimated 1% change in construction costs Wharves, walls and would result in a material change in the fair value. surfaces

Market capitalisation

Gross market rent An estimated 10% change in rent received would Land & Buildings result in a material change in the fair value.

Market capitalisation rate An estimated 1% change in market capitalisation Land & Buildings rate would result in a material change in the fair value.

Direct sales comparison

Rate per square metre An estimated 10% change in rate per square Land & Buildings metre would result in a material change in the fair value.

PAGE F - 23 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

Revaluations

i. Land and buildings

Port land and buildings were revalued on 31 March 2018 (total fair value of $33.1 million) by an independent valuer; Colliers International. The method of valuation was market-based for non-specialised land assets. The values ranged from $10m2 - $240m2 in the port location and $7.8m2 - $9m2 for rural storage sites. For specialised buildings, Optimised Depreciated Replacement cost (ODRC) was used. For other buildings a comparison was made of contract income to capitalised market yield rates. The range was from $170m2 - $1,867m2. The per square metre rates were affected by building size and other factors. The net book value at 31 March 2020 was $36.6 million (2019: $32.3 million).

Network operational land and buildings were valued on 31 March 2019 (total fair value of $7.4 million) by an independent valuer; AON New Zealand Limited. The method of valuation was the market approach. The methods used were direct comparison, income based, capitalisation and the capitalisation rate or yield. In addition to this valuation, land and buildings of $7.3 million net book value at 31 March 2019 were revalued as part of the distribution asset valuation in 2018. The net book value at 31 March 2020 was $14.7 million (2019: $14.7 million).

ii. Electricity distribution equipment

Electricity distribution assets and related land and buildings were last revalued on 30 November 2017 (fair value $146.7 million) by PricewaterhouseCoopers ("PwC"). The net book value at 31 March 2020 was $149.2 million (2019: $145.9 million).

The valuation method used was a discounted cash flow basis, using the following assumptions: • Forecast revenue and operating costs • Default Price Quality Path (WACC) assumptions 6.19% - 7.28% • Closing 2030 Regulatory Asset Base used as the terminal value and discounted back to valuation date • Forecast capital projects

An impairment assessment was performed at 31 March 2020, the key variables that changed were the WACC to 5.54% and the forecast allowable revenues under DPP3. As the value was in the range no impairment was assessed.

iii. Electricity generation equipment

Electricity generation equipment (“Gensets”), owned by Eastland Generation Limited, were revalued at 31 March 2020 (total fair value of $1.7 million) by an independent valuer; PwC. The net book value as at 31 March 2020 was $1.7 million (2019: $1.2 million). The valuation method used was a discounted cash flow basis, using the following assumptions: • A nominal post-tax discount rate (WACC) of 7.00%, however annual WACC’s are applied each year due to short term cashflows • Revenue forecasts were based on the terms of a supply agreement together with assumptions on electricity spot price at time of generation.

The Waihi Hydroelectric Scheme, owned by Eastland Generation Limited, was revalued as at 31 March 2020 (total fair value of $6.0 million) by an independent valuer; PwC. The valuation used was a discounted cash flow basis, using the following assumptions: • Outputs were based on an average plant availability of 25.5% of capacity resulting in an average production of 11.19 GWh. • PwC price path • A half-life overhaul of the generator and turbine equipment was assumed in capital expenditure in 2036. • A nominal post-tax discount rate (WACC) of 7.00% which is reflective of the expectation an investor would expect to receive on private generation projects.

PAGE F - 24 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

The geothermal plant, owned by Te Ahi o Maui Limited Partnership, was revalued at $181.9 million less the carrying value of steam wells, at $146.82 million as at 31 March 2020 by an independent valuer, PwC. The valuation used was a discounted cash flow basis using the following assumptions: • Net output of 216.3 GWh • PwC price path • Capital expenditure was derived from the plant’s asset management plan, with two new re-injection wells expected to be drilled in 2029. • A nominal post-tax discount rate (WACC) of 7.00% which was reflective of the return an investor in this asset would expect to receive on private generation projects.

The geothermal plant, owned by Geothermal Developments Limited was revalued at $30.2 million less the carrying value of steam wells, at $20.0 million as at 31 March 2020 by an independent valuer, PwC. The valuation used was a discounted cash flow basis using the following assumptions: • Net output 69.9 GWh • PwC price path • Capital expenditure was derived from the plant’s asset management plan, with a new re-injection well expected to be drilled in 2029. • A nominal post-tax discount rate (WACC) of 7.00% which was reflective of the return an investor in this asset would expect to receive on private generation projects • The terminal value was based on free cash flow at 2041 with the valuation tested at terminal value growth rates of 1.5 - 3.5%.

The restoration provision for all generation assets of $1.6 million (2019: $4.5 million) has been recognised. This was valued by PwC in accordance with their valuation of generation equipment on 31 March 2020.

iv. Wharves, walls and surfaces

The port wharves, walls and surfaces and some other plant and equipment were revalued on 31 March 2016 (total fair value $105.9 million) by independent valuers, Opus International Consultants Ltd. The net book value at 31 March 2020 was $111.5 million (2019: $99.4 million). The method of valuation was depreciated replacement cost which is supported by a discounted cash flow valuation prepared, using the following assumptions: • Revenues were based on management's best estimate of cargo volumes (predominantly logs) over the years to 2030 with these estimates supported in the case of log exports by external reports and customer forecasts of likely log volumes • Port charges for all log cargos increase from 1 April 2017 following a customer consultation period • Capital expenditures include both maintenance and growth capital expenditure to support the estimated volumes • The post-tax discount rate (WACC) of 8.5% was used • The terminal value was based on free cash flow at 2030 with the valuation tested at terminal value growth rates of 1.5 - 3.5%.

PAGE F - 25 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

2020 2019 Depreciation $’000 $’000

Depreciation of property, plant and equipment 21,431 18,526

π Depreciation is recognised in the Statement of Financial Performance on a straight-line basis considering the estimated useful life of each part of an item of property, plant and equipment and it’s residual value. Land is not depreciated.

The estimated useful lives for significant classes of assets for the current and comparative periods are as follows: Buildings 40-50 years Electricity distribution equipment 10-70 years Wells 15 years Electricity generation equipment 10-50 years Other plant and equipment: Plant and equipment 3-20 years Motor vehicles 5-10 years Wharves, walls and surfaces 3-100 years Floating plant 2-25 years

Depreciation methods, useful lives and residual values are reassessed at the reporting date.

Commitments

As at 31 March 2020, Eastland Group had total capital commitments payable within the next 12 months of $5.4 million (2019: $16.5 million).

PAGE F - 26 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

6. Investment properties 2020 2019 $’000 $’000

Opening balance at 1 April 22,020 20,820 Additions 2,268 923 Transfers to operational property (1,220) - Fair value adjustment 2,293 277 Closing balance at 31 March 25,361 22,020

Investment properties include parcels of land and buildings strategically located at Eastland Port, Inner Harbour, Gisborne Airport and various other locations in Gisborne.

They are measured at fair value, based on an annual valuation by an independent valuer; Telfer Young. These valuations were completed at 31 March 2020. The valuations comply with approved/accepted valuation standards.

The fair value is based on a discounted cashflow model using expected market rentals for the highest and best use of the property. An analysis of current property sales is also assessed in determining the value. The investment property that has been revalued is categorised as level 3 in the fair value hierarchy. There have been no transfers between levels and no change to valuation techniques in the current year.

π Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value with any change recognised in the Statement of Financial Performance within administrative expenses or other income and disclosed separately in the financial statements.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete, at which time it is revalued to a fair value and reclassified as investment property. Any gain or loss arising on revaluation is recognised in the Statement of Financial Performance.

When the use of a property changes from owner-occupied to investment property, the property is revalued to fair value and reclassified as investment property. Any gain arising on revaluation is recognised directly in equity. Any loss is recognised immediately in the Statement of Financial Performance.

7. Intangible assets 2020 2019 $’000 $’000

Geothermal development rights 4,110 1,753 Te Ahi o Maui - vended assets 1,785 1,838 Resource consents 2,180 483 Goodwill 710 710 Access rights 1,257 1,285 Other 350 208 Total 10,392 6,277

The intangible asset groups shown above are amortised over their assessed lives. Goodwill relating to the weighbridge and Inner Harbour Marina is not amortised, is reviewed for impairment on an annual basis. The directors are comfortable with the carrying values.

The amortisation charge relating to resource consent, access rights and other intangible assets for the year was $216,691 (2019: $101,000).

PAGE F - 27 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

8. Trade and other receivables 2020 2019 $’000 $’000

Trade receivables 7,453 7,953 Other receivables 4,074 4,174 Total trade and other receivables 11,527 12,127

Trade receivables are stated net of expected credit loss of $59,083 (2019: $88,279). Eastland Group has recognised a loss allowance of 100% against all receivables over three months past due, because historical experience has indicated that these receivables are generally not recoverable. Eastland Group assesses credit risk and recognises credit losses on recognition of a receivable and when a loss is probable. No expected credit losses have been recognised on related party receivables. There has been no change in the estimation techniques or significant assumptions made during the current reporting period.

9. Payables and accruals 2020 2019 $’000 $’000

Trade payables 6,737 7,473 Non-trade payables and accrued expenses 3,145 10,454 Interest payable 696 732 GST payable 47 226 Total payables and accruals 10,625 18,885

All cash receipts and payments are made through the bank accounts of Eastland Group Limited which provides treasury services to the Eastland Group.

Trade and other payables generally have terms of 30 days and are interest free. The directors consider the carrying amount of trade and other payables approximates fair value because the amounts due will be settled within 12 months and are interest free.

PAGE F - 28 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

PAGE F - 29 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

This associate is accounted for using the equity method. The following summarised financial information in respect of the Group’s interest in the immaterial associate is set out below. 2020 2019 $’000 $’000 Group’s share of: Loss from continuing operations 1,431 2,264 Other comprehensive income 780 (324) Share of loss in associate 2,211 1,940

Reconciliation of the interest in the associate recognised in the consolidated financial statements: Opening balance 9,887 7,529 Purchase of shares - 356 Conversion of shares - 3,942 Share of change in net assets (share of loss in associate) at 22.60% - (1,398) Share of change in net assets (share of loss in associate) at 20.63% (1,431) (866) Impairment of associate (1,812) - Share of associate - other comprehensive income (780) 324 Carrying amount of the Group’s interest in the associate 5,864 9,887

12. Investment in joint venture

Details of the Group’s joint venture at the end of the reporting period is as follows:

Name of Proportion of ownership interest and voting Joint Venture Principal activity Place of Incorporation rights held by the Group 2020 2019 Eastland Debarking Debarking and anti-sap New Zealand treatment of export logs stored 50% 50% at the port in Gisborne

This joint venture is accounted for using the equity method. The following summarised financial information in respect of the Group’s interest in the immaterial joint venture is set out below.

Eastland Debarking Joint Venture 2020 2019 $’000 $’000 Group’s share of: Profit from continuing operations 1,126 1,348 Group eliminations 116 119 Share of profit of joint venture 1,242 1,467

Net assets of the joint venture 2,190 2,635 Proportion of the Group’s ownership interest in the joint venture 50% 50% Carrying amount of the Group’s interest in the joint venture 1,095 1,317

PAGE F - 30 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

13. Loans

This note provides information about the contractual terms of Eastland Group’s interest-bearing loans and borrowings.

2020 2019 $’000 $’000 The borrowings are repayable as follows: From one to two years 210,000 - Within two to five years 40,000 227,000 Total bank borrowings 250,000 227,000

Classified as follows: Non-current liabilities 250,000 227,000 Total bank borrowings 250,000 227,000

Drawn Undrawn $’000 $’000

As at 31 March 2020 Facility A - Tranche A maturing 1 April 2021 210,000 - Facility A - Tranche B maturing 1 April 2022 30,000 - Facility A - Tranche C maturing 1 April 2023 10,000 40,000 Facility B maturing 30 June 2021 - 15,000 250,000 55,000

As at 31 March 2019 Facility A - Tranche A maturing 1 April 2021 210,000 - Facility A - Tranche B maturing 1 April 2022 17,000 13,000 Facility A - Tranche C maturing 1 April 2023 - 50,000 Facility B maturing 30 June 2020 - 15,000 227,000 78,000

Eastland Group Limited has arranged bank funding from the ANZ Bank, ASB and BNZ (“Syndicate”) on behalf of Eastland Group. As at 31 March 2020 there were total bank facilities of NZD $305 million (2019: $305 million) which are unsecured and subject to a Deed of Negative Pledge. The borrowings are in the name of Eastland Group Limited. The guaranteeing subsidiaries of the Eastland Group debt held by the Parent entity are as follows:

Gisborne Airport Limited Geothermal Developments Limited Eastland Port Limited Inner Harbour Marina Limited Eastland Port Debarking Limited Eastland Network Limited Eastland Investment Properties Limited Eastech Limited Eastland Generation Limited Northland Debarking Limited Te Ahi o Maui Limited Partnership

These borrowings are rolled over at 90 day intervals spread throughout the year. The interest rate on these borrowings is the BKBM rate at the rollover date plus a margin of 0.76% to 1.21% (2019: 0.96% to 1.21%). As at 31 March 2020, the rates on borrowings range from 1.30% to 2.34% (2019: 2.86% to 3.19%). Facilities with the Syndicate have expiry dates of 1 April 2021 Tranche A ($210 million), 1 April 2022 Tranche B ($30 million), 1 April 2023 Tranche C ($50 million) and an evergreen facility of $15 million which expires 18 months from drawdown. There have been no defaults during the period of principal, interest, sinking fund, covenants or redemption terms of those loans payable during the period.

PAGE F - 31 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

14. Finance expenses 2020 2019 $’000 $’000

Interest income on cash and cash equivalents 12 172 Total finance income 12 172

Interest expense 12,735 9,332 Interest on leases 720 - Total finance expense 13,455 9,332

Net finance expenses 13,443 9,160

π Finance expenses comprises of interest expense on borrowings, changes in the fair value of financial assets at fair value through the Statement of Financial Performance and impairment losses recognised on financial assets (except for trade receivables), and losses on hedging investments that are recognised in the Statement of Financial Performance.

All borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for use. All other borrowing costs are recognised in the profit or loss section of the Statement of Financial Performance in the period which they are incurred.

PAGE F - 32 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

15. Financial assets and liabilities

This note discloses Eastland Group’s financial assets and liabilities, how they are valued and managed. Eastland Group’s financial assets and liabilities are presented below:

2020

Fair value Financial through other assets Liabilities Cash and cash comprehensive measured at amortised equivalents income at cost cost Fair Value Notes $’000 $’000 $’000 $’000 $’000 Financial assets Cash and cash equivalents 9,049 - - - 9,049 Trade and other receivables 8 - - 11,527 - 11,527 Electricity derivatives - 3,825 - - 3,825 Total financial assets 9,049 3,825 11,527 - 24,401

Financial liabilities Payables and accruals 9 - - - (10,625) (10,625) Employee entitlements 25 - - - (3,663) (3,663) Electricity derivatives - (36) - - (36) Derivative financial instruments - (16,164) - - (16,164) Loans 13 - - - (250,000) (250,000) Capital notes 21 - - - (30,000) (30,000) Total financial liabilities - (16,200) - (294,288) (310,488)

Total net financial assets/(liabilities) 9,049 (12,375) 11,527 (294,288) (286,087)

2019

Fair value Financial through other assets Liabilities Cash and cash comprehensive measured at amortised equivalents income at cost cost Fair Value Notes $’000 $’000 $’000 $’000 $’000 Financial assets Cash and cash equivalents 3,491 - - - 3,491 Trade and other receivables 8 (1) - 12,128 - 12,127 Electricity derivatives - 191 - - 191 Total financial assets 3,490 191 12,128 - 15,809

Financial liabilities Payables and accruals 9 - - - (18,885) (18,885) Employee entitlements 25 - - - (2,130) (2,130) Electricity derivatives - (4,979) - - (4,979) Derivative financial instruments - (13,029) - - (13,029) Loans 13 - - - (227,000) (227,000) Capital notes 21 - - - (30,000) (30,000) Total financial liabilities - (18,008) - (278,015) (296,023)

Total net financial assets/(liabilities) 3,490 (17,817) 12,128 (278,015) (280,214)

PAGE F - 33 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

π Valuation of financial assets and liabilities The following methods and assumptions were used to estimate the carrying amount and fair value of each asset class of financial instrument carried at fair value. Where financial instruments are measured at fair value they have been classified at the following levels.

Level 1: Quoted prices (unadjusted) in active markets for assets or liabilities; or

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); or

Level 3: Inputs for the asset and liability that are not based on observable market data (unobservable inputs).

Derivative financial instruments used by Eastland Group are interest rate swaps. These are based on Level 2 fair value methodologies and were calculated using valuation models applying observable market data such as forward rates and contract rates, discounted at a rate that reflects the credit risk of various counterparties.

Electricity derivatives used by Eastland Group are contract for differences. These are based on level 3 fair value methodologies and were calculated using valuation models applying forward price rates and discount at a rate that reflects the credit risk of various counterparties.

16. Interest rate electricity price risk

Eastland Group‘s loans predominantly have floating interest rates. Eastland Group actively manages interest rate exposures in accordance with treasury policy and they are regularly reviewed by the Board. In this respect, at least fifty percent of interest costs must be fixed using interest rate swaps, forward rate agreements, options and other derivative instruments. The main objectives are to minimise the cost of total debt, control variations in the interest expense of the loans and to match the interest rate risk profile of debt with the expected return on Eastland Group’s assets. The treasury policy sets parameters for managing the interest rate risk profile.

Eastland Group has elected to apply cash-flow hedging to all of its interest rate swaps, a notional value totalling $180 million (2019: $200 million) with terms or maturity dates between 1 and 96 months, interest on a floating rate for fixed interest is between 2.03% to 5.94% (2019: 2.03% to 5.94%). The last cash-flow hedge swap matures on 31 March 2028.

The interest rate swaps that have been designated as cash-flow hedges affect profit and loss at the same time as the underlying interest expense is recognised on the retrospective borrowings. The hedge relationships are expected to be highly effective over the life of the swaps. All current hedges are effective.

Average 2020 Average 2019 contract rate Notional Amount contract rate Notional Amount % $’000 % $’000 Interest rate swaps (floating to fixed) Maturing in less than 1 year 4.04 60,000 2.95 20,000 Maturing between 1 and 2 years 2.33 15,000 4.04 60,000 Maturing between 2 and 5 years 4.59 65,000 3.77 60,000 Maturing after 5 years 3.49 40,000 4.41 60,000 Total notional interest rate swaps 180,000 200,000

2020 2019 $ MWH $ MWH Electricity revenue swaps Maturing in less than 1 year 109.91 92,832 93.70 109,368 Maturing between 1 and 2 years 102.09 72,144 117.00 17,520 Maturing between 2 and 5 years 102.87 22,368 - 187,344 126,888

PAGE F - 34 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

π Hedge accounting and sensitivity analysis The sensitivity analysis has been determined based on the exposure to interest rates and foreign exchange rates for both derivatives and non-derivative instruments at balance date. It is assumed that the amount of the liability at balance date was outstanding for the whole year. A one percent increase or decrease is used for interest rates and these changes represent management’s current assessment of the reasonably possible change over a year.

Interest rate swaps hedging the floating rate debt are hedge accounted and treated as cash flow hedges and hence any changes in interest rates would have no material impact on profits as changes in the fair value of these swaps are taken through other comprehensive income where the hedge is an effective hedge. The fair value of these interest rate swaps is a $10.0 million loss (2019: $8.4 million loss). A fall of 1% in interest rates would result in a loss in other comprehensive income of $3.4 million (2019: $3.7 million) whereas an increase of 1% in interest rates would result in a gain in other comprehensive income of $3.2 million (2019: $3.6 million).

Forward starting interest rate swaps hedging the forecasted floating rate debt are also hedge accounted and are recognised as cash flow hedges and hence any changes in interest rates would have no material impact on profit as changes in the fair value of these swaps are recognised through other comprehensive income where the hedge is effective. The fair value of these interest rate swaps is $6.1 million loss (2019: $4.6 million loss). A reduction of 1% in interest rates would result in a loss in other comprehensive income of $1.7 million (2019: $2.5 million) whereas an increase of 1% in interest rates would result in a gain in other comprehensive income of $1.6 million (2019: $2.3 million).

Electricity derivatives hedge the forecasted revenues from electricity generation and are recognised as cash flow hedges, and hence any changes in electricity prices would have no material impact on profit as changes in fair value are recognised through other comprehensive income where the hedge is effective. The fair value of the electricity derivatives is $4.0 million gain (2019: $4.8 million loss). A reduction of 1% in electricity prices would result in a gain in other comprehensive income of $155,414, (2019: $162,162) whereas an increase in electricity prices would result in a loss in other comprehensive income of $155,413 (2019: $162,162).

Electricity contracts for differences that have been designated as cash-flow hedges affect profit and loss at the same time as the underlying electricity revenue is recognised. The hedge relationships are expected to be highly effective over the life of the contract for differences and no ineffectiveness has been recognised in the Statement of Financial Performance.

The following is a reconciliation of derivative balances and their movements.

Hedging derivatives 2020 Interest rate Electricity swaps CFD's Total $’000 $’000 $’000 Opening balance (13,029) (4,788) (17,817) Recognised in the Statement of Financial Performance: Interest expense of contract settlements (3,360) - (3,360) Electricity sales of contract settlements - (2,073) (2,073) Change in fair value recognised in other comprehensive income 225 10,652 10,877 Closing balance (16,164) 3,791 (12,373)

Hedge reserve balances - Statement of Changes in Equity (11,535) 2,729 (8,806)

Derivatives summary 2020 2019 Assets Liabilities Assets Liabilities $’000 $’000 $’000 $’000

Interest rate swaps - (16,164) - (13,029) Electricity revenue swaps 3,826 (36) 191 (4,979) 3,826 (16,200) 191 (18,008)

Current 3,167 (772) 75 (4,990) Non-current 659 (15,428) 116 (13,018) 3,826 (16,200) 191 (18,008)

PAGE F - 35 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

17. Liquidity risk

The risk that Eastland Group will not be able to meet its financial obligations as they fall due is described as liquidity risk. Eastland Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Eastland Group's reputation.

Eastland Group manages its cash commitments at a Group level with all cash transactions and funding taking place as part of Eastland Group’s treasury function. Eastland Group Limited has sufficient funding and banking facilities available to meet the liquidity requirements of Eastland Group.

2020

6 -12 <6 months months 1-3 years 3-5 years >5 years Total Notes $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash and cash equivalents 9,049 - - - - 9,049 Trade and other receivables 8 11,527 - - - - 11,527 Electricity derivatives 2,169 997 659 - - 3,825 Total financial assets 22,745 997 659 - - 24,401

Financial liabilities Payables and accruals 9 (10,625) - - - - (10,625) Employee entitlements 25 (2,350) - (1,313) - - (3,663) Electricity derivatives (4) (29) (3) - - (36) Derivative financial instruments (565) (175) (2,220) (6,735) (6,469) (16,164) Loans 13 - - (250,000) - - (250,000) Capital notes 21 - - - - (30,000) (30,000) Total financial liabilities (13,544) (204) (253,536) (6,735) (36,469) (310,488)

Liquidity gap 9,201 793 (252,877) (6,735) (36,469) (286,087)

2019

6 -12 <6 months months 1-3 years 3-5 years >5 years Total Notes $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash and cash equivalents 3,491 - - - - 3,491 Trade and other receivables 8 12,127 - - - - 12,127 Electricity derivatives - 75 116 - - 191 Total financial assets 15,618 75 116 - - 15,809

Financial liabilities Payables and accruals 9 (18,885) - - - - (18,885) Employee entitlements 25 (2,130) - - - - (2,130) Electricity derivatives - (4,774) (205) - - (4,979) Derivative financial instruments - (216) (2,215) (4,149) (6,449) (13,029) Loans 13 - - - (227,000) - (227,000) Capital notes 21 - - (30,000) - - (30,000) Total financial liabilities (21,015) (4,990) (32,420) (231,149) (6,449) (296,023)

Liquidity gap (5,397) (4,915) (32,304) (231,149) (6,449) (280,214)

PAGE F - 36 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

18. Credit risk

Eastland Group’s business transactions are largely with large wholesale intermediaries or agents representing a number of exporting clients. Sales transactions are typically settled intra-month resulting in relative low receivable balances. Our businesses incur credit risk in the following ways:

• Networks – distributes electricity selling to electricity retailers, who settle on the 20th of the month. Historically, there have been no defaults by electricity retailers.

• Ports – Export agents and logistics companies represent customers who ship product through Eastland Port using a variety of port services. These agents generally settle transactions intra-month while settling sale proceeds with their customers. Historically there have been no defaults by these agents.

Airport landing charges paid by Air New Zealand represent 80% of Gisborne Airports’ revenue. These landing charges are typically settled on the 20th of the month.

• Generation – The majority of power generated is sold through the NZX and settled on the 20th of the month. The NZX acts as clearing agent ensuring the cash settlement of electricity sold. Where electricity revenue is hedged, through the use of contracts for differences, counterparty credit risk may exist. Contract for differences are with multiple counterparties and are settled monthly, reducing this credit risk. Historically there have been no defaults on electricity sales.

Credit risk and expected credit losses are assessed on recognition of revenue. The credit risk of a debtor is assumed to have increased significantly since initial recognition if the contractual obligations are over 90 days past due. Eastland Group assesses increases in credit risk through consideration of changes in a debtor’s industry or adverse changes in the debtor’s environment that result in significant decreases in the debtors’ ability to meet its obligations. Where there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. placed in liquidation or has entered into bankruptcy proceedings, the debt will be impaired and recognised as a bad debt in the Statement of Financial Performance.

A central treasury function is provided by Eastland Group to all the subsidiary companies. Credit risk exposure in relation to the subsidiaries is not considered to be significant, and no specific risk management policies have been put in place in relation to inter- group balances.

There are no financial assets that have been pledged as collateral for liabilities or contingent liabilities.

Eastland Group recognises expected credit losses on trade and other receivables that are believed to be irrecoverable. The expected credit loss at 31 March 2020 was $59,083 (2019: $88,279). Actual bad debts written off in the Statement of Financial Performance were $61,589 (2019: $23,764) and there was no adjustment to the specific expected credit loss.

19. Capital management

The Directors' policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor the return on capital on a regular basis. This involves the management of reserves and issued capital. The Directors also monitor the level of dividends to ordinary shareholders.

The Directors seek to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

PAGE F - 37 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

20. Leases

π Transition to new standard (IFRS 16 Accounting for leases) In the current year IFRS 16 Accounting for leases replaced the previous standard IAS 17 to implement a comprehensive basis of accounting for leases for lessees. In effect the new standard requires that all leases that transfer the substantive right to use an asset for longer than one year and above an entity de minimus, be recognised as an asset as a Right of Use Asset (“RoU”) and compensating financial liability.

Eastland Group applied NZ IFRS 16 Leases from 1 April 2019 using the cumulative catch-up approach. Applicable leases that were identified by Eastland Group include land, buildings and copier leases as set out in the accounting policies below.

On transition, as a practical expedient available Eastland Group has not: • Recognised right of use assets and liabilities for short term leases with lease terms ending within 12 months from the date of transition. The costs related to these leases are recognised in the Statement of Financial Performance

• Where the asset is of low value (less than $8,000) costs are recognised on a straight line basis in the Statement of Financial Performance; and

• Future cash outflows to which the lessee is potentially exposed to that are not reflected in the measurement of lease liabilities are adjustments regarding CPI and PPI and any other variable lease payments, where they apply to an individual lease.

Policies applicable from 1 April 2019

i. as lessee

In assessing whether an arrangement is, or contains a lease, Eastland Group considers whether the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. In considering the lease and its term, the group applies judgment in determining whether it is reasonably certain that an extension or termination option will be exercised.

RoU assets are initially recognised at cost, comprising the initial amount of the lease liability less any unamortised lease incentives. RoU assets are subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. Interest and depreciation are recognised in the Statement of Financial Performance relating to these lease transactions.

Lease liabilities are measured at the present value of remaining lease payments, discounted by using the rate implicit in the lease. If this is not readily determined Eastland Group’s incremental borrowing rate as at 1 April 2019 is used. The weighted average rate is 5.96%.

ii. as lessor

Assets leased under operating leases are included in Investment property in the Statement of Financial Position. Rental income (net of any incentives given to lessees) is recognised on a straight line basis over the lease term. For more details see the Investment property policy (note 6).

Policies applicable prior to 1 April 2019

i. as lessee

Payments made under operating leases, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased property, plant and equipment are recognised in the Statement of Financial Performance on a straight-line basis over the lease term. Lease incentives received are recognised as an integral part of the total lease expense over the term of the lease.

Property, plant and equipment used by Eastland Group under operating leases are not recognised in Eastland Group’s Statement of Financial Position.

ii. as lessor

Assets leased under operating leases are included in investment property in the Statement of Financial Position. Rental income (net of any incentives given to lessees) is recognised on a straight- line basis over the lease term. For more details see the Investment property policy Note 6.

PAGE F - 38 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

Transition to new standard (IFRS 16 Accounting for leases)

The Group has recognised $12.3 million of right of use assets and $12.3 million of lease liabilities on transition to NZ IFRS 16. As the value of the lease liabilities is the same as the value of the right of use assets, no difference has been recognised in retained earnings.

a) Leases receivable

Eastland Group has leased certain Investment properties (refer to Note 6) and some other land and buildings. These are recognised under Rental income in the Statement of Financial Performance. The average lease period for leases receivable is 1.7 years. The future minimum lease payments receivable under non-cancellable leases are as follows, comparatives are presented in accordance with the former standard IAS 17.

2020 2019 $’000 $’000 IFRS - 16 IAS - 17

Year one 2,482 2,523 Year two 1,664 - Year three 855 - Year four 726 - Year five 424 - Year two to five 3,669 3,063 More than six years 426 305 Total leases receivable 6,577 5,891

Other Land and plant and buidings equipment Total b) Right of use assets $’000 $’000 $’000

Opening net book value 1 April 2019 12,252 93 12,345 Additions - 11 11 Depreciation for the period (554) (24) (578) Carrying amount at 31 March 2020 11,698 80 11,778 Cost 12,252 104 12,356 Accumulated depreciation (554) (24) (578)

c) Lease liabilities maturity analysis and commitments

The average remaining lease term for land and buildngs is 18.3 years and 3.2 years for copiers.

2020 IFRS - 16 2019 IAS - 17

Fixed Lease lease liability Interest payments Commitments $’000 $’000 $’000 $’000 Year one 246 (707) 953 1,047 Year two 258 (694) 952 - Year three 275 (681) 956 - Year four 292 (666) 958 - Year five 299 (649) 948 - Year two to five 1,124 (2,690) 3,814 3,582 Beyond five years 10,751 (8,926) 19,677 18,153 Total 12,121 (12,323) 24,444 22,782 Current portion 246 (707) 953 1,047 Non-current portion 11,875 (11,616) 23,491 21,735 Total 12,121 (12,323) 24,444 22,782

The Group does not face significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group's financial management function.

PAGE F - 39 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

d) Lease expenses included in profit or loss 2020 $'000 Short term/low value leases 115 Depreciation on RoU assets 578 Interest on lease liabilities 720

e) Lease cashflows included in cashflow statement 2020 $'000 Interest payments 720 Principal payments 318 Total cash outflow in relation to leases 1,038

f) Transitional adjustments to new standard (NZ IFRS 16 Leases) for lease liabilities 2020 Operating lease commitment at 31 March 2019 as disclosed in $'000 Eastland Group's financial statements 22,782 Discounted using the incremental borrowing rate at 1 April 2019 (13,040) Changes re lease assumptions (6,326) Exemption for: Short-term leases (6) Extension options reasonably certain to be exercised 8,935 Net changes in leases (10,437) Lease liabilities recognised at 1 April 2019 12,345

PAGE F - 40 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

21. Our shareholder

Authorised and Issued capital

Total number of shares authorised on issue is 1,000. There was no movement in the total number of shares during the year. All shares are classed as ordinary, have no par value and are subject to the same rights and privileges and are subject to the same restrictions. There are no restrictions on the distribution of dividends and the repayment of capital.

Dividends paid

Dividends of $10.12 million were paid during the year (2019: $10 million). This includes a subvention payment of $1.97 million (2019: $Nil). The dividend per share is $10,120 (2019: $9,950).

Imputation credits

As at 31 March 2020, the imputation credits available to the shareholders of the parent and Eastland Group total $25.6 million (2019: $20.6 million).

Capital notes

Eastland Group issued capital notes on 1 April 2010 of $30 million to Trust Tairawhiti.¯ The notes have a perpetual term and are subject to repayment, after 31 March 2020, on receipt of 15 months notice. Trust Tairawhiti¯ elected to renew the capital notes on 1 April 2015. Eastland Group may elect at any time to redeem all or part of the notes for equity or cash. The capital notes incur interest at 7.10% (2019: 7.10%), which is fixed until 31 March 2020.

Interest paid for the year ended 31 March 2020 was $2.1 million (2019: $2.1 million).

Other transactions

Eastland Group provides finance, human resource and information technology services to Trust Tairawhiti¯ and subsidiary companies. Management fees for these services were $234,000 (2019: $217,500).

22. Directors’ information

Directors are appointed by our shareholder, Trust Tairawhiti.¯ They are appointed as Directors of Eastland Group Limited, Eastland Network Limited, Gisborne Airport Limited and Eastland Port Limited. Directors' fees are paid by Eastland Group Limited to the directors, as the directors of the Eastland Group. Total fees paid were $339,802 (2019: $437,460). There are no separate fees paid in respect of the subsidiaries.

Approved Director remuneration as at 31 March 2020 is as follows: $’000 Board chair 110 Board member 58 Audit, finance and risk committee - Chair 12 Audit, finance and risk committee - Member 6 Remuneration committee - Chair 4 Remuneration committee - Member 2

PAGE F - 41 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

Total fee pool $375,000 Business Performance & Performance Audit, Finance Remuneration & Pricing Board Fees & Risk Committee Committee Committee Total 2019 Notes $ $ $ $ $ $ Current Directors M Mahuika 110,371 1,421 111,792 52,407 Appointed Interim Chair of Board 22 May 2019. Appointed Chair of Board 16 October 2019. T Gray 58,238 7,357 65,595 59,282 Appointed Chair of Audit, Finance and Risk committee from 16 October 2019. W Harvey 26,709 1,145 27,854 - Appointed 16 October 2019. Member of Remuneration Committee. J Nichols 29,000 3,000 32,000 - Appointed 16 October 2019. Member of Audit, Finance and Risk committee.

J Rae 58,529 3,331 1,000 62,860 56,257 Former Directors K Sutton 10,531 836 11,367 105,131 Resigned 8 May 2019. K Devine 8,333 1,334 9,667 54,779 Resigned 8 May 2019. M Glover 8,333 667 9,000 52,535 Resigned 8 May 2019. F Mules 8,333 667 667 9,667 57,069 Resigned 8 May 2019. Total 318,377 14,355 4,069 3,001 339,802 437,460

Interests Register

Directors may be appointed to boards of various organisations, which may transact on a commercial basis, with Eastland Group and its subsidiaries. The following entries were on record in the interests register as at 31 March 2020 of general disclosures of interest.

There were no specific disclosures made during the year of transactions entered into by Eastland or any of its subsidiaries.

Mr Matanuku Mahuika Mr Tony Gray Activate Tairawhiti¯ Limited Artemis Nominees Limited Callahan Innovation Civic Assurance Property Pool JP Ferguson Trustee Company Limited Civic Financial Services Limited Hauiti Berries GP Limited Hastings District Council Kahui Legal Local Government Mutual Fund Trustees Limited New Zealand Geographic Board Ngati Pukenga Investments Limited Ngati Porou Berries Limited Quality Roading and Services (Wairoa) Limited Ngati Porou Holding Company Limited Tatau Tatau O Te Wairoa Commercial Limited Ngati Porou Wind Farms Limited

NPWF Holdings Limited Ms Wendie Harvey Pakihiroa Farms Limited Aurora Energy Limited Paraumu A1 Centralines Limited Pohewa Limited Electrical Training Company Limited St Mary’s Church & Cemetery Trust Excellence in Business Solutions Limited Te Runanganui O Ngati Porou Trustee Limited Fire and Emergency New Zealand Te Tira Toi Whakangao Limited Hawkes Bay Airport Limited The NZ Merino Company Limited Hawkes Bay Airport Construction Limited New Zealand Gambling Commission

PAGE F - 42 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

Mr Jon Nichols Centralines Limited Hastings District Council Maungaharuru Tangitu Trust Nichols Consulting Limited Palmerston North Airport Tregaskis Brown Limited

Mr John M Rae Abodo Wood Limited Trust Tairawhiti¯ Investment Committee and associated companies Cavalier Corporation and associated companies F J Hawkes & Co Limited and associated companies Gobble Limited and associated companies New Zealand Government Provincial Growth Fund Ngapuhi Asset Holding Company Limited and subsidiary companies Smart Environmental Limited and associated companies Te Tumu Paeroa Thos Corson Holdings Limited and subsidiary companies Jacks Co Advisory Board

23. Management compensation

Key management compensation comprises of the Chief Executive, Chief Financial Officer, Chief Operating Officer and the members of the senior leadership team: 2020 2019 $’000 $’000

Short term employee benefits 3,355 2,176 Kiwisaver and other contributions 240 181 Total key management compensation 3,595 2,357

24. Other related party transactions

Eastland Group Limited operates a shared services model and is responsible for the management of all Eastland Group debtors and creditors. There are no parent guarantees of subsidiary liabilities.

Settlements of sales of electricity were made to Flick Energy Limited during the year of $598,880 (2019: $420,150).

An electricity derivative with Flick Energy Limited was paid to Flick Energy Limited of $1,262,103 (2019: $953,808). Further details of our electricity deriviatives are in Note 15.

A grant was made by Trust Tairawhiti¯ of $5 million for the construction of the airport terminal building which is recorded as other income in the Statement of Financial Performance. Eastland Group has made the judgment that this grant is received in the capacity as a beneficiary of the Trust on the basis that the funds were gifted for with no expectation that the funds would generate a commercial return for the Trust and the receipt of the funds were contingent on the completion of the terminal.

There are no other material transactions with employees, directors or joint ventures.

Directors and management may transact with Eastland Group in the ordinary course of business on an arm’s length basis.

PAGE F - 43 EASTLAND GROUP • ANNUAL REPORT 2020

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

25. Employee entitlements 2020 2019 Provisions for: $’000 $’000

Annual leave 1,131 1,084 Post-employment benefits 80 76 Other benefits 2,452 970 Total employee entitlements 3,663 2,130

Expenses recognised in profit or loss: Wages and salaries 13,794 10,963 Contributions to defined contribution plans 613 566 Total personnel expenses 14,407 11,529

Eastland Group operates a long-term incentive plan, which remunerates the senior leadership team over a five year period, based on the financial performance of the Group.

During the year the following number of employees received remuneration of at least $100,000. 2020 2019 Total Total 100,000 - 109,999 4 9 110,000 - 119,999 5 7 120,000 - 129,999 6 3 130,000 - 139,999 3 3 140,000 - 149,999 4 1 150,000 - 159,999 1 5 160,000 - 169,999 3 2 170,000 - 179,999 1 2 180,000 - 189,999 2 1 190,000 - 199,999 2 - 200,000 - 209,999 2 2 210,000 - 219,999 1 - 220,000 - 229,999 - - 230,000 - 239,999 - 2 240,000 - 249,999 1 2 250,000 - 259,999 2 1 260,000 - 269,999 3 - 270,000 - 279,999 - - 280,000 - 289,999 1 1 300,000 - 309,999 - 1 350,000 - 359,999 1 1 360,000 - 369,999 1 - 390,000 - 399,999 1 - 400,000 - 409,999 - 1 540,000 - 549,999 1 - 620,000 - 629,999 - 1 680,000 - 689,999 1 -

26. Subsequent events

Effective 1 April 2020 the coupon on our Capital Notes, issued to our Shareholder, repriced to 3.45% from the previous coupon of 7.1%. The coupon on capital notes is repriced every five years. The terms of the capital notes are summarised in note 21.

An agreement was signed on 6 May 2020 between Geothermal Developments Limited (“GDL”) and Ngati Tuwharetoa Geothermal Assets Limited (“NTGA”) to supply geothermal fluid to our GDL plant. The management and operation of our GDL production well KA24, will transfer and be treated as a lease receivable from 1 May 2020.

As described in note 1 (e), the outbreak of novel coronavirus (Covid-19) and the business and government response to it, continues to influence Eastland Group’s businesses and people. The outcomes and impact are currently difficult to predict.

PAGE F - 44 Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2020

EASTLAND GROUP LIMITED

COMPANY INFORMATION AS AT 31 MARCH 2020

Board of Directors Matanuku Mahuika (Chair) Tony Gray Wendie Harvey Jon Nichols John Rae

Chief Executive Officer Matt Todd

Chief Financial Officer Aaron Snodgrass

Chief Operating Officer Andrew Gaddum

Senior Leadership Team Debbie Anstis Steven Follows Ben Gibson Steferl Gordon Jarred Moroney Alice Pettigrew Philip Wallingford Suzanne Winterflood

Auditors Deloitte Limited

Lawyers Chapman Tripp

Bankers ANZ ASB Bank of New Zealand

Registered Office 37 Gladstone Rd PO Box 1048 Gisborne 4040 New Zealand T: 06 986 4800 F: 06 867 8563 E: [email protected] W: www.eastland.nz Printed on 100% recycled paper using eco-friendly vegetable inks.

Front cover image: Strike Photography.

Photo credits: Strike Photography, Cinema East, Keepa Digital, Trust Taira¯whiti.