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VECTOR LIMITED
ELECTRICITY LINES BUSINESS 2006
INFORMATION FOR DISCLOSURE
PURSUANT TO
SECTION 57T OF THE COMMERCE ACT 1986
KPMG
Auditors Report
To the readers of the financial statements of Vector Electricity Lines Business.
We have audited the accompanying special purpose information disclosure statements of Vector Electricity Lines Business. The special purpose information disclosure statements provide information about the past financial performance of Vector Electricity Lines Business and its financial position as at 31 March 2006. This information is stated in accordance with the accounting policies set out in the special purpose financial statements.
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 Vector Electricity Lines Business as at 31 March 2006, and the results of operations and cash flows for the year then ended.
Auditor's Responsibilities
It is our responsibility to express an independent opinion on the special purpose information disclosure statements presented by the Directors and report our opinion to you.
Basis of Opinion
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the special purpose information disclosure statements. It also include assessing-
· the significant estimates and judgements made by the Directors in the preparation of the financial statements; and
· whether the accounting policies are appropriate to Vector Electricity Lines Business's circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary. We obtained sufficient evidence to give reasonable assurance that the special purpose information disclosure statements are free from misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the special purpose information disclosure statements.
Our firm has also provided other services to the company in relation to other audit related services. Partners and employees of our firm may also deal with the company on normal terms within the ordinary course of trading activities of the business of the company. These matters have not impaired our independence as auditors of the electricity lines business. The firm has no other relationship with, or interest in Vector Limited - Electricity Lines Business.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion-
· proper accounting records have been maintained by Vector Electricity Lines Business as far as appears from our examination of those records; and
· the special purpose information disclosure statements referred to above-
· comply with generally accepted accounting practice; and
· give a true and fair view of financial position of Vector Electricity Lines Business as at 31 March 2006 and the results of its operations and cash flows for the year ended; and
· comply with the Electricity Information Disclosure Requirements 2004.
Our audit was completed on 9 November 2006 and our opinion is expressed as at that date.
KPMG
KPMG Centre
PO Box 1584
Auckland
KPMG
Auditor's Opinion of Performance Measures
We have examined the attached information, being:
(a) a derivation table per Schedule 1 Part 7; and
(b) an annual ODV reconciliation report per Schedule 1 Part 8; and
(c) financial performance measures in clause 1 of Part 3 of Schedule 1; and
(d) financial components of the efficiency performance measures in clause 2 of Part 3 of Schedule 1,
that were prepared by Vector Electricity Line Business and dated 9 November 2006 for the purposes of the Commerce Commission's Electricity Information Disclosure Requirements 2004.
In our opinion, having made all reasonable enquiry, to the best of our knowledge, that information has been prepared in accordance with those Electricity Information Disclosure Requirements 2004.
KPMG
KPMG Centre
PO Box 1584
Auckland
Vector Limited
Electricity Lines Business
Statement of Financial Performance
For the year ended 31 March 2006
Statement of Movements in Equity
For the year ended 31 March 2006
Vector Limited
Electricity Lines Business
Statement of Financial Position
As at 31 March 2006
Vector Limited
Electricity Lines Business
Statement of Cash Flows
For the year ended 31 March 2006
* Cash inflows and outflows have been netted for ease of presentation.
Vector Limited
Electricity Lines Business
Statement of Cash Flows (continued)
For the year ended 31 March 2006
Reconciliation of net surplus after tax to net cash from operating activities
Vector Limited
Electricity Lines Business
Statement of Accounting Policies
For the year ended 31 March 2006
Reporting entity
The reporting entity is the electricity lines business of Vector Limited and therefore the electricity lines business adheres to the accounting policies of the Vector group. Those policies as they relate to the electricity lines business are detailed below.
Vector Limited is a company registered under the Companies Act 1993. Vector Limited is an issuer for the purpose of the Financial Reporting Act 1993 and its financial statements comply with that Act.
These financial statements are prepared for the year ended 31 March 2006 of the electricity lines business activity of Vector Limited and are Special Purpose Financial Reports as defined in the New Zealand Institute of Chartered Accountants' "framework for differential reporting".
All prior year comparative numbers are as disclosed for the electricity lines business activity of Vector Limited for the year ended
31 March 2005.
Statutory base
These financial information disclosure statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Electricity Information Disclosure Requirements 2004.
Measurement base
The financial information disclosure statements are prepared on the basis of historical cost modified by the revaluation of certain items of property, plant and equipment as identified in specific accounting policies below.
Vector group has adopted a policy to apply the avoidable cost allocation methodology (ACAM) described in the Electricity Information Disclosure Handbook 31 March 2004, for the allocation of revenues, costs, assets and liabilities between the regulated businesses and other activities of the company.
The electricity lines business is treated as separate regulated standalone business.
The costs have been allocated on the following basis:
· Direct allocation of all components of financial statement items which are directly attributable to the specific businesses.
· For any components of financial statement items that are not directly attributable to a specific business:
o By assessing the proportions of those components which are avoidable and non-avoidable; and
o Allocating those components amongst the businesses on the basis of those proportions using an appropriate cost allocator.
The two main allocators used are the number of employees and the book value of property plant and equipment. Some costs like integration costs, IT costs and non-system asset depreciation are separately analysed and are allocated using allocators specific to those costs.
All costs not allocated to the standalone electricity lines business, are allocated to other businesses within the Vector group. Other businesses are not disclosed within these financial information disclosure statements.
Allocators are also utilised to allocate balance sheet assets and liabilities that are not directly attributable to the standalone business (for instance accounts payable related to allocated cost items and goodwill). Debt and equity are allocated to the standalone business on the basis of the debt to equity ratio of the Vector group.
The Vector group has undertaken a review of the application of the ACAM methodology in the current year and adjusted some allocators used to ensure that ACAM is applied across the group in a consistent manner. These changes have not had a material impact on the results of the electricity lines business.
Specific accounting policies
The financial statements are prepared in accordance with New Zealand generally accepted accounting practice. The following specific accounting policies that materially affect the measurement of financial performance, financial position and cash flows have been applied.
a) Comparatives
Where a change in the presentational format of the financial information disclosure statements has been made during the period, comparative figures have been restated accordingly.
Vector Limited
Electricity Lines Business
Statement of Accounting Policies (continued)
For the year ended 31 March 2006
b) Acquisitions and disposals of an entity or business
Acquisition or disposal during the year
Where an entity becomes or ceases to be a part of the group during the period, the results of the entity are included in the results from the date that control or significant influence commenced or until the date that control or significant influence ceased. When an entity is acquired all identifiable assets and liabilities are recognised at their fair value at acquisition date. The fair value does not take into consideration any future intentions by the group. Where an entity that is part of the group is disposed of, the gain or loss recognised in the statement of financial performance is calculated as the difference between the sale price and the carrying amount of the identifiable assets and liabilities and related goodwill of that entity.
Goodwill arising on acquisition
Goodwill arising on acquisition of a subsidiary or associate represents the excess of the purchase consideration over the fair value of the identifiable net assets acquired. Goodwill is amortised to the statement of financial performance on a straight line basis over the period during which benefits are expected to be derived up to a maximum of 20 years.
Fees and other costs incurred in raising debt finance directly attributable to the acquisition are recognised as part of the cost of acquisition within goodwill and amortised on a straight line basis over a period of up to 20 years.
c) Income recognition
Income from the provision of services is recognised as services are delivered. Interest and rental income is accounted for as earned. Income from customer contributions is typically recognised on an as-invoiced or percentage of completion basis to match the conditions of the underlying contract.
d) Goods and services tax (GST)
The statement of financial performance and statement of cash flows have been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.
e) Accounts receivable
Accounts receivable are carried at estimated realisable value after providing against debts where collection is doubtful.
f) Income tax
The income tax expense recognised for the year is based on the operating surplus before taxation, adjusted for permanent differences between accounting and tax rules.
The impact of all timing differences between accounting and taxable income is recognised as a deferred tax liability or asset. This is the comprehensive basis for the calculation of deferred tax under the liability method.
A deferred tax asset, or the effect of losses carried forward is recognised in the financial statements only where there is the virtual certainty that the benefit of the timing differences, or losses, will be utilised.
Vector Limited
Electricity Lines Business
Statement of Accounting Policies (continued)
For the year ended 31 March 2006
g) Property, plant and equipment
The cost of purchased property, plant and equipment is the value of the consideration given to acquire the property, plant and equipment and the value of other directly attributable costs, which have been incurred in bringing the property, plant and equipment to the location and condition necessary for the intended service. All feasibility costs are expensed as incurred.
The cost of self-constructed property, plant and equipment includes the cost of all materials used in construction, direct labour on the project, costs of obtaining resource management consents, financing costs that are attributable to the project and an appropriate proportion of the variable and fixed overheads. Costs cease to be capitalised as soon as the item of property, plant and equipment is ready for productive use and do not include any inefficiency costs.
Subsequent expenditure relating to an item of property, plant and equipment is added to its gross carrying amount when such expenditure either increases the future economic benefits beyond its existing service potential, or is necessarily incurred to enable future economic benefits to be obtained, and that expenditure would have been included in the initial cost of the item had the expenditure been incurred at that time.
Distribution systems and some land and buildings are revalued by independent experts on the basis of depreciated replacement cost, while land and buildings are valued by reference to market information. Other classes of property, plant and equipment are not revalued. Valuations are performed based on highest and best use in accordance with New Zealand Financial Reporting
Standard No. 3. If the estimated recoverable amount of an asset is less than its carrying amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognised in the statement of financial performance.
Estimated recoverable amount is the greater of the estimated amount from the future use of property, plant and equipment and its ultimate disposal, and its net market value. Annual impairment reviews are undertaken for all property, plant and equipment not subject to revaluations. Revaluations of distribution systems and distribution land and buildings are carried out at least every three years.
h) Depreciation
Depreciation of property, plant and equipment, is calculated on a straight line basis so as to expense the cost of the property, plant and equipment, or the revalued amounts, to their residual values over their useful lives as follows:
Buildings 40 - 100 years
System fixed assets 15 - 100 years
Motor vehicles and mobile equipment 3 - 20 years
Consumer billing and information systems 3 - 40 years
Other plant and equipment 5 - 20 years
i) Leased property, plant and equipment
Operating leases
Lease payments under operating leases, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased property, plant and equipment are expensed to the statement of financial performance in equal instalments over the lease term.
Leasehold improvements
The costs of improvements to leasehold property are capitalised and depreciated over the unexpired period of the lease or the estimated useful life of the improvements, whichever is the shorter.
j) Provisions
Employee entitlements
Employee entitlements to salaries and wages, annual leave, long-term leave and other benefits are recognised when they accrue to employees.
Vector Limited
Electricity Lines Business
Statement of Accounting Policies (continued)
For the year ended 31 March 2006
j) Provisions (continued)
Other provisions
A provision is recognised as a liability where a constructive or legal obligation exists to settle items in the foreseeable future. A provision is recognised where the likelihood of a resultant liability is considered more probable than not. Where the likelihood of a resultant liability is more than remote but insufficient to warrant a provision, such events are disclosed as contingent liabilities.
k) Financial instruments
Derivative financial instruments are used within predetermined policies and limits in order to manage the exposure to fluctuations in foreign currency exchange rates and interest rates.
Derivative financial instruments that are designated as hedges of specific items are recognised on the same basis as the underlying hedged items. The Vector group does not engage in speculative transactions or hold derivative financial instruments for trading purposes.
Fees and other costs incurred in raising debt finance not directly attributable to the acquisition of subsidiaries are capitalised and amortised over the term of the debt instrument or debt facility.
Interest income and expenses are recognised on an accrual basis. Where a debt instrument is issued at a discount or premium, the discount or premium is capitalised and amortised over the life of the instrument.
Fair value adjustments on derivative transactions acquired are capitalised to goodwill and the mark to market adjustment included in the statement of financial position. The component relating to goodwill is accounted for in accordance with the accounting policy for goodwill arising on acquisition. The mark to market adjustment is amortised to the statement of financial performance over the period of the underlying derivative.
The allocation of debt and equity items is in accordance with the principles and rules of ACAM. The debt and equity balances have been determined based on the debt to equity ratio of the Vector group.
l) Foreign currencies
Transactions in foreign currencies are translated at the New Zealand rate of exchange ruling at the date of the transaction. At balance date foreign monetary assets and liabilities not hedged by foreign currency derivative instruments are translated at the closing rate, and exchange variations arising from these translations are included in the statements of financial performance as operating items.
Monetary assets and liabilities in foreign currencies at balance date hedged by foreign currency derivative instruments are translated at contract rates.
m) Statement of cash flows
The following are the definitions of the terms used in the statement of cash flows:
Operating activities include all transactions that are not investing or financing activities.
Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and of investments.
Investments can include securities not falling within the definition of cash.
Financing activities are those that result in changes in the size and composition of the capital structure. This includes both equity and debt not falling within the definition of cash. Dividends paid in relation to the capital structure are included in financing activities.
Cash is considered to be cash on hand and current accounts in banks, net of bank overdrafts.
Changes in accounting policy
All policies have been applied on a basis consistent with those applied for the year ended 31 March 2005.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
1. SEGMENT INFORMATION
The electricity lines business operates within the electricity distribution sector. All operations are carried out within New Zealand.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
8. DIVIDENDS
The 2005 final dividend of $49.1 million was paid in August 2005. For the 2006 financial information disclosure, it is assumed that the electricity lines business has paid a notional dividend of $70.2 million, equating to 83.5% of net profit after tax and before intangible asset amortisation (NPATA), which is based on the NPATA payout ratio of the group.
Notional equity is determined by adjusting notionally debt and equity balances such that the debt to equity ratio is maintained the same as the Vector group.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
13. PROPERTY, PLANT AND EQUIPMENT (continued)
The directors consider that the fair value of the land and buildings is equal to their net book value.
As stated in the statement of accounting policies, interest and other costs are capitalised to property, plant and equipment while under construction. During the year $1.6 million (2005: $2.0 million) of interest and other costs were capitalised.
The system fixed assets were revalued to $2,442.4 million as at 31 March 2006 consistent with the group's accounting policy to revalue property, plant and equipment at least every three years. The basis of this valuation is the lesser of depreciated replacement cost and the estimated amount from the future use of these system fixed assets. This valuation was undertaken in conjunction with the following parties:
NAME FIRM QUALIFICATION
Eric Lucas PricewaterhouseCoopers CA; BA (Hons)
Lynne Taylor PricewaterhouseCoopers BSoc.Sci (Hons) Economics
Trevor Walker Telfer Young Ltd Dip Val; ANZIV; SNZP; Registered Valuer
Jeffrey Wilson Wilson Cook & Co Ltd ME; BCom; CEng; FIEE; FIPENZ; MIEEE
Goodwill is amortised over a period up to 20 years in accordance with the Vector group's accounting policy. Prior period adjustment is in respect of the amendment to the goodwill allocation methodology. Goodwill is allocated based on the acquired property, plant and equipment of the business.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
17. BORROWINGS
All borrowings are unsecured with all bank loans and medium term notes being subject to negative pledge arrangements.
Interest rates for all bank loans are floating based on the bank bill rate plus a margin. Bank loans are arranged through various facility agreements. Facilities with total committed amount of $700 million will expire in October 2008. The working capital facility with total commitment of $70 million is due to expire in October 2006.
Medium term notes - fixed rate NZ$ mature April 2007 and are shown at the value of proceeds received after deducting the discount on issue of $1.7 million and adjusting for the amount amortised to 31 March 2006 of $1.4 million. The interest on NZ$ medium term notes is fixed at 6.5% per annum and is paid semi-annually.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
17. BORROWINGS (continued)
Medium term notes - floating rate A$ mature April 2008 and April 2011. The interest on A$ medium term notes is paid quarterly, based on BBSW plus a margin.
Capital bonds are subordinated debt and have a first election date of 15 December 2006. The interest is currently fixed at 8.25% per annum and is paid semi-annually. The board are currently considering options and intend to extend the term of the capital bonds beyond the first election date.
Private placement senior notes of US$15 million, US$65 million and US$195 million, with maturity periods of 8, 12 and 15 years respectively were placed with US investors in September 2004 at a contract exchange rate of 0.6574 US$ for every NZ$.
Borrowings are classified between current and non-current dependent on expected repayment dates. Borrowings are subject to various lending covenants. These have all been met for the years ended 31 March 2006 and 31 March 2005.
Provisions include provisions for various commercial matters expected to be settled during the next two financial years but which could require settlement at any time.
19. COMMITMENTS
The following amounts have been committed to but not recognised in the financial statements.
The majority of the operating lease commitments relate to premises leases. Operating leases held over properties give the lessee the right to renew the lease.
Notes to the Financial Statements
For the year ended 31 March 2006
20. FINANCIAL INSTRUMENTS
A comprehensive treasury policy approved by the board of directors is used to manage financial instruments risks. The policy outlines the objectives and approach that the Vector group will adopt in its treasury management processes. The policy covers, among other things, management of credit risk, interest rate risk, funding risk, liquidity risk, currency risk and operational risk.
Interest rate risk
Interest rate exposures are actively managed in accordance with treasury policy. In this respect, at least forty percent of all debt must be at fixed interest rates or effectively fixed using interest rate swaps, forward rate agreements, options and other derivative instruments.
The weighted average rates of borrowings are as follows.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
20. FINANCIAL INSTRUMENTS (continued)
The weighted average interest rates of interest rate swaps and cross currency swaps are as follows.
Bank loans, working capital loans, A$ medium term notes are based on floating rates. A portion of the bank loans are hedged through interest rate swaps which convert the floating rate into a fixed rate.
The A$ medium term notes are hedged through cross currency swaps (eliminating the foreign currency risk) and interest rate swaps (floating to fixed).
The NZ$ medium term notes are fixed interest rate notes. These notes are hedged by the interest rate swaps (fixed to floating).
Fixed interest rate bonds are at fixed interest rates. These notes are hedged by the interest rate swaps (fixed to floating).
The US$ privately placed senior notes are hedged through cross currency swaps (eliminating the foreign currency risk).
The forward starting interest rate swaps (fixed to floating) shall convert the fixed interest rate borrowings to floating rates.
NZ floating rate notes are hedged through interest rate swaps which convert the floating rate into a fixed rate.
The forward starting interest rate swaps (floating to fixed) are to hedge future forecasted floating rate debt.
FOREIGN EXCHANGE RISK
In this reporting period the group has conducted transactions in foreign currencies for the purpose of protecting the NZ$ value of capital expenditure.
At balance date the group has no significant exposure to foreign currency risk.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
20. FINANCIAL INSTRUMENTS (continued)
CREDIT RISK
In the normal course of business, the Vector group is exposed to credit risks from energy retailers, financial institutions and trade debtors. The Vector group has credit policies, which are used to manage the exposure to credit risks.
As part of these policies, the Vector group can only have exposures to financial institutions having at least a credit rating of A+ long term from Standard & Poor's (or equivalent rating). In addition, limits on exposures to financial institutions have been set by the board of directors and are monitored on a regular basis. In this respect, the Vector group minimises its credit risk by spreading such exposures across a range of institutions. The Vector group does not anticipate non-performance by any of these financial institutions.
The Vector group has some concentration of credit exposures with a few large energy retailers and large energy customers. To minimise this risk, the Vector group performs credit evaluations on all energy retailers and large energy customers and requires a bond or other form of security where deemed necessary.
The Vector group places its cash deposits with a small number of banking institutions and limits the amount deposited with each institution.
The maximum exposure to credit risk is represented by the carrying value of each financial asset.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
20. FINANCIAL INSTRUMENTS (continued)
The following methods and assumptions were used to estimate the carrying amount and fair value of each class of financial instrument where it is practical to estimate that value.
Trade receivables and payables, cash and short-term deposits, bank loans and working capital loans
The carrying amount of these items is equivalent to their fair value and includes the principal and interest accrued. Bank overdrafts are set-off against cash balances pursuant to right of set off. Trade receivables are net of doubtful debts provided.
Medium term notes
The fair value of NZ$ medium term notes is based on quoted market prices.
The carrying amount for the NZ$ medium term notes is based on face value less discount plus accruals.
The fair value of A$ medium term notes is based on quoted market prices.
The carrying amount for the A$ medium term notes includes the principal and interest accrued, converted at the contract rates.
Capital bonds
The fair value of capital bonds is based on quoted market prices.
The carrying amount includes the principal and interest accrued.
Vector Limited
Electricity Lines Business
Notes to the Financial Statements
For the year ended 31 March 2006
20. FINANCIAL INSTRUMENTS (continued)
Fair values (continued)
Private placement senior notes
The fair value of US$ privately placed senior notes is based on quoted market prices.
The carrying amount for the US$ privately placed senior notes includes the principal and interest accrued, converted at the contract rates.
NZ floating rate notes
The carrying amount of these notes is equivalent to their fair value and includes the principal and interest accrued.
Derivative instruments
The fair value of interest rate swaps, cross currency swaps, forward rate agreements, and other derivative instruments is estimated based on the quoted market prices for these instruments.
The carrying amount includes the fair value adjustments (net of amortisation) on derivative transactions acquired and interest accrued.
LIQUIDITY RISK
Liquidity risk is the risk that the Vector group may be difficulty in raising funds at short notice to meet financial commitments as they fall due. In order to reduce the exposure to liquidity risk, the Vector group has access to undrawn committed lines of credit.
21. CONTINGENT LIABILITIES
The directors are aware of claims against entities within the Vector group and, where appropriate, have recognised provisions for these within the financial statements. No other material contingencies requiring disclosure have been identified (2005: nil).
22. TRANSACTIONS WITH RELATED PARTIES
The electricity lines business has purchased vegetation management services of $8.5 million from Treescape Limited, which is an associate of Vector group.
The electricity lines business has purchased telecommunications services of $0.9 million from Vector Communications Limited.
Vector Limited
Electricity Lines Business
Financial Performance and Efficiency Measures
For the year ended 31 March 2006
SCHEDULE 1 - PART 3
2006 2005 2004 2003
1 Financial performance measures
a Return on funds 13.16% 12.80% 13.30% 10.60%
b Return on equity 349.71% 49.00% 77.90% 13.60%
c Return on investment 8.54% 8.20% 1 8.40% 11.20%

2 Efficiency performance measures
a Direct line cost per kilometre (including street lighting) $2,281.87 $1,923.80 $1,488.56 $1,825.05
b Direct line cost per kilometre (excluding street lighting) $2,949.28 $2,492.50 $1,944.18 $2,024.11
c Indirect line cost per consumer $79.28 $90.99 $92.02 $118.95
1Revaluation arising from the recalibration of the ODV Handbook is excluded. Including the recalibration the ROI would be 21.9%, however, Vector considers this provides a misleading view of the return on investment for 2004 given the source of the change is a recalibration.
Vector Limited
Electricity Lines Business
Energy Delivery Efficiency Performance Measures and Statistics
For the year ended 31 March 2006
SCHEDULE 1 - PART 4
1. Energy delivery efficiency performance measures
2006 2005 2004 2003
(a) Load factor 59.13% 58.81% 59.81% 67.43%
(b) Loss ratio 4.91% 4.65% 4.72% 4.55%
(c) Capacity utilisation 41.39% 42.29% 40.42% 35.91%
2. Statistics
(a.1) System length including street lighting (in kilometres)
400V 6.6kV 11kV 22kV 33kV 110kV Total
2006 18,149.94 35.11 8,531.50 131.41 975.98 101.92 27,925.86
2005 18,018.94 29.43 8,519.50 145.58 916.61 101.62 27,731.68
2004 18,000.06 33.79 8,405.33 130.92 969.00 101.55 27,640.65
2003 10,526.31 65.39 6,182.68 126.36 673.28 83.07 17,657.09
(b.1) Total circuit length including street lighting (in kilometres) of overhead electric lines
400V 6.6kV 11kV 22kV 33kV 110kV Total
2006 7,996.43 26.12 4,483.04 2.91 487.48 27.67 13,023.65
2005 7,665.82 26.17 4,503.87 3.21 439.61 27.68 12,666.36
2004 7,993.40 26.17 4,480.65 2.91 487.48 27.67 13,018.28
22003 4,683.84 26.40 3,293.11 2.91 314.94 13.84 8,335.04
(c.1) Total circuit length including street lighting (in kilometres) of underground electric lines
400V 6.6kV 11kV 22kV 33kV 110kV Total
2006 10,153.51 8.99 4,048.46 128.50 488.50 74.25 14,902.21
2005 10,353.12 3.26 4,015.63 142.37 477.00 73.94 15,065.32
2004 10,006.66 7.62 3,924.67 128.02 481.52 73.88 14,622.37
22003 5,842.47 38.99 2,889.57 123.45 358.34 69.23 9,322.05
Vector Limited
Electricity Lines Business
Energy Delivery Efficiency Performance Measures and Statistics
For the year ended 31 March 2006
SCHEDULE 1 - PART 4
2. Statistics (continued)
(a.2) System length excluding street lighting (in kilometres)
400V 6.6kV 11kV 22kV 33kV 66kV 110kV Total
2006 11,747.75 67.43 8,638.40 144.90 917.31 0.00 90.63 21,606.42
2005 11,638.52 67.17 8,571.24 125.68 910.38 0.00 91.30 21,404.29
42004 11,481.46 66.54 8,487.72 125.24 911.60 0.00 90.48 21,163.04
2, 42003 8,783.03 66.45 6,213.92 126.37 640.64 12.53 77.69 15,920.63
(b.2) Total circuit length excluding street lighting (in kilometres) of overhead electric lines3
400V 6.6kV 11kV 22kV 33kV 66kV 110kV Total
2006 5,371.28 25.92 4,486.26 7.44 436.35 0.00 25.74 10,352.99
42005 5,396.52 26.43 4,486.98 2.91 437.89 0.00 25.74 10,376.47
42004 5,417.57 26.43 4,495.66 2.91 446.11 0.00 25.74 10,414.42
2, 42003 3,957.49 26.43 3,303.91 2.91 291.69 12.53 12.86 7,607.82
(c.2) Total circuit length excluding street lighting (in kilometres) of underground electric lines3
400V 6.6kV 11kV 22kV 33kV 66kV 110kV Total
2006 6,376.47 41.51 4,152.14 137.46 480.96 0.00 64.89 11,253.43
42005 6,242.00 40.74 4,084.26 122.77 472.49 0.00 65.56 11,027.82
42004 6,063.89 40.11 3,992.06 122.33 465.49 0.00 64.74 10,748.62
2, 42003 4,825.54 40.02 2,910.01 123.46 348.95 0.00 64.83 8,312.81
Vector Limited
Electricity Lines Business
Energy Delivery Efficiency Performance Measures and Statistics (continued)
For the year ended 31 March 2006
SCHEDULE 1 - PART 4 (continued)
2. Statistics (continued)
2006 2005 2004 22003
(d) Transformer capacity (MVA) 5,046.67 4,930.04 4,843.25 3,685.28
(e) Maximum demand (kW) 2,088,862 2,085,090 1,957,774 1,323,472
(f) Total electricity entering system (before losses of electricity), in kilowatt hours 10,820,021,932 10,742,433,048 10,257,438,450 7,818,016,002
(g) The total amount of electricity (in kilowatt hours) supplied from the system (after losses of electricity) during the financial year on behalf of each person that is an electricity generator or an electricity retailer, or both 10,289,040,526 10,243,037,361 9,773,773,861 7,462,630,726
Company A 3,441,561,038 3,307,258,372 2,850,340,301 2,619,377,061
Company B - - - -
Company C - - - 52,194,205
Company D 1,905,575,365 2,053,761,415 2,220,527,842 1,434,854,901
Company E 3,308,788,718 3,406,723,668 3,101,604,795 1,808,784,932
Company F 941,139,488 858,163,539 891,429,437 580,017,136
Company G - - - -
Company H - - - -
Company I - - - -
Company J 671,690,116 614,060,342 690,358,384 837,754,095
Company K - - - -
Company L - - - -
Company M - - - 7,274,558
Company N 20,285,801 3,070,025 19,513,102 54,277,785
Company O - - - 32,339,274
Company P - - - 14,010,704
Company Q - - - 464,486
Company R - - - 1,921,774
Company S - - - 1,418,731
Company T - - - 17,941,084
(h) Total consumers 660,347 651,000 644,000 467,248
2 The 2003 performance statistics have been calculated using a time-weighted average in accordance with the Electricity (Information Disclosure) Regulations 2000, Regulation 33. Vector Limited was combined with UnitedNetworks Limited in October 2002. One month (October 2002) includes the Eastern region of UnitedNetworks Limited as well as the Northern and Wellington regions. The final 5 months are for Vector Limited, plus the Northern and Wellington regions of UnitedNetworks Limited.
Vector Limited
Electricity Lines Business
Reliability Performance Measures to be Disclosed by Disclosing Entities (Other than Transpower)
For the year ended 31 March 2006
SCHEDULE 1 - PART 5
1. Interruptions
2006 2005 2004 22003
Total number of interruptions according to class
Class A 1 - 1 1
Class B 532 416 610 329
Class C 1,400 1,131 1,333 896
Class D 7 7 7 6
Class E - - - -
Class F - - - -
Class G - - - -
Class H - - - -
Class I - - - -
Total interruptions 1,940 1,554 1,951 1,232
2. Interruption targets
2007
(a) Planned (class B) 550
(b) Unplanned (class C) 1,400
3. Average interruption targets
2007-2011
(a) Planned (class B) 550
(b) Unplanned (class C) 1,400
4. The proportion (expressed as a percentage) of the total number of class C interruptions not restored within:
2006
(a) 3 hours 29.7%
(b) 24 hours 0.1%
2 The 2003 performance statistics have been calculated using a time-weighted average in accordance with the Electricity (Information Disclosure) Regulations 2000, Regulation 33. Vector Limited was combined with UnitedNetworks Limited in October 2002. One month (October 2002) includes the Eastern region of UnitedNetworks Limited as well as the Northern and Wellington regions. The final 5 months are for Vector Limited, plus the Northern and Wellington regions of UnitedNetworks Limited.
Vector Limited
Electricity Lines Business
Reliability Performance Measures to be Disclosed by Disclosing Entities (Other Than Transpower) (continued)
For the year ended 31 March 2006
SCHEDULE 1 - PART 5 (continued)
5. Faults per 100 circuit kilometres of prescribed voltage electric line
2006 2005 2004 22003
(a) The total number of faults 15.22 12.56 14.91 12.55
2007
(b) The total number of targeted faults 13.27
2007-2011
(c) The average total number of faults 10.81
(d) Breakdown of (a) to (c) according to line voltage
6.6kV 11kV 22kV 33kV 110kV Total
(a) 52006 10.38 15.96 2.07 11.99 1.10 15.22
(b) 2007 5.70 14.42 3.64 7.64 0.98 13.27
(c) 2007-2011 - 12.23 3.18 6.62 0.98 10.81
6. Number of faults per 100 circuit kilometres of underground prescribed voltage electric line5
6.6kV 11kV 22kV 33kV 110kV Total
2006 7.23 7.18 1.45 5.20 - 6.73
2005 - 4.04 4.07 1.06 - 3.66
2004 - 6.46 4.09 5.59 7.72 6.28
22003 - 6.46 5.67 0.57 1.54 5.68
7. Number of faults per 100 circuit kilometres of overhead prescribed voltage electric line5
6.6kV 11kV 22kV 33kV 110kV Total
2006 15.43 24.10 13.44 19.48 3.89 23.53
2005 - 21.37 - 20.10 19.43 21.12
2004 - 23.18 - 23.54 11.66 23.01
22003 15.13 20.22 - 8.57 7.78 19.12
Vector Limited
Electricity Lines Business
Reliability Performance Measures to be Disclosed by Disclosing Entities (Other Than Transpower) (continued)
For the year ended 31 March 2006
SCHEDULE 1 - PART 5 (continued)
SAIDI
8. The SAIDI for the total number of interruptions
2006 2005 2004 22003
119.81 83.09 107.94 79.72
9. SAIDI targets for the following financial year
2007
(a) Planned (class B) 4.27
(b) Unplanned (class C) 81.18
10. Average SAIDI targets
2007-2011
(a) Planned (class B) 4.27
(b) Unplanned (class C) 81.18
11. The SAIDI for the total number of interruptions within each interruption class
2006 2005 2004 22003
Class A - - - -
Class B 4.70 3.70 9.16 7.19
Class C 112.57 78.21 94.29 72.21
Class D 2.54 1.18 4.50 0.32
Class E - - - -
Class F - - - -
Class G - - - -
Class H - - - -
Class I - - - -
2 The 2003 performance statistics have been calculated using a time-weighted average in accordance with the Electricity (Information Disclosure) Regulations 2000, Regulation 33. Vector Limited was combined with UnitedNetworks Limited in October 2002. One month (October 2002) includes the Eastern region of UnitedNetworks Limited as well as the Northern and Wellington regions. The final 5 months are for Vector Limited, plus the Northern and Wellington regions of UnitedNetworks Limited.
Vector Limited
Electricity Lines Business
Reliability Performance Measures To Be Disclosed By Disclosing Entities (Other Than Transpower) (continued)
For the year ended 31 March 2006
SCHEDULE 1 - PART 5 (continued)
SAIFI
12. The SAIFI for the total number of interruptions
2006 2005 2004 22003
1.67 1.25 1.54 1.32
13. SAIFI targets for the following financial year
2007
(a) Planned (class B) 0.03
(b) Unplanned (class C) 1.28
14. Average SAIFI targets
2007-2011
(a) Planned (class B) 0.03
(b) Unplanned (class C) 1.28
15. The SAIFI for the total number of interruptions within each interruption class
2006 2005 2004 22003
Class A - - - -
Class B 0.03 0.02 0.05 0.04
Class C 1.47 1.12 1.38 1.28
Class D 0.17 0.11 0.11 0.02
Class E - - - -
Class F - - - -
Class G - - - -
Class H - - - -
Class I - - - -
2 The 2003 performance statistics have been calculated using a time-weighted average in accordance with the Electricity (Information Disclosure) Regulations 2000, Regulation 33. Vector Limited was combined with UnitedNetworks Limited in October 2002. One month (October 2002) includes the Eastern region of UnitedNetworks Limited as well as the Northern and Wellington regions. The final 5 months are for Vector Limited, plus the Northern and Wellington regions of UnitedNetworks Limited.
Vector Limited
Electricity Lines Business
Reliability Performance Measures to be Disclosed by Disclosing Entities (Other Than Transpower) (continued)
For the year ended 31 March 2006
SCHEDULE 1 - PART 5 (continued)
CAIDI
16. The CAIDI for the total of all interruptions
2006 2005 2004 2003
71.55 66.62 70.05 60.61
17. CAIDI targets for the following financial year
2007
(a) Planned (class B) 142.33
(b) Unplanned (class C) 63.42
18. Average CAIDI targets
2007-2011
(a) Planned (class B) 142.33
(b) Unplanned (class C) 63.42
19. The CAIDI for the total number of interruptions within each interruption class
2006 2005 2004 2003
Class A 273.00 - 439.00 75.00
Class B 150.83 164.25 174.18 186.75
Class C 76.47 70.05 68.40 56.55
Class D 15.03 10.88 40.93 13.19
Class E - - - -
Class F - - - -
Class G - - - -
Class H - - - -
Class I - - - -
Description of interruption classes as per The Electricity Information Disclosure Requirements 2004
Class A Planned interruption by Transpower
Class B Planned interruption by the principal
Class C An unplanned interruption originating within the principal disclosing entity, where those works are used for carrying out lines business activities
Class D An unplanned interruption originating within the works of Transpower, where those works are used for carrying out line business activities
Class E An unplanned interruption origination within works used, by the principal disclosing entity, for the generation of electricity
Class F An unplanned interruption originating within works used, by persons other than the principal disclosing entity, for the generation of electricity
Class G An unplanned interruption caused by another disclosing entity
Class H A planned interruption caused by another disclosing entity
Class I An interruption not referred to in classes A to H
Form for the Derivation of Financial Performance Measures from Financial Statements
For the year ended 31 March 2006
SCHEDULE 1 - PART 7
Vector Limited
Electricity Lines Business
Form for the Derivation of Financial Performance Measures from Financial Statements
For the year ended 31 March 2006
SCHEDULE 1 - PART 7
Derivation Table Input and Calculation Symbol in formula ROF ROE ROI
Operating surplus before interest and income tax from financial statements 227,866
Operating surplus before interest and income tax adjusted pursuant to requirement 18 (OSBIIT)
227,866
Interest on cash, bank balances, and short-term investments (ISTI) 94
OSBITT minus ISTI 227,772 a 227,772 227,772
Net surplus after tax from financial statements 53,769
Net surplus after tax adjusted pursuant to requirement 18 (NSAT) 53,769 n 53,769
Amortisation of goodwill and amortisation of other intangibles 30,244 g add 30,244 add 30,244 add 30,244
Subvention payment - s add - add - add -
Depreciation of SFA at BV (x) 60,165
Depreciation of SFA at ODV (y) 61,398
ODV depreciation adjustment (1,233) d add (1,233) add (1,233) add (1,233)
Subvention payment tax adjustment - s*t deduct - deduct -
Interest tax shield 42,064 q deduct 42,064
Revaluations - r
Income tax 48,153 p deduct 48,153
Numerator 256,783OSBIITADJ = a+g+s+d 82,780NSATADJ = n+g+s-s*t+d 166,566OSBIITADJ = a+g-q+r+s+d-p-s*t
Fixed assets at end of previous financial year (FA0) 2,000,913
Fixed assets at end of current financial year (FA1) 2,535,630
Adjusted net working capital at end of previous financial year (ANWC0) (23,261)
Adjusted net working capital at end of current financial year (ANWC1) (28,796)
Average total funds employed (ATFE) 2,242,243(or requirement 32 time-weighted average) c 2,242,243 2,242,243
Total equity at end of previous financial year (TE0) 781,982
Total equity at end of current financial year (TE1) 879,688
Average total equity 830,835(or requirement 32 time-weighted average) k 830,835
WUC at end of previous financial year (WUC0) 70,415
WUC at end of current financial year (WUC1) 69,730
Average total works under construction 70,073(or requirement 32 time-weighted average) e deduct 70,073 deduct 70,073 deduct 70,073
Revaluations - r
Half of Revaluations - r/2 deduct -
Intangible assets at end of previous financial year (IA0) 531,890
Intangible assets at end of current financial year (IA1) 499,470
Average total intangible asset 515,680(or requirement 32 time-weighted average) m deduct 515,680
Subvention payment at end of previous financial year (S0) -
Subvention payment at end of current financial year (S1) -
Subvention payment tax adjustment at end of previous financial year -
Subvention payment tax adjustment at end of current financial year -
Average subvention payment & related tax adjustment - v add -
System fixed assets at end of previous financial year as book value (SFAbv0) 1,901,031
System fixed assets at end of current financial year as book value (SFAbv1) 2.442,361
Average value of system fixed assets at book value 2,171,696(or requirement 32 time-weighted average) f deduct 2,171,696 deduct 2,171,696 deduct 2,171,696
System fixed assets at year beginning at ODV value (SFAodv0) 1,915,102
System fixed assets at end of current financial year at ODV value (SFAodv1) 1,985,468
Average value of system fixed assets at ODV value 1,950,285(or requirement 32 time-weighted average) h add 1,950,285 add 1,950,285 add 1,950,285
Denominator 1,950,759ATFEADJ = c-e-f+h 23,671Ave TEADJ = k-e-m+v-f+h 1,950,759ATFEADJ = c-e-½r-f+h
Financial Performance measure: 13.2ROF = OSBIITADJ/ATFEADJ x 100 349.7ROE = NSATADJ/ATEADJ x 100 8.5ROI = OSBIITADJ/ATFEADJ x 100
t = maximum statutory income tax rate applying to corporate entities
bv = book value
ave = average
odv = optimised deprival valuation
subscript 'O' = end of the previous financial year
Vector Limited
Electricity Lines Business
Annual Valuation Reconciliation Report
For the year ended 31 March 2006
SCHEDULE 1 - PART 8