For the year ended 2001

Transcription

1 ANNUAL REPORT For the year ended 31 March 2001

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3 ANNUAL REPORT For the year ended 2001 Directors K.J. (Ken) Scott MNZM (Chairman) A.J. (Tony) Brady K.M.(Kate) Brown J.N. (John) Lamberg L.M. (Lindsay) Malcolm Executive Officer Bankers G.B. (Graham) Clark (Manager) The National Bank of New Zealand Ltd Thames Street, Oamaru Solicitors Auditors Registered Office Berry and Co. Eden Street, Oamaru Audit New Zealand on behalf of the Controller and Auditor-General 6-8 Chelmer Street, Oamaru CONTENTS Directory 1... Chairmans Report Management Review and Outlook Annual Report Statement of Accounting Policies Statement of Financial Performance Statement of Movements in Equity Statement of Financial Position Statement of Cash Flows Notes to Support the Financial Statements Auditor s Report

4 CHAIRMAN S REPORT Clearly the most important function of a lines company is to provide a consistent high quality delivery of energy to its consumers. Our Network extends into some of the more remote parts of our district and ranks as one of the most difficult to maintain and service in New Zealand. It is therefore gratifying to report that Network Waitaki leads the country in performance reliability. No less important in the minds of our consumers is cost and in this respect we are now among the lowest and as this report is being prepared provision for a further line charge reduction is underway. This year, at the request of our Shareholders, we have followed the example of some other trust owned companies by making discounts available instead of dividends, thereby reducing the Company s tax liability. This appears to have been well received by most. Networks South approaches the end of its first full year of trading and the projected savings and efficiencies have been achieved and exceeded in almost every respect. The stability of management and financial controls we now enjoy, has in large measure allowed us to reduce our revenue in order to lower line charges. Network Waitaki Board of Directors and Managers Back row: Lindsay Malcolm, Tony Brady, John Lamberg, Jim Pearce Front row: Graham Clark, Ken Scott (Chairman), Kate Brown Our commitment to ensure the efficiency of our Network remains and our Asset Management Plan provides the blue print for this. At the request of our Shareholders, the Company commissioned a review of the Director s actions in establishing Networks South Limited. I am pleased to report that the review which was in fact the third one, confirmed that the directors had acted appropriately and in the best interests of the Company and its Shareholders. Our subsidiary, Pulse Business Solutions Limited and its subsidiaries, Pulse Business Services Limited and Call South Limited, continue to be a significant employer in the community. The arenas of Telecommuncation and 2

5 Information Technology are undoubtedly highly competitive and a very high degree of technical expertise has been developed by Pulse staff. One of the most exciting developments in North Otago at present is the prospective irrigation scheme(s). I feel it is incumbent on us with our resources to engage in and contribute to such projects as they evolve. Our company has had an involvement for some years now and it would appear that research and wide investigation may well bear fruit in the not too distant future. In summation, perusal of the accounts demonstrates that the Company is functioning very efficiently and credit for this goes to all of our staff, to whom I extend my sincere thanks. I thank also my fellow Directors for their support and contribution to the year s operation of Network Waitaki Limited. K.J. Scott MNZM Chairman 3

6 MANAGEMENT REVIEW AND OUTLOOK Financial The Company Group produced a tax-paid profit of $1.326 million compared with the prior year s profit of $1.178 million. This profit level returns 2.73% on year-end shareholders funds of $ million. The distribution assets were revalued using Optimised Deprival Value at 31 March 2001 resulting in a reduction in value of $.291 million. Shareholders funds stand at $48,646 million and there are no external borrowings. Investments and long term receivables have increased by $15,000 and $1.5 million respectively with the establishment of Networks South Limited which Network Waitaki Limited has 50% ownership. This investment is accounted for as an Associated Company contributing $.174 million to the profit. Community Benefits The Company reduced its revenues by giving a discount in February of $1.964 million and reduced its schedule of Network Charges from 1 February 2001 by approximately $0.950 million. A fully imputed dividend was paid to the Waitaki Power Trust of $110,000. Management The management of Network Waitaki Limited was contracted to Networks South Limited from 1 July This decision was taken after extensive investigation to provide economic benefits to the company and strengthen the management resources. This decision has been reviewed by an independent consultant who has supported the change. Networks South Limited reports to the Directors of Network Waitaki Limited on a monthly basis. Maintenance and Capital Services are being provided by NetCon Limited a company that combines both Network Waitaki Limited and Alpine Energy Limited contracting activities. NetCon Limited has employees based in Oamaru to provide a prompt local service. The Network In the past year the network business revenue was less than budgeted revenue by 0.11% while the net profit before tax and discount exceeded budget by 17.07%. Operational performance has continued at a high level with customer minutes lost being 5.15% below target and with an annual SAIDI (system interruption duration) of 72 minutes compared to the 2000 national average of minutes. Capital expenditure of $1.751 million was incurred with the significant items being: 33kV, 11kV and associated protection upgrades, $591,842 Distribution transformer replacements, $112,974 Low voltage lined replacement, $165,780 Zone substation upgrades, $133,040 Being conscious of the need to avoid contamination as a result of an oil spillage the company has continued with its programme of building oil containments at each of its substations. 4

7 Metering The Company continues to own the majority of site metering equipment and is following a programme of meter replacement to ensure that these assets comply with the MARIA compliance requirements. The replacement programme is into year four of a ten-year project, which includes the replacement of load control cyclo relays with ripple relays. Sponsorship The Company has maintained a limited sponsorship policy with sponsorship of the Air Ambulance Service Victorian Heritage Celebrations Computers for the Public Library Internet Service Pulse The Subsidiary Companies The activities of these companies continue to look for opportunities to invest in activities that grow the Company and provide a benefit to the community. It was disappointing to have Meridian Energy centralise its billing and call center activities in Christchurch but this has not stopped this group of companies from exploring and gaining new business opportunities. The development of Call South Limited is one such achievement that aims to provide a competitive telephone toll service. The Future As indicated in the last annual report the Company has proceeded with the formation of a Joint Management Company, Networks South Limited, with Alpine Energy Limited. This development has not been easy and has involved some staff relocating to Timaru. The staff have responded in a positive manner with only one person taking early retirement. Benefits are already being experienced and these benefits are expected to grow. The Company continues to work with groups who require energy to enhance the economy of North Otago and is ready to support the initiatives that are currently being investigated. The announcement from Meridian that they are planning a $1billion Lower Waitaki development with maybe 40,000 hectares of irrigation in North Otago provides further impetus for economic growth. Graham Clark Manager 5

8 ANNUAL REPORT The Directors have pleasure in presenting their Annual Report together with audited Financial Statements for the year ended 31 March 2001 Principal Activities The principal activity for the Group during the year was: providing and maintaining the electricity distribution network through North Otago Results The Parent Company s profit after tax for the year was $1,097,053 (2000) $970,571 after paying a discount to consumers of $1,963,784 (2000 nil). The Group's profit after tax for the year was $1,325,657 (2000 $1,177,514). Dividend A dividend of $110,000 (2000 $2,000,000) has been paid to the Waitaki Power Trust as Shareholder. Directors Remuneration Directors remuneration received, or due and receivable during the period, is as follows: Directors Other Total Fees Fees Network Waitaki Limited K.J. Scott (Chairman) $25,750 $1,360 $27,110 A.J. Brady (Audit & Compliance Committee) $14,250 $14,250 G.N. Robinson (Audit & compliance Committee) Managing Director $3,500 $26,356 $29,856 J.N Lamberg $13,250 $13,250 L.M. Malcolm $13,250 $13,250 K. M. Brown $9,750 $9,750 $79,750 $27,716 $107,466 Subsidiary Companies P.R. Young $14,750 $0 $14,750 D.J Douglas $15,000 $0 $15,000 $29,750 $0 $29,750 Directors Benefits Since the end of the previous financial year, no Director of the Company has received, or become entitled to receive, a benefit other than a benefit included in the total remuneration received, or due and receivable, by Directors. The Company received no notices from Directors to the Company requesting the use of Company information that was received in their capacity as Directors and that would not otherwise have been available to them. Directors Interests Disclosed 1 General 1.1 The Directors, except G.N. Robinson and K. M. Brown, are interested in transactions with the company involving the supply of network or associated service, on standard terms and conditions, to premises in which they may have an interest in one or more of the following ways: a) A owner, either alone or jointly with others. b) As parent, child or spouse of another person who may have a material interest in a property. c) As director, officer or shareholder of a body corporate that may have a material interest in a property. 6

9 1.2 Because the interests that Directors may have in such transactions is no different in kind, quality, benefit or obligation from transactions that the Company has with other network services customers, it is not intended to list these in the Interest Register. Mr K.J. Scott - Chairman Mr L.M. Malcolm No interests declared No interests declared Mr A.J. Brady Mr G.N. Robinson Partner - Brady & Wollstein No interests declared Director - Whitestone Roading Ltd K. Brown Secretary - ABCO Meats (Oamaru) Limited No interests declared Mr J.N. Lamberg Leasing of building Directors Resignations Mr G.N. Robinson resigned in the current year. Directors Indemnity and Liability Insurance A Directors and Officers liability insurance in place. The sum insured is $5 million. Changes in Accounting Policy There are no changes to accounting policies. Donations Donations for the year were $8,806 Employee Remuneration No employees of the Company received remuneration greater than $100,000 in their capacity as employees. One employee of a subsidiary company received remuneration greater than $100,000. The employee received between $120,000 and $130,000 in the financial year. Pulse Business Solutions Ltd, Pulse Business Services Limited and Call South Limited These wholly owned subsidiary companies were established to provide a call and billing centre service and marketing of Toll Service. Their service contract with Meridian Energy Limited expired in July 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, the result of those operations or the state of affairs of Network Waitaki Ltd. Auditor In accordance with Section 45 of the Energy Companies Act 1992, the Controller and Auditor-General will remain as auditor of the Group. The auditor s remuneration for the year was $22,007. For and on behalf of the Board. Director Director Date: 1 June 2001 Date: 1 June

10 STATEMENT OF ACCOUNTING POLICIES For the Year Ended 31 March Reporting Entity 1.1 The Financial Statements presented here are for the reporting entity Network Waitaki Limited and its subsidiary companies. 1.2 The Financial Statements have been prepared in accordance with the Companies Act 1993, the Financial Reporting Act 1993 and the Energy Companies Act Measurement Base 2.1 The Financial Statements have been prepared on the basis of Historical Cost with the exception of certain items for which specific accounting policies are identified. 2.2 Accrual accounting is used to match expenses and revenues. 2.3 Reliance is placed on the fact that the Company is a going concern. 3 Accounting Policies 3.1 Accounts Receivable are shown at expected realisable value after providing for doubtful debts. 3.2 Inventories are valued at the lower of cost or net realisable value. Serial numbered stock is recorded at the appropriate individual cost. 3.3 Fixed assets The network system assets are revalued at least every three years by independent valuers to Optimised Deprival Value (ODV) - the lower of Optimised Depreciated Replacement Cost and Economic Value. The last revaluation was undertaken at 31 March Meters and relay are valued at Depreciated Replacement Cost - DRC. The last revaluation was undertaken at 31 March Land and buildings are valued at Net Current Value. All other assets are valued at cost less accumulated depreciation: Radio Equipment 15 yrs SL Distribution System yrs SL Substation Transformers etc 50 yrs SL Substation Load Control Equipment 20yrs SL Distribution Transformers 40yrs SL Meters and Relays yrs SL Buildings 1.0% SL-2.5% SL Office Equipment & Furniture 12.0% DV - 50% DV Plant/Machinery 10.0% DV-50% DV Motor Vehicles 15.0% DV % DV 3.4 These accounts are exclusive of GST except for Accounts Receivable and Accounts Payable. 3.5 Income tax expense has been calculated using the Liability Method. Tax effect accounting is applied on a comprehensive basis to all timing differences. A debit balance in the deferred tax account, arising from timing differences or income tax benefits from income tax losses, is recognised only if there is virtual certainty of realisation. 3.6 Investments, including subsidiaries Pulse Business Solutions Limited and Pulse Business Services and investment in associated company, are stated at cost. 8

11 3.7 Financial Instruments: the Group is party to financial instrument arrangements as part of its everyday operations. Revenues and expenses, including gains and losses in relation to all financial instruments, are recognised in the Statement of Financial Performane on an accrual basis. The Group has no off-balance sheet exposures. The Group values all financial statements at fair value in the Statement of Financial Position. 3.8 Contributions received towards Capital Works are charged to the Statement of Financial Performance and shown as income earned in the year in which they are received. 3.9 Basis of consolidation: Purchase method. The consolidated financial statements include the Parent Company and its subsidiaries. The subsidiaries are accounted for using the Purchase Method, which involves adding together corresponding assets, liabilities, revenues and expenses on a line-by-line basis. The associated Company, Networks South Limited, has been consolidated using the Equity Method. All significant inter-company transactions are eliminated on consolidation Employee entitlements. Provision is made in respect of the Company s liability for annual, long-service and retirement leave. Annual and long-service leave has been calculated on an actual entitlement basis at current rates of pay, whilst the other provisions have been calculated on an actuarial basis at current rates of pay. 4 Changes in Accounting Policy 4.1 There has been no changes in accounting policies. 9

12 STATEMENT OF FINANCIAL PERFORMANCE For the year ended 31 March 2001 Group Parent Group Parent Note Continuing Activities Revenue 1 13,610,427 10,158,913 14,394,756 11,738,913 Expenses 2 9,448,954 6,338,946 10,807,776 8,478,435 Operating Surplus / (Deficit) From Continuing Activities 4,161,473 3,819,967 3,586,980 3,260,478 Discontinued Activities Revenue 1 480, , Expenses 2 204, , Operating Surplus / (Deficit) From Discontinuing Activities 275, , Operating Surplus / (Deficit) Before Discount and Asset Revaluation 4,437,373 4,095,867 3,586,980 3,260,478 Diminuation of Value, Land and Buildings , ,766 Customer Discount 1,963,784 1,963, Operating Surplus / (Deficit) Before Tax 2,473,589 2,132,083 3,083,214 2,756,712 Taxation 7 1,322,378 1,209,476 1,905,700 1,786,141 1,151, ,607 1,177, ,571 Share of Associated Company Profit 174, , Net Surplus / (Deficit) For The Period $1,325,657 $1,097,053 $1,177,514 $970,571 STATEMENT OF MOVEMENTS IN EQUITY For The Year Ended 31 March 2001 Group Parent Group Parent Note Equity At Beginning Of The Year 47,304,882 47,086,416 17,163,075 17,151,552 Net Surplus/(Deficit) for period 1,325,657 1,097,053 1,177, ,571 Revaluation 125, ,155 30,964,293 30,964,293 Total Recognised Revenues and Expenses 1,450,812 1,222,208 32,141,807 31,934,864 Dividend Paid 110, ,000 2,000,000 2,000,000 Equity At The End Of The Year 10 $48,645,694 $48,198,624 $47,304,882 $47,086,416 The accompanying notes and accounting policies form part of and are to read in conjunction with this statement. 10

13 STATEMENT OF FINANCIAL POSITION As at 31 March 2001 Group Parent Group Parent Note Equity Share Capital (14,000,000 Fully Paid Ordinary Shares) 14,000,000 14,000,000 14,000,000 14,000,000 Reserves 10 33,472,067 33,472,067 33,346,912 33,346,912 Retained Earnings 10 1,173, ,557 (42,030) (260,496) Total Shareholders Equity $48,645,694 $48,198,624 $47,304,882 $47,086,416 Current Assets Cash on Hand Cash at Bank 5,612,765 5,139,252 5,632,827 5,300,000 Accounts Receivable 1,024, ,780 1,564,212 1,103,737 Work in Progress ,879 35,879 GST 172, , Inventory 143, , , ,270 Prepayments 2, ,401 25,152 Taxation Refund 171, , Total Current Assets 7,127,201 6,711,787 7,481,194 6,684,243 Current Liabilities Bank Overdraft ,334 Accounts Payable 1,136, ,761 1,237, ,424 Tax Payable , ,954 Holiday Pay 46, , ,542 Provision Gratuity , ,064 GST ,604 77,230 Total Current Liabilities 1,183, ,761 2,195,471 1,777,548 Working Capital 5,943,825 5,822,026 5,285,723 4,906,695 Non Current Assets Long Term Receivables 1,592,625 1,592, ,000 Investments 189, , ,490 Fixed Assets 5 43,405,121 42,851,282 44,474,979 44,176,220 51,131,017 50,677,869 49,760,702 49,545,405 Non-Current Liabilities Deferred Tax 8 & 10 2,485,323 2,479,245 2,455,820 2,458,989 Term Liabilities Net Assets $48,645,694 $48,198,624 $47,304,882 $47,086,416 DIRECTOR DIRECTOR Date: 1 June 2001 Date: 1 June 2001 The accompanying notes and accounting policies form part of and are to be read in conjunction with this statement. 11

14 STATEMENT OF CASH FLOWS For The Year Ended 31 March 2001 Note Group Parent Group Parent Cash Flows From Operating Activities Cash was provided from: Receipts from customers 12,201,187 8,467,958 14,080,298 11,783,623 Interest 408, , , ,042 GST ,552 8,960 Income Tax Cash was disbursed to: Payments to suppliers (6,422,714) ( 4,593,784) (5,954,119) (5,016,409) Employees (1,580,384) (350,675) ( 2,228,807) (1,315,240) Income Tax (1,565,288) (1,559,937) (879,528) (879,221) FBT (13,228) (12,689) (47,830) (41,002) Interest Paid (10,272) (10,890) (28,153) (28,153) GST (272,897) (235,912) 0 0 Net Cash Flows From Operating Activities 6 $2,744,874 $2,078,729 $5,235,968 $4,778,600 Cash Flows From Investing Activities Cash was provided from: Proceeds from sale of fixed assets 26,204 16, ,204 68,675 Collection on loans 0 240, Cash was applied to: Cash outflows for fixed assets (2,315,981) (1,874,412) (2,741,356) (2,253,723) Investments (365,764) (365,764) 0 (140,000) Net Cash From Investing Activities $(2,655,541) $(1,983,348) $(2,374,152) $(2,325,048) Cash Flows From Financing Activities Cash was provided from: Loans Cash was applied to: Dividend Paid (110,000) (110,000) (2,000,000) (2,000,000) Repayment Debenture 0 0 (500,000) (500,000) Cash From Financing Actiities (110,000) (110,000) (2,500,000) (2,500,000) Net Increase (Decrease) In Cash Held (20,667) (14,619) 361,816 (46,448) Add opening cash brought forward 5,633,432 5,153,871 5,271,616 5,200,319 Ending Cash Carried Forward 3 $5,612,765 $5,139,252 $5,633,432 $5,153,871 The accompanying notes and accounting policies form part of and are to be read in conjunction with this statement. 12

15 NOTES TO SUPPORT FINANCIAL STATEMENTS For The Year Ended 31 March 2001 Group Parent Group Parent Note 1. Revenue Network 8,861,138 8,861,138 8,951,174 8,951,174 Contracts (External) 480, ,276 1,706,357 1,706,357 Metering 550, , , ,547 Pulse 3,468, ,733,135 0 Interest 501, , , ,849 Bad Debts Recovered 2,404 2,404 7,121 7,121 Rent 66, ,639 42,098 68,994 Capital Contributions 155, ,680 87,348 87,348 Dividend - Consumer 0 0 5,910 5,553 Other 3,933 13,820 92, ,970 $14,090,703 $10,639,189 $14,394,756 $11,738,913 Note 2. Expenses Included within expenses are: Directors Fees 110,860 81, ,000 80,000 Bad Debts ,237 2,237 Audit Fee 18,507 18,507 24,000 21,500 Other Audit Service 3,500 3,500 3,500 3,500 Interest 10,272 10,890 28,153 28,153 Depreciation 1,955,787 1,794,319 2,262,441 2,121,872 Loss (Gain) on Sale of Assets (78,019) (80,565) (2,365) (1,511) Capital Gain 0 0 (1,047) (1,047) Donations 8,806 8,806 13,607 13,607 Lease Charges 9,600 9,600 54,856 47,502 Provision Doubtful Debts 0 0 (4,900) (4,900) Note 3. Cash Flow Reconciliation with Cash Balance Ending Cash Balance is represented by: Cash on Hand Cash at Bank 5,612,665 5,139,252 5,632,827 5,300,000 Bank Overdraft (146,334) Note 4. Term Liability There are no term liabilities. $5,612,765 $5,139,252 $5,633,432 $5,153,871 13

16 Note 5. Fixed Assets Group Parent Fixed Assets Accumulated Net Book Net Book Fixed Assets Accumulated Net Book Net Book at Cost or Depreciation Value at Value at at Cost or Depreciation Value at Value at Valuation 31/03/01 31/03/00 Valuation 31/03/01 31/03/00 Distribution ( at valuation) 39,768,268 39,768,268 40,230,942 39,768, ,768,268 40,230,942 Meters and Relays (at valuation) 2,082, ,865 1,679,811 1,623,504 2,082, ,865 1,679,811 1,623,504 Land and Buildings Land (at valuation) 92, ,500 92,500 92, ,500 92,500 Buildings (at valuation) 1,015,898 26, ,528 1,000,898 1,015,898 26, ,528 1,000,898 $1,108,398 $26,370 $1,082,028 $1,093,398 $1,108,398 $26,370 $1,082,028 $1,093,398 Motor Vehicles Plant and Equipment Plant & Equipment (at cost) 1,003, , ,769 1,050, , ,553 38, ,544 Loose Tools (at cost) 0 2, ,213 Motor Vehicles (at cost) 20,996 16,200 4, , ,297 1,024, , ,565 1,525, , ,553 38,526 1,227,054 Work in Progress 330, ,449 1, , ,648 1,322 $44,314,713 $909,592 $43,405,121 $44,474,979 $43,456,069 $604,788 $42,851,281 $44,176,220 Optimised Deprival Valuation The Distribution Assets were again revalued at 31 March 2001, using the ODV methodology, by KPMG Corporate Finance to a value of $39,768,268. Meters and Relays Revaluation The meters and relays were revalued to $1,628,501, being DRC at 1 April 1999, by Kerslake and Partners. Land and Buildings Revaluation Land and Buildings were revalued as at 31 March 1998 by Hugh Perkins, Registered Valuer. The basis of valuation adopted has been Depreciated Replacement Cost for specialised property. Other commercial property has been valued using Net Current Value basis. 14

17 Note 6. Reconcilliation of Net Surplus/(Deficit) after Taxation with Net Cash Flow from Operating Activities Group Parent Group Parent Surplus After Taxation 1,151, ,607 1,177, ,571 Add(Less) Non Cash Items: Depreciation 1,955,787 1,794,319 2,262,441 2,121,872 Asset Revaluation , ,766 Deferred Tax 446, , , ,534 Transfers to Subsidiaries ,401,854 2,231,138 3,062,477 2,923,172 $3,553,065 $3,153,745 $4,239,991 $3,893,743 Add (Less) Movements In Working Capital Items: Accounts Receivable 575, ,836 (230,158) 126,516 Inventory 76,149 76,149 (12,003) (12,003) Accounts Payable (100,292) 10, ,863 23,132 GST Liability (272,897) (235,912) 35,552 8,960 Prepayments 25,616 24,526 (12,326) (10,489) Holiday Pay (140,824) (130,542) 993 (21,988) Gratuity (152,906) (147,064) (23,203) (20,335) Hire Purchase Interest 0 0 (312) (312) Inter Company Receivables 0 120, ,151 Tax Asset (568,464) (787,280) 609, ,386 Work In Progress , ,397 (558,255) (809,433) 982, ,415 Add (Less) Items Classified as Investing Activities: Net Loss/Profit on Sale of Fixed Assets (78,019) (80,565) (3,412) (2,558) Movement in Long Term Receivables for Interest (92,625) (92,625) 0 0 Movement in Debtors Refering to Capital (283,969) (283,969) 0 0 Movement in Creditors Refering to Capital 204, ,576 17,200 0 Net Cash Flow From Operating Activities $2,744,874 $2,078,729 $5,235,968 $4,778,600 Note 7. Taxation Group Parent Group Parent Note Surplus (Deficit) before taxation 2,473,589 2,132,083 3,083,214 2,756,712 Income Tax Expenses at 33 cents in the dollar 816, ,587 1,017, ,715 Plus/(Less) The Effect Of: Realised Capital Gains 0 0 (346) (346) Non-Deductible Expenses 506, , , ,772 $1,322,378 $1,209,476 $1,905,700 $1,786,141 The Taxation Charge is represented By: Income Tax Liability (Benefit) in respect of current year 876, ,657 1,912,981 1,792,159 Deferred Taxation 446, ,819 (7,281) (6,018) $1,322,378 $1,209,476 $1,905,700 $1,786,141 There are no income tax losses carried forward for the Group and Parent (2000 Nil). 15

18 Note 8. Movement in Deferred Tax Account Group Parent Group Parent Opening Balance (2,455,820) (2,458,989) 28,949 27,043 Movement in deferred Tax (446,067) (436,820) 7,281 6,018 Future Income Tax Benefit 0 0 (303,551) (303,551) Deferred Tax on Revaluation 416, ,564 (2,188,499) (2,188,499) Closing Balance $(2,485,323) $(2,479,245) $(2,455,820) $(2,458,989) Note 9. Imputation Credit Account Group Parent Group Parent Opening Balance 441, , , ,843 Imputation credits attached to dividends paid in the year (54,179) (54,179) (985,075) (985,075) Imputation credits attached to Consumer Dividends Received 0 0 1,950 1,833 Income tax payment during the year 1,565,288 1,559, , ,388 Refund over payment tax Closing Balance $1,952,355 $1,944,747 $441,246 $438,989 Note 10. Reserves and Movements within Equity Group Parent Group Parent Movements within Equity Opening Retained Earnings (42,030) (260,496) 280, ,933 Surplus for Year 1,325,657 1,097,053 1,177, ,571 1,283, ,557 1,457,970 1,239,504 Dividend Payment 110, ,000 1,500,000 1,500,000 Transfer to Special Reserves Closing Retained Earnings $1,173,627 $726,557 $(42,030) $(260,496) Reserves Share Premium Reserves 571, , , ,119 Special Reserves Opening Balance 1,811,500 1,811,500 2,311,500 2,311,500 Applied to Dividend Payment 0 0 (500,000) (500,000) Revaluation Reserve 32,861,383 32,861,383 33,152,792 33,152,792 Deferred Tax on Revalued Assets (1,771,935) (1,771,935) (2,188,499) (2,188,499) $33,472,067 $33,472,067 $33,346,912 $33,346,912 Note 11. Predominant Industry The Company operates predominately in the electricity industry and revenue is derived from the operation of a distribution network and contracting work. Note 12. Financial Instruments Credit Risk Financial instruments which potentially subject the Company to a credit risk principally consist of bank balances, accounts receivable and investments. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits, accounts receivables and investments. Cash balances are held with Trading Banks, with surplus funds deposited with banks for short terms. 16

19 The estimated fair value of Companies Financial Instruments are as follows: Group Parent Carrying Carrying Carrying Carrying Value Fair value Value Fair value Value Fair Value Value Fair value 31/03/01 31/03/01 31/03/00 31/03/00 31/03/01 31/03/01 31/03/00 31/03/00 Accounts Payable $1,136,896 $1,136,896 $1,237,187 $1,237,187 $889,761 $889,761 $879,423 $879,423 Bank Balance $5,612,765 $5,612,765 $5,632,827 $5,632,827 $5,139,252 $5,139,252 $5,153,666 $5,153,666 Accounts Receivable $1,024,728 $1,024,728 $1,564,212 $1,564,212 $879,780 $879,780 $1,103,737 $1,103,737 Investments $0 $0 $0 $0 $237,490 $237,490 $222,490 $222,490 Credit Faclities The Company has a total overdraft facility of $100,000. The overdraft interest rate is 10.95% Note 13. Related Parties Transaction Network Waitaki Limited is 100% owned by the Waitaki Power Trust. Network Waitaki Limited owns 100% of Pulse Business Solutions Limited and Pulse Business Services Limited. A loan valued at $100,000 made to Pulse Business Solutions Limited and $140,000 to Pulse Business Services Limited has been repaid. Network Waitaki Limited has charged Pulse Business Solutions Limited for rent and services amounting to $53,899 (2000 $73,678) and has paid Pulse Business Solutions Limited $5,820 (2000 $34,920). Network Waitaki Limited owns 50% of Networks South Limited. Network Waitaki Limited has invested $1,269,752 in Networks South Limited. It has charged Networks South Limited rent of $2,167 and interest of $92,625. Debtor outstanding at balance date $243. Network Waitaki Limited has been charged by Networks South Limited for services $747,747. Creditor outstanding at balance date $6,010. NetCon Limited a 100% owned subsidiary of Networks South Limited has been charged rent of $34,976. Debtor outstanding at balance date $4,334. Net Con has charged Network Waitaki Limited for service $772,975. Creditor outstanding at balance date $312,745. No amounts have been forgiven or written-off during the year. During the year, services were provided to Network Waitaki Limited by the following Directors: K.J. Scott $1,360 and G.N. Robinson $26,356. Mr J.N. Lamberg, a Director of Network Waitaki Limited in his capacity as a Real Estate agent, is providing services to Network Waitaki Limited on normal terms and conditions. Note 14. Commitments and Contingent Liabilities There were Capital commitments at 31 March 2001 of $103,046 (2000 $174,200). There were no contingent liabilities. Lease Liabilities Network Waitaki Limited has entered into non-cancellable operating leases with lease terms in excess of one year in respect of plant and equipment. At balance date the aggregate lease commitment was a follows: Group Parent Due within one year 1,200 36,264 1,200 25,710 Due later than one year and up to and including two years 0 9, ,670 Due later than two years and up to and including five years Operating lease liability 1,200 46,091 1,200 33,380 17

20 Note 15. Subsequent Events There are no subsequent events Statement of Performance Targets for Parent Company The Company has developed performance targets for the year as stated in the 2000 Statement of Corporate Intent. The Company s actual performance is compared with these targets. (I) The ratio of earnings before tax and interest to total capital employed: Actual Target % 2.95% % 20.69% (ii) The ratio of net profit after tax to total shareholders funds: Actual Target % 1.67% % 14.30% (iii) Accounting rate of profit Actual Target % 1.58% % 4.4% (iv) (v) (vi) SAIDI (System Average Interruption Duration Index) Actual Target SAIFI (System Average Interruption Frequency Index) Actual Target CAIDI (Customer Average Interruption Duration Index) Actual Target (vii) Direct Line Cost Per Circuit Kilometre of Line Actual Target 2001 $708 $ $640 $570 (viii) Indirect Line Cost Per Electricity Customer Actual Target 2001 $20 $ $41 $40 (ix) The Company has distributed to customers by way of discount the sum of $1,963,784 (2000 Nil ). A Dividend of $110,000 (2000 $2 million) was paid. No final dividend is recommended This complies with the Companies Financial Surplus and Dividend Policy. 18

21 REPORT OF THE AUDIT OFFICE TO THE READERS OF THE FINANCIAL STATEMENTS OF NETWORK WAITAKI LIMITED AND GROUP FOR THE YEAR ENDED 31 MARCH 2001 We have audited the financial statements and performance information on pages 8 to 18. The financial statements provide information about the past financial performance of Network Waitaki Limited and Group and its financial position as at 31 March The performance information specifies the performance targets and other measures by which the performance of Network Waitaki Limited and Group can be judged in relation to its objectives. This information is stated in accordance with the accounting policies set out on page 8 to 9. Responsibilities of the Board of Directors The Energy Companies Act 1992 and the Financial Reporting Act 1993 require the Board of Directors (the Board) to prepare financial statements which comply with generally accepted accounting practice and give a true and fair view of the financial position of Network Waitaki Limited and Group as at 31 March 2001 and the results of its operations and cash flows for the year ended 31 March The Energy Companies Act 1992 also requires the Board to report the performance targets and other measures by which the performance of Network Waitaki Limited and Group can be judged in relation to its objectives. Auditor s responsibilities Section 45(1) of the Energy Companies Act 1992 requires the Audit Office to audit the financial statements and the performance information presented by the Board. It is the responsibility of the Audit Office to express an independent opinion on the financial statements and the performance and report its opinion to you. The Controller and Auditor-General has appointed K J Boddy, of Audit New Zealand, to undertake the audit. Basis of opinion An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements and performance information. It also includes assessing: the significant estimates and judgements made by the Board in the preparation of the financial statements and performance; and whether the accounting policies are appropriate to Network Waitaki Limited and Group s circumstances, consistently applied and adequately disclosed. 19

22 We conducted our audit in accordance with generally accepted auditing standards, including the Auditing Standards issued by the Institute of Chartered Accountants of New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements. We have carried out an assurance related assignment for Network Waitiaki Limited and Group. This involved issuing audit certificates pursuant to the Electricity (Information Disclosure) Regulations Other than this assignment, and in our capacity as auditor acting on behalf of the Controller and Auditor-General, we have no relationship with or interests in Network Waitiaki Limited and Group. Unqualified opinion We have obtained all the information and explanations we have required. In our opinion: proper accounting records have been kept by Network Waitaki Limited and Group as far as appears from our examination of those records; the financial statements of Network Waitaki Limited and Group on pages 8 to 18: - comply with generally accepted accounting practice; and - give a true and fair view of:. the financial position as at 31 March 201; and. the results of its operations and cash flows for the year ended on that date; and the performance information of Network Waitaki Limited and Group on page 18 gives a true and fair view of the achievements in relation to the performance targets and other measures adopted for the year ended 31 March Our audit was completed on 7 June 2001 and our unqualified opinion is expressed as at that date. K J Boddy Audit New Zealand On behalf of the Controller and Auditor-General Christchurch, New Zealand 20

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24 Network Waitaki Limited 6-8 Chelmer Street P.O. Box 247 Oamaru Ph Fax Freephone Website.