Photo: Substation Mornings taken by Gemma Langford TABLE OF CONTENTS

Westpower Highlights 5 Chief Executive’s Report 6 Chairman’s Report 8 Westpower limited Company Structure 9 Executive Management Team 10 COVID-19 Working from Home – April 2020 12 Health and Safety 14 Project Gateway - PowerPilot 15 ElectroNet Photo Competition 16 Major Design-build-deliver projects 18 Directors’ Report 19 Financial Statements 24 Notes to the Financial Statements 28 Independent Auditor’s Report 60

3 Mission Statement A West Coast Company operating successful businesses which provide first class electrical and technology solutions wherever our customers take us. Vision Recognised for excellence in all links of the electricity value chain.

Photo by Ricky Trompetter Highlights FOR THE 12 MONTHS TO 31 MARCH 2020

TURNOVER NUMBER OF POLES $88 MILLION ON NETWORK 21,203

TOTAL ASSETS $201 MILLION

NUMBER OF ZONE CUSTOMER PREMISES SUBSTATIONS CONNECTED TO NETWORK 18 13,687

NET PROFIT BEFORE TAX AND DISCOUNT $10.8 MILLION EMPLOYEES 333 WESTPOWER SPECIAL DISCOUNT TO CONSUMERS TO BE PAID AUGUST 2020 $5 MILLION Auckland = 3

LENGTH OF NETWORK Hamilton = 1

2,194KM Taupo = 1

New Plymouth = 14 NUMBER OF DISTRIBUTION SUBSTATIONS Picton = 1 2,463 Nelson = 54 Wellington = 15 Reefton = 2 Greymouth = 161 Hokitika = 5 Harihari = 1 Christchurch = 68

Cromwell = 4

Locations Photo: Rainbow Road AND STAFF NUMBERS taken by Gemma Langford CHIEF EXECUTIVE’S REPORT

HEALTH AND SAFETY The Westpower Group’s approach to Health and Safety has been characterised by a focus on continual improvement and leadership at all levels of the organisation. The Directors and Executive Management have been active in developing and supporting strategies that ensure the safety of our people, and the public in terms of the day to day operation of the business. As can be seen in the graph below, lost time injuries occurred in May 2017 and another in May 2019. Up until May 2019 the group had achieved more than 1.2 million hours free from lost time injury. HEALTH AND SAFETY

1.502013 - 93 working days lost due to injury 2015 - 81 working days lost to injury = Average Time Lost of 31 days per injury = Average Time Lost of 27 days per injury 1.25 2014 - 150 working days lost due to injury 21 months from 1 October 2015 to 30 June 2017 = Average Time Lost of 50 days per injury free from LTI and Average Time Lost = 5 days

1.00 LTI LTI LTI LTI LTI LTI LTI 2 Consecutive LTI LTI LTI’s 0.75 21 months free 21 months free from LTI ENS Line from LTI ETL Line Mechanic Mechanic 0.50 - Strained - Strained Elbow Shoulder Torn Tendon 0.25

0.00 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 May-13 May-14 May-15 May-16 May-17 May-18 May-19

Previous frequency of Lost Time Injury occurrences and performance Barometer Challenge Commenced 1 Otober 2015 following introduction of Barometer Challenge on 1 October 2015 Reset on 1 July 2017 following an elbow strain injury

ELECTRICITY DELIVERY – VOLUME AND QUALITY Electricity delivered through the network during the 2020 year showed a marginal increase on that delivered in 2019. It is positive400000 to see year on year increases in consumption and it is hoped that economic activity in the region will see some large steps in load on the network in the coming years. ELECTRICITY350000 DELIVERY

300000

250000

200000

Megawatt Hour 150000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

The System Average Interruption Index (SAIDI) for the last year was impacted by flood related outages in South Westland, where poles were washed out of Docherty’s creek in two separate events in December 2019 and February 2020. These events demonstrate the difficulties in maintaining supply to rural townships where only a single line route is available, and the route is constrained1000 within very difficult mountainous terrain and stands of native bush. In these events it is the commitment and skill of our talented local work crews that makes the difference in the length of the outages 900the communities face. 800 SAIDI 700 600 500 400 300 200

Total Minutes Total 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

6 CHIEF EXECUTIVE’S REPORT

400

SAIDI350 WORM APRIL 2019 - MARCH 2020 — System Average Interruption Duration Index

309.15 Target 300 5 Year Monthly Average With Major Event Days SAIDI Total Less Med 250 229.97 220.71

200 175.12 179.95 165.33 170.69 177.00 147.50 162.25 150 93.73 132.75 87.79 118.00 137.41 103.25 127.62 100 88.50 73.75 86.03 59.00 73.93 50 44.25 65.72 29.50 47.71 40.32 14.75 18.50 21.97 0 5.16 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

FINANCIAL PERFORMANCE

Group performance for 2020 has been impacted by the impairment and revaluation of the Group’s electricity network assets. The revaluation resulted in an impairment writedown of the assets associated with the Globe and Pike mines totalling $1.06m and a revaluation uplift of $4.6m on the remaining network assets. Had those impairments not been required to be taken into the accounts for the year, performance would have been on par with 2019’s record performance. Results Summary $,000s 2020 2019 2018 2017 2016 Operating Surplus Before Discount 10,793 11,868 9,958 7,020 8,902 Less Discount to Consumers (2,990) (2,971) (1,992) (1,978) (2,961) Operating Surplus Before Tax 7,803 8,896 7,966 5,042 5,941 Taxation Expense (1,386) (2,588) (2,567) (2,376) (2,420) Net Surplus After Taxation 6,417 6,308 5,399 2,666 3,521 In December 2019 Westpower was able to provide discounts to it’s consumers totalling close to $3m while still maintaining post tax profits at virtually the same level as for the previous financial year.

OUR PEOPLE Having been with Westpower for several years, I am delighted to be in a position to take over the leadership of the company as its new Chief Executive. Over the course of the last several years the business has continued to grow its capacity and capability, particularly in the contracting and consultancy fields. We are respected by our peers in the electricity industry as a strong business with deep competence and a real can-do attitude. We are in a position to provide good sustainable returns to the West Coast. The nature and scope of work now being performed across the group has grown significantly, offering new challenges and new opportunities both for existing and new employees, from the design and construction of Wind Farms in Taranaki to our innovative MOSS, transportable switchroom technology. The strength of the diversification of the business over the past decade has helped us endure the effects of the COVID-19 lockdown at the very end of the financial year. While the financial effects of COVID-19 will not be fully seen until 2021, the business has been positioned well to manage the impacts of the lockdown and, at the time of writing this report, has emerged with a robust pipeline of forward work.

Peter Armstrong - Chief Executive

7 CHAIRMAN’S REPORT

SUMMARY – CHAIRMAN MIKE NEWCOMBE

The Directors continue to be satisfied that Health and Safety performance is constantly monitored and all of our people are encouraged to be active and show leadership in this important area. The two instances of injury experienced during the year are a stark reminder that previous performance is not necessarily an indication of future performance, and that we must remain vigilant to ensure that our people and the public are kept free from harm. This year has seen further work on the Transpower Pricing Methodology, an outcome for which was delivered at the time of preparation of this annual report. Westpower’s approach appears to have delivered an outcome which, when changes to the Avoided Cost of Transmission are taken into account, will be positive for the region. During the year Directors closely followed the Electricity Price Review Panel’s work, and also that of the Electricity Authority with regard to Cost Reflective Pricing. It is clear that until a solution is found to the ongoing constraint of the Low User Fixed Charge regime, regions like the West Coast who have a significant number of consumers qualifying for the low user charge will not see any benefit from moves to reform current pricing. The past six months have seen more work on the stalled concession process for the proposed Waitaha Hydro Scheme. While the decision Mike Newcombe - Chairman delivered in August 2019 declined the application, we continue to explore with the Department of Conservation a more positive outcome to this project. The requirement to recognise an asset impairment has not distracted from what would otherwise have been another solid year of trading by the group, when compared on a like for like basis to last year. The Directors are pleased to have been able to recognise this by including a discount on line charges of $5m in the tariff for the 2021 year. The West Coast Electric Power Trust has continued to support the Directors and the organisation in its ongoing endeavour to provide the consumer/shareholders with benefits of continued ownership of the Westpower Group of companies. This support is greatly appreciated by the Directors.

Mike Newcombe chairman

8 WESTPOWER LIMITED COMPANY STRUCTURE

ORGANISATIONAL STRUCTURE

Westpower Limited

Amethyst Hydro Limited (88% Ownership) 100% Ownership

100% Ownership 100% Ownership 100% Ownership

9 EXECUTIVE MANAGEMENT TEAM

PETER ARMSTRONG RODGER GRIFFITHS

Group Chief Executive Group General Manager Assets Peter has been with Westpower and Engineering since early 2015 and in April Rodger is a Professional Engineer 2020 took over the role of Group with over thirty-five years of Chief Executive. Prior to this experience with the Westpower he was the General Manager network, and West Coast Hydro for Mitton ElectroNet where, Generation schemes. Rodger is under his leadership, has seen the Mitton team grow the driving force behind the Asset Management team. to a team of nearly 100 staff. A chartered mechanical Rodger’s knowledge of the electrical industry and engineer, Peter’s early career was as a specialist in its commercial realities provide a great resource for wind and renewable power generation projects and for industry players. In addition, his engineering expertise the last decade has been in technical and commercial provides customers with the assurance that scoping, leadership roles in the transmission and distribution design and commissioning of all work is subject to space, primarily in Australia and New Zealand. Peter rigorous quality assurance. Rodger is highly regarded in sees a bright future for the Westpower group and the electrical industry and was awarded life membership expects to see the business continue to grow over the to the Electricity Engineers Association in 2016 in coming years. recognition of the contribution he has made to the industry. GLENN BALLOCH ROBYN SCOTT Group Information Technology Manager Group Health & Safety Glenn joined the team in 1999 as Coordinator the IT Support Officer and since Robyn has held her role as Health then has built a team that supports and Safety Coordinator with continually evolving business ElectroNet for over 20 years. She and technological change. He is holds a NZIM Level 6 Diploma in currently the Information Technology Manager, leading Health and Safety Management. a team that supports the Westpower/ElectroNet Group She is responsible for the development and compliance across its many sites. Glenn’s extensive IT skill set, of safety matters for Westpower and the ElectroNet gained predominantly within the electrical industry, Group. Robyn regularly provides the entire group enables him and his team to successfully provision, with safety focuses, initiatives and improvements for support and maintain high quality and secure IT services the ElectroNet Safety System and is committed to to the ElectroNet Group, its employees and external keeping our workers free from harm. She is an active stakeholders. member in many safety forums both within and outside of the electrical industry. Along with her Health and Safety role, Robyn also leads the ElectroNet Services BRAD ROONEY administration team. General Manager Mitton ElectroNet Ltd Brad leads our engineering and professional services subsidiary, Mitton ElectroNet Ltd, which has offices in Christchurch, Wellington and Auckland. Brad joined Mitton ElectroNet in 2014 as a Senior Engineer and has progressed through the ranks, becoming the Business Development Leader and recently General Manager. He is a Chartered Professional Engineer with extensive experience in the transmission and distribution industry within New Zealand and Australia, where he has previously held technical, business development and management roles. Brad has overseen the growth and servicing of our customers for the last 5 years, providing a solid foundation to continue the growth of Mitton ElectroNet and bring a customer focus to the executive team.

10 EXECUTIVE MANAGEMENT TEAM

PETE THERON TRICIA RANDS

Group General Manager Group Finance Manager Contracting Tricia Rands is the Westpower/ Pete has been involved in the ElectroNet Group Finance electrical industry for over 35 Manager, with overall years in various roles in the responsibility for the processing construction, projects and service and management of Westpower environment. He took the role and ElectroNet Group accounts. of General Manager Contracting for the ElectroNet Tricia’s previous experience in the public sector, Group 8 years ago. Pete has extensive experience in working for the Buller District Council, and prior to this project management with specific focus on turnkey as an Auditor for Audit New Zealand, has provided her projects. With ElectroNet’s extensive product portfolio with a wide and diverse range of skills. Tricia has been Pete provides leadership on turnkey projects from with the company since 2007 and during this time has concept through to testing and commissioning. Pete introduced many systems and processes to contribute also monitors the safe construction and maintenance toward financial reporting excellence. Tricia’s team of the Westpower Network and contracts for other valued clients, through his electrical, distribution and of nine employees is responsible for organising the transmission teams. financial affairs of the Group companies. After eight years of continuous service, Pete moved on After thirteen years of continuous service, Tricia has from his role as GM Contracting to pursue a new role in moved on from her role as Group Finance Manager to Timaru, we thank Pete for his input to the business over pursue a new role in Oamaru, we thank Tricia for her this time. input to the business over this time.

SIMON HARVEY STU MCKAY

Group General Manager Group Chief Financial Officer Contracting Stu is the Chief Financial Officer Simon has been with the for the Westpower/Electronet ElectroNet Group since 2007, Group and is responsible for the starting in the Electrical Group finance function. Stu has department before discovering a recently started in this role, prior passion for Project Management. to joining the Group he held CFO In more recent years he has been the Manager of roles for Brightwater Engineering & the Kaipara Group. the Electrical and Telecommunication division of A CA qualified accountant, Stu has extensive experience ElectroNet, leading the teams who have delivered some in contracting and mining, and has had a long affiliation large infrastructure projects such as the UFB network with the West Coast through various roles with Solid throughout the West Coast and the Grey Base Hospital Energy. Stu brings a strong strategic, commercial, and Rebuild. Simon’s experience in construction, project analytical skillset that will add significant value to the management, and leadership has seen him appointed Westpower business. into the role of General Manager Contracting in August 2020. Simon brings a fresh collaborative approach at a time when the market is rapidly evolving.

ROB CALDWELL

Group Chief Executive (2001 - 2020) Rob joined Westpower in 2001 after 11 years in local government. In the following years he led the Group through the expansion of its contracting business, including into transmission maintenance and the electrical engineering consultancy. Along with a return to hydro generation in 2013 with the commissioning of Amethyst Hydro in South Westland. His background in financial management and organisational leadership has provided a solid base for growing the Westpower group. Rob retired from the group at 31 March 2020 after a period of over 18 years of continuous service. We thank Rob for his significant service to Westpower and to the community of the West Coast and wish him well for the future.

11 COVID-19 WORKING FROM HOME – APRIL 2020

Tas Scott, Principal Consultant Peter Armstrong – Group CEO Mitton ElectroNet Executive Team Call

Gary Williams, Systems Network Manager Westpower

Georgia Stanton – processing the pays with Mum Arthur Harvey – helping out Dad Jacinda Barrington, Payroll Assistant - ElectroNet Services Simon Harvey, Manager - ElectroNet Services

12 COVID-19 WORKING FROM HOME – APRIL 2020

Gemma Langford, Administration Valerie Lang, Personal Assistant ElectroNet Transmission Mitton ElectroNet

Ava McRoberts – on a Teams Meeting with Dad Murray Bell, Accountant Andrew McRoberts, Test Technician - ElectroNet Services Westpower

“Working from Home” became the new normal during COVID-19 Lockdown Level 4. April 2020 saw new, unprecedented ways of working company wide. Make-shift office spaces were created on kitchen tables, foldout trestles, and spare room desks. Meetings via MS Teams, Skype and Zoom soon became common place, as work continued on, uninterrupted as possible around family commitments and lock- down distractions. This time was a true testament to how our team can adapt and change to meet challenges and embrace change. Dean French, Systems Technician Westpower

13 HEALTH AND SAFETY

We are pleased to report that in October 2019 the ElectroNet Group Safety System gained certification to ISO45001, complementing our ISO9001 Quality Management System certification. This external audit of the safety and quality systems ensures a high benchmark is being achieved and maintained. The safety of the public is also paramount to the company, and our robust Public Safety Management System again gained a Telarc NZS7901 Certification renewal. A key set of safety challenges for the Westpower and ElectroNet companies continues to ensure a strong safety leadership message is reflected throughout the businesses. Participation is key to the success of any safety system, and during the 2019-20 year the safety recognition programme saw 76 people rewarded for their contributions toward safety system improvements. In March 2020 the competence, agility and safety focus of our workers was put to a new test, with the introduction of COVID-19 protocols. Management and staff worked collectively to ensure services and fault response could continue to be provided safely to our community. The results of our continuous focus on safety management is clearly reflected in a 10-year injury occurrence analysis. In 2010 22% of the workforce sustained an injury of some nature, however, as at the time this report was produced, the statistic is now 1%. The severity of injury has also greatly reduced.

ALL INJURIES REPORTED 2010-2020

45

40 Barometer Challenge Initiated 01/10/15 35

30

25

20

15

10

5

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 LTI 3 5 2 2 3 4 0 1 0 1 1 FAI 39 31 25 11 22 16 5 21 6 24 3

Staff Nos. 195 202 209 232 250 245 255 270 270 313 327 % injured 22% 18% 13% 6% 10% 8% 2% 8% 2% 8% 1% YTD

14 PROJECT GATEWAY - POWERPILOT

PowerPilot is an innovative new IoT based, low voltage management device, designed and built by Westpower subsidiary, ElectroNet Technology. The PowerPilot device provides real-time network data, transmitting this data using wireless communications such as Wi-Fi or LoRaWAN (Long Range Wireless). This will assist in providing ways to improve customer safety and service. Now, as part of a major field trial, Westpower is rolling out Project Gateway which is the installation of 500 PowerPilot units on its network, to gain experience with mass collection of LV data, and to understand how this can best be used by the business to improve our service performance. It is also expected to lead to optimal management of the assets, thus reducing lifetime costs. Moreover, it has the ability to pick up a number of potential safety issues on the PowerPilot Devices network and identify these before they can become a hazard to the public. PowerPilots are being installed at a range of distribution substations and installations, including a mix of intensive urban sites in the Blaketown area, in conjunction with other low-voltage maintenance work. The data insights provided to date are building a strong case for extending the rollout throughout the network and then marketing this exciting new innovation to other Electricity Distribution Networks.

Distribution Substation Installation

Real Time Dash Board examples

Technicians Installing Devices on Westpower Network Device Network Applications

15 ELECTRONET PHOTO COMPETITION

Each year staff are invited to take part in the Annual Report Photo Competition. This year’s theme was “Staff at Work“, 115 entries were received. Entries came from across NZ and have really showcased what our staff do in their daily work lives throughout New Zealand. Photos from the competition are used throughout this report, with additional entries also displayed on these pages.

Photo by Ricky Trompetter Photo by Gary McLennan

Photo by Tony Fearn Photo by Hayden Booker Photo by Tim Schroder

Photo by Matt Clough Photo by Josh Komen Photo by Richard Harding

16 ELECTRONET PHOTO COMPETITION

Photo by Brian Tannahill Photo by David Szekely

Photo by Tim Schroder Photo by Tim Schroder Photo by Gary McLennan

Photo by Lucy Bain Photo by Matt Clough

Photo by Tim Schroder Photo by Kelly Glass

17 MAJOR DESIGN-BUILD-DELIVER PROJECTS

2019 saw the completion of one, and start of a second significant Design–Build–Deliver projects for ElectroNet. These showcased the ability to take on contracts and manage these end-to-end projects within the ElectroNet Group.

JUNCTION ROAD

The Junction Road Grid Connection Project in New Plymouth, undertaken for Todd Generation, included both a short 110kV Transmission Line and a 110/11kV Substation and was completed with the successful commissioning undertaken in January 2020. This project involved staff from across the organisation. We received positive feedback from the client with regard to the design, build quality and professionalism shown by all the staff involved.

WAIPIPI WIND FARM

The 133MW Waipipi Wind Farm project consists of 31 4.3MVA Siemens Gamesa wind turbines located approximately 6km South-East of Patea, and 8km south-west of Waverley in South Taranaki, developed by Tilt Renewables Ltd. The turbines are 95m to the nacelle with 65m blades for 160m blade tip height. ElectroNet are contracted to Tilt Renewables to install the 33kV collector system cabling, 33/110kV substation and an 11 km 110kV overhead transmission line under a design build deliver contract. This also included the specification and procurement of primary electrical equipment. Mitton ElectroNet have completed the design works and are providing engineering support to the ElectroNet installation crews. The scope of works includes: • Progression of design from concept to detail and specification of all primary plant • The design, procurement, and installation of an 11km 110kV overhead transmission line • Procurement of 70+ km of 33kV cable ranging in size from 185mm to 800mm², and installation in 21km of trenches on the wind farm site • Termination of collector system cabling into 33kV switchgear in turbine bases • Procurement and installation of substation works: o 145MVA 33/110kV transformer o 110kV switchyard o 33kV combined switchroom and control room • Testing and commissioning of substation and collector system Works are being closely coordinated with the other major contractors on site.

18 WESTPOWER LIMITED DIRECTORS’ REPORT

In respect of the financial year ended 31 March 2020 the AUDITOR’S REMUNERATION Directors of Westpower Limited submit the following report: In accordance with section 45 of the Energy Companies The names of the Directors of the company during the year Act 1992, the Auditor-General is responsible for the and their remuneration were as follows: audit of Westpower Limited. The audit is undertaken by Audit New Zealand on behalf of the Auditor-General. It is recommended that the Directors be authorised to fix the WESTPOWER remuneration of the auditor. Michael John Newcombe Chairman, Director of Subsidiaries $76,807 REVIEW OF OPERATIONS Suzanne Peta Merriman Deputy Chair, Chair of Audit Committee, $66,510 The Group’s net surplus for the year ended 31 March Director of Subsidiaries. 2020 was $7.8m before taxation (2019: $8.9m). On a Hugh Robert Little before discount basis, the net surplus before taxation Non Executive Director, Director of Subsidiaries $42,340 was $10.8m (2019: $11.9m).

Anthony Graham Williams Non Executive Director, Director of Subsidiaries $42,340 ELECTION OF DIRECTORS

Ross Pickworth The Directors are appointed by the shareholders. Non Executive Director, Director of Subsidiaries $42,340 DIRECTORS’ INDEMNITY AND LIABILITY AND INSURANCE AMETHYST HYDRO

Michael John Newcombe A Directors’ and Officers’ Liability Insurance is in place for Chairman $34,634 Directors. The sum insured is $5 million. Hugh Robert Little $18,229 Non Executive Director EMPLOYEES’ REMUNERATION Suzanne Peta Merriman Non Executive Director $18,229 During the year, the number of non-director employees who received remuneration and other benefits of Anthony Graham Williams Non Executive Director $18,229 $100,000 or more was as follows: Robert Alan Smith TOTAL REMUNERATION AND NUMBER OF $18,229 Non Executive Director OTHER BENEFITS EMPLOYEES $100,000 - $110,000 28 PRINCIPAL ACTIVITIES OF THE $110,000 - $120,000 18 COMPANY $120,000 - $130,000 14 $130,000 - $140,000 13 The Group’s principal activities for the financial year ended 31 March 2020 were the reticulation and generation of $140,000 - $150,000 2 electricity and electrical contracting. $150,000 - $160,000 5 $160,000 - $170,000 6 RECOMMENDED DIVIDEND $170,000 - $180,000 2

The Directors recommend that in respect of the year $180,000 - $190,000 1 ended 31 March 2020: $270,000 - $280,000 1 • a final ordinary dividend of $178,250 be paid $320,000 - $330,000 1 • a preference dividend of 7.25% per annum amounting $330,000 - $340,000 1 to $21,750 be paid $480,000 - $490,000 1 • the dividends carry full imputation credits and are payable following the company’s annual general No other non-director employees received remuneration meeting in September 2020. and other benefits which totaled more than $100,000.

19 WESTPOWER LIMITED DIRECTORS’ REPORT

DIRECTORS’ INTERESTS DISCLOSED

The following Directors have declared interests in the identified entities as shareholder and/or director. The declaration serves as notice that the Director may benefit from any transactions between the Company or Group and the identified entities.

MICHAEL NEWCOMBE

Relationship with Position Held Entity Westpower Limited Director ElectroNet Services Limited Subsidiary of Westpower

Director Amethyst Hydro Limited Subsidiary of Westpower

Director ElectroNet Transmission Limited Subsidiary of ElectroNet Services

Director Mitton ElectroNet Limited Subsidiary of ElectroNet Services

Director ElectroNet Technology Limited Subsidiary of ElectroNet Services

Director Standby Power Limited

Trustee Wanaka Terraces Trust Otautahi Education Development Trustee Trust

ANTHONY WILLIAMS

Relationship with Position Held Entity Westpower Limited Director ElectroNet Services Limited Subsidiary of Westpower

Director Amethyst Hydro Limited Subsidiary of Westpower

Director Mitton ElectroNet Limited Subsidiary of ElectroNet Services

Director ElectroNet Transmission Limited Subsidiary of ElectroNet Services

Director ElectroNet Technology Limited Subsidiary of ElectroNet Services

Director/Shareholder Williams Hotel Group Limited

Director/Shareholder WHG Management Limited

Director/Shareholder WHG Oakridge Land Limited

Director/Shareholder WML Limited

Director/Shareholder The Towers on the Park Limited

Director/Shareholder The Ashley Hotel Limited

Director/Shareholder Williams Mining Limited

Director/Shareholder WHG Oakridge Limited WHG Oakridge Management Director/Shareholder Limited Director/Shareholder GE Williams Road Metals Limited The Ashley Hotel Christchurch Director/Shareholder Limited Director/Shareholder WHG Punakaiki Land Limited

Director/Shareholder WHG Punakaiki Resort Limited

Director/Shareholder Moet Limited

Trustee Williams Investment Trust

20 WESTPOWER LIMITED DIRECTORS’ REPORT

HUGH LITTLE

Relationship with Position Held Entity Westpower Limited Director ElectroNet Services Limited Subsidiary of Westpower Director Amethyst Hydro Limited Subsidiary of Westpower Director Mitton ElectroNet Limited Subsidiary of ElectroNet Services Director ElectroNet Transmission Limited Subsidiary of ElectroNet Services Director ElectroNet Technology Limited Subsidiary of ElectroNet Services Director Cranley Farms Limited Director Boldhead Farm Limited Director West Coast Development Holdings Stations Inn Restaurant, Bar and Owner/Director Accommodation Director/Shareholder Lilyvale Farms Limited Director/Shareholder Stations 2004 Limited Director/Shareholder Eastgate 2004 Limited

SUZANNE MERRIMAN

Relationship with Position Held Entity Westpower Limited Director ElectroNet Services Limited Subsidiary of Westpower Director Amethyst Hydro Limited Subsidiary of Westpower Director Mitton ElectroNet Limited Subsidiary of ElectroNet Services Director ElectroNet Transmission Limited Subsidiary of ElectroNet Services Director ElectroNet Technology Limited Subsidiary of ElectroNet Services Managing Director/ Marshall and Heaphy Limited Partner Director/Shareholder Moet Limited Director/Shareholder Westland Consultancy Limited Director/Shareholder HSBP Limited Director Kokatahi Trustee Services Limited M & H Trustee One – Twelve Director Limited M & H Trustee Fourteen – Director Nineteen Limited Director Coast Investments Limited Williams Development Trustee Shareholder Company Limited Shareholder Ledigital Limited The Ashley Hotel Christchurch Shareholder Limited Shareholder The Towers on Park Limited Shareholder WHG Management Limited Shareholder WHG Oakridge Land Limited Shareholder WHG Oakridge Limited Shareholder WHG Punakaiki Land Limited Shareholder WHG Punakaiki Resort Limited Shareholder Williams Hotel Group Limited Shareholder WML Limited Trustee Minerals West Coast Trust Trustee Merriman Family Trust Trustee Williams Investment Trust

21 WESTPOWER LIMITED DIRECTORS’ REPORT

ROSS PICKWORTH

Relationship with Position Held Entity Westpower Limited Director ElectroNet Services Limited Subsidiary of Westpower

Director Mitton ElectroNet Limited Subsidiary of ElectroNet Services

Director ElectroNet Transmission Limited Subsidiary of ElectroNet Services

Director ElectroNet Technology Subsidiary of ElectroNet Services

Director Whitestone Contracting Ltd

Director WestRoads Ltd

Director Transwaste Canterbury Ltd

Director Tiromoana Station Ltd

Director Burwood Resource Recovery Park Ltd

Director Ashburton Contracting Ltd

Director Pipeline Group Ltd

Director/Shareholder West Oak Trading Ltd Sole Trader trading as Pickworth Owner/Director Holdings

Westpower Directors: l-r: Tony Williams, Hugh Little, Ross Pickworth, Sue Merriman and Mike Newcombe

22 WESTPOWER LIMITED DIRECTORS’ REPORT

PARTICULARS OF DIRECTORS’ INTEREST IN THE SHARES OF WESTPOWER LIMITED

There are no directors who held an interest in the shares of Westpower Limited.

DIRECTORS’ BENEFITS

No Director of the Company has, since the end of the previous financial year, received or become entitled to receive a benefit other than a benefit included in the total remuneration received or due and receivable by Directors shown in the group financial statements. There were no notices from Directors to the company requesting to use company information received in their capacity as Directors which would not otherwise have been available to them.

EVENTS SUBSEQUENT TO BALANCE DATE

The Directors are not aware of any matter or circumstance since the end of the financial year that is not otherwise dealt with in this report or financial statements and that has significantly affected, or may significantly affect, the operations of Westpower group, the result of those operations or the state of affairs of the group.

FINANCIAL STATEMENTS

The financial statements for the year ended 31 March 2020 immediately follow this report. On behalf of the Board,

M J Newcombe S P Merriman CHAIRMAN 2019/20 CHAIR 2020/21

23 October 2020

23 STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2020

GROUP

Notes 31-Mar-20 31-Mar-19 $000 $000

Operating Revenue 6 87,888 67,682 Other Income 7 82 8 87,970 67,690

Operating Expenses 8 72,860 52,253 Depreciation, Amortisation and Impairment 6,772 5,982 79,632 58,235

Operating Profit 8,338 9,455

Finance Income 534 475 Finance Expenses (1,069) (1,034) Net Finance Cost 9 (535) (559)

Profit Before Income Tax 7,803 8,896

Income Tax 10 1,386 2,588

Profit After Income Tax 6,417 6,308

Attributable to: Company Shareholders 6,190 6,127 Minority Interests 227 181 6,417 6,308 The accounting policies and notes on pages 28 to 59 are an integral part of these financial statements.

24 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2020

GROUP

Notes 31-Mar-20 31-Mar-19 $000 $000

Profit for the year 17 6,417 6,308

Other comprehensive income Other comprehensive income that may be reclassified to profit or loss in subsequent periods (net of tax) Net gain/(loss) on cash flow hedges 17 93 (28)

Net other comprehensive income/(loss) that may be reclassified to 93 (28) profit or loss in subsequent periods Other comprehensive income that will not be reclassified to profit or loss in subsequent periods (net of tax) Revaluation of Property, Plant and Equipment 17 3,375 774

Net other comprehensive income/(loss) that will not be reclassified 3,375 774 to profit or loss in subsequent periods

Total Comprehensive Income for the year, net of tax 9,885 7,054

Attributable to: Parent Entity 9,647 6,876 Minority Interest 238 178 9,885 7,054

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2020

GROUP

Notes 31-Mar-20 31-Mar-19 $000 $000

Balance at 1 April 135,543 128,809

Total comprehensive income 9,885 7,054

Contributions from equity holders Dividends to equity holders (320) (320) Reclassification of leased assets (958)

Balance at 31 March 17 144,150 135,543

Attributable to: Parent Entity 142,932 134,443 Minority Interest 1,218 1,100 144,150 135,543 The accounting policies and notes on pages 28 to 59 are an integral part of these financial statements.

25 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2020

GROUP Notes 31-Mar-20 31-Mar-19 $000 $000 NON CURRENT ASSETS Property, Plant and Equipment 11 148,562 144,603 Right-of-Use-Assets 19 4,191 Goodwill and Other Intangible Assets 12 7,654 7,707 Other Investments 13 247 346 Total Non Current Assets 160,654 152,656 CURRENT ASSETS Cash and Cash Equivalents 14 10,048 5,528 Short Term Deposits 15,500 15,000 Trade and Other Receivables 15 13,711 14,474 Financial Derivatives 21 62 Assets Held for Sale 16 283 Inventories 1,024 809 Total Current Assets 40,345 36,094 TOTAL ASSETS 200,999 188,750 EQUITY Share Capital 17 30,800 30,800 Reserves 17 14,462 11,389 Retained Earnings 17 97,670 92,254 Minority Interest 17 1,218 1,100 TOTAL EQUITY 144,150 135,543 NON CURRENT LIABILITIES Loans and Borrowings 5,18 19,800 300 Lease Liability 19 3,798 41 Financial Derivatives 21 172 324 Fibre IRU Liability 1,016 1,070 Provision for Site Restoration 24 23 Employee Benefits 751 721 Deferred Tax Liabilities 10 18,383 18,873 Total Non Current Liabilities 43,944 21,352 CURRENT LIABILITIES Trade and Other Payables 20 7,304 6,005 Employee Benefits 2,949 2,358 Finance Lease Payable 19 420 22 Financial Derivatives 21 310 287 Fibre IRU Liability 54 52 Current Portion of Borrowings 5,18 450 21,700 Income Tax Payable 1,418 1,431 Total Current Liabilities 12,905 31,855

TOTAL LIABILITIES 56,849 53,207

TOTAL EQUITY AND LIABILITIES 200,999 188,750 Authorised for issue on 23 October 2020 for and on behalf of the Board:

The accounting policies and notes on pages 28 to 59 are an integral part of these financial statements. M J Newcombe S P Merriman chairman deputy chair

26 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2020

GROUP

Notes 31-Mar-20 31-Mar-19 $000 $000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 88,272 65,736 Interest Received 539 428

Payments to suppliers and employees (70,384) (50,621) Interest Paid (1,067) (1,032) Income Tax (Paid) Received (3,126) (1,864) Net GST Paid (114) 23 Net cash inflows/(outflows) from operating activities 25 14,120 12,670

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment 89 1,085 Investments repaid 18,000 12,000 Loan repayments received 99 94

Acquisition of property, plant and equipment (6,632) (3,951) Acquisition of investments (18,500) (17,500) Purchase of goodwill and intangibles (188) (505) Net cash inflows/(outflows) from investing activities (7,132) (8,777)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings 1,250 1,150 Contributions from equity holders

Repayment of borrowings (3,000) (2,650) Finance lease repayments (398) (5) Dividends paid (320) (351)

Net cash inflows/(outflows) from financing activities (2,468) (1,856)

Net increase (decrease) in cash and cash equivalents 4,520 2,037

Cash and cash equivalents at 1 April 5,528 3,491

Cash and cash equivalents at 31 March 14 10,048 5,528

The GST (net) component of operating activities reflects the net GST paid and received with the IRD. The GST (net) component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes. The accounting policies and notes on pages 28 to 59 are an integral part of these financial statements.

27 NOTES TO THE FINANCIAL STATEMENTS

1. REPORTING ENTITY Estimates and underlying assumption are reviewed on an ongoing basis. Revisions to accounting estimates are Westpower Limited is a company domiciled in New recognised in the period in which the estimate is revised Zealand and registered under the Companies Act 1993. and in any future periods affected. The consolidated financial statements of Westpower In particular, information about significant areas of Limited as at and for the year ended 31 March 2020 estimation uncertainty and critical judgments in applying comprise the parent and its subsidiaries (see note 27), accounting policies that have the most significant effect together referred to as the Group. on the amount recognised in the financial statements are The company is a reporting entity for the purposes of the described in the following notes: Companies Act 1993 and its financial statements comply • Note 3(j)(iii) Measurement of the recoverable amount with that Act and section 44 of the Energy Companies of cash generating units. Act 1992. • Valuation of Electricity Distribution and Land & Westpower Limited is primarily involved in the generation Building Assets see Notes 11 & 22. and reticulation of electricity and electrical contracting, and consultancy. Significant Judgement The financial statements were authorised for issue by the (i) In assessing the useful life of the hydro generation Board on 23 October 2020. assets, the Group has made a significant judgement that the current Department of Conservation concession will be extended from its current expiry date of 30 April 2. BASIS OF PREPARATION 2059 to 2083 in line with the useful lives of the hydro generation assets. (a) Statement of Compliance If the concession is not renewed the following areas The financial statements have been prepared in would be affected: accordance with New Zealand generally accepted • an increase in depreciation (assessment of useful lives) accounting practice (NZ GAAP). They comply with NZ • an increase in restoration liability provision (based on equivalents to International Financial Reporting Standards timing of future costs) (NZ IFRSs) and other applicable financial reporting • create an impairment indicator, which could result in standards appropriate for profit-oriented entities. an impairment to the value of the scheme assets. The Group is a Tier 1 for-profit entity and has reported in (ii) Determining the lease term of lease contracts with accordance with Tier 1 For-profit accounting standards. renewal options The Group has lease contracts that include extension (b) Basis of Measurement options. These options are negotiated by management to The financial statements have been prepared on the provide flexibility in managing the leased-asset portfolio historical cost basis except for the following: and align with the Group’s business needs. • derivative financial instruments are measured at fair The Group determines the lease term as the non- value. cancellable term of the lease, together with any periods • equity instruments designated at fair value through covered by an option to extend the lease if it is reasonably other comprehensive income. certain to be exercised. The Group considers all relevant factors that create an economic incentive for it to exercise • distribution assets and land and buildings are the renewal. The Group included the renewal periods of its measured at fair value. property leases as part of the lease term because there will The methods used to measure fair value are discussed be a significant negative effect on the Group’s operations further in Note 4. if a replacement asset is not readily available.

(c) Functional and Presentation Currency (iii) Estimating the incremental borrowing rate for lease These financial statements are presented in New Zealand liabilities dollars ($), which is the parent's functional currency. All The Group cannot readily determine the interest rate financial information has been rounded to the nearest implicit in the lease, therefore, it uses its incremental thousand. borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to (d) Use of Estimates, Judgments and Assumptions borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the The preparation of financial statements requires right-of-use asset in a similar economic environment. The management to make judgments, estimates and Group estimates the IBR using observable inputs (such assumptions that affect the application of accounting as market interest rates) when available and is required policies and the reported amounts of assets, liabilities, to make certain entity-specific estimates (such as the income and expenses. Actual results may differ from subsidiary’s stand-alone credit rating). these estimates.

28 NOTES TO THE FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING are not held for trading. The Group has made an irrevocable election at initial recognition to classify these investments POLICIES as financial asset at fair value through other comprehensive income (FVOCI). Subsequent to initial recognition, they are (a) Basis of Consolidation measured at fair value and changes therein, are recognised directly in equity within a revaluation reserve. When an (i) Subsidiaries investment is derecognised, the cumulative gain or loss Subsidiaries are entities controlled by the Group. Control recognised in the revaluation reserve is reclassified to exists when the Group has the power to govern the financial retained earnings and is not transferred to profit or loss. and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting The fair value of equity investments that are not traded in rights that presently are exercisable are taken into account. an active market and are classified as FVOCI, are based on The financial statements of subsidiaries are included in the non-market valuation techniques. consolidated financial statements from the date that control commences until the date that control ceases. (ii) Financial Liabilities Financial liabilities are classified as subsequently measured (ii) Transactions Eliminated on Consolidation at amortised cost, or subsequently measured at fair value Intra-group balances, and any unrealised income and through profit or loss. All financial liabilities are initially expenses arising from intra-group transactions, are remeasured at fair value. eliminated in preparing the consolidated financial Loans and Borrowings statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against After initial recognitions, all borrowings are measured at the investment to the extent of the Group’s interest in the amortised cost using the effective interest rate method. investee. Unrealised losses are eliminated in the same way Trade and Other Payables as unrealised gains, but only to the extent that there is no Trade and other payables are initially measured at fair evidence of impairment. value and subsequently measured at amortised cost using the effective interest rate method. (b) Foreign Currency Transactions Transactions in foreign currencies are translated at the foreign Derivatives Designated as Hedging Instruments exchange rate ruling on the date of the transaction. Foreign The Group uses derivative financial instruments to hedge currency monetary items at reporting date are translated at its exposure to interest rate and foreign exchange risks the exchange rate existing at reporting date. Non-monetary arising from operational, financing and investment assets and liabilities carried at fair value that are denominated activities. In accordance with its treasury policy, the Group in foreign currencies are translated at the rates prevailing does not hold or issue derivative financial instruments at the date when the fair value was determined. Exchange for trading purposes. However, derivatives that do not differences are recognised in the profit or loss statement in qualify for hedge accounting are accounted for as trading the period in which they arise. instruments. Derivative financial instruments are recognised initially at (c) Financial Instruments fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial (i) Financial Assets instruments are stated at fair value at each balance Financial assts are classified, at initial recognition, and date. The gain or loss on remeasurement to fair value is subsequently measured at amortised cost or fair value recognised immediately in profit or loss. However, where through other comprehensive income (FVOCI). Financial derivatives qualify for hedge accounting, recognition of assets are recognised initially at fair value plus, for any resultant gain or loss depends on the nature of the instruments not at fair value through profit or loss, any hedging relationship (see below). directly attributable transaction costs. Subsequent to initial Cash Flow Hedges recognition financial assets are measured as described below. Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are Financial Assets at Amortised Cost recognised directly in equity to the extent that the hedge Financial assets at amortised cost include cash and cash is effective. To the extent that the hedge is ineffective, equivalents, short term deposits, trade and other receivables changes in fair value are recognised in profit or loss. and other loans receivable. Financial assets at amortised If the hedging instrument no longer meets the criteria cost are subsequently measured using the effective interest for hedge accounting, expires or is sold, terminated method and are subject to impairment. Gains or losses are or exercised, then hedge accounting is discontinued recognised in profit or loss when the asset is derecognised, prospectively. The cumulative gain or loss previously modified or impaired. recognised in equity remains there until the forecast Financial Assets Measured at FVOCI transaction occurs. When the hedged item is a non- financial asset, the amount recognised in equity is The Group’s investment in non subsidiary equity securities

29 NOTES TO THE FINANCIAL STATEMENTS

transferred to the carrying amount of the asset when it is - electricity distribution system 5-70 years SL recognised. In other cases the amount recognised in equity - buildings 5-50 years SL is transferred to profit or loss in the same period that the hedged item affects profit or loss. - motor vehicles 10-50% DV - plant and equipment 2.5-67% DV (iii) Share Capital - furniture and fittings including computers 5-67% DV Ordinary Shares - hydro generation assets 5-70 years SL Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a Depreciation methods, useful lives and residual values are deduction from equity. reassessed at the reporting date. Preference Share Capital (iv) Subsequent Measurement Preference share capital is classified as equity if it is non- Land and buildings are subsequently measured at fair redeemable, or redeemable only at the Parent’s option, value. Fair value is determined on the basis of a periodic and any dividends are discretionary. Dividends thereon are independent valuation prepared by external valuers based recognised as distributions within equity. on either a depreciated replacement cost or a market Preference share capital is classified as a liability if it is based approach. Land and buildings were revalued as at 31 redeemable on a specific date or at the option of the March 2019 by Preston Rowe Paterson, registered valuers shareholders, or if dividend payments are not discretionary. at $12,896,500. These are reviewed at the end of each reporting period to ensure that the carrying value of land Dividends thereon are recognised as interest expense in and buildings is not materially different from fair value. profit or loss. The distribution system is subsequently measured at fair (d) Property, Plant and Equipment value. Fair value is determined on the basis of a periodic independent valuation prepared by external valuers, based (i) Recognition and Measurement on a discounted cashflow approach. Distribution system Property, plant and equipment are stated at cost or assets were revalued by PricewaterhouseCoopers as at valuation less accumulated depreciation and impairment 31 March 2020 at $95,357,000. These are reviewed at the losses. The cost of property, plant and equipment at 1 April end of each reporting period to ensure that the carrying 2006, the date of transition to NZ IFRS, was determined by value of the distribution system is not materially different reference to its fair value at that date. from fair value. Consideration is given as to whether the distribution system is impaired as detailed in note 3(k)(ii). Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed Any revaluation increase arising on the revaluation of land assets includes the cost of materials and direct labour, any and buildings and the distribution system is credited to other costs directly attributable to bringing the asset to the asset revaluation reserve, except to the extent that a working condition for its intended use, and the costs of it reverses a revaluation decrease for the same asset dismantling and removing the items and restoring the site previously recognised as an expense in profit or loss, in on which they are located. which case the increase is credited to the profit or loss to the extent of the decrease previously charged. A decrease When parts of an item of property, plant and equipment in carrying amount arising on the revaluation of land have different useful lives, they are accounted for as and buildings and the distribution system is charged as separate items (major components) of property, plant and an expense in profit or loss to the extent that it exceeds equipment. the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that asset. (ii) Subsequent Costs Depreciation on revalued buildings and the distribution The cost of replacing part of an item of property, plant system is charged to profit or loss. On the subsequent and equipment is recognised in the carrying amount of sale or retirement of a revalued item, the attributable the item if it is probable that the future economic benefits revaluation surplus remaining in the asset revaluation embodied within the part will flow to the Group and its reserve, net of any related deferred taxes, is transferred cost can be measured reliably. The costs of the day-to-day directly to retained earnings. servicing of property, plant and equipment are recognised in profit or loss as incurred. (e) Goodwill Goodwill arises on the acquisition of subsidiaries. Goodwill (iii) Depreciation represents the excess of the cost of the acquisition over Depreciation is recognised in profit or loss on a straight- the group’s interest in the net fair value of the assets and line or diminishing value basis over the estimated useful liabilities of the acquiree. Goodwill is measured at cost lives of each part of an item of property, plant and less accumulated impairment losses. Where impairment equipment. Land is not depreciated. The estimated useful losses are recognised these are not reversible. Goodwill is lives for the current and comparative periods are as follows: assessed at each reporting date for impairment.

30 NOTES TO THE FINANCIAL STATEMENTS

(f) Other Intangible Assets The Group applies a single recognition and measurement Other intangible assets that are acquired by the Group, which approach for all leases, except for short-term leases have finite useful lives, are measured at cost less accumulated and leases of low-value assets. As a practical expedient amortisation and accumulated impairment losses. IFRS 16 permits a lessee not to separate non-lease components and instead account for any lease Amortisation is recognised in profit or loss on a diminishing and associated non-lease components as a single value basis over the estimated useful lives of the intangible arrangement. The Group uses this practical expedient. assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current (i) Right of Use Assets and comparative periods are as follows: The Group recognises right-of-use assets at the - software 10-67% DV commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use (g) Contract Balances assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any Contract Assets remeasurement of lease liabilities. The cost of right-of-use A contract asset is the right to consideration in exchange assets includes the amount of lease liabilities recognised, for good or services transferred to the customer. If the initial direct costs incurred, and lease payments made Group performed by transferring goods or services before at or before the commencement date less any lease the customer pays consideration or before payment is due, incentives received. a contract asset is recognised for the earned consideration Right-of-use assets are depreciated on a straight-line that is conditional. The contract asset is measured based basis over the shorter of the lease term and the estimated on the revenue recognition policy refer to 3(n). useful lives of the assets as follows:

Trade Receivables Plant and machinery 5-15 years A receivable represents the Group’s right to an amount of Motor vehicles and other equipment 3-5 years consideration which is unconditional. Other property 1-80 years Standard payment terms are for payment due 20th of If ownership of the leased asset transfers to the Group at the month following the date of invoice. As a practical the end of the lease term or the cost reflects the exercise expedient, the Group has made no adjustment for the of a purchase option, depreciation is calculated using the effect of the financing component of the contract if the estimated useful life of the asset. Group expects, at contract inception that the period between the transfer of goods and service and payment The right-of-use assets are also subject to impairment. will be less than one year. Refer to the accounting policies in section 3(k) Impairment of non-financial assets. Contract Liabilities (ii) Lease Liabilities A contract liability is the obligation to transfer goods or services to a customer which the Group has received At the commencement date of the lease, the Group consideration from the customer. If a customer pays recognises lease liabilities measured at the present value consideration before the Group transfers the goods or of lease payments to be made over the lease term. services to the customer, a contract liability is recognised The lease payments include fixed payments (including when the payment is received. Contract liabilities are in-substance fixed payments) less any lease incentives recognised as revenue when the Group performs under receivable, variable lease payments that depend on an the contract. index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain (h) Leases (as lessee) to be exercised by the Group and payments of penalties Before 1 April 2019, leases in which a significant portion for terminating the lease, if the lease term reflects the of the risk and rewards of ownership are retained by the Group exercising the option to terminate. lessor are classified as operating leases. Payments made under operating leases (net of any incentives received by Variable lease payments that do not depend on an index the lessor) are charged to the statement of comprehensive or a rate are recognised as expenses (unless they are income on a straight-line basis over the period of the incurred to produce inventories) in the period in which lease. the event or condition that triggers the payment occurs. After 1 April 2019, the Group assesses at contract In calculating the present value of lease payments, inception whether a contract is, or contains, a lease. That the Group uses its incremental borrowing rate at the is, if the contract conveys the right to control the use of lease commencement date because the interest rate an identified asset for a period of time in exchange for implicit in the lease is not readily determinable. After the consideration. commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced

31 NOTES TO THE FINANCIAL STATEMENTS

for the lease payments made. In addition, the carrying effective interest rate (i.e. the effective interest rate amount of lease liabilities is remeasured if there is a computed at initial recognition of these financial assets). modification, a change in the lease term, a change in the Receivables with a short duration are not discounted. lease payments (e.g., changes to future payments resulting Impairment losses on an individual basis are determined from a change in an index or rate used to determine such by an evaluation of the exposures on an instrument lease payments) or a change in the assessment of an by instrument basis. All individual instruments that are option to purchase the underlying asset. considered significant are subject to this approach. (iii) Short-term leases and leases of low-value assets (ii) Impairment of Non Financial Assets The Group applies the short-term lease recognition The carrying amounts of the Group’s non-financial exemption to its short-term leases of machinery and assets, other than inventories and deferred tax assets are equipment (i.e., those leases that have a lease term of reviewed at each reporting date to determine whether 12 months or less from the commencement date and do there is any indication of impairment. If any such indication not contain a purchase option). It also applies the lease of exists then the asset’s recoverable amount is estimated. low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease An impairment loss is recognised if the carrying amount of payments on short-term leases and leases of low-value an asset or its cash-generating unit exceeds its recoverable assets are recognised as an expense on a straight-line amount. A cash-generating unit is the smallest identifiable basis over the lease term. asset group that generates cash flows that are largely independent from other assets and groups. Impairment (i) Inventories losses are recognised in profit or loss. Inventories consist of construction materials. Inventories The recoverable amount of an asset or cash-generating are measured at the lower of cost and net realisable unit is the greater of its value in use and its fair value value. The cost of inventories is based on the weighted less costs to sell. In assessing value in use, the estimated average cost principle, and includes expenditure incurred future cash flows are discounted to their present value in acquiring the inventories and bringing them to their using a pre-tax discount rate that reflects current market existing location and condition. Net realisable value is the assessments of the time value of money and the risks estimated selling price in the ordinary course of business, specific to the asset. less the estimated costs of completion and selling expenses. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss (j) Cash and Short Term Deposits has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used Cash and short term deposits in the statement of financial to determine the recoverable amount. An impairment position comprise cash at banks and on hand and short loss is reversed only to the extent that the asset’s carrying term highly liquid deposits with a maturity of three months amount does not exceed the carrying amount that or less, that are readily convertible to a known amount of would have been determined, net of depreciation or cash and subject to an insignificant risk of changes in value. amortisation, if no impairment loss had been recognised. For the purposes of the consolidated statement of cashflows, cash and cash equivalents consist of cash and (l) Employee Benefits short- term deposits as defined above. (i) Defined Contribution Plans (k) Impairment Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or (i) Impairment of Financial Assets loss when they are due. The carrying amounts of the Group’s financial assets are reviewed at each balance date and an allowance for any (ii) Other Long Term Employee Benefits expected credit losses recognised. Expected credit losses The Group’s net obligation in respect of long-term are based on the difference between the contractual employee benefits is the amount of future benefit that cashflows due in accordance with the contract and all the employees have earned in return for their service in the cashflows that the Group expects to receive discounted at current and prior periods; that benefit is discounted to an effective interest rate. determine its present value, and the fair value of any Expected credit losses directly reduce the carrying amount related assets is deducted. The discount rate is the of assets and are recognised in the profit or loss. risk free interest rate. Any actuarial gains or losses are recognised in profit or loss in the period in which they arise. Trade Receivables The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of (iii) Short Term Benefits estimated future cash flows, discounted at the original Short-term employee benefit obligations are measured on

32 NOTES TO THE FINANCIAL STATEMENTS

an undiscounted basis and are expensed as the related • the performance obligation is part of a contract that service is provided. has an original expected duration of one year or less i.e. contracting and consulting revenues. (m) Provisions A provision is recognised if, as a result of a past event, (iv) Vested Assets and Capital Contribution the Group has a present legal or constructive obligation Vested assets are recognised as revenue at the fair value that can be estimated reliably, and it is probable that an of the assets at the point that assets are connected to the outflow of economic benefits will be required to settle the network. obligation. Provisions are determined by discounting the Capital contribution payments are calculated in line expected future cash flows at a pre-tax rate that reflects with Westpower’s capital contribution policy. Capital current market assessments of the time value of money contributions are recognised as revenue when payable at and the risks specific to the liability. the point that the assets are connected to the network.

(n) Revenue from Contracts with Customer (o) Leases (as lessor) Leases in which the Group does not transfer substantially (i) Lines Charges all the risks and rewards incidental to ownership of an The Group provides electricity distribution services to asset are classified as operating leases. Rental income energy retailers. This revenue is recognised at the time of arising is accounted for on a straight-line basis over the supply under the output method based on the quantity, lease terms and is included in revenue in the statement of time and capacity provided. This reflects the physical profit or loss due to its operating nature. Initial direct costs transfer of the services to the customer. incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and (ii) Electricity Generation recognised over the lease term on the same basis as rental Electricity generation revenue is recognised at the time income. Contingent rents are recognised as revenue in the of supply under the output method based on the date, period in which they are earned. time and quantity of electricity generated. This reflects the physical transfer of the services to the customer. (ii) Fibre IRU Liability The Group has entered into Indefeasible Right of Use (IRU) (iii) Contracting and Consulting Revenue Agreements for the provision of fibre assets for a term of 20 years with payment at the commencement of the The Group provides electrical engineering consultancy and agreements. The liability has been valued on a discounted contracting services. The Group satisfies the performance cashflow basis over the term of the agreements. obligations and recognises revenue over time. Revenue is recognised under the input method based on the costs incurred to date with reference to stage of completion of (p) Finance Income and Expenses the contract and the contract value. Finance income comprises interest income on funds invested, unwinding of the discount on assets and Performance obligations are considered to be satisfied dividend income. Interest income is recognised as it over time on the basis that performance creates or accrues, using the effective interest method. Dividend enhances an asset that the customer controls and which income is recognised on the date that the Group’s right to has no alternative use (i.e. is a customised solution). The receive payment is established. fact that another supplier would not need to re-preform Finance expenses comprise interest expense on the services provided to date demonstrates that the borrowings and dividends on preference shares classified performance obligations are satisfied over time. as liabilities. Borrowing costs directly attributable to the The transaction price is normally fixed at the start of the acquisition, construction, or production of a qualifying project. However changes to job scope, performance asset are capitalised as part of the cost of that asset. A against contract timeframes or quality provisions, result in qualifying asset is defined as a separate asset where the elements of variable consideration. Variable consideration construction period exceeds twelve months and costs in is estimated based on the most likely amount. The variable excess of $2m. All other borrowing costs are recognised in consideration is not considered constrained based on profit or loss using the effective interest method. the defined underlying contract provisions, the Group’s historical performance and that the uncertainty will be (q) Income Tax Expense resolved within a short timeframe. Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except As a practical expedient, the Group need not disclose to the extent that it relates to items recognised directly in the transaction price allocated to remaining performance equity, in which case it is recognised in equity. obligations on the basis that • the Group has a right to consideration from a Current tax is the expected tax payable on the customer in amount equal to the value transferred to taxable income for the year, using tax rates enacted or the customer for the performance completed i.e.lines substantively enacted at the reporting date, and any charges and electricity generation; or adjustment to tax payable in respect of previous years.

33 NOTES TO THE FINANCIAL STATEMENTS

Deferred tax is the amount of income tax payable or previously identified as leases applying NZ IAS 17 and NZ recoverable in future periods in respect of temporary IFRIC 4 at the date of initial application. differences and unused tax losses. Deferred tax is recognised using the balance sheet method, providing for The effect of adoption of NZ IFRS 16 as at 1 April 2019 temporary differences between the carrying amounts of (increase/(decrease)) is as follows: assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is Assets $000 not recognised for differences relating to investments in Right-of-use assets 3,891 subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable Property, plant and equipment (1,020) future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when Total assets 2,871 they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Liabilities A deferred tax asset is recognised to the extent that it Lease Liabilities 3,868 is probable that future taxable profits will be available less Finance Leases reclassified (63) against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date Total Liabilities 3,806 and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Total adjustment on equity

(r) Goods and Services Tax Retained earnings (574) All items in the financial statements are net of Goods and Revaluation reserve (384) Services Tax except for debtors and creditors which are shown in the balance sheet inclusive of GST. Where GST is (958) not recoverable as input tax then it is recognised as part of The Group has lease contracts for various items of plant, the related asset or expense. machinery, vehicles and other equipment. Before the The net amount of GST recoverable from, or payable to, adoption of NZ IFRS 16, the Group classified each of its the IRD is included as part of receivables or payables in leases (as lessee) at the inception date as either a finance the balance sheet. lease or an operating lease. Refer to h) above for the accounting policy prior to 1 April 2019. The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is • leases previously classified as finance leases classified as an operating cash flow in the statement of The Group did not change the initial carrying amounts cashflows. of recognised assets and liabilities at the date of initial application for leases previously classified as finance leases (s) Changes in accounting policies and disclosures (i.e., the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised under NZ IAS 17). (i) NZ IFRS 16 Leases The requirements of NZ IFRS 16 were applied to these The Group applied NZ IFRS 16 for the first time. NZ leases from 1 April 2019. IFRS 16 supersedes NZ IAS 17 Leases. The standard sets out the principles for the recognition, measurement, • leases previously classified as operating leases presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet. The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating Lessor accounting under NZ IFRS 16 is substantially leases, except for short-term leases and leases of low- unchanged from NZ IAS 17. Lessors will continue to value assets. For all leases, the right-of-use assets classify leases as either operating or finance leases using were recognised based on the amount equal to the similar principles as in NZ IAS 17. Therefore, NZ IFRS 16 lease liabilities, adjusted for any related prepaid and did not have an impact for leases where the Group is the accrued lease payments previously recognised. Lease lessor. liabilities were recognised based on the present value The Group adopted NZ IFRS 16 using the modified of the remaining lease payments, discounted using retrospective method of adoption with the date of initial the incremental borrowing rate at the date of initial application of 1 April 2019. Under this method, the application. standard is applied retrospectively with the cumulative The Group also applied the available practical expedients effect of initially applying the standard recognised at the wherein it: date of initial application. The Group elected to use the transition practical expedient to not reassess whether a • Used a single discount rate to a portfolio of leases contract is, or contains, a lease at 1 April 2019. Instead, with reasonably similar characteristics the Group applied the standard only to contracts that were

34 NOTES TO THE FINANCIAL STATEMENTS

• Relied on its assessment of whether leases are The fair value of land and buildings (excluding specialised onerous immediately before the date of initial buildings) are determined using a market comparable application method. This means that valuations performed by the • Applied the short-term leases exemptions to leases valuer are based on active market prices, adjusted for with lease term that ends within 12 months of the differences in the nature, location or condition of the date of initial application specific property. • Excluded the initial direct costs from the measurement Where buildings are of a specialised nature such as of the right-of-use asset at the date of initial substation and depot buildings, these have been valued application on a depreciated replacement cost basis. The significant • Used hindsight in determining the lease term where valuation inputs are outlined in Note 22. the contract contained options to extend or terminate the lease (b) Investments in Equity These lease liabilities as at 1 April 2019 can be reconciled The fair value of equity instruments through other to the operating lease commitments as of 31 March 2019 comprehensive income is determined by non-market as follows: valuation techniques at the reporting date.

Assets $000 (c) Derivatives The fair value of interest rate swaps is based on bank Operating lease commitments as at 31 1,723 valuations. Those quotes are tested for reasonableness by March 2019 discounting estimated future cash flows based on the terms Weighted average incremental 3.08% and maturity of each contract and using market interest borrowing rate as at 1 April 2019 rates for a similar instrument at the measurement date. Discounted operating lease 3,836 commitments as at 1 April 2019 less 5. PRIOR PERIOD RESTATEMENT Commitments relating to short term The Statement of Financial Position, 31 March 2019 - leases comparative amounts have been restated to classify all Loans and Borrowings as a current liability rather than Commitments relating to leases of low (11) a non-current liability. This restatement is to reflect that value assets as at 31 March 2019 the borrowing facility with Westpac add was due to expire on 31 December 2019 and therefore the borrowings were due to be paid within 12 months Commitments relating to leases 66 of balance date. It should be noted that the facility was previously classified as finance leases renewed with Westpac in Dec 2019 for a further 2 years. Total financial assets 3,891 Below summarises the restatement:

Note – includes lease payments relating to renewal Previous Adjust- Restated periods not included in operating lease commitments at Amount ment Amount 31 March 2019. Non Current liabilities Loans and 4. DETERMINATION OF FAIR 21,300,000 (21,000,000) 300,000 Borrowings VALUES Total 42,352,000 (21,000,000) 21,352,000 A number of the Group’s accounting policies and Non Current disclosures require the determination of fair value, for both Liabilities financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure Current purposes based on the following methods. Where liabilities applicable, further information about the assumptions Loans and made in determining fair values is disclosed in the notes 700,000 21,000,000 21,700,000 specific to that asset or liability. Borrowings Total (a) Property, Plant and Equipment Current 10,855,000 21,000,000 31,855,000 The fair value of the distribution system assets is based Liabilities on a discounted cashflow methodology. The significant valuation inputs are outlined in Note 22.

35 NOTES TO THE FINANCIAL STATEMENTS

6. OPERATING REVENUE

GROUP

31-Mar-20 31-Mar-19 $000 $000

Line Charges 21,664 21,067 Less Special Discount (2,990) (2,971) Rentals & Sundry Income 586 817 Vested Assets 564 318 Generation Revenue 4,656 4,013 Consulting Income 14,758 11,265 Contracting Income 48,650 33,173 Total Operating Revenue 87,888 67,682

7. OTHER INCOME

GROUP

31-Mar-20 31-Mar-19 $000 $000 Gain on sale of property, plant and equipment 20 8 Unrealised gains on foreign exchange contracts 62

Total Other Income 82 8 8. OPERATING EXPENSES

GROUP

31-Mar-20 31-Mar-19 $000 $000

Loss on disposal of property, plant and equipment 168 178 Loss on impairment and revaluation 1,065 63 Directors' Fees 378 354 Auditor's remuneration to Audit New Zealand comprises: - Audit of financial statements 160 139 - Other audit related services 27 19 Operating Lease Expense 367 Variable Lease Expenses 105 90 Impairment of Receivables 370 Transmission Charges 3,901 3,765 Maintenance and Operations 5,598 5,168 Inventory Expensed 1,342 1,041 Employee Related Expenses- Defined contribution schemes 772 646 Employee Related Expenses- Other employee benefits 28,660 23,310 Other Expenses 30,314 17,112 72,860 52,253

36 NOTES TO THE FINANCIAL STATEMENTS

9. FINANCE INCOME AND EXPENSES

GROUP 31-Mar-20 31-Mar-19 $000 $000 Interest income 534 475

Finance Income 534 475 Interest expense on financial liabilities measured at amortised cost 945 1,034 Interest on lease liability 124 Finance Expense 1,069 1,034 Net Finance Costs (535) (559)

10. INCOME TAX

GROUP 31-Mar-20 31-Mar-19 $000 $000 Current Tax Expense Current Period 3,171 2,583 Adjustment for prior period (62) (39) 3,109 2,544 Deferred Tax Expense Origination and reversal of temporary differences (1,790) 5 Adjustment for prior period 67 39 (1,723) 44 Income Tax Expense Recognised in Profit 1,386 2,588

Reconciliation of Effective Tax Rate GROUP 31-Mar-20 31-Mar-19 $000 $000 Profit before income tax 7,803 8,896 Prima facie tax at 28% 2,186 2,491 Non deductible expenses 166 97 Tax exempt income Under (over) provided in prior periods 65 Imputation credits received Change in temporary differences Effect on deferred tax balances of: - reintroduction of depreciation on buildings (1,031) Income Tax Expense Recognised in Profit 1,386 2,588

Income Tax Recognised Directly in Equity GROUP 31-Mar-20 31-Mar-19 $000 $000 Movement in fair value of derivatives 36 (11) Deferred tax movement on revaluation of electricity distribution assets 1,197 328 Total Income Tax Recognised Directly In Equity 1,233 317

37 NOTES TO THE FINANCIAL STATEMENTS

10. INCOME TAX (CONTINUED)

Recognised Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following:

Group Opening Credited/ Credited/ Closing Balance (Charged) (Charged) Balance 31-Mar-19 to Income to Equity 31-Mar-20 $000 $000 $000 $000 Deferred Tax Liabilities Property, plant and equipment 19,646 (1,476) 1,197 19,366 Available for sale assets 21 21 Construction contracts 63 21 84 Derivatives (172) 17 36 (119) 19,558 (1,438) 1,233 19,353 Deferred Tax Assets Employee Provisions 526 110 636 Provision for Doubtful Debts 39 120 159 Tax Losses 120 55 175 685 285 970

Net Deferred Tax Liability 18,873 (1,723) 1,233 18,383

Attributable to: Parent 16,878 (1,633) 1,197 16,442 Subsidiaries 1,995 (90) 36 1,941 18,873 (1,723) 1,233 18,383

Group Opening Credited/ Credited/ Closing Balance (Charged) (Charged) Balance 31-Mar-18 to Income to Equity 31-Mar-19 $000 $000 $000 $000 Deferred Tax Liabilities Property, plant and equipment 19,204 114 328 19,646 Available for sale assets 21 21 Construction contracts 2 61 63 Derivatives (161) (11) (172) 19,066 175 317 19,558 Deferred Tax Assets Employee Provisions 528 (2) 526 Provision for Doubtful Debts 28 11 39 Tax Losses (2) 122 120 554 131 685

Net Deferred Tax Liability 18,512 44 317 18,873

Attributable to: Parent 16,657 (107) 328 16,878 Subsidiaries 1,855 151 (11) 1,995 18,512 44 317 18,873

38 NOTES TO THE FINANCIAL STATEMENTS

10. INCOME TAX (CONTINUED)

Imputation Credits

GROUP

31-Mar-20 31-Mar-19 $000 $000 Imputation credits available for use in subsequent periods: Through the Parent 24,462 22,250 Through subsidiaries 6,739 6,739 31,200 28,989

11. PROPERTY, PLANT AND EQUIPMENT

Electricity Hydro Land and Group Distribution Generation Buildings Other Total Notes $000 $000 $000 $000 $000 Cost or deemed cost Balance at 31 March 2018 96,439 36,622 13,433 16,139 162,633 Additions 2,274 23 109 1,864 4,270 Disposals (150) (68) (218) Revaluation 22 (535) (535) Balance at 31 March 2019 98,563 36,645 13,007 17,935 166,150

Additions 3,434 2 2,358 1,715 7,509 Disposals (181) (958) (350) (1,489) Revaluation 22 (6,462) (6,462) Balance at 31 March 2020 95,354 36,647 14,407 19,300 165,708

Accumulated Depreciation, Amortisation and Impairment Balance at 31 March 2018 3,415 3,221 1,215 9,532 17,383 Depreciation for the year 3,398 707 358 1,346 5,809 Disposals (10) (62) (72) Revaluation 22 (1,573) (1,573) Balance at 31 March 2019 6,803 3,928 10,816 21,547

Depreciation for the year 3,468 708 377 1,529 6,083 Disposals (18) (212) (230) Revaluation 22 (10,253) (10,253) Balance at 31 March 2020 4,636 377 12,133 17,146

Net Book Value at 31 March 2019 91,760 32,717 13,007 7,119 144,603

Net Book Value at 31 March 2020 95,354 32,011 14,030 7,167 148,562

39 NOTES TO THE FINANCIAL STATEMENTS

11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Capital work in progress is contained in the following categories:

GROUP 31-Mar-20 31-Mar-19 $000 $000 Electricity Distribution System 1,606 645 Hydro Generation 15 21 Land and Buildings 2,430 111 Other 32 114 4,083 891

Security At 31 March 2020, the assets of the group are subject to a guarantee to secure bank loans.

12. GOODWILL AND OTHER INTANGIBLES

Software Group Goodwill Total and Other $000 $000 $000 Cost or deemed cost Balance at 31 March 2018 6,993 2,614 9,607 Additions 238 238 Disposals Balance at 31 March 2019 6,993 2,852 9,845

Additions 190 190 Disposals

Balance at 31 March 2020 6,993 3,042 10,035 Amortisation and impairment losses Balance at 31 March 2018 1,965 1,965 Amortisation for the year 173 173 Disposals Balance at 31 March 2019 2,138 2,138

Amortisation for the year 243 243 Disposals

Balance at 31 March 2020 2,381 2,381 Net Book Value 31 March 2019 6,993 714 7,707

Net Book Value 31 March 2020 6,993 661 7,654 Goodwill is held in relation to the contracting and consulting operations of the Group. While these operations may be separate corporate entities, they are considered interdependent parts of the Group as part of the Design Build Deliver strategy. The recoverable amount in relation to these balances has been assessed based on value in use. The assessment has been based on 5 year cashflow forecasts which has been reassessed to take into account the impact of COVID-19 (see Note 29). These forecasts are based on past experience and forecast pipeline works including revenues from joint projects. Growth rates of 0 to 5% have been applied to years 2 and 3 of the forecasts and 0% for year 4 and 5 in assessing any impairment. A discount rate of 7.8% has been applied. Inflation has not been applied to the forecasts. Capital work in progress is contained in the following categories:

40 NOTES TO THE FINANCIAL STATEMENTS

GROUP 31-Mar-20 31-Mar-19 $000 $000 Software and Other 88 48

13. OTHER INVESTMENTS

GROUP

31-Mar-20 31-Mar-19 $000 $000 Non Current Investments Equity instruments designated at fair value through OCI - International Panel & Lumber (West Coast) Limited 103 103 Other Loans 144 243 247 346

14. CASH AND CASH EQUIVALENTS

GROUP

31-Mar-20 31-Mar-19 $000 $000 Bank Balances 1,398 342 Call Deposits 8,650 5,186 Cash and Cash Equivalents in Statement of Cashflows 10,048 5,528

15. TRADE AND OTHER RECEIVABLES

GROUP

31-Mar-20 31-Mar-19 $000 $000 Trade and other receivables 9,906 11,174 Trade receivables due from related parties 11 6 Prepayments 361 309 Contract assets 3,815 3,041 14,093 14,530 less provision for impairment (382) (56) 13,711 14,474

41 NOTES TO THE FINANCIAL STATEMENTS

16. ASSETS HELD FOR SALE

GROUP

31-Mar-20 31-Mar-19 $000 $000 Assets Held for Sale 283 283

17. EQUITY

Share Capital The Company has 25,800,000 (2019 25,800,000) ordinary shares on issue, 300,000 (2019 300,000) 7.25% redeemable preference shares on issue and 5,000,000 (2019 5,000,000) preference shares on issue. No ordinary shares were issued during the current year (2019 no shares issued). All issued shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Parent. The redeemable preference shares are classified as liabilities. The shares have a fixed dividend payment and can be redeemed to cash at the option of the Company. Holders of preference shares receive a dividend of per share at the Parent’s discretion determined by the Company in a general meeting. They do not have the right to participate in any additional dividends declared for ordinary shareholders. Preference shares and redeemable preference shares do not carry the right to vote. All shares rank equally with regard to the Parent’s residual assets, except that preference shareholders participate only to the extent of the face value of the shares.

Hedging Reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Fair Value Reserve The fair value reserve comprises the cumulative net change in the fair value of equity instruments through other comprehensive income, until the investment is derecognised.

Revaluation Reserve The revaluation reserve relates to the revaluation of property, plant and equipment

Dividends per Share Dividend paid by Westpower Limited on ordinary shares were paid at a rate of $0.0083 per share and 7.25% on preference share. Dividends by Amethyst Hydro to minority interests were paid at a rate of $0.1263 per share.

42 NOTES TO THE FINANCIAL STATEMENTS

17. EQUITY (CONTINUED)

GROUP Attributable to Equity Holders of the Company Minority Total Share Hedging Revaluation Retained Interest Equity Capital Reserve Reserve Earnings Total $000 $000 $000 $000 $000 $000 $000

Balance at 31 March 2018 30,800 (362) 11,002 86,327 127,767 1,042 128,809

Profit for the period 6,127 6,127 181 6,308

Other comprehensive income:

Fair value of cashflow hedges (33) (33) (5) (38) Revaluation 1,101 1,101 1,101 Income tax on items taken 9 (328) (319) 2 (317) directly to equity Total other comprehensive (24) 773 749 (3) 746 income

Total comprehensive income (24) 773 6,127 6,876 178 7,054 for the period

Dividends to Equity Holders (200) (200) (120) (320)

Balance at 31 March 2019 30,800 (386) 11,775 92,254 134,443 1,100 135,543

Profit for the period 6,190 6,190 227 6,417

Other comprehensive income:

Fair value of cashflow hedges 114 114 15 129 Revaluation 4,572 4,572 4,572 Income tax on items taken (32) (1,197) (1,229) (4) (1,233) directly to equity Total other comprehensive income 82 3,375 3,457 11 3,468

Total comprehensive income 82 3,375 6,190 9,647 238 9,885 for the period

Transfer to Retained Earnings (384) (574) (958) (958)

Contributions from Equity Holders Dividends to Equity Holders (200) (200) (120) (320)

Balance at 31 March 2020 30,800 (304) 14,766 97,670 142,932 1,218 144,150

43 NOTES TO THE FINANCIAL STATEMENTS

18. LOANS AND BORROWINGS

GROUP

31-Mar-20 31-Mar-19 $000 $000 Non Current Liabilities Non current portion of secured bank loans 19,500 Redeemable preference shares 300 300 19,800 300 Current Liabilities Current portion of secured bank loans 450 21,700 Loans from subsidiaries 450 21,700 20,250 22,000

GROUP Weighted Average Carrying Interest Rate Face Value Value Face Value 2019 2020 2020 2020 2019 $000 $000 $000 Less than one year Secured bank loan - call 3.05% 1.55% 450 450 700 Secured bank loans 4.22% 21,000 450 450 21,700 Longer than one year Secured bank loans 4.01% 19,500 19,500 Redeemable preference shares 7.25% 7.25% 300 300 300 19,800 19,800 300

Total Interest Bearing Liabilities - Group 20,250 20,250 22,000 The bank loans are secured over all the assets of the Group. The borrowing facility is due for renewal in Dec 2021.

19. LEASES (AS A LESSEE)

The Group has lease contracts for offices, buildings, warehouses, vehicles, transmission sites, and office equipment. The property leases have lease terms between 1-80 years and include various terms such as renewable rights, inflation features and variable lease payments.The Group also has leases of equipment with lease terms of 5 years. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:

Vehicles & Land & Total Equipment Buildings $000 $000 $000 As at 31 March 2019 Adoption of NZ IFRS 16 172 3,719 3,891 As at 1 April 2019 172 3,719 3,891 Additions 389 360 748 Depreciation (163) (285) (448) As at 31 March 2020 397 3,794 4,191

44 NOTES TO THE FINANCIAL STATEMENTS

Set out below are the carrying amounts of lease liabilities and the movements during the period.

As at 31 March 2019 Adoption of NZ IFRS 16 3,868 The Group had total cash outflows as at 30 April 2019 3,868 for leases of $521,212 in 2020. The Additions 748 Group also had non-cash additions Accretion of interest 124 to right-of-use assets and lease Payments (522) liabilities of $747,791 in 2020. As at 31 March 2020 4,218 As at 31 March 2020 the Group had leases which had not yet commenced to which they were Current 420 committed with a total cash outflow Non Current 3,798 of $20,951. 4,218

20. TRADE AND OTHER PAYABLES

GROUP 31-Mar-20 31-Mar-19 $000 $000 Trade payables due to related parties 103 72 Other trade payables 6,289 5,196 Accrued interest 83 90 Contract Liabilities 829 647 7,304 6,005

Contract liabilities at the beginning of the period were recognised as revenue in the following 12 months. The Group provides contracting services for which the transaction price allocated to partially unsatisfied performance obligations at 31st March 2020 are set out below. The Group has applied the practical expedient not to disclose the transaction price allocated to remaining performance obligations relating to the Electricity Generation and Design Consultancy contracts on the basis that the Group has a right to consideration from a customer in amount equal to the value transferred to the customer for the performance completed. The Group has applied the practical expedient not to disclose the transaction price allocated to remaining performance obligations relating to contracts with an original expected duration of 1 year or less.

Contracting Services 31-Mar-20 31-Mar-19 $000 $000 To be recognised < 1 yr 18,744 5,444 To be recognised > 1 yr - - Amounts received in advance of performance are included in Contract Liabilities. 21. FINANCIAL INSTRUMENTS Exposure to credit, interest rate, foreign currency, and liquidity risks arises in the normal course of the Group’s business. Credit Risk Financial instruments which potentially subject the Group to credit risk are cash and cash equivalents, trade receivables and investments. The Group places its cash with high quality financial institutions and limits the amount of exposure to any one financial institution. The Group has a high concentration of credit risk to Trustpower in relation to distribution line charges to the electricity retailer, electricity generation sales and other contract works and Transpower in relation to contract works. Trustpower and Transpower represent 9% and 22% respectively of receivables as at 31 March 2020 (2019 8% and 27% respectively). When determining changes in the credit risk of a financial asset since initial recognition, the Group considers reasonable

45 NOTES TO THE FINANCIAL STATEMENTS

and supportable information that is relevant and available. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward looking information. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due and the party is unlikely to pay its obligations to the Group in full. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amount subject to the write off. However, financial assets that are written off may still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. The carrying amount of financial assets represents the Group’s maximum credit exposure. The Group has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being past due or avoid a possible past due status. The Group’s exposure to geographical credit risk is almost entirely within New Zealand, with some transactions to Australia. The status of trade receivables at the reporting date is as follows:

31 March 2020 Trade Receivables Days Past Due Contract 30-60 Current <30 days >61 days Total Assets days $000 $000 $000 $000 $000 $000 Expected credit loss rate 36% Estimated total gross carrying amount at default 3,815 8,040 701 117 1,058 9,917 Expected credit loss 382 382

31 March 2019 Trade Receivables Days Past Due Contract 30-60 Current <30 days >61 days Total Assets days $000 $000 $000 $000 $000 $000 Expected credit loss rate 19% Estimated total gross carrying amount at default 3,041 9,405 1,242 236 297 11,180 Expected credit loss 56 56 As at 31 March 2020 the Group has contract assets of $3,815,000 (2019: $3,041,000). There are no expected credit losses on contract assets (2019: nil). A provision for expected credit losses relates to receivables past due by more than 60 days and is based on an analysis of individual balances. Set out below is the movement in the allowance for expected credit losses for trade receivables and contract assets.

GROUP

31-Mar-20 31-Mar-19 $000 $000 As at 1 April 56 62 Provision for expected credit losses 370 Write-off (44) (6) As at 31 March 382 56

Loans receivable are secured by way of bond or other commercial arrangement. The value of security is at least equal to the value of the outstanding loan balance. Liquidity Risk Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoing basis. In general, the Group generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and has credit lines in place to cover potential shortfalls.

46 31-Mar-19 31-Mar-18

NOTES TO THE FINANCIAL STATEMENTS

Foreign Currency Risk The Group has minimal currency risk given that financial instruments are principally transacted in New Zealand dollars. Foreign exchange contracts may be employed by the Group to manage its exposure to currency fluctuations for major transactions denominated in currencies other than New Zealand dollars. As at 31 March 2020 the Group had exposure to Australian dollar receivables of $123,310 NZD (2019 $200,564 NZD). As at 31 March 2020 the Group had in place foreign exchange contracts to purchase Australian dollars AUD$79,936 (2019 nil) and USD $594,209 (2019 nil). Interest Rate Risk The Group manages its exposures to changes in interest rates on borrowings in line with the policy parameters set in its Treasury Policy. The Treasury Policy sets minimum and maximum parameters allowing the Group to have up to between 60% and 90% of its borrowings at fixed rates for terms up to 7 years to achieve an appropriate mix of fixed and floating interest rate exposures This is achieved by borrowing at a floating rate and using interest rate swaps as hedges of the variability of cashflows attributable to movements in interest rates. The Group applies a hedge ratio 1:1. The Group determines the existence of an economic relationship between the hedging instrument and hedging item based on the reference interest rates, tenors, repricing dates and maturities and notional amounts. The Group assesses whether the derivatives designated in each hedging relationship if expected to be effective in offsetting changes in cashflows of the hedged item using the hypothetical derivative method. In these hedge relationships, the main sources of ineffectiveness are: • the effect of the counterparty and the Group’s own credit risk on the fair value of the swaps, which is not reflected in the change in the fair value of the hedged cashflows attributable to the change in interest rates.

National Amount Carrying Amount Line item in Change HEDGE TYPE of the Hedging of the Hedging Statement of in Fair Instrument Instrument Financial Position Value Assets Liabilities Cashflow Hedge $ $ $ $ Interest Rate Risk NZD Interest rate swaps Financial 31-Mar-20 11,900,000 - 482,058 128,705 (terms 1 - 3 years 2.80 - 4.85%) Derivatives

NZD Interest rate swaps Financial 31-Mar-19 11,900,000 - 610,763 (37,797) (terms 2 - 4 years 2.80 - 4.85%) Derivatives

These swap contracts have been designated as cashflow hedges. The above interest rate swaps provide fixed rate cover for $11.9m of the Group’s non-current borrowings.

31-Mar-20 31-Mar-19 Notional Amount of Notional Amount of Maturity Profile Interest Rate Hedging Instrument Interest Rate Hedging Instrument

Less than 1 year 4.84% 7,900,000 1-2 years - 4.84% 7,900,000 2-5 years 2.80% 4,000,000 2.80% 4,000,000 11,900,000 11,900,000

Other Market Price Risk The Group is exposed to variability in electricity generation sales revenue due to changes in electricit spot prices. To manage this risk the Group has entered into a Power Purchase Agreement under which Trustpower agrees to purchase all electricity produced by the Group at specified fixed prices. Currently there is an agreement with a term of two years from 1 July 2019 to 30 June 2021.

47 NOTES TO THE FINANCIAL STATEMENTS

Capital Management The Group’s capital includes share capital, reserves, retained earnings and minority interests. The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and shareholder confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ returns is also recognised and the Group recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. The Group is not subject to any externally imposed capital requirements. The allocation of capital between its specific business segments operations and activities is, to a large extent, driven by optimisation of the return achieved on the capital allocated. The process of allocating capital to specific business segment operations and activities is undertaken independently of those responsible for the operations and activities. The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors. There have been no material changes in the Group’s management of capital during the period. Sensitivity Analysis In managing interest rate and currency risks, the Group aims to reduce the impact of short term fluctuations on the Group’s earnings. Over the longer term however, permanent changes in foreign exchange and interest rates will have an impact on profit. At 31 March 2020, it is estimated that a general increase of one percentage point in interest rates could decrease the Group’s profit by $47,095 (2019 $98,000) and increase equity (excluding retained earnings) by $154,542 (2019 $267,527). A decrease of one percentage point in interest rates would have the opposite impact on profit and decrease equity by $158,855 (2019 $276,482). It is estimated that a general increase of ten percentage points in the value of the New Zealand dollar against other foreign currencies would have decreased the Group’s profit before tax by less than $10,000 for the year ended 31 March 2020 (2019 less than $10,000).

Classification of Financial Instruments FVOCI Total GROUP - 2020 Hedging FV Profit & Amortised Carrying Notes Instument FVOCI Loss Cost Value $000 $000 $000 $000 $000 Current Assets Cash and cash equivalents 14 10,048 10,048 Short Term Deposits 15,500 15,500 Trade and other receivables 15 9,535 9,535 Financial derivatives 21 62 62 62 35,083 35,145

Non Current Assets Other investments 13 103 144 247 103 144 247 Total Financial Assets 103 62 35,227 35,392

Current Liabilities Trade and other payables 20 6,475 6,475 Loans and borrowings 18 450 450 Financial derivatives 21 310 310 Lease liability payable 19 420 420 310 7,345 7,655 Non Current Liabilities Loans and borrowings 18 19,800 19,800 Financial Derivatives 21 172 172 Lease liability payable 19 3,798 3,798 172 23,598 23,770 Total Financial Liabilities 482 30,943 31,425

48 NOTES TO THE FINANCIAL STATEMENTS

FVOCI Total GROUP - 2019 Hedging Amortised Carrying Notes Instument FVOCI Cost Value $000 $000 $000 $000 Current Assets Cash and cash equivalents 14 5,528 5,528 Short Term Deposits 15,000 15,000 Trade and other receivables 15 11,124 11,124

31,652 31,652

Non Current Assets Other investments 13 103 243 346

103 243 346

Total Financial Assets 103 31,895 31,998

Current Liabilities Trade and other payables 20 5,358 5,358 Loans and borrowings 18 21,700 21,700 Financial derivatives 21 287 287 Lease liability payable 22 22 287 27,080 27,367

Non Current Liabilities Loans and borrowings 18 300 300 Financial derivatives 21 324 324 Lease liability payable 41 41 324 341 665

Total Financial Liabilities 611 27,421 28,032

49 NOTES TO THE FINANCIAL STATEMENTS

Maturity Analysis of Financial Liabilities

Group 2020 Balance Contractual Less than More than Sheet Cashflows 1 Year 1-2 Years 2-5 Years 5-7 Years 7 Years $000 $000 $000 $000 $000 $000 $000 Secured bank loans 1 19,950 20,049 20,049 Redeemable preference shares 2 300 153 22 22 65 44 note 2 Trade and other payables 6,475 6,475 6,475 Lease Liabilities 4,218 7,007 542 437 681 403 4,944

Total Non Derivative Liabilities 30,943 33,684 27,088 459 746 447 4,944

Interest Rate Swaps: Net Interest Settled Outflow (Inflow) 482 531 350 91 90

31,425 34,215 27,438 550 836 447 4,944

Group 2019 Balance Contractual Less than More than Sheet Cashflows 1 Year 1-2 Years 2-5 Years 5-7 Years 7 Years $000 $000 $000 $000 $000 $000 $000 Secured bank loans 1 21,700 21,854 21,854 Redeemable preference shares 2 300 153 22 22 65 44 note 2 Trade and other payables 5,358 5,358 5,358 Lease Liabilities 63 68 25 25 18

Total Non Derivative Liabilities 27,421 27,433 27,259 47 83 44

Interest Rate Swaps: Net Interest Settled Outflow (Inflow) 611 632 290 251 92

28,032 28,065 27,549 298 175 44

1 The contractual cashflows of the secured bank loans are based on the next loan maturity/rollover which is independent of the facility term. 2 Annual cashflows continue in perpetuity until preference shares are redeemed.

50 NOTES TO THE FINANCIAL STATEMENTS

22. FAIR VALUE MEASUREMENT

The following table provides the fair value measurement hierarchy for the Group’s assets and liabilities:

GROUP 2020 Quoted prices in Significant Significant Date of Total active markets observable unobservable Valuation (Level 1) inputs (Level 2) inputs (Level 3) Asset measured at fair value $000 $000 $000 $000 Electricity Network Assets (Note 11) 31-Mar-20 95,354 95,354 Land and Buildings (Note 11) 31-Mar-19 14,030 12,473 1,557

Liabilities measured at fair value Interest Rate Swaps (Note 21) 31-Mar-20 482 482 Foreign Exchange Contracts 31-Mar-20 62 62 (Note 21)

GROUP 2019 Quoted prices in Significant Significant Date of Total active markets observable unobservable Valuation (Level 1) inputs (Level 2) inputs (Level 3) Asset measured at fair value $000 $000 $000 $000 Electricity Network Assets (Note 11) 31-Mar-17 91,760 91,760 Land and Buildings (Note 11) 31-Mar-19 13,007 11,379 1,628

Liabilities measured at fair value Interest Rate Swaps (Note 21) 31-Mar-19 611 611 There have been no transfers between Levels 1 and 2 during the period.

Land and Building Assets: Westpower Limited engaged an external valuer to comment on whether any material impact to the previous valuation (revaluation as at 31 March 2019) had arisen due to the COVID-19 pandemic. The external valuer believes that the values of these buildings have not been affected.

Electricity Distribution Assets: Westpower Limited engaged an external valuer to revalue the electricity distribution assets as at 31 March 2020. The impacts of COVID-19 on a lines business are not expected to be material. Accordingly, no adjustments have been made to the valuation cashflows as a result of the pandemic. Description of unobservable inputs to level 3 valuations: • Electricity Distribution Assets The Group’s electricity distribution assets have been valued on a discounted cashflow basis. Below is a summary of the key unobservable inputs into this valuation.

Significant unobservable input Sensitivity of the input to fair value The impact on the midpoint valuation of a change of 0.5% in WACC to the high WACC (post tax) Range 5.18% or low points of the range is approximately 4% A 5% movement in operating expenditure forecasts would result in a reduction/ Operating expenditure forecasts increase in the valuation of approximately 1.7% A 5% movement in capital expenditure forecasts would result in a reduction/ Capital expenditure forecasts increase in the valuation of less than 0.1% A reconciliation of the movement in value of electricity distribution assets is provided in Note 11.

51 NOTES TO THE FINANCIAL STATEMENTS

• Building Assets - Specialised Westpower Limited's substation buildings are considered purpose built with no reliable market evidence and so have been valued on a depreciated replacement cost basis. An optimised depreciated replacement cost methodology has been applied in line with Treasury Guidelines including development of asset registers, standard replacement costs, optimisation and assessment of useful lives. Below is a reconciliation of the movement in the value of specialised building assets for the period:

GROUP $000 Balance 31 March 2018 4,602 Plus Additions 152 Less Depreciation (223) Reclassification on Revaluation (3,392) Revaluation Movement 487

Balance 31 March 2019 1,628

Plus Additions Less Depreciation (71)

Balance 31 March 2020 1,557

• Financial Assets at fair value through other comprehensive income (FVOCI) As financial assets at FVOCI are not actively traded the fair value of these investments has been assessed based on the net asset backing of these investments.

23. COMMITMENTS

GROUP 31-Mar-20 31-Mar-19 $000 $000 Capital Commitments No longer than 1 year 986 388

Operating Lease Commitments see note 19 No longer than 1 year 399 1 to 2 years 299 2 to 5 years 340 Longer than 5 years 685 1,723 24. CONTINGENCIES

ElectroNet Services Limited, Mitton ElectroNet Limited and ElectroNet Transmission Limited have provided guarantees secured over the assets of the companies, to Westpac in relation to debts owed by Westpower Limited (No change from 2019). Westpower has provided a guarantee to Westpac in relation to the debts owed by Amethyst Hydro Limited (No change from 2019). Westpower Limited has provided bank guarantees from Westpac to the value of $600,000 (2019 $1,100,000). ElectroNet Services Limited has provided Contractors Performance Guarantees from Westpac to the value of $2,931,713.98 (2019 $604,150.88). ElectroNet Transmission Limited has provided Contractors Performance Guarantees from Westpac to the value of $955,940.30 (2019 $1,382,722.30). Mitton ElectroNet has provided a bank guarantee to the value of $25,000 to the Wellington Regional Chamber of Commerce in relation to a carnet (2019 $25,000). The Group has no other contingent liabilities or contingent assets.

52 NOTES TO THE FINANCIAL STATEMENTS

25. RECONCILIATION OF PROFIT FOR THE PERIOD WITH NET CASH FROM OPERATING ACTIVITIES

GROUP 31-Mar-20 31-Mar-19 $000 $000

Profit for the period 6,417 6,308

Adjustments for non cash items Depreciation 6,529 5,809 Amortisation of intangibles 243 173 Vested assets (564) (318) Loss (Gain) on sale of property, plant and equipment 148 108 Loss on impairment and revaluation 1,065 65 Reversal of previous loss on revaluation (2) Movement in financial instruments (62) Change in deferred tax (1,723) 44 Change in employee entitlements (non current) 30 41 5,666 5,920 Movement in working capital items Change in trade and other receivables 763 (3,214) Change in inventories (215) (121) Change in trade and other payables 1,247 2,795 Change in employee benefits 591 171 Change in current tax liability (12) 678

Adjustments for items classified as investing activities Change in capital creditors (314) 39 Change in finance lease payable (current) (23) 22 Change in finance lease payable (non current) 41

Adjustments for items classified as financing activities Change in tax creditors (RWT on dividend) 31

Net Cashflow from Operating Activities 14,120 12,670

RECONCILIATION OF CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES

GROUP Non-Cash 31-Mar-19 Cash Flows 31-Mar-20 Movement Long term borrowings 300 19,500 19,800 Short term borrowings 21,700 (1,750) (19,500) 450 Lease liabilities 63 (522) 4,677 * 4,218 Total liabilities from financing activities 22,063 (2,272) 4,677 24,468 * for more information refer to note 19

53 NOTES TO THE FINANCIAL STATEMENTS

26. RELATED PARTIES

Parent and Ultimate Controlling Party The group is comprised of Westpower Limited and its subsidiaries and the ultimate controlling party of the Group is West Coast Electric Power Trust. See summary of group entities Note 27. Directors Interests Directors or their related parties hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. A number of these entities transacted with the Group in the reporting period. The transactions were for the purchase of electrical contracting and IT services. The terms and conditions of the transactions with directors and their related parties were no more favorable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows:

Transaction Value for the Balance Outstanding period ended Note 31-Mar-20 31-Mar-19 31-Mar-20 31-Mar-19 Director $000 $000 $000 $000 Services provided to: H Little (i) 8 319 - - S Merriman (ii) 53 23 3 1 R Pickwoth (iii) 115 61 8 5 A Williams (iv) 1 -

Services received from: A Williams (iv) 12 6 - - S Merriman (ii) 1 R Pickworth (iii) 703 946 99 69 i. The Group provided services to Lilyvale Farms, Westland Milk Products Limited and Development West Coast. H Little is a director/shareholder of Lilyvale farms, a shareholder of Westland Milk Products and a trustee of Development West Coast. ii. The Group provided services to Marshall and Heaphy Limited. S Merriman is the managing director and shareholder of Marshall and Heaphy Limited. iii. The Group provided services to and received services from Westroads Limited. Ross Pickworth is director of Westroads Limited. iv. The Group received services from The Ashley Hotel Limited, The Ashley Hotel Christchurch Limited and The Towers on the Park Limited. A Williams is a director and shareholder of these companies.

54 NOTES TO THE FINANCIAL STATEMENTS

Other Related Party Transactions Transaction Value for the Balance Outstanding period ended 31-Mar-20 31-Mar-19 31-Mar-20 31-Mar-19 $000 $000 $000 $000 ElectroNet Services Limited and Westpower Limited Services provided to Westpower 7,379 7,599 1,035 871 Services received from Westpower 636 512 70 47 Loan advances to Westpower 5,850 9,300 1,900 1,125 Loan repayments from Westpower 5,075 9,655 Interest paid by Westpower 5 16 - 1 Dividend paid to Westpower 2,150 2,750 Loan advances from Westpower 5,390 Loan repayments to Westpower 5,390 Interest paid to Westpower 11

ElectroNet Servicies Limited and Amethyst Hydro Limited Services provided to Amethyst Hydro 115 88 6 12

ElectroNet Services Limited and Mitton ElectroNet Limited Services provided to Mitton ElectroNet 368 135 230 12 Services received from Mitton ElectroNet 1,144 373 157 50 Dividend paid by Mitton ElectroNet 1,000 1,000

ElectroNet Services Limited and West Coast Electric Power Trust (WCEPT) Services provided to WCEPT 5 5

ElectroNet Services Limited and ElectroNet Technology Limited (ETech) Services provided to ETech 777 216 111 53

Mitton ElectroNet Limited and Westpower Limited Services provided to Westpower 79 28 33 10 Loan advance from Westpower 250 1,500 1,500 Loan repayment to Westpower 250 Interest paid to Westpower 39 48 3 4 Loan advance to Westpower 7,100 5,900 2,300 1,750 Loan repayments from Westpower 6,550 5,125 Interest paid by Westpower 15 13 1 2 Services received from Westpower 507 493 58 47

Mitton ElectroNet Limited and Amethyst Hydro Limited Services provided to Amethyst Hydro 13 27

Mitton ElectroNet Limited and ElectroNet Transmission Limited (ETL) Services provided by ETL Services provided to ETL 352 338 7

55 NOTES TO THE FINANCIAL STATEMENTS

Transaction Value for the Balance Outstanding period ended 31-Mar-20 31-Mar-19 31-Mar-20 31-Mar-19 $000 $000 $000 $000

Mitton ElectroNet Limited and ElectroNet Technology Limited (ETech) Services provided to ETech 1

Amethyst Hydro Limited and Westpower Limited Services provided by Amethyst Hydro 376 534 36 51 Services received from Westpower 164 185 18 9 Dividend paid to Westpower 880 880

ElectroNet Services Limited and ElectroNet Transmission Limited (ETL) Services provided to ETL 656 820 85 507 Services provided by ETL 1,347 1,158 611 399 Dividend paid by ETL 500 250

Westpower Limited and ElectroNet Transmission Limited (ETL) Loan advance to ETL 655 2,175 1,500 1,500 Loan repayments from ETL 655 2,175 Interest paid by ETL 40 48 3 4 Loan advance to Westpower 9,375 5,850 1,450 150 Loan repayments from Westpower 8,075 5,700 Interest received by ETL 7 11 1 1 Services provided to ETL 80 45 13 4

Westpower Limited and ElectroNet Technology Limited (ETech) Services provided to ETech 96 16 10 16 Loan Advance to ETech 1,095 750 1,720 700 Loan repayment from ETech 75 50 Interest paid by ETech 30 8 3 2 Services received from ETech 133 79

Westpower Limited and West Coast Electric Power Trust (WCEPT) Dividend paid to WCEPT 200 200 Services provided to WCEPT 7 6

Amethyst Hydro Limited and Hari Hari Hydro Limited Services provided by Hari Hari Hydro 20 20 2 2

56 NOTES TO THE FINANCIAL STATEMENTS

Key Management Personnel Compensation Key management personnel include the Board of Directors and senior management.

31-Mar-20 31-Mar-19 $000 $000 Salaries and other short term benefits 2,178 1,894 Post employment benefits Other long term benefits 2,178 1,894

27. GROUP ENTITIES

Subsidiaries

Country of Ownership Interest (%) Incorporation 2020 2019 ElectroNet Services Limited (ENS) (subsidiary of Westpower) New Zealand 100 100 Mitton ElectroNet Limited (subsidiary of ENS) New Zealand 100 100 ElectroNet Transmission Limited (subsidiary of ENS) New Zealand 100 100 ElectroNet Technology Limited (subsidiary of ENS) New Zealand 100 100 Amethyst Hydro Limited (subsidiary of Westpower) New Zealand 88 88

57 NOTES TO THE FINANCIAL STATEMENTS

28. STATEMENT OF PERFORMANCE

Notes Actual Target Target Target 2019/20 2019/20 2020/21 2021/22 Safety Lost time injury frequency rate 2.93 0 0 0 Reliability SAIDI (System Average Interruption Duration Index)1 1 229.97 177 177 177 SAIFI (System Average Interruption Frequency Index)1 1 1.92 2.1 2.1 2.1 Asset Management Opex Ratio 2 9.8% 9.72% 9.68% 9.81% Capex Ratio 3 2.7% 3.09% 3.21% 2.69% Renewal Ratio 4 40.5% 33% 69% 55% Electricity Generation Generation Availability 98.9% 95% 95% 95% Generation Capacity 81.8% 75% 75% 75% Environment Number of reported breaches of resource consent 0 0 0 0 conditions per annum Number of environmental incidents 0 0 0 0 Financial Performance Group operating surplus before tax $7.8m $10.6m $12.2m $15.3m Pre discount operating surplus before tax on 7.5% 9.6% 9.5% 10.9% consolidated shareholder funds Post discount operating surplus before tax on 5.4% 7.5% 8.2% 9.6% consolidated shareholder funds % of contracting revenue from group external parties 5 89% >50% >50% >50% Consolidated shareholder funds to total assets 71.7% >50% >50% >50%

1 SAIDI and SAIFI are standard industry measures of network reliability. SAIDI is the average duration of supply interruptions per connected consumer in a year in minutes. SAIFI is the average number of supply interruptions per connected consumer in a year.

Covid -19 impact on SAIDI and SAFI There was no significant impact on supply under Levels 3 and 4. In respect of SAIFI, the number of interruptions was consistent with the rest of the financial year, and similar to previous years. Although our staff were working remotely, this did not affect our response times to emergency repairs. This meant that there was also no significant impact on our SAIDI result. 2 Operational Expenditure/System Assets Depreciated Replacement Cost 3 Capital Expenditure/System Assets Depreciated Replacement Cost 4 Asset Renewal-Refurbishment Opex and Capex/Depreciation 5 % of ENS Group operating revenue from external parties

58 NOTES TO THE FINANCIAL STATEMENTS

29. SGNIFICANT EVENT - Covid-19

On 11 March 2020, the World Health Organisation declared the outbreak of Covid-19 a pandemic and two weeks later the New Zealand Government declared a State of National Emergency. From this, the country was in lockdown at Alert Level 4 for the period 26 March to 27 April, then Alert Level 3 from 28 April to 13 May, Alert Level 2 from 14 May to 9 June and have remained at Alert Level 1, thereafter. Westpower, Amethyst Hydro and Mitton ElectroNet continued to operate through all stages of lockdown with minimal impact on revenue earned. The contracting operations of ElectroNet Services and ElectroNet Transmission were shut down to all but essential services during Alert Level 4 with a significant impact on revenue over this period with Group receiving the government Wages Subsidy in respect of these companies. The progressive lifting of restrictions during May and June has seen a strong rebound in productivity and revenue earned to pre Covid levels. Impairment assessments have been completed for each of the Group’s cash generating units based on post lockdown financial forecasts. No impairments to the Group’s assets were identified from these assessments. The impact of the Covid-19 pandemic was assessed as part of the revaluation of Westpower’s electricity distribution assets as at 31 March 2020 and external advice was received regarding the impact on the carrying value of land and buildings (see Note 22). The Covid-19 pandemic has not had any material impact on the Group’s credit risk and lifetime expected credit losses. In May the Board of Directors announced a line charge special discount this year of $5m, an increase of $2m from last year. It has been decided that the payment of the special discount to consumers this year will be brought forward to August rather than December as has been the practice in the past. This decision has been made by the Board of Directors to help reduce the financial pressure on our community at a time where many are facing uncertainty caused by the Covid-19 events.

30. POST BALANCE DATE EVENTS

On 9 July 2020, Rio Tinto announced that it had made the decision to close the Tiwai Point Smelter and to terminate their electricity contract with Meridian Energy effective August 2021. As a significant electricity consumer, the closure of Tiwai Point is expected to impact on prices on the NZ electricity market. The Group will be assessing the potential impact of this for Amethyst Hydro as an electricity generator and seller into the NZ electricity market. At the time of signing, with a pending election and both major parties indicating they will work towards extending the Tiwai Point Smelter life, the impact of any closure may be deferred and/or reduced.

31. STATUTORY DEADLINE

Section 44(3) of the Energy Companies Act 1992 requires that the company adopt its annual report within three months after the end of the financial year. The company was not able to comply with this requirement for the year ended 31 March 2020 and the annual report was not adopted until 23 October 2020.

59 INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report To the readers of Westpower Limited Group’s financial statements and statement of performance for the year ended 31 March 2020 The Auditor-General is the auditor of Westpower Limited Group (the Group). The Auditor-General has appointed me, Julian Tan, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements and the statement of performance of the Group on his behalf. Opinion on the financial statements and the statement of performance We have audited: • the financial statements of the Group on pages 24 to 59, that comprise the statement of financial position as at 31 March 2020, the statement of financial performance, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information; and • the statement of performance of the Group on page 58. In our opinion: • The financial statements of the Group:

¡ present fairly, in all material respects: ž its financial position as at 31 March 2020; and ž its financial performance and cash flows for the year then ended; and

¡ comply with generally accepted accounting practice in New Zealand in accordance with New Zealand equivalents to International Financial Reporting Standards; and • the statement of performance of the Group presents fairly, in all material respects, the Group’s achievements measured against the performance targets adopted for the year ended 31 March 2020. Our audit was completed on 23 October 2020. This is the date at which our opinion is expressed. The basis for our opinion is explained below, and we draw your attention to the impact of the Covid-19 pandemic. In addition, we outline the responsibilities of the Board of Directors and our responsibilities relating to the financial statements and the statement of performance, we comment on other information, and we explain our independence. Emphasis of matter – Impact of Covid-19 pandemic Without modifying our opinion, we draw attention to the disclosures about the impact of the Covid-19 pandemic on the Group as set out in notes 28 and 29 to the financial statements. These notes outline the impact of the pandemic on the Group’s operations, revenue, and fair value assessments of its property, plant and equipment assets. Basis for our opinion We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the Professional and Ethical Standards and the International Standards on Auditing (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Responsibilities of the auditor section of our report. We have fulfilled our responsibilities in accordance with the Auditor-General’s Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors for the financial statements and the statement of performance The Board of Directors is responsible on behalf of the Group for preparing the financial statements that are fairly presented and that comply with generally accepted accounting practice in New Zealand.

60 INDEPENDENT AUDITOR’S REPORT CONTINUED

The Board of Directors is also responsible on behalf of the Group for preparing the statement of performance that is fairly presented. The Board of Directors is responsible for such internal control as it determines is necessary to enable it to prepare the financial statements and the statement of performance that are free from material misstatement, whether due to fraud or error. In preparing the financial statements and the statement of performance, the Board of Directors is responsible on behalf of the Group for assessing the company’s ability to continue as a going concern. The Board of Directors is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. The Board of Directors’ responsibilities arise from the Energy Companies Act 1992. Responsibilities of the auditor for the audit of the financial statements and the statement of performance Our objectives are to obtain reasonable assurance about whether the financial statements and the statement of performance, 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 it is not a guarantee that an audit carried out in accordance with the Auditor-General’s Auditing Standards will always detect a material misstatement when it exists. Misstatements are differences or omissions of amounts or disclosures, and can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of readers taken on the basis of these financial statements and statement of performance. For the performance targets reported in the statement of performance, our procedures were limited to checking that the performance targets agreed to the Group’s statement of corporate intent. We did not evaluate the security and controls over the electronic publication of the financial statements and the statement of performance. As part of an audit in accordance with the Auditor-General’s Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. Also: • We identify and assess the risks of material misstatement of the financial statements and the statement of performance, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • We evaluate the appropriateness of the reported performance information within the Group’s framework for reporting its performance. • We evaluate the appropriateness of the accounting policies used and the reasonableness of the accounting estimates and the related disclosures made by the Board of Directors. • We conclude on the appropriateness of the use of the going concern basis of accounting by the Board of Directors and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements and the statement of performance or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

61 INDEPENDENT AUDITOR’S REPORT CONTINUED

• We evaluate the overall presentation, structure and content of the financial statements and the statement of performance, including the disclosures, and whether the financial statements and the statement of performance represent the underlying transactions and events in a manner that achieves fair presentation. • We obtain sufficient appropriate audit evidence regarding the financial statements of the entities or business activities within the Group to express an opinion on the consolidated financial statements and statement of performance. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Our responsibilities arise from the Public Audit Act 2001. Other information The Board of Directors is responsible for the other information. The other information comprises the information included on pages 2 to 23, but does not include the financial statements and the statement of performance, and our auditor’s report thereon. Our opinion on the financial statements and the statement of performance does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon. In connection with our audit of the financial statements and the statement of performance, our responsibility is to read the other information. In doing so, we consider whether the other information is materially inconsistent with the financial statements and the statement of performance or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on our work, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independence We are independent of the Group in accordance with the independence requirements of the Auditor-General’s Auditing Standards, which incorporate the independence requirements of Professional and Ethical Standard 1: International Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board. In addition to the audit, we have carried out an assurance engagement pursuant to the Electricity Distribution Information Disclosure Determination 2012 - (consolidated in 2015), which is compatible with those independence requirements. Other than the audit and the assurance engagement, we have no relationship with or interests in the Group.

Julian Tan audit new zealand On behalf of the Auditor-General Christchurch, New Zealand

Matters relating to the electronic presentation of the audited financial statements

This audit report relates to the financial statements of Westpower been hyperlinked to or from these financial statements. If readers of Limited Group (the Group) for the year ended 31 March 2020 included this report are concerned with the inherent risks arising from electronic on the company’s website. The Board of Directors are responsible for data communication they should refer to the published hard copy the maintenance and integrity of the company’s website. We have not of the audited financial statements and related audit report dated been engaged to report on the integrity of the company’s website. We 23 October 2020 to confirm the information included in the audited accept no responsibility for any changes that may have occurred to the financial statements presented on this website. financial statements since they were initially presented on the website. Legislation in New Zealand governing the preparation and The audit report refers only to the financial statements named above. It dissemination of financial information may differ from legislation in does not provide an opinion on any other information which may have other jurisdictions.

62 WESTPOWER LIMITED COMPANY DETAILS

COMPANY DETAILS

REGISTERED OFFICE 146 Tainui Street Greymouth 7805

POSTAL ADDRESS PO Box 375 Greymouth 7840 Telephone: 03 768 9300 Fax: 03 768 2766

EMAIL ADDRESS [email protected]

AUDITORS Audit New Zealand On behalf of the Auditor-General Private Box 2, Christchurch

TAX ADVISORS KPMG PO Box 996, Wellington

BANKERS Westpac Banking Corporation Ltd PO Box 25, Greymouth

LOAN UNDERWRITERS Westpac Banking Corporation PO Box 2721, Christchurch

SOLICITORS Hannan and Seddon PO Box 8, Greymouth Buddle Findlay PO Box 2694, Wellington

WEBSITE www.westpower.co.nz

SUBSIDIARY COMPANIES WEBSITES www.ElectroNet.co.nz www.mittonElectroNet.com www.powerpilot.io

63 WESTPOWER LIMITED 146 Tainui Street PO Box 375, Greymouth Telephone: 03 768 9300 Facsimile: 03 768 2766 Email: [email protected]

Front Cover Photo by Louisa Belcher - Pole Changes

Back Cover Photo by Gary McLennan - Tree Felling