Notice Type
General Section
Notice Title

UNISON NETWORKS LIMITED

INFORMATION FOR DISCLOSURE
PURSUANT TO SECTION 57T OF THE COMMERCE ACT 1986
CERTIFICATION ON FINANCIAL STATEMENTS, PERFORMANCE MEASURES AND STATISTICS DISCLOSED BY LINE OWNERS (OTHER THAN TRANSPOWER)
We, Brian Joseph Martin and John Richard Palairet, Directors of Unison Networks Limited, certify that, having made all reasonable enquiry, to the best of our knowledge -
a. The attached audited financial statements of Unison Networks Limited, prepared for the purposes of requirement 6 of the Commerce Commission's Electricity Information Disclosure Requirements 2004 comply with those Requirements; and
b. The attached information, being the derivation table, financial performance measures, efficiency performance measures, energy delivery efficiency performance measures, statistics, and reliability performance measures in relation to Unison Networks Limited, and having been prepared for the purposes of requirements 14, 15, 20 and 21 of the Electricity (Information Disclosure) Requirements 2004 comply with those Requirements.
The valuations on which those financial performance measures are based are as at 31 March 2006.
Declared at this day of November 2006
_______________________ _____________________
Director Date
________________________ _____________________
Director Date
Unison Networks Limited - Lines Business
Statement of Significant Accounting Policies
For the year ended 31 March 2006
UNISON NETWORKS LIMITED - LINES BUSINESS
STATEMENT OF FINANCIAL PERFORMANCE
For the year ended 31 March 2006
2006 2005
Notes $000 $000
Operating revenue 4 94,333 92,898
Operating surplus before non operating benefits/(costs) 36,883 39,321
Amortisation 18, 4 4,495 4,495
Restatement of goodwill 18, 4 60,559 -
Interest costs 12,179 12,787
Surplus/(deficit) before taxation (40,350) 22,039
Taxation expense/(benefit) 3(a) 1,430 3,339
Net surplus/(deficit) for year (41,780) 18,700
UNISON NETWORKS LIMITED - LINES BUSINESS
STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2006

2006 2005
$000 $000
Equity at beginning of year 211,539 195,877
Net surplus/(deficit) (41,780) 18,700
Revaluation of network assets 15 135,844 -
Total recognised revenues and expenses for the year 94,064 18,700
Dividends paid 16 4,600 3,038
Equity at end of year 301,003 211,539
The accompanying Statement of Significant Accounting Policies and Notes form part of and are to be read in conjunction with
these Financial Statements. The Financial Statements have been prepared solely for the purpose of complying with Electricity
Information Disclosure Requirements pursuant to Section 57T of the Commerce Act 1986.
UNISON NETWORKS LIMITED - LINES BUSINESS
STATEMENT OF FINANCIAL POSITION
As at 31 March 2006

2006 2005
Notes $000 $000
Equity
Share capital 5 66,661 66,661
Asset revaluation reserve 15 248,010 112,166
Retained earnings 16 (13,668) 32,712
301,003 211,539
Represented by:
Non Current Assets
Property, plant and equipment 6 447,424 294,111
Goodwill arising on acquisition 18 14,000 79,054
Capital work in progress 19 5,204 9,805
466,628 382,970
Current Assets
Receivables and prepayments 7 8,855 8,854
Inventories 2,386 1,418
Taxation refund 3c 4,105 2,735
15,346 13,007
Total Assets 481,974 395,977
Non Current Liabilities
Employee entitlements 17 725 1,121
Term debt 8 161,600 170,600
162,325 171,721
Current Liabilities
Bank overdraft 3,362 4,011
Accounts payable and accruals 20 14,102 8,064
Employee entitlements 17 1,181 642
18,645 12,717
Total Liabilities 180,970 184,438
Net Assets Employed 301,003 211,539
The accompanying Statement of Significant Accounting Policies and Notes form part of and are to be read in conjunction with
these Financial Statements. The Financial Statements have been prepared solely for the purpose of complying with Electricity
Information Disclosure Requirements pursuant to Section 57T of the Commerce Act 1986.
UNISON NETWORKS LIMITED - LINES BUSINESS
STATEMENT OF CASH FLOWS
For the year ended 31 March 2006

Notes 2006 2005
Cash flows from operating activities $000 $000
Cash was provided from:
Receipts from customers 86,240 84,517
Contributions for capital works 7,989 7,443
Taxation refunds - 687
Interest received 84 143
94,313 92,790
Cash was disbursed to:
Payments to suppliers 36,239 31,610
Payments to employees 9,377 9,287
Interest paid on loans 12,141 12,695
Income taxes paid 2,800 3,400
60,557 56,992
Net cash flows from operating activities 12 33,756 35,798
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment 43 92
43 92
Cash was applied to:
Purchase and construction of property, plant and equipment 24,051 18,343
24,051 18,343
Net cash flows from investing activities (24,007) (18,251)
Cash flows from financing activities
Cash was provided from:
Borrowings 1,000 2,500
1,000 2,500
Cash was applied to:
Settlement of borrowings 10,000 18,500
Payment of dividends 100 3,038
10,100 21,538
Net cash flows from financing activities (9,100) (19,038)
Net increase/(decrease) in cash held 649 (1,491)
Cash balances at beginning of year (4,011) (2,520)
Cash balance at end of year (3,362) (4,011)
The accompanying Statement of Significant Accounting Policies and Notes form part of and are to be read in conjunction with
these Financial Statements. The Financial Statements have been prepared solely for the purpose of complying with Electricity
Information Disclosure Requirements pursuant to Section 57T of the Commerce Act 1986.
Unison Networks Limited - Lines Business
Statement of Significant Accounting Policies
For the year ended 31 March 2006
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
· Reporting Entity
Unison Networks Limited (Unison) is registered as a Company under the Companies Act 1993, and is an Energy Company in terms of the Energy Companies Act 1992.
The financial statements have been prepared in accordance with the relevant provisions of these two Acts, the Financial Reporting Act 1993 and the Electricity Information Disclosure Requirements 2004.
· Measurement System
The general accounting principles recognised as appropriate for the measurement and reporting of earnings and financial position on a historical cost basis is followed by Unison, with the exception that certain property, plant and equipment have been revalued.
· Specific Accounting Policies
The following particular accounting policies, which materially affect the measurement of profit and the financial position, have been applied:
a. Property, Plant and Equipment
Owned Assets
All owned items of property, plant and equipment are initially recorded at cost and, except for land, depreciated. These costs include the purchase consideration plus, where appropriate, site preparation costs, installation costs and all relevant overheads. Costs cease to be capitalised when substantially all the activities necessary to bring an asset to its intended location and condition are complete.
The electrical distribution network is independently valued at fair value based on Depreciated Replacement Cost (DRC).
Land and buildings not included in the electrical distribution network are stated at valuation determined by an independent registered valuation company, and are adjusted for additions at cost and depreciation at appropriate rates. The basis of valuation is fair value as defined under the Financial Reporting Standard 3 - Accounting for property, plant and equipment.
Revaluations
The electrical distribution network is revalued on a cyclical basis with no components being recognised at a valuation undertaken more than three years previously.
Land and buildings are revalued on a cyclical basis at no more than 5 yearly intervals.
Any revaluation surplus arising on the revaluation of a class of property, plant or equipment is transferred directly to the asset revaluation reserve. A revaluation deficit in excess of the asset revaluation reserve balance for the class of property, plant or equipment is recognised in the Statement of Financial Performance in the period it arises. Revaluation surpluses which reverse previous revaluation deficits
recognised in the Statement of Financial Performance are recognised as revenue in the Statement of Financial Performance.
Unison Networks Limited - Lines Business
Statement of Significant Accounting Policies
For the year ended 31 March 2006
The carrying values of property, plant and equipment do not exceed their estimated recoverable value.
Disposal of Property, Plant and Equipment
When an item of property, plant or equipment is disposed of, any gain or loss is recognised in the Statement of Financial Performance and is calculated as the difference between the sale price and the carrying value of the asset.
On disposal of an item of property, plant or equipment, any revaluation surplus in respect of that class of asset is reduced or increased by the amount applicable to that item.
b. Depreciation
Depreciation is provided on a straight line basis on all tangible items of property, plant and equipment other than freehold land, at rates calculated to allocate the assets' cost or valuation less any residual value, over their estimated useful lives.
The estimated useful lives of property, plant and equipment are as follows:
Electrical Distribution Network
33kV sub transmission 35 - 70 Years
Zone substations, structures and equipment 15 - 60 Years
Distribution transformers 40 - 55 Years
Distribution switchgear 35 - 40 Years
Overhead lines 35 - 70 Years
Underground cables 45 - 70 Years
Other distribution equipment 10 - 45 Years
Other Plant, Property and Equipment
Freehold buildings 60 - 100 Years
Land Indefinite
Motor vehicles 5 - 10 Years
Plant and equipment 5 - 10 Years
Office furniture and equipment 4 - 10 Years
Information technology 3 - 10 Years
c. Investments
Investments are stated at the lower of cost or net realisable value.
d. Receivables
Receivables are stated at their estimated realisable value, after providing for doubtful debts.
e. Inventories
Inventories are stated at the lower of weighted average cost and net realisable value.
f. Capital Work in Progress
Capital work in progress includes the cost of materials and other direct and indirect costs incurred as at balance date.
Unison Networks Limited - Lines Business
Statement of Significant Accounting Policies
For the year ended 31 March 2006
g. Income Tax
Unison adopts the liability method of accounting for deferred taxation.
The taxation charge against the surplus for the period is the estimated liability in respect of that surplus after allowance for all the permanent differences and timing differences not expected to reverse in the foreseeable future. This is the partial basis for the calculation of deferred tax.
A debit balance in the deferred tax account, arising from timing differences or income tax benefits from income tax losses, is only recognised if there is virtual certainty of realisation. The subsequent realisation of such income tax benefits is subject to the requirements of income tax legislation being met.
h. Financial Instruments
Unison has financial instruments with off-balance sheet risk for the primary purpose of reducing its exposure to fluctuations in interest rates.
Financial instruments entered into as hedges of an underlying exposure are accounted for on the same basis as the underlying exposure. Accordingly, hedge gains and losses are included in the Statement of Financial Performance when the gains or losses arising on the underlying exposures are recognised in the Statement of Financial Performance.
Financial instruments such as bank balances, bank investments, receivables, accounts payable and term debt are included in the accounts at their estimated fair value.
i. Capitalisation
Capital expenditure is defined as all expenditure incurred in the creation of a new asset, replacement of an asset that has reached the end of its economic life, or the increasing service potential of an existing asset. Constructed assets are included in property, plant and equipment as each becomes operational and available for use.
j. Cash Flows
For the purpose of the Statement of Cash Flows, cash includes cash on hand, deposits held on call with banks, and investments in money market instruments.
k. Employee Entitlements
A liability for annual leave, long service leave and retirement gratuities is accrued and recognised in the Statement of Financial Position. Liabilities for annual leave is calculated on an entitlement basis at current rates.
Retirement gratuity liability and long service leave are calculated using current rates and appropriate probabilities for all qualifying staff. The calculations are based on the net present value of the estimated future cashflow.
l. Goodwill Arising on Acquisition
Goodwill arising on acquisition of subsidiaries/businesses/assets is amortised on a straight-line basis over the period of expected benefit or 20 years, whichever is the lesser. Goodwill is tested annually for impairment.
Unison Networks Limited - Lines Business
Statement of Significant Accounting Policies
For the year ended 31 March 2006
m. Borrowings
Borrowings are stated at face value less unamortised discounts, premiums and prepaid interest. Discounts, premiums and prepaid interest are amortised to interest expenses on a yield to maturity basis over the period of the borrowing.
n. Goods and Services Tax
The financial statements have been prepared with revenue and expense items exclusive of GST. In the statement of financial position, accounts receivable and accounts payable are inclusive of GST. All other assets and liabilities are exclusive of GST.
o. Operating Leases
Payments made under operating leases are recognised in the Statement of Financial Performance on a basis representative of the pattern of benefits expected to be derived from the leased assets.
Changes in Accounting Policies
There have been no changes to accounting policies.
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
3 INCOME TAX
2006 2005
$000 $000
a) Taxation
Operating surplus/(deficit) before taxation (40,350) 22,039
Prima facie tax @ 33% (13,315) 7,273
Permanent differences 19,241 (777)
Timing differences not recognised (4,716) (3,353)
Prior period adjustments 220 196
Current taxation expense/(benefit) 1,430 3,339
Taxation expense/(benefit) is represented by:
Current taxation 1,430 1,796
Deferred tax - 1,543
1,430 3,339
b) In respect of network assets there is a deferred tax liability for tax depreciation recoverable amounting to approximately $31 million (2005: $24.5million) which would crystallise if all network assets were disposed of at their carrying value.
c) Taxation (Refund)/Payable
Opening balance (2,735) (1,818)
Current year taxation expense/(benefit) 1,430 1,796
Taxation paid (2,800) (3,400)
Taxation refunded prior periods - 687
Closing balance (4,105) (2,735)
d) Deferred Tax (Asset)/Liability
Opening balance - (1,543)
Movement - 1,543
Closing balance - -
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
4 SURPLUS BEFORE TAXATION
2006 2005
$000 $000
Operating Revenue
Interest revenue 84 143
Recovery of debt previously written off as bad 17 18
All other revenue 94,232 92,737
94,333 92,898
Depreciation
Electrical distribution system 11,656 11,187
Freehold buildings 140 148
Motor vehicles 235 295
Plant and equipment 147 178
Office furniture and equipment 57 72
Information technology 1,079 868
13,316 12,748
Operating Expenses
Audit New Zealand - audit services 79 79
Audit New Zealand - disclosure accounts 7 6
Remuneration paid to directors 270 232
Bad debts written off 17 5
Operating lease payments 76 79
Change in provision for doubtful debts 23 (31)
Loss on sale of properties, plant and equipment 4 16
All other expenses 43,658 40,443
44,134 40,829
Other Costs
Amortisation 4,495 4,495
Restatement of goodwill 60,559 -
Interest 12,179 12,787
77,233 17,282
Surplus/(Deficit) Before Taxation (40,350) 22,039
5 SHARE CAPITAL 2006 2005
Number of ordinary fully paid shares on issue 64,000,000 64,000,000
2006 2005
$000 $000
Issued and paid up value 66,661 66,661
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
6 PROPERTY PLANT AND EQUIPMENT
2006 2005
$000 $000
Electrical Distribution Network
33kV Subtransmission
at valuation 23,774 16,839
additions at cost - 809
less accumulated depreciation - 1,142
23,774 16,506
Zone Substation Structures and Equipment
at valuation 31,044 20,151
additions at cost - 1,323
less accumulated depreciation - 1,765
31,044 19,709
Distribution and Substation Transformers
at valuation 78,806 44,868
additions at cost - 11,294
less accumulated depreciation - 3,940
78,806 52,222
Distribution Switchgear
at valuation 32,108 15,327
additions at cost - 1,532
less accumulated depreciation - 1,579
32,108 15,280
11kV Lines and Cables
at valuation 152,857 99,328
additions at cost - 8,475
less accumulated depreciation - 6,743
152,857 101,060
LV Lines and Cables
at valuation 79,087 61,677
additions at cost - 4,170
less accumulated depreciation - 4,931
79,087 60,916
Other Distribution Equipment
at valuation 40,245 18,772
additions at cost - 1,579
less accumulated depreciation - 1,538
40,245 18,813
Net carrying value, Electricity Distribution Network 437,921 284,506
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
6 PROPERTY PLANT AND EQUIPMENT…continued
2006 2005
$000 $000
Freehold Buildings
at valuation 3,573 3,573
at cost 447 407
less accumulated depreciation 502 417
3,518 3,563
Land and Additions to Land
at valuation 479 479
at cost 205 205
684 684

Motor vehicles
at cost 2,716 2,416
less accumulated depreciation 1,844 1,773
872 643
Plant and Equipment
at cost 2,324 2,458
less accumulated depreciation 1,460 1,723
864 735
Office Furniture and Equipment
at cost 782 887
less accumulated depreciation 545 583
237 304
Information Technology
at cost 7,127 6,608
less accumulated depreciation 3,799 2,932
3,328 3,676
Net Carrying Value, Other items of Property, Plant and Equipment 9,503 9,605
TOTAL NET CARRYING VALUE 447,424 294,111
Reconciliation:
Balance at beginning of reporting period 294,111 293,371
Plus revaluations 135,844 -
Plus other property, plant and equipment additions 30,784 13,488
Less depreciation 13,316 12,748
Balance at end of reporting period 447,424 294,111
This is represented by:
Property, plant and equipment at valuation 441,973 281,014
Property, plant and equipment at cost 13,601 42,163
Less accumulated depreciation 8,150 29,066
447,424 294,111
7 RECEIVABLES AND PREPAYMENTS
2006 2005
$000 $000
Trade debtors 8,878 8,865
Provision for doubtful debts (48) (24)
Prepayments 25 13
8,855 8,854
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
8 BORROWINGS
2006 2005
$000 $000
Term borrowings
Maturing within 1 year 26,500 9,000
Maturing between 1 and 2 years 66,500 80,000
Maturing between 2 and 3 years 67,000 -
Maturing between 3 and 4 years - 80,000
160,000 169,000
Related party borrowings
Maturing between 5 and 10 years 1,600 1,600
1,600 1,600
Total borrowings 161,600 170,600
2006 2005
% %
Weighted average interest rate on term borrowings 7.35% 7.13%
Effective interest rate related party 6.00% 6.00%
All term borrowings are bank loans and interest rates for these borrowings are based on the bank bill rate plus a margin.
Unison utilises a multi tranche bank facility arrangement for a total of $200m. Components of this facility
will be routinely renewed on maturity date. For this reason all borrowings under this facility are reported as term borrowings.
The bank facility is unsecured and has the benefit of a negative pledge and cross guarantee. The facility is subject to
various covenants such as limitations on long-term indebtedness, leverage and other ratios. Unison complied
with all covenants for the 2006 and 2005 financial years.
The related party loan is from the Hawke's Bay Power Consumers' Trust and is unsecured. This loan is renewable on
01 June 2013.
9 RELATED PARTY TRANSACTIONS
The Hawke's Bay Power Consumers' Trust holds the shares of Unison on behalf of the consumers in their capacity as owners.
Unison has issued a debt security to the Trust of $1,600,000 repayable on 1 June 2013. The debt security carries
a fixed interest rate of 6% per annum. During the year Unison paid $96,000 in interest to the Hawke's Bay Power Consumers' Trust.
During the year the following entities, in which directors had an interest, provided services to Unison under normal
commercial terms.
2006 2005
$000 $000
Information Management Services Ltd/K Atkinson 3 11
Vectek Electronics Ltd/K Valentine 4 -
As at balance date the only amounts outstanding were $270 (2005: $660) to Information Services Limited and $1,302 (2005:nil) to Vectek Electronics Ltd under normal trading terms.
An operating lease agreement to supply backup generation facilities was entered into during the year on normal commercial terms between Unison and the Hawke's Bay District Health Board, of which Mrs H Walker and Mr K Atkinson are directors.
There were no other related party transactions.
10 COMMITMENTS
The value of contractual capital commitments as at 31 March 2006 is estimated at $3,096,038 (2005: $7,147,346).
Unison has a perpetual contract with Siemens (N.Z.) Limited for the provision of maintenance and non-customer generated
capital works over the electricity networks in the Taupo and Rotorua regions.
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
Operating lease commitments
2006 2005
$000 $000
Less than 1 year 32 79
1-2 years 10 33
2-5 years - 13
42 125
11 CONTINGENT LIABILITIES
Note 22 discloses potential implications for Unison's prices and asset carrying values as a result of the Commerce Commission's current inquiry.
Unison has no other contingent liabilities.
12 RECONCILIATION OF REPORTED NET OPERATING SURPLUS AFTER TAX WITH NET CASH FLOWS FROM OPERATING ACTIVITIES
2006 2005
$000 $000
Net surplus/(deficit) (41,780) 18,700
(Gain)/loss on sale of property, plant and equipment (16) 16
Amortisation 4,495 4,495
Restatement of goodwill 60,559
Depreciation 13,316 12,748
36,574 35,959
(Increase)/decrease in receivables and prepayments (1) (793)
(Increase)/decrease in inventories (968) 49
(Decrease)/increase in accounts payable, accruals
and employee entitlements (479) (42)
(Decrease)/increase in taxation payable (1,370) 625
Net cash inflow from operating activities 33,756 35,798
13 FINANCIAL INSTRUMENTS
Unison has a comprehensive treasury policy approved by the Board of Directors in respect of managing the risks of financial instruments.
a) Interest rate risk
Unison manages interest rate exposure in accordance with treasury policy by hedging no less than 60% of all borrowings
with interest rate hedge instruments.

The weighted average rates on interest rate swaps are as follows:
2006 2006 2005 2005
% $000 % $000
Maturing in less than 1 year 6.35 30,000 6.15 30,000
Maturing between 1 and 2 years 6.45 30,000 6.32 30,000
Maturing between 2 and 5 years 6.51 46,000 6.46 54,000
Maturing after 5 years 6.58 64,000 6.65 36,000
170,000 150,000
Included in the 2006 notional swap amounts at 31 March 2006 are $40 million of forward start swaps that have been transacted but only actively hedge floating interest rates from 1 November 2006. Of the forward start swaps $10 million are maturing between 2 and 5 years and the remaining $30 million are maturing after 5 years.
The market valuation of these hedges at 31 March 2006 is a $136,843 gain (2005: $2,177,608 gain).
13 FINANCIAL INSTRUMENTS …continued
b) Credit risk
Financial instruments which potentially subject Unison to credit risk principally consist of bank balances and accounts receivables. No collateral is held on these amounts. (2005: nil)
Maximum exposure to credit risk is the amount stated in the financial statements and is net of any recognised provision for loses
on these financial instruments.
c) Concentration of credit risk
Unison has exposure to four electricity retailers that account for 66% of accounts receivable. To minimise this risk, the
Company performs credit evaluations on all energy retailers in conjunction with the contractual requirements contained within the
use of system agreements operating with these parties. A bond or bank undertaking may be required where deemed necessary.
At balance date a bank guarantee of up to $5.4 million is currently held by Unison in respect of one retailer.
d) Fair values
The methods and assumptions used are carrying amounts in the financial statements reflect the estimated fair
value of the financial instruments including receivables, bank and investments, accounts payable and term debt.
There were no material investments at balance date.
e) Currency risk
Unison enters into forward exchange contracts for any significant transactions conducted in currency other than the New
Zealand dollar to eliminate the effects of any currency fluctuations. At balance date no forward exchange contracts were
in operation (2005:nil).
14 SEGMENT INFORMATION
Unison operates predominantly in one industry - the ownership, management and operation of electricity
networks within the Hawke's Bay, Rotorua and Taupo regions.
15 RESERVES
2006 2005
$000 $000
Asset Revaluation Reserve
Balance at beginning of year 112,166 112,166
Revaluation of electrical distribution network 135,844 -
248,010 112,166
Detailed As
Land 278 278
Revaluation of electrical distribution network 247,732 111,888
248,010 112,166
16 RETAINED EARNINGS
2006 2005
$000 $000
Balance at beginning of year 32,712 17,050
Net surplus/(deficit) (41,780) 18,700
Dividends paid (4,600) (3,038)
Balance at end of year (13,668) 32,712
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
17 EMPLOYEE ENTITLEMENTS
Employee entitlements expected to be taken within the 12 months following balance date are recorded as current liabilities.
All other employee entitlements are recorded as term liabilities.
18 GOODWILL ARISING FROM ACQUISITION 2006 2005
$000 $000
Goodwill at cost 89,888 89,888
Restatement of goodwill (60,559) -
Accumulated amortisation (15,329) (10,834)
Balance at year end 14,000 79,054

Goodwill arising on acquisition was not established by a valuation but represents the difference between the purchase price paid for the Rotorua and Taupo electrical distribution networks in November 2002 and the subsequent Depreciated Replacement Cost values assigned to tangible assets for financial reporting purposes as at 31 March 2003.
Unison's Policy is to amortise goodwill over a twenty year useful life as well as assess the goodwill balance for any impairment. Any impairment is determined by comparing the economic value of the Taupo and Rotorua networks against its component values, being the tangible value of its assets and the intangible value reflected through goodwill. Any resulting impairment is deducted from the goodwill component.
The impairment test has been assessed assuming future cash inflows and outflows relating to the Taupo and Rotorua assets in existence at 31 March 2006. Cash inflows are based on line charge revenues calculated using the Commerce Commission's "Building Blocks" methodology and regional allocations in line with Unison's proposed new administrative settlement offer, which has yet to be agreed with the Commission. Cash outflows relate to operating and capital expenditure allocations using current best estimates and reflect expenditure essential to maintaining the assets at their current service capability. Note that any changes to these assumptions can have a material impact on the remaining goodwill balance and therefore the assessed goodwill adjustment.
The remaining unamortised goodwill balance after the impairment test is assessed to be $14 million. However, the revaluation of the electrical distribution network assets as at 31 March 2006 results in a significant uplift in tangible asset values. In essence some of the Taupo and Rotorua Networks value previously reflected in Goodwill has been replaced by the uplift in the tangible value of the electrical distribution network.
19 CAPITAL WORK IN PROGRESS
2006 2005
$000 $000
Electrical distribution network 4,798 9,805
Other 406 -
5,204 9,805
20 ACCOUNTS PAYABLE AND ACCRUALS
2006 2005
$000 $000
Trade creditors 8,363 6,863
Final dividend payable 4,500 -
Interest payable 1,239 1,201
14,102 8,064
21 EVENTS SUBSEQUENT TO BALANCE DATE
There have been no significant reporting events subsequent to balance date.
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
22 OTHER MATTERS
Unison is subject to the Commerce Commission's Price and Quality Threshold Regime which applies to electricity lines businesses.
The Commerce Commission had published an intention to declare control of Unison's prices. This is based on a preliminary view that Unison's current level of charges result in excessive profits being earned and that the benefits of control outweigh the costs.
Unison has provided the Commerce Commission with an administrative settlement offer. The Commerce Commission is expected to consult on the administrative settlement offer during November 2006. In developing an administrative settlement offer, Unison has made, and the Commerce Commission has accepted an interim offer to reduce line charges in Taupo and Rotorua from 1 April 2006. This equates to a $1.9 million reduction in revenues. The final settlement offer includes a further reduction in revenue of $694 thousand on an annualised basis, to take effect from 1 December 2006, together with a rebalancing of tariffs between regions and customer groups. The Commerce Commission has announced that it has formed the view that the administrative settlement offer made by Unison should (subject to public consultation) be accepted. The formal outcome of this should be known in December.
23 MANDATORY SPECIFIC DISCLOSURE
The following information is required to be disclosed in the financial statements under requirement 6 of
the Commerce Act Electricity Information Disclosure Requirements 2004.
Statement of Financial Position Disclosure (Schedule 1, Part 2)
2006 2005
$000 $000
Current assets
(a) Cash and bank balances: - -
(b) Short-term investments: - -
(c ) Inventories: 2,386 1,418
(d) Accounts receivable: 8,855 8,854
(e) Other current assets not listed in (a) to (d): 4,105 2,735
(f) Total current assets 15,346 13,007
Fixed assets
(a) System fixed assets: 437,921 284,506
(b) Consumer billing and information system assets: 3,328 3,676
(c ) Motor vehicles: 872 643
(d) Office equipment: 237 304
(e) Land and buildings: 4,202 4,247
(f) Capital works under construction: 5,204 9,805
(g) Other fixed assets not listed in (a) to (f): 864 735
(h) Total fixed assets 452,628 303,916
Other tangible assets not listed above - -
Total tangible assets 467,974 316,923
Intangible assets
(a) Goodwill: 14,000 79,054
(b) Other intangibles not listed in (a) above: - -
(c ) Total intangible assets 14,000 79,054
Total assets 481,974 395,977
Current liabilities
(a) Bank overdraft: 3,362 4,011
(b) Short-term borrowings: - -
(c ) Payables and accruals: 9,602 8,064
(d) Provision for dividends payable: 4,500 -
(e) Provision for income tax: - -
(f) Other current liabilities not listed in (a) to (e) above: 1,181 642
(g) Total current liabilities 18,645 12,717
Non-current liabilities
(a) Payables and accruals: - -
(b) Borrowings: 161,600 170,600
(c ) Deferred tax: - -
(d) Other non-current liabilities not listed in (a) to (c ) above: 725 1,121
(e) Total non-current liabilities 162,325 171,721
Equity
(a) Shareholders' equity:
Share capital: 66,661 66,661
Retained earnings: (13,668) 32,712
Reserves: 248,010 112,166
Total Shareholders' equity: 301,003 211,539
(b) Minority interests in subsidiaries: - -
(c ) Total equity: 301,003 211,539
(d) Capital notes: - -
(e) Total capital funds: 301,003 211,539
Total equity and liabilities 481,974 395,977
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
23 MANDATORY SPECIFIC DISCLOSURE…continued
The following information is required to be disclosed in the financial statements under requirement 6 of
the Commerce Act Electricity Information Disclosure Requirements 2004.
Statement of Financial Performance Disclosure (Schedule 1, Part 2)
2006 2005
$000 $000
Operating revenue
(a) Revenue from line/access charges: 82,474 89,956
(b) Revenue from "Other" business for services carried out by - -
the line business (transfer payment): - -
(c) Interest on cash, bank balances and short term investments: 84 143
(d) AC loss-rental rebates: 3,671 2,779
(e) Other revenue not listed in (a) to (d): 8,104 20
(f) Total operating revenue pre Discounts 94,333 92,898
2006 2005
Operating expenditure $000 $000
(a) Payment for Transmission Charges 20,083 19,877
20,083 19,877
(b) Transfer payments to the 'other" business for:
(i) Asset maintenance: - -
(ii) Consumer disconnection/reconnection services: - -
(iii) Meter data: - -
(iv) Consumer-based load control services: - -
(v) Royalty and patent expenses: - -
(vi) Avoided transmission charges on account of own generation - -
(vii) Other goods and services not listed in (i) to (vi) above - -
(viii) Total transfer payment to the "Other" business - -
(c )
Expense to entities that are not related parties for:
(i) Asset maintenance: 5,490 4,136
(ii) Consumer disconnection/reconnection services - -
(iii) Meter data - -
(iv) Consumer-based load control services - -
(v) Royalty and patent expenses - -
(vi) Total of specified expenses to non-related parties (sum of (i) to (v)) 5,490 4,136
(d) Employee salaries, wages and redundancies 7,725 7,997
(e) Consumer billing and information system expense - -
(f) Depreciation on:
(i) System fixed assets: 11,656 11,187
(ii) Other assets not listed in (i) 1,660 1,561
(iii) Total depreciation 13,316 12,748
(g) Amortisation of:
(i) Goodwill: 65,054 4,495
(ii) Other intangibles: -
(iii) Total amortisation of intangibles 65,054 4,495
(h) Corporate and administration: 1,759 2,456
(i) Human resource expenses: 797 381
(j) Marketing/advertising: 338 153
(k) Merger and acquisition expenses: - -
(l) Takeover defence expenses: - -
(m) Research and development expenses: -
(n) Consultancy and legal expenses: 3,315 613
(o) Donations: - -
(p) Directors' fees: 270 232
6,479 3,835
UNISON NETWORKS - LINES BUSINESS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2006
23 MANDATORY SPECIFIC DISCLOSURE…continued
The following information is required to be disclosed in the financial statements under requirement 6 of
the Commerce Act Electricity Information Disclosure Requirements 2004.
2006 2005
(q) Auditors' fees: $000 $000
(i) Audit fees paid to principal auditors: 86 85
(ii) Audit fees paid to other auditors: -
(iii) Fees paid for other services provided by principal and other auditors: -
(iv) Total auditors' fees: 86 85
(r ) Costs of offering credit:
(i) Bad debts written off: 17 5
(ii) Increase in estimated doubtful debts: 23 (31)
(iii) Total cost of offering credit: 40 (26)
(s) Local authority rates expense: 104 88
(t) AC loss-rentals (distribution to retailers/customers) expense: 3,671 2,779
(u) Rebates to consumers due to ownership interest: - -
(v) Subvention payments: - -
(w) Unusual expenses: - -
(x) Other expenditure not listed in (a) to (w) 456 2,058
4,231 4,925
Total operating expenditure 122,504 58,072
Operating surplus/(deficit) before interest and income tax (28,171) 34,826
Interest expense
(a) Interest expense on borrowings 12,179 12,787
(b) Financing charges related to finance leases - -
(c) Other interest expense - -
Total interest expense 12,179 12,787
Operating surplus before income tax (40,350) 22,039
Income tax 1,430 3,339
Net surplus/(deficit) after tax (41,780) 18,700
UNISON NETWORKS LIMITED - LINES BUSINESS
ELECTRICITY INFORMATION DISCLOSURE
REQUIREMENTS 2004
Requirement 14 (Schedule 1, Part 3)
Disclosure by line owners of financial and efficiency performance measures
Financial Measures 2006 2005 2004 2003
Return On Funds 12.19% 13.20% 10.10% 6.67%
Return On Equity 17.18% 19.82% 20.04% 6.13%
Return On Investment 10.39% 10.67% 33.41% 17.74%
The regulatory calculation for ROI adds revaluations into the Operating Surplus. ROI percentages excluding revaluations from the operating surplus are as follows: (2006: 10.39%, 2005: 10.67%, 2004: 9.02%, 2003: 5.80%).
Efficiency Measures 2006 2005 2004 2003
Direct Line Cost Per Kilometre $1,138 $1,326 $1,030 $1,055
Indirect Line Cost Per Customer $94 $57 $58 $45
The information for the year ending 31 March 2003 has been time-weighted to reflect the acquisition of Taupo and Rotorua distribution assets from United Networks Limited.
SCHEDULE 1 - PART 7
FORM FOR THE DERIVATION OF FINANCIAL PERFORMANCE MEASURES FROM FINANCIAL STATEMENTS
Derivation Table Input and Calculations Symbol in formula ROF ROE ROI
Operating surplus before interest and income tax from financial statements (OSBIT) -28,171,057
Operating surplus before interest and income tax adjusted pursuant to regulation 18 (OSBIIT) -28,171,057
Interest on cash, bank balances, and short-term investments (ISTI) 84,070
OSBIIT minus ISTI -28,255,127 a -28,255,127 -28,255,127
Net surplus after tax from financial statements -41,779,745
Net surplus after tax adjusted pursuant to regulation 18 (NSAT) -41,779,745 n -41,779,745
Amortisation of goodwill and amortisation of other intangibles 65,054,000 g add 65,054,000 add 65,054,000 add 65,054,000
Subvention payment 0 s add 0 add 0 add 0
Depreciation of SFA at BV (x) 11,655,895
Depreciation of SFA at ODV (y) 11,655,895
ODV depreciation adjustment 0 d add 0 add 0 add 0
Subvention payment tax adjustment 0 s*t deduct 0 deduct 0
Interest tax shield 3,991,280 q deduct 3,991,280
Revaluations 0 r add 0
Income tax 1,430,021 p deduct 1,430,021
Numerator 36,798,873 23,274,255 31,377,572
OSBIITADJ = a + g + s + d NSATADJ = n + g + s - s*t + d OSBIITADJ = a + g - q + r + s + d - p - s*t
Fixed assets at end of previous financial year (FA0) 303,709,000
Fixed assets at end of current financial year (FA1) 452,628,232
Adjusted net working capital at end of previous financial year (ANWC0) 1,566
Adjusted net working capital at end of current financial year (ANWC1) -4,042,000
Average total funds employed (ATFE) 376,148,399 c 376,148,399 376,148,399
(or regulation 33 time-weighted average)
Total equity at end of previous financial year (TE0) 211,539,372
Total equity at end of current financial year (TE1) 301,003,255
Average total equity 256,271,313 k 256,271,313
(or regulation 33 time-weighted average)
WUC at end of previous financial year (WUC0) 9,805,000
WUC at end of current financial year (WUC1) 5,204,000
Average total works under construction 7,504,500 e deduct 7,504,500 deduct 7,504,500 deduct 7,504,500
(or regulation 33 time-weighted average)
Revaluations 0 r
Half of revaluations 0 r/2 deduct 0
Intangible assets at end of previous financial year (IA0) 79,054,000
Intangible assets at end of current financial year (IA1) 14,000,000
Average total intangible asset 46,527,000 m deduct 46,527,000
(or regulation 33 time-weighted average)
Subvention payment at end of previous financial year (S0) 0
Subvention payment at end of current financial year (S1) 0
Subvention payment tax adjustment at end of previous financial year 0
Subvention payment tax adjustment at end of current financial year 0
Average subvention payment & related tax adjustment 0 v add 0
System fixed assets at end of previous financial year at book value (SFAbv0) 284,506,439
System fixed assets at end of current financial year at book value (SFAbv1) 437,921,000
Average value of system fixed assets at book value 361,213,720 f deduct 361,213,720 deduct 361,213,720 deduct 361,213,720
(or regulation 33 time-weighted average)
System Fixed assets at year beginning at ODV value (SFAodv0) 285,688,313
System Fixed assets at end of current financial year at ODV value (SFAodv1) 303,260,003
Average value of system fixed assets at ODV value 294,474,158 h add 294,474,158 add 294,474,158 add 294,474,158
(or regulation 33 time-weighted average)
Denominator 301,904,338 135,500,252 301,904,338
ATFEADJ = c - e - f + h ATEADJ = k - e - m + v - f + h ATFEADJ = c - e - ½r - f + h
Financial Performance Measure: 12.19 17.18 10.39
ROF = OSBIITADJ/ATFEADJ x 100 ROE = NSATADJ/ATEADJ x 100 ROI = OSBIITADJ/ATFEADJ x 100
t = maximum statutory income tax rate applying to corporate entities bv = book value ave = average odv = optimised deprival valuation subscript '0' = end of the previous financial year
subscript '1' = end of the current financial year ROF = return on funds ROE = return on equity ROI = return on investment
NOTE: System fixed assets at the end of the previous financial year at book value have been amended due to a calculation error
UNISON NETWORKS LIMITED - LINES BUSINESS
ELECTRICITY INFORMATION DISCLOSURE
REQUIREMENTS 2004
Requirement 16 (Schedule 1, Part 8)
Annual Valuation Reconciliation Report
For the year ending 31 March 2006
2006 2005
$000 $000
System fixed assets at ODV - end of the previous financial year 285,688 285,044
Add system fixed assets acquired during the year at ODV 29,228 11,831
Less system fixed assets disposed of during the year at ODV - -
Less depreciation on system fixed assets at ODV (11,656) (11,187)
Add revaluation of system fixed assets - -
Equals system fixed assets at ODV - end of financial year 303,260 285,688
Requirement 21 (Schedule 1, Part 5)
Reliability Performance Measures
Year ended 31 March 2006
Interruptions 2007/10 2007 2006 2005 2004 2003
Target Target
Total interruptions 869 983 1,012 583
a) Planned interruptions (Class B) 432 463 490 324
b) Unplanned interruptions (Class C) 437 520 522 259
Unplanned interruptions not restored within:
a) 3 Hours (%) 25.23% 26.00% 43.00% 29.00%
b) 24 Hours (%) 0.46% 0.96% 1.72% 0.39%
Faults 2007/10 2007 2006 2005 2004 2003
Target Target
Faults/100km
a) Total No. of faults 9.80 9.80 8.92 9.36 10.67 8.96
b) Next year targets
c) Next 5 year average target
d) i) 33kV line voltage
a) Total no. of faults 9.82 5.63 5.17 3.58
b) Next year target
c) Next 5 year target
ii) 11kV line voltage
a) Total no. of faults 8.84 9.71 11.20 8.89
b) Next year target
c) Next 5 year target
Faults/100km of underground line
a) Total 7.30 7.30 6.60 8.82 7.22 10.06
b) 33kV 16.81 - *6.60 -
c) 11kV 6.61 9.28 7.59 10.06
Faults/100km of overhead line
a) Total 10.00 10.00 9.10 9.44 11.18 12.52
b) 33kV 9.22 6.08 5.06 3.20
c) 11kV 9.20 9.78 11.81 9.31
*2 substation equipment faults are now classed as underground 33kV faults
2007/10 2007 2006 2005 2004 2003
Reliability Measures Target Target
Total SAIDI (Classes B & C) 153 153 134 156 202 97
SAIDI
a) Planned interruptions (Class B) 38 38 28 25 30 25
b) Unplanned interruptions (Class C) 115 115 106 130 171 72
c) Unplanned interruptions Transpower (Class D) 0.03 5 - -
Total SAIFI (Classes B & C) 2.40 2.40 2.83 3.21 2.38 2.02
SAIFI
a) Planned Interruptions (Class B) 0.20 0.20 0.18 0.16 0.21 0.22
b) Unplanned interruptions (Class C) 2.20 2.20 2.65 3.05 2.17 1.80
c) Unplanned interruptions Transpower (Class D) 0.01 0.20 - -
Total CAIDI (Classes B & C) 243 243 47 48 85 67
CAIDI
a) Planned interruptions (Class B) 191 191 160 154 141 172
b) Unplanned interruptions (Class C) 52 52 40 43 79 56
c) Unplanned interruptions Transpower (Class D) 3 22 - -
Requirement 20 (Schedule 1, Part 4)
Year ended 31 March 2006
Energy Delivery Efficiency Performance Measures 2006 2005 2004 2003
a) Load Factor 62.92 63.45 65.81 59.11
b) Loss Ratio 6.33% 5.82% 4.52% 5.17%
c) Capacity Utilisation 31.56% 31.28% 29.44% 29.96%
Energy Delivery Efficiency Performance Measures 2006 2005 2004 2003
a) Systems Length (kms)
~ 33kV 429 427 426 337
~ 11kV 4,457 4,475 4,477 3,145
~ 230/400V 4,431 4,363 4,270 2,561
Total 9,317 9,264 9,173 6,043
b) Circuit Length (Overhead) (kms)
~ 33kV 389 394 395 312
~ 11kV 3,836 3,866 3,869 2,692
~ 230/400V 1,632 1,639 1,646 675
Total 5,856 5,899 5,910 3,679
c) Circuit Length (Underground) (kms)
~ 33kV 40 32 31 25
~ 11kV 621 610 608 453
~ 230/400V 2,800 2,724 2,624 1,886
Total 3,461 3,366 3,263 2,364
d) Transformer Capacity (kVA) 975,000 965,439 940,500 727,931
e) Maximum Demand (kW) 307,724 302,014 276,884 218,070
f) Total Electricity entering the network (before losses) (kWh) 1,696,095,881 1,678,730,000 1,596,108,000 1,170,556,066
g) Total electricity supplied for each Retailer (kWh) 1,588,683,182 1,581,079,000 1,523,885,000 1,110,069,995
Retailer A 555,579,599 550,648,000 578,884,000 599,690,446
Retailer B 146,121,137 86,037,000 48,441,000 17,748,204
Retailer C 95,283,713 137,490,000 145,489,000 91,845,438
Retailer D - - -
Retailer E 404,508,895 407,285,000 434,831,000 192,679,424
Retailer F 208,556,826 220,718,000 188,639,000 148,798,871
Retailer G - - -
Retailer H - - -
Retailer I - - -
Retailer J 178,633,012 169,098,000 118,259,000 45,063,316
Retailer K 17,841,992 9,804,000 9,342,000 14,244,296
h) Total customers 104,578 103,347 102,299 76,469
Note:
The information for the year ending 31 March 2003 has been time-weighted to reflect the acquisition of Taupo and Rotorua distribution assets from United Networks Limited.
2003 has been restated for f) and g) to align with definitions of energy pre and post distribution losses.
AUDIT NEW ZEALAND
REPORT OF THE AUDITOR-GENERAL
TO THE READERS OF THE FINANCIAL STATEMENTS OF UNISON NETWORKS LIMITED FOR THE YEAR ENDED 31 MARCH 2006
We have audited the financial statements of Unison Networks Limited on pages 2 to 20. The financial statements provide information about the past financial performance of Unison Networks Limited and its financial position as at 31 March 2006. This information is stated in accordance with the accounting policies set out on pages 5 to 8.
Directors' responsibilities
The Commerce Commission's Electricity Information Disclosure Requirements 2004 made under section 57T of the Commerce Act 1986 require the Directors to prepare financial statements which give a true and fair view of the financial position of Unison Networks Limited as at 31 March 2006, and the results of its operations and cash flows for the year ended on that date.
Auditor's responsibilities
Section 15 of the Public Audit Act 2001 and Requirement 30 of the Electricity Information Disclosure Requirements 2004 require the Auditor-General to audit the financial statements. It is the responsibility of the Auditor-General to express an independent opinion on the financial statements and report that opinion to you.
The Auditor-General has appointed Rudie Tomlinson 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. It also includes assessing:
n the significant estimates and judgements made by the Directors in the preparation of the financial statements; and
n whether the accounting policies are appropriate to Unison Networks Limited's circumstances, consistently applied and adequately disclosed.
We conducted the audit in accordance with the Auditing Standards published by the Auditor General, which incorporate 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 obtain 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.
Other than in our capacity as auditor acting on behalf of the Auditor-General, we have no relationship with or interests in Unison Networks Limited.
Unqualified opinion
We have obtained all the information and explanations we have required.
In our opinion:
n proper accounting records have been maintained by Unison Networks Limited as far as appears from our examination of those records; and
n the financial statements of Unison Networks Limited on pages 2 to 20:
(a) comply with generally accepted accounting practice in New Zealand; and
(b) give a true and fair view of Unison Networks Limited's financial position as at 31 March 2006 and the results of its operations and cash flows for the year ended on that date; and
(c) comply with the Electricity Information Disclosure Requirements 2004.
Our audit was completed on 17 November 2006 and our unqualified opinion is expressed as at that date.
R L Tomlinson
Audit New Zealand
On behalf of the Auditor-General
Auckland, New Zealand
AUDIT NEW ZEALAND
AUDITOR-GENERAL'S OPINION ON THE PERFORMANCE MEASURES OF UNISON NETWORKS LIMITED
We have examined the information on pages 21 to 24, being -
(a) the derivation table in requirement 15;
(b) the annual ODV reconciliation report in requirement 16;
(c) the financial performance measures in clause 1 of Part 3 of Schedule 1; and
(d) the financial components of the efficiency performance measures in clause 2 of Part 3 of Schedule 1, -
that were prepared by Unison Networks Limited and dated 17 November 2006 for the purposes of the Commerce Commission's Electricity Information Disclosure Requirements 2004.
In our opinion, having made all reasonable enquiry, and to the best of our knowledge, that information has been prepared in accordance with those Electricity Information Disclosure Requirements 2004.
R L Tomlinson
Audit New Zealand
On behalf of the Auditor-General
Auckland, New Zealand
17 November 2006