Eastland Annual Report 2016

Annual Report2016

Highlights 2

Chairman and Chief Executive’s Report 4

Our Company Structure 10

Financial Performance Trends 12

Board Of Directors 14

Leadership Team 16

Eastland Network 18

Eastland Generation 26

Eastland Port 30

Community 38

Financial Statements F1

Auditor’s Report F2

Notes to the Financial Statements F9

Company Information F48

Contents

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1Annual Report 2016 Eastland Group

Eastland Group specialises in regional infrastructure: ports,electricity distribution and transmission networks, andelectricity generation.

Our operations include Eastland Port, Gisborne Airportand Eastland Network – the electricity network forGisborne, Wairoa and the East Coast – as well as EastlandGeneration, which produces electricity from hydro, dieseland geothermal plants.

As the provider of critical infrastructure, we are the businessbehind the businesses powering our regional economy.

Our aim is to make good things happen for our shareholder,our customers, and our East Coast community.

Eastland GroupAnnual Report 2016


Our peoplemake it happen

Rod makes it happen for Eastland Port

2

2016 Highlights

• Total income $73.9 million

• Profit $15.2 million

• Dividend paid to ECT $5.6 million

• Interest paid on shareholder capital notes $2.1 million

• Total dividend and interest paid to shareholder $7.7 million

• Assets $422.2 million

• Equity $204.9 million

• Bank debt $114 million

• Return on equity 7.7%

• $32.3 million capital expenditure, $25.6 million invested in Tairawhiti

3

Chairman andChief Executive’s Report

Highlights and challenges

The 2016 financial year brought unprecedented highlights for Eastland Group, butalso delivered tremendous challenges. It is our shared belief that the company willlook back on this year as a turning point, a pivotal twelve months that laid thefoundation for a new stage in Eastland Group’s evolution.

The year in review

In September 2015, we received the green light to proceed with development of ourTe Ahi O Maui geothermal project near Kawerau. We hold consents for a 25 megawattgeothermal power station situated in Kawerau on land owned by the A8D Ahu WhenuaTrust. Once operational in 2018 the plant will produce enough electricity to power25,000 houses. By 31 March 2016, excavations were well underway and drilling wasscheduled to begin in mid-May. This next stage of the Te Ahi O Maui geothermalpower project is a significant milestone for the company and continues our strategyof investment within the renewable electricity generation sector.

In December 2015, Eastland Group took a cornerstone investment in high-growthelectricity business Flick Electric Co. We are attracted to Flick’s technology-drivenmodel, disruptive potential and strong customer engagement, and, while the investmentstands on its own merits as Flick continues to grow, we see the investment as a wayto gain a foothold in the electricity retail sector.

At Eastland Port, the year’s record volumes exported of 2.3 million tonnes eclipsedthe previous best 2014 result of 2.27 million tonnes, and was an increase of 59,000tonnes on the 2015 year. This was despite uncertain indications from forestrycustomers in the first half of the year.

We worked with our port customers to resolve their concerns over the pricingof our services and discuss the infrastructure they need at the port. The outcomewas a strengthening of our customer relationships, ensuring future capitalinvestment is made in right areas and pricing produces a fair return.

Our debarking operation in Whangarei hit its straps during the year. The1.1 hectare operation provides debarking and anti-sap staining servicesto Northland forestry customers, largely replicating Eastland Port’sGisborne operation. In the twelve months to 31 March 2016, the plantprocessed 121,000 tonnes of logs.

The transfer of Transpower’s Gisborne and Wairoa 110kV assets toEastland Network on 31 March 2015, was a significant step towardsEastland Group’s growth aspirations. The network’s acquisitionof the transmission assets has helped increase its operating profit,albeit in the context of a regulatory environment that limitsupside and a market that is still flat in terms of connectionand demand growth.

Eastland Network’s reliability – as measured by SAIDI *results – was the best result reported over the last decade.This reflects over a decade of strategic investment toimprove the condition and reliability of the network,enabling it to withstand severe weather events. Thesnow storm of July 2015, for example, was the worstin 50 years, and the impact of snow and high windswas felt right across the region when EastlandNetwork suffered widespread power outages.Trees blocking the roads made repairs challengingbut our lines maintenance teams worked hardto restore supply in icy conditions, and despiteweather-induced power cuts, overall theelectricity network performed very well.


* SAIDI = System Average Interruption Duration Index – the average outage duration for each electricitycustomer served; calculated as the sum of all customer duration interruptions divided by the totalnumber of customers served.

Eastland Group recorded a record audited profit of$15.2 million for the yearended 31 March 2016.

One hundred percentowned by EastlandCommunity Trust, ouroperations include EastlandPort, Gisborne Airport andEastland Network — theelectricity network forGisborne, Wairoa and theEast Coast — as well asEastland Generation, whichproduces electricity fromhydro, diesel andgeothermal plants.

Our five megawatt Waihi hydroelectricity station near Wairoa was out of operationfrom late last year until 23 March 2016, following damage to the sluice gates causedby extreme weather in September 2015. The damage meant the gates could not befully closed, resulting in silt being released into the Waiau River system. Our team ofspecialist engineers and divers worked in extreme conditions, often underwater, tourgently repair the gates. In December 2015 with that team working seven days aweek, when they had nearly completed work on the first of the three gates, Hawke’sBay Regional Council asked us to stop work and provide an independent engineeringreport. The subsequent report concluded that essentially the same work needed tobe completed. We restarted the project immediately, and by the end of the financialyear, the reservoir lake was full and the dam was generating electricity again.

Financial performance

The 2016 financial year saw Eastland Group achieve a record profit of $15.2 million.Underlying financial performance was strong with operating profit (earnings beforeinterest and tax) $27.4 million, up from FY 2015 $26.8 million. This was due to strongperformance in our key sectors with Eastland Port’s operating profit at $10.9 million,Eastland Network $11.7 million and Eastland Generation $1.9 million.

In 2003 when the company bought Eastland Port, it had $80 million of assets andnow, 13 years’ later, Eastland Group’s assets are worth $422.2 million, the result of acapital investment programme driven by increasing demand from customers.

The business we operate requires a large amount of up-front capital investment thatearns a return over a long period of time. While Eastland Group achieved a recordprofit of $15.2m million, up $1.1 million on 2015’s $14.1 million, we acknowledge thatwe need to work hard to ensure our assets are maintained and are fit for purpose.

Our financial success has allowed us to increase our returns to the shareholder, andhas also enabled our customers – who are predominantly businesses – to operateeffectively, generating economic growth for our region. That’s something we areunashamedly proud of and something we aim to continue.

During FY 2016 the establishment of a new syndicated loan helped Eastland Groupachieve savings in interest costs of $400,000 compared to the previous year.

Shareholder distributions

Eastland Group’s sole shareholder, the Eastland Community Trust (ECT) was paid afully imputed dividend of $5.6 million (2015 $5.0 million). Interest paid on shareholdercapital notes was $2.1 million (2015 $2.6 million), meaning the total dividend andinterest paid to the shareholder was $7.7 million (2015 $7.6 million).

Capital investment

Eastland Group's aim is to develop regional infrastructure assets to support the growthaspirations of our customers, and encourage prosperity in the Gisborne, Wairoa andEast Coast regions. We invested $32.5 million during the year on development ofassets. Of this, 79.3 percent – or $25.6 million – was spent within Tairawhiti.

The company’s commitment to the region is ongoing; over the next five years we areplanning to invest $100 million in local infrastructure, as well as around $116.1 millionon (predominantly) energy assets outside the region.

At 31 March 2016, the company’s total assets were $422.2 million (2015 $385.7 million),with about 86 percent of this currently invested in the Gisborne and Wairoa districts.

Equity was $204.9 million (2015 $189.8 million).

Significant investments in FY 2016 included the $12 million expansion of EastlandPort’s upper log yard. Our continued investment at the port aims to meet expectedfuture demand from customers at the same time as we strive to improve both operatingefficiency and safety.

A $2.5 million project to reseal Gisborne Airport’s runway was completed in time forour tenth anniversary celebrations. We have been operating the airport since 1 April2005, on lease from Gisborne District Council. Since that time, Gisborne District Councilhas remained the asset owner, but Eastland Group has operated, managed anddeveloped the airport, investing over $5 million in capital projects as well as payingGisborne District Council more than $1 million in rent.

6 Eastland Group Annual Report 2016

Portfolio AllocationBy Region

By Business

Regional (86%)

Non-Regional (14%)

Eastland Network (34%)

Eastland Generation (17%)

Eastland Port (41%)

All other segments (8%)

To date, Eastland Group has invested $9 million in the Te Ahi O Maui geothermaldevelopment near Kawerau, and we’ve only just started. The final amount is expectedto be $120 million, an investment which will generate a significant return to ourshareholder for longer than 30 years.

Strategic focus

For us, strong positive growth is an important strategic objective. We aim to makegood things happen for our shareholder, our customers and our East Coast community,by being the best regional infrastructure specialist in New Zealand. Eastland Group’sstrategic plan outlines a two-fold commitment. Our goal is to provide excellent returnsto our shareholder, at the same time as we develop and operate fit-for-purposeregional infrastructure. The company continues to aspire to grow its investments andearnings, which will increase shareholder value and diversify risk.

We believe that compared to similar businesses in the sectors in which we participate,Eastland Group has a more entrepreneurial spirit and is relatively fast and agile.Although the company is an opportunistic one, we seek out opportunities within thebroader supply chains associated with our businesses. For example, our holistic viewof the New Zealand electricity sector – with interests in generation, distribution andretail – means we are well positioned to assess how changes to one element of thevalue chain will potentially impact others and to use this to strategic advantage.

We have invested heavily in infrastructure to power Gisborne’s regional economy, butwe also look further to develop commercial opportunities, which include geothermalpower stations in Kawerau and debarking operations in Whangarei. In recent years, wehave focussed on developing this geographical, as well as sector, diversity in an attemptto manage business risk associated with geographic concentration. Eastland Group has14 percent of its assets invested outside of the Tairawhiti region. This will increase toapproximately 30 percent once the Te Ahi O Maui geothermal plant is complete.

Health, safety and environment

Without question, the health and safety of our people and the public comes first.Eastland Group has an aspirational target of having no Lost Time Injury (LTI) accidentsand achieving continued reduction in our harm related injuries. Our target was areduction of incidents causing harm by 25 percent. During the year 13 incidents causingharm were recorded; this was a 35 percent reduction in comparison to the 20 theprevious year.

As the company focuses on building a truly safe culture – one where everyone goeshome safely at the end of each day – we have broadened our attention to include allpeople who come into contact with the company, not just employees. Our board ofdirectors is very engaged in the health and safety discussions and also undertakessite audits on the company’s behalf. However, even though we have made steady andgenuine progress, we know there is still work ahead of us. Eastland Group is committedto doing whatever it takes to make sure we are offering safe and healthy environmentsfor employees, contractors and any member of the public.

Eastland Group continues to take its environmental responsibilities very seriously. Thedamage that was sustained by the Waihi Dam following the floods in September 2015became newsworthy as our team fought to get the gates repaired and stem the flowof silt into the Waiau river system. We understand that a dirty river over the summerseason reduced people’s ability to enjoy the water and for that we sincerely apologise.Thankfully the river system appears to be recovering well.

The Te Ahi O Maui project is part of Eastland Group’s strategy to develop a portfolioof renewable electricity generation and minimise the environmental impacts of itsprojects. Our project team has worked very closely with the A8D Trust, who are kaitiakiof the land, to understand and accommodate their needs as tangata whenua and toprotect the mauri of the land, air and water. The A8D Trust members will meet on sitefor a project update and traditional blessing just prior to the commencement of drilling.Eastland Group is keen to see the new geothermal power plant provide clean base-load energy to New Zealand’s emerging alternative energy markets and play a greaterrole in meeting the country’s current and future energy needs.


We make it happen

The aim of our 2016 brand positioning review was to ensure the company is positionedcorrectly for projected growth. We wanted a company image, key messages andassociated collateral that strengthens our ability to attract new business opportunities.We also wanted to build employee engagement and a sense of ‘team’ right acrossthe company, which employs around 100 people spread across 8 different geographicalsites - 5 in Gisborne, plus Wairoa, Whangarei and Whakatane.

A secondary objective was to reduce the public confusion between the company andits sole shareholder with a similar name, the Eastland Community Trust.

In 2016, we introduced a new shared logo mark across all businesses in the EastlandGroup of companies. The logo has a dual meaning; it is a stylised representation ofthe place we call home, Gisborne and the East Coast, and also symbolises the karearea,one of New Zealand’s most impressive native birds.

Like the karearea, which can fly at speeds of up to 200km an hour, Eastland Groupis fast, agile and powerful. We move quickly to take action in our daily businessoperations, and we are always taking flight, ready to make things happen whenopportunities arise.

Our new brand positioning line captures the ‘anything is possible’ ethos of EastlandGroup. We don’t ask “Can it happen?”, rather “How do we make it happen?”.

Our community

As providers of vital infrastructure for our region Eastland Group is committed tocommercial excellence, economic development and regional prosperity. Every yearwe deliver real benefits to our local community. Our annual dividend to the ECT issubstantial and this directly benefits the community in the form of grants distributionby the Trust.

There are other flow-ons too. Eastland Group spent a total of $8.7 million on wagesin 2016 ($8.2 million 2015), and a further $27.8 million on local goods and services($24.2 million 2015).

We also sponsor events, clubs and business initiatives, including Gisborne Speedwayand Gisborne Chamber of Commerce. In November 2015 we staged a free harbourparty with the Tatapouri Fishing Club; the event attracted locals to hear bands playingon a barge in the inner harbour marina. Eastland Group also offers tertiary scholarshipsto Eastland region engineering and accounting students and continues to activelyencourage our employees to be involved in a wide range of community activities.

Looking ahead

If 2016 was a year of continued acceleration, the year ahead will see the companypress ahead with more of the same. Aside from the $67.8 million capital investmentcommitted for the development and construction of Eastland Generation’s Te Ahi OMaui geothermal development near Kawerau, Eastland Group’s total planned capitalexpenditure of a further $29.3 million for 2017 will focus on investment in key upgradesand maintenance programmes – specifically the construction of Eastland Port’swharfside log yard, and Eastland Network’s maintenance of the transmission anddistribution networks.

The sectors in which Eastland Group businesses operate continue to evolve, with rapidchange occurring in the energy sector in particular. We believe the future of the NewZealand electricity market is renewable generation. Plans are in place for small-scalesolar trials in the coming year; the results will help us understand the operationalimpact of solar on the network, as well as the associated commercial opportunities.

Our Te Ahi O Maui geothermal project makes excellent economic sense to us, it hasa strong positive cashflow which will enhance profitability for the company and addvalue for our shareholder and its beneficiaries within Tairawhiti. Te Ahi O Maui createsdiversification for Eastland Group and, once completed, means approximately 30percent of our investments will sit outside of the region.

The port is committed to improving its environmental performance. The installationof a world class water treatment plant is only the beginning. The final significantstorage project is the wharfside log yard adjacent to wharf 5 and 6. A consent for thisis expected to be lodged early in the next financial year and it will be removed fromservice until the consented work is completed from 30 June 2016.

$30m

$25m

$20m

$15m

$10m

$5m

02006 2016

Eastland Generation

Eastland Network

Eastland Port

Three Great Businesses(EBIT)

Nelson Cull

Chairman

Matt Todd

Chief Executive


In order to meet the demands of a forestry industry which provides opportunity andemployment for our entire region, Eastland Group has spent around $75 million oncapital enhancements since 2010 and plans to invest just as significantly over the nextfive years to accommodate customer projections for forestry harvest. Our aim is toprovide excellent infrastructure to support a sector which is truly booming.

The region’s air travellers have almost outgrown Gisborne Airport’s terminal buildingand so, with the future in mind, Eastland Group is working with Air New Zealand andother stakeholders to understand their needs for the coming years. However, EastlandGroup continues to hold the view that a new terminal will not support a full commercialreturn and that if the community wants a new terminal then some level of otherfunding will be required.

Our people

Eastland Group’s success to date is directly attributable to the quality of our team. Wehave wonderful people, they go the extra mile when they need to and they genuinelydo make it happen. We thank each and every person employed by the company andwe thank their families as well – while we may write the narrative of Eastland Group,it is the people working here who are creating something worth talking about.

We also take this opportunity to say thank you to our board of directors, and to ourshareholder and customers. During the 2016 year, Anne Blackburn retired as a directorof Eastland Group, a position she had held since September 2011. In August 2015 wewelcomed Keiran Devine onto the board.

Closing comments

Eastland Group’s future aspirations are really ‘more of the same’. We want to continueto grow, and we believe that growth will come from within the same sectors in whichwe are currently operating. For us, success is first and foremost about commercialsuccess that will directly – and indirectly – create real value for our whole community.

When we reflect on the year, we believe the company is right where it needs to be.While there is a long way still to go to achieve our ambitions and much of the hardwork is yet to come, a detailed plan is in place and a committed and passionate teamis ready to take the action required to make it happen.


Our Company Structure

Eastland Network provides electricitydistribution and transmission services tothe 54,000 people who live and work inGisborne, Wairoa and the East Coast.Eastech is the 24/7 fault response teamfor the entire region, and also providesa comprehensive range of contracting,electricity lines and electrical services.

Eastland Generation owns and operatesvarious electricity generation projects.These include the 9MW GeothermalDevelopments (GDL) plant in Kawerau,the 5MW Waihi hydroelectricity schemenear Wairoa and six 1MW diesel gensets.Eastland Generation is a partner in the

Te Ahi O Maui geothermal developmentproject. Consents are in place to build a22MW power plant which is expected tobe operational by the end of 2018.

Eastland Port provides a vital piece ofinfrastructure for a forestry industry thathas been the single biggest contributorto regional GDP since 2012. Eastland Portis the most easterly commercial port inNew Zealand, and is proud to be thecountry’s second largest and mostefficient log export port.

Eastland Port is a 50 percent shareholderin Eastland Debarking Joint Venture.

Northland Debarking is our debarkingoperation at Northport, south ofWhangarei.

Gisborne Airport provides an all-weatherrunway, airfield and associated airportfacilities, to meet the growing air transportand recreational needs of the region.

Eastland Investment Properties is theowner of key commercial property inGisborne, including the inner harbourarea and marina berths.

Eastland Group’s primary companies are:


Like the karearea, which can fly at speeds of up to 200kman hour, Eastland Group isfast, agile and powerful.

We move quickly to take action in our dailybusiness operations,and we are alwaystaking flight, ready to make thingshappen whenopportunitiesarise.

Financial Performance 2012 2013 2014 2015 2016

Income 59.8 70.5 71.0 73.9 73.9

Operating expenditure (29.2) (31.7) (32.2) (34.4) (31.7)

Earnings before interest, income tax, depreciation and amortisation(EBITDA) 30.6 38.8 38.8 39.5 42.2

Depreciation and amortisation (10.3) (10.9) (12.0) (12.7) (14.8)

Earnings before interest and income tax (EBIT) * 20.3 27.9 26.8 26.8 27.4

Net interest (10.5) (9.7) (8.6) (8.4) (8.4)

Share of profit of joint venture 0.7 1.1 1.6 1.4 1.4

Profit before income tax 10.5 19.3 19.8 19.8 20.4

Income tax (3.7) (5.8) (5.6) (5.5) (5.2)

Profit from continuing operations 6.8 13.5 14.2 14.3 15.2

Discontinued operations (1.5) (0.7) 0.7 (0.2) 0

Profit 5.3 12.8 14.9 14.1 15.2

Operating cashflows 19.9 25.6 19.3 23.1 28.6* Referred to as operating profit

Financial Position 2012 2013 2014 2015 2016

Total Assets 353.8 365.9 365.5 385.7 422.2

Total Liabilities 189.5 184.9 179.1 195.9 217.3

Bank Debt 100.5 93.0 94.5 105.0 114.0

Capital Notes 20.0 30.0 30.0 30.0 30.0

Other Liabilities 69.0 61.9 54.6 60.9 73.3

Total Equity 164.3 181.0 186.4 189.8 204.9

Bank Debt % of Assets 28.4% 25.4% 25.9% 27.2% 27.0%

Distributions to shareholder 2012 2013 2014 2015 2016

Interest on capital notes 2.6 2.6 2.6 2.6 2.1

Dividends to shareholder 4.4 4.6 4.8 5.0 5.6

Cummulative dividends paid (A) 33.8 38.7 43.5 48.5 54.1

Cummulative growth in equity (B) 110.2 132.1 137.5 138.5 139.5

Shareholder value (A+B) 144.0 170.8 181.0 187.1 193.7

Compound Dividend Return ** 6.4% 6.4% 6.4% 6.9% 6.9%

Compound Shareholder Value Return ** 15.3% 14.4% 13.7% 13.9% 13.2%** Calculated from 2003

Business segment 2012 2013 2014 2015 2016

Network • • • • •

Generation • • • • •

Airport • • • • •

Port • • • • •

Aviation • •

Strategic property investments • • • • •

HR 2012 2013 2014 2015 2016

Employees 133 144 112 120 110

Electricity Distribution 2012 2013 2014 2015 2016

Energy distributed (GwH) 306 307 300 300 308

Customer connections 25,567 25,550 25,353 25,387 25,415

Logistics 2012 2013 2014 2015 2016

Total export volumes (mill tonnes) 1.7 2.0 2.3 2.2 2.3

Electricity Generation 2012 2013 2014 2015 2016

Energy generated (GwH) 64.5 71.4 77.1 78.7 71.6


Financial performance trends


Cumulative Dividend

Shareholder Value Added

0$ Millions

50 100 150 200 250 300

Total Equity

Profit vs. Income

0Profit ($ Millions)

2 10 12 14 16864

Income ($ Millions)0 10 50 60 70 80403020

9.270.6

13.8100.0

17.4106.3

21.2116.8

25.2122.5

29.4162.0

33.8164.3

38.7181.0

43.5186.4

48.5189.8

54.1204.92016

2015

2014

2013

2012

2011

2010

2008

2009

2007

2006

Total Assets

0$ Millions

50 250 300 350 400 450200150100

141.9

196.5

229.3

250.2

293.2

345.0

353.8

365.9

365.5

385.7

422.22016

2015

2014

2013

2012

2011

2010

2008

2009

2007

2006

2016

2009

2010

2011

2012

2013

2014

2015

2006

2007

2008

Board of Directors


Kieran Devine is an electrical engineer with morethan 40 years’ experience within the electricityand energy industries both in New Zealand andoffshore. He has served as a senior manager ingeneration, transmission and system operations,including managing the real time electricity marketwithin the New Zealand industry. He has recentlycompleted a role as the interim chief executiveof the Institution of Professional Engineers NewZealand (IPENZ). He is currently chair of the Centrefor Advanced Engineering. He is an industrymember of the Natural Hazards Research PlatformStrategic Advisory Group. Kieran is a fellow ofIPENZ, a senior member of the IEEE (USA), anda member of the IET (UK).

Michael Glover is the director of his owncompany, FSL Foods, has a law degree andextensive experience in the commercial arena,as well as governance experience which includesten years as a director of electricity distributorNetwork Tasman. He has worked as an investmentbanker and advisor to some of the biggestcompanies in South-East Asia and Australasia.He is a fellow of the Institute of Directors and iscurrently chair and director of two Nelsoncompanies with national operations.

John Rae has a wide range of management and directorial experience with, and in, a varietyof different business sectors including banking,investment, venture capital, technology,infrastructure, construction, and engineering. He has had wide-ranging geographic experiencewith responsibility for operations in New Zealand,Australia, Asia and Europe and experience as adirector in New Zealand, Australia and UK includingthree years as a Bank of England approvedexecutive director of a UK bank with assets inexcess of $1 billion. In addition to chairing the NewZealand Council for Infrastructure Development,John is a member of the National InfrastructureAdvisory Board which provides independent adviceto Treasury and the Minister for Infrastructure.


Nelson Cull, Chairman brings extensive local andinternational experience in the oil industry to hisrole with Eastland Group. He is also chair anddirector of MSC Consulting, a structural and civilengineering consultancy. Nelson has previouslybeen chair of Lanzafuels and Techscape, and hismany other directorships include GuardianHealthcare, Kerifresh and Netball New Zealand.He has also fulfilled board advisory roles for SportsNew Zealand in football, cycling and swimming.

John Clarke QSO, JP served as Mayor of Gisbornefor twelve years, and then as chairman of PortGisborne prior to its purchase by ECT and hispresent appointment as a director of EastlandGroup and its subsidiary companies. John is aviticulturalist and is deputy Chair of New ZealandWinegrowers. He is a board member ofEastwoodhill Aboretum and a trustee of the SunriseFoundation as well as being involved in a numberof local philanthropic entities.

Tony Gray is special projects manager at HastingsDistrict Council, and previously chief financialofficer at Hastings District Council. Prior to that,Tony held the senior finance role at Te Runangao Ngai Tahu, the CFO role at Mighty River Power,and the same position at TVNZ. His national andinternational experience covers both public andprivate in a wide variety of industry sectors. Tonyis a Fellow of the New Zealand and AustraliaInstitute of Chartered Accountants and a charteredmember of the Institute of Directors. He has beenon the board of various companies and is currentlyan independent director of Ngati ApaDevelopments Limited, director of the NewZealand Local Government Insurance Corporation,chair of Ngati Pukenga Investments Limited.


Matt Todd makes it happen asGroup Chief Executive for Eastland Group

Aaron Snodgrass makes it happen asChief Financial Officer for Eastland Group

Andrew Gaddum makes it happen asGeneral Manager Eastland Port

Ben Gibson makes it happen asGeneral Manager Generation andTe Ahi O Maui Project Manager

Brent Stewart makes it happen asGeneral Manager Eastland Network

Gavin Murphy makes it happen asGeneral Manager Business Developmentfor Eastland Group

Jarred Moroney makes it happen asHealth, Safety and Environment Managerfor Eastland Group

Kathy McVey makes it happen asMarketing and Communications Managerfor Eastland Group

Maria Wikstrom makes it happen asHuman Resources Managerfor Eastland Group

Leadership Team

Our health and safety team worked withcurrent port users to draft a scriptoutlining how to use the site safely. Usinga drone, we filmed the entire EastlandPort site, including the newly openedupper log yard. Anyone wanting to enterEastland Port must now watch the videoonline, then complete a multi-choicequestionnaire. Those passing with 100percent accuracy are automaticallycleared to come on site via email.

Truck drivers wanting to use the hoist atEastland Port must watch another videoonline, and complete a further multi-choice questionnaire. Drivers who receivea hundred percent pass rate are thenissued a Dallas tag which electronicallyunlocks access to the trailer hoist.

To date we’ve had a fantastic responsefrom drivers themselves, and thecompanies employing them. Our newhealth and safety induction process fortruck drivers using the trailer hoist atEastland Port received the ultimatecompliment – after seeing the port’s video,Wellington’s CentrePort developed asimilar video. While it’s essential thatindustries work together to improve thesafety of those at risk, our primary focusis on reducing the potential for accidentsfor the drivers who use our trailer hoist.

Our aim is to make sure everyone onevery Eastland Group site is safe. Thatmeans anyone using Eastland Portneeds to be aware of the hazards andrisks in the area, and how to operateequipment properly.

We’re always looking for more effectiveways to demonstrate safetyprocedures, so that newcomers don’thave to wander around the site in orderto familiarise themselves.

We make it happen safely

18

We make it happenday and night

19

2016 Highlights

Electricity distributed to about54,000 people

308 gigawatt hours distributed

25,415 total connections

600+ power polereplacements carried out

Eastland Network powers our entireregion by distributing electricity to thehomes and businesses in which we alllive and work.

As the electricity lines company forGisborne, Wairoa and the East Coast, weown and maintain the poles, wires andunderground cabling used by electricityretailers to supply customers withelectricity. Since 31 March 2015, we’vealso owned the region’s high voltageelectricity transmission network: the steeltowers and poles that connect our regionto the national grid.

The snow storm of July 2015 was theworst in 50 years, and the impact ofsnow and high winds was felt right acrossthe region when Eastland Networksuffered widespread power outages.With trees blocking roads in many places,access to effect repairs was difficult butour line maintenance crews workeddiligently to restore supply in icy andchallenging conditions.

In spite of weather-induced power cuts,the electricity network performed verywell over the year. Reliability – asmeasured by SAIDI results – was the bestresult reported in the last decade. (SAIDI= System Average Interruption DurationIndex: This is the average outage durationfor each electricity customer served, andis calculated as the sum of all customerduration interruptions divided by the totalnumber of customers served.)

This excellent result is the consequenceof work carried out in recent years thathas improved the condition and reliabilityof the network. Eastland Network coversa challenging and expansive areaspanning some 12,000 square kilometres,much of which is remote and toughterrain. With nearly 25,500 connectionsto customers throughout the region, thenetwork has a low averagecustomer/connection density of only 6.4connections per kilometre with the NewZealand average being 12.2 connectionsper kilometre.

Eastland Network is characterised by lowconnection growth and low demandgrowth so, once again performancecontinued in ‘steady state’, with energyconsumption, maximum demand andconnection numbers remaining similar toprevious years.

In total, network connections increasedmarginally from 25,387 to 25,415 – anincrease of 28 ICPs (installation controlpoints). The continuing trend of non-domestic rural connection reduction,through the amalgamation of multipleconnections into one, was largely offsetby an increase in domestic connections.

Energy retailers trading on our networksincreased by three – from 12 to 15. A newModel Use of System Agreement wasreached with all retailers in line with anElectricity Authority initiative.

During the year the net book value ofEastland Network’s assets, (including land,buildings and work in progress) increasedmarginally, to $142 million.

The network’s key operating objective isto ensure our community receives reliableelectricity supply at a reasonable price.

High voltage assets

The transfer of Transpower’s Gisborneand Wairoa 110kV assets to EastlandNetwork on 31 March 2015, was asignificant step towards Eastland Group’sgrowth aspirations. The change providedadditional regulated revenue via theCommerce Commission’s pricingprocesses, as well as the opportunity forus to continue to resource EastlandNetwork for both operational andengineering work and to meet theongoing challenges of regulation.


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FAST FACTS

• Eastland Network is theelectricity lines company forGisborne, Wairoa and the East Coast.

• We own and maintain the poles,wires and underground cablingused by electricity retailers tosupply customers withelectricity.

• Since 31 March 2015, we’ve alsoowned the region’s high voltageelectricity transmission network:the steel towers and poles thatconnect our region to thenational grid.

• The network has 17 zonesubstations and 3,680distribution substations

• Our lines crews work 24/7 insunshine, snow, sleet, hail, rainand wind.


Annual Reported SAIDIBETWEEN 2003/04–2015/16

Paul makes it happenfor Eastech

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Anthony makes it happen for Eastech

During FY 2016 our focus has been on theongoing development and implementationof operating procedures and protocolsand asset management schedules for thehigh voltage assets. Spend on these assetsduring FY 2016 was $1.5 million.

Eastland Network is committed tospending around $12 million on the new110kV assets over the next five years, aswell as around $1.5 million a year onoperations.

Regulatory management

Being a regulated business continues tohave the effect that the regulatory burdenincreases year on year, imposing additionalcost and complexity onto EastlandNetwork. Also, the regulatory challengesto network operating margins, which havebeen in place for the past decade, carryon through the newly introduced Qualityand IRIS incentive schemes.

Like many other lines companies, EastlandNetwork notes the increasing burden ofreporting to the Commerce Commission.As emerging energy technologies likesolar and battery challenge currentbusiness models, our concern is thatnetworks are constrained by regulatedpricing in terms of the kinds of discussionson appropriate services and pricing it isable to have with customers. That is, ourview is regulation of electricity networksis not keeping pace with rapidlyexpanding consumer choices.

We believe networks need freedom withinthe regulatory framework to developcommercialisation models which balanceemerging market opportunities with theprotection of the existing network andgeneration assets.

In common with other electricitydistribution businesses (EBDs), emergingtechnologies are forcing the industry toreview traditional approaches to consumerload profiling and, subsequently, to theoperation of the network and consumptionbased pricing for line function services.Small scale solar/PV generation, smartmeters, smart appliances and electricvehicles are areas of emerging technologyexpected to impact on the industry overthe next few years.

Asset management

The network is constantly upgrading itsservices and reinvesting in the region.Future plans for the sustainablemanagement and development of thenetwork are described in our AssetManagement Plan, (AMP). The AMP isupdated annually and our current onecovers a planning period for the next tenyears. Included in the plan are prioritisedprograms and projects for the maintenance,renewal and development of the networkdesigned to deliver optimum customerservice, safe and operational efficiencywithin financial boundaries.

Connections and developments

Domestic

The year brought a continuation of a trend noticed over the previous fouryears, with only a low number of newresidential developments and/orsubdivisions requiring reticulation.The total new reticulation installed allowsfor supply of approximately 30 newdomestic connections.

Non-domestic

Compared to previous years, there wasan increase in the number of non-domestic development projectscompleted to meet the new and/orenhanced supply requirements ofcustomers. Those of note were:

• Salesyard Road – the upgrade of atransformer and the installation of400V cabling to supply a newindustrial/commercial subdivision

• Salesyard Road - the installation of11kV switchgear for a private1000KVA transformer supplying anew grain drying facility.

• Dunstan Road – the installation of11kV switchgear and networkconfiguration alterations associatedwith the provision of supply to a newlog storage and processing facility

• Lytton Road – the upgrade of anexisting transformer and additional400V cabling in order to supply anew 3 lot commercial subdivision.

• Palmerston Road – the installationof 400V cabling for a new officeblock development

• Bell Road – the upgrading of supplyto a packhouse via the relocation ofan existing pole mountedtransformer and the installation ofa new private transformer

Maintenance and capital expenditure

Maintenance and capital expenditure onthe network were once again successfullymanaged within budget and inaccordance with Eastland Network’sAsset Management Plan.

While expenditure on the renewal of agedand underperforming assetspredominated, reticulation upgrades andoverhead-to-underground conversionswere also carried out in a continuingprogramme to meet load growth andimprove security of supply requirementsalong main arterial routes and/or thosewith high amenity value within theGisborne and Wairoa areas.

Eastland Network’s Asset ManagementPlan forecasts expenditure of $46 millionon network capital projects and $30million on maintenance work over thenext five years. These capital andmaintenance forecasts take into accountexpenditure associated with the operationof newly acquired transmission assets.

Asset replacements

Eastland Network’s planned programmeof aged-asset replacement and assetmaintenance continued on the Gisborneand Wairoa networks. Of significance were:

• Fourteen urban ground mounteddistribution transformers replaced,(eleven in Gisborne and three inWairoa)

• Ten sets of ground mounted 11kV switchgear replaced

• Replacement of seven 400V link boxes

• Completion of 11kV overheadconductor replacement projects in Te Araroa and Te Puia townships,Tarndale/Whatatutu and WairereRoad, Wainui. A total route length of4kms of conductor was replaced

• Continuation of asset renewal andupgrading projects in the Manutuke/Muriwai/Wharerata and Whatatutu/Maungatu areas (rural Gisborne), andTe Araroa to Ruatoria on the EastCoast– this work included thereplacement of 11kV and 400V poles,the upgrading of transformers andremoval of redundant overhead plant

• Significant clearance of trees from thevicinity of overhead lines – throughoutthe Gisborne and Wairoa areas.



Compliance

Public safety management plan

In FY 2016, in accordance with theElectricity Act and Electricity (Safety)Regulations 2010, Eastland Group’s PublicSafety Management Plans, (covering bothdistribution and generation assets), metregulatory compliance, subject to aninterim audit.

The interim audit that was undertaken byan accredited third party against NZ7901:2008 Electricity and Gas Industries– Safety Management Systems for PublicSafety, concluded that our plans andassociated systems are fully compliantwith requirements.

Electricity distribution services defaultprice–quality path determination 2015

The 2016 financial year was the firstyear of a new five year regulatoryperiod. From 1 April 2015 it introduceda number of changes, including a newprice path, changes to quality limits andthe method of assessment, and theintroduction of quality and incrementalrolling incentive schemes.

During the year the Electricity Authorityreleased a discussion paper on theimplications of evolving technologies forpricing of distribution services. This paperindicated a change of view by theAuthority regarding the Electricity (LowFixed Charge Tariff Option for DomesticConsumers) Regulations 2004 whichwould allow the use of demand andcapacity based charges for domesticconsumers. In light of this, EastlandNetwork is considering its optionsregarding pricing, in order to providegreater choice for electricity consumersin our region.

Regulatory compliance was achievedagainst Electricity Distribution ServicesDefault Price-Quality Path Determination2015, for allowable notional revenue andreliability/network performance thresholdsfor the 2015 -16 assessment period.


Overhead-to-undergroundconversions

Completed projects which focusedon the installation of 400V cablingand new service connections and theremoval of overhead 400V roadcrossings were:

• Aberdeen Road – betweenAlbert Street and Wellington St

• Stanley Road – Gisborne GirlsHigh School to Aberdeen Road

• Darwin Road, Kaiti

• Palmerston Road – betweenRoebuck Road and Disraeli St

• Lytton Road – Childers Road toManuka St

Eastech

Our in-house network service provider,Eastech, continued to meet its primaryobjective of providing line mechanic andfault man resources as required to deliveran effective and efficient 24 hour x 7 dayfault restoration service.

The efforts of the Eastech team and theirtimely response to network and customerfaults significantly contributed toEastland Network again achievingcompliance with regulatory networkperformance thresholds.

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Sandy makes it happen for Eastland NetworkRob makes it happen for Eastech

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We make it happenclean and green

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2016 Highlights

Overall generation output was 71.6 GWhrs

GDL’s output was 65.6 GWhrs

Diesel genset output was 0.347 GWhrs

Waihi hydroelectricity schemeoutput was 2.5 GWhrs

The Eastland Generation businessincludes geothermal, hydro and dieselelectricity generation plants.

Our focus is on building strong, long-term,mutually beneficial relationships from theground up — together with the ownersof the land on which the plants operate.

We power a realisation of value to ourland owner partners and deliver a resourcethat wouldn’t otherwise be available.

For Eastland Group’s portfolio of energygeneration businesses, the past twelvemonths have been exciting and challengingin equal measures. Following years ofplanning, we put the final plans in placefor our $120 million Te Ahi O Mauigeothermal project to start drilling thefirst production well, in a three wellprogramme.

However, our hydroelectricity powerstation at Waihi dam near Wairoa wasout of operation for four monthsfollowing damage to the sluice gates inextreme weather.

The energy industry is on the brink ofpotential major disruption driven by realadvances in solar energy conversion andstorage, and we believe Eastland Grouphas the opportunity to become a leaderin the adoption of new technologies. AsEastland Network seeks to understandthe potential impact of the widespreadadoption of solar on their lines network,Eastland Generation is also keeping aclose eye on developments in thegeneration space.

Overall generation output for the year was71.6 gigawatt hours (2015 78.7GWhrs).

Te Ahi O Maui geothermal project

In 2016 the green light was given toprogress to the construction phase of theTe Ahi O Maui geothermal project, apartnership between Eastland Generationand Kawerau A8D Ahu Whenua Trust.Resource consents, granted in 2015, allowfor the construction and operation of asustainable geothermal power plant ona site 2.3 kilometres north-east of theKawerau township.

Over the past five years we have invested$9 million in the development of theproject, including development rights,resource consents and front endengineering design. By 31 March 2016, theconstruction of well pads was well underway and preparations were being madeto mobilise the drilling rig to site to begindrilling the first of three wells in May.

When operational in 2018, the Te Ahi OMaui plant will generate around 25megawatts of renewable electricity, withan average of 15,000 tonnes ofgeothermal fluid extracted daily beforeit is re-injected back into the reservoir toensure that the field can be replenishedand operate sustainably. A plant of thissize has the potential to generate enoughpower to supply as many as 20,000homes for up to 35 years.

Although demand remains relatively flatin the electricity market, EastlandGeneration is confident Te Ahi O Mauilends itself to project success. This is dueto its modest scale, the fact there isalready a well on the property and thatthe plant will be on an established andunderstood geothermal field. With adownturn in onshore and offshoregeothermal plant construction, we believethere is capacity in the market formanufacture and construction.

Te Ahi O Maui is part of the company’swider commitment to renewablegeneration in New Zealand. The projectis consistent with Eastland Group’sstrategy of developing a portfolio ofrenewable electricity generation.Geothermal will provide complementarybase load generation to support anemerging market where solarphotovoltaic (PV) plays a greater part inmeeting the country’s energy needs.

Eastland Group is also focused onminimising the environmental impact ofits projects. The Te Ahi O Maui projectteam works in close partnership with theKawerau A8D Whenua Trust tounderstand and accommodate theirneeds as tangata whenua.

GDL geothermal plant(Geothermal Developments Ltd)

Our GDL (Geothermal Developments Ltd)plant performed well and was on load fora total of 96.7% of the time during the2016 financial year. GDL’s overall totaloutput for the year was 65.6 gigawatthours (2015 - 66.8 gigawatt hours), withthe best month being May when weachieved an output of 6.172 gigawatt hours.

During the first week in December theplant was shut down for its annualmaintenance. During this time amodification to the production wellheadwas undertaken, a process which involvedquenching the well, installing well headequipment and performing a pressure andtemperature test.

Since December 2015, electricity producedby the plant has been sold on thewholesale electricity market due to theexpiry of a power purchase agreementwith a nearby industrial customer. Otherpossibilities exist for the sale of this output,such as supporting other opportunitiesand projects locally and nationally.

Diesel generation

The six one megawatt diesel generatorsstrategically located throughout thenetwork collectively generated 0.347gigawatt hours (2015 0.374GWh) duringthe 2016 financial year. There was no callon the arrangement with an energyretailer to operate the gensets at timesof high wholesale electricity prices –consequently all of the annual productionwas to maintain supply to customersduring faults and scheduled maintenance,or to reduce maximum demand attransmission grid supply points. As inprevious years, the operation of thegensets over the year saved in excess of100 SAIDI minutes.


We make it happenclean and green

Ben makes it happen for Eastland Generation

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We make it happenfor exports

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2016 Highlights

2.3 million tonnes of logs wereexported in 2016

98% of total exports were raw logs

133 vessels visiting during 2016

40,000 square metres of runwayresealed at Gisborne Airport

15,629 total movements at Gisborne Airport

The past twelve months was a year oftwo halves for Eastland Port, with logprices plummeting early in the year andsubsequently impacting on exportvolumes. But as the year progressedforest owners saw significant upsidedevelop and, by summer, harvesting onthe East Coast got into full swing andthe year ended strongly. Anunprecedented 500,000 tonnes wereexported through the port in Februaryand March.

More than 2.3 million tonnes – mostly rawlogs – were exported from Eastland Portduring FY 2016, a record that smashedthe company’s previous best year. Thetotal tonnage of 2.302 million tonneseclipsed the port’s 2014 result of 2.274million tonnes, and was a 59,000 increaseon the 2015 throughput, despite uncertainindications from forestry customers earlierin the year. The port’s busiest ever monthwas recorded in February, with a totalcargo of 264,000 tonnes exported.

Of the 133 ships to dock at Eastland Portover the 2016 financial year, 113 werelogging ships, reflected in the fact that98.4% of total exports were raw logs. Theremaining exports were squash, maize andkiwifruit. In addition to export vessels,eleven cruise ships visited during thetwelve months to 31 March 2016. The portalso saw the first coastal shipments ofmaize in many years, with the Anatokimaking four trips from Gisborne to Timaru.

As the country’s most efficient loggingport, we have worked hard with ourcustomers and suppliers to introducesystems and processes that move logsas efficiently as possible. Every single logis barcoded then scanned in and out, andan individual log stays an average of justeight days on port. The company hasspent around $75 million on capitalenhancements since 2010 and willcontinue to invest significantly over thenext five years to accommodate customerprojections for forestry harvest, estimatedto reach more than 3.5 million tonnesannually over the next few years.

Huge improvements to environmentalprocesses have also been implementedat the port over the past 12 months, withone of the most significant being theintroduction of a world class watertreatment system at the upper log yard.The industrial grade system includes twolamella clarifier systems which aredesigned to settle and separate particlesin the water as quickly as possible; eachclarifier can treat up to fifty cubic metersof water an hour. We continue to look atnew ways to minimise our environmentalfootprint at the same time as we helpcustomers move logs offshore.

Upper log yard construction

The $12 million makeover of the upperlog yard was the result of seven years’consultation and planning and was drivenby our customers’ requirements for aneven more efficient port.

The upper log yard’s footprint wasexpanded to 2.4 hectares, boosting totallog storage area on port to 12.2 hectaresor over 120,000 tonnes. The nine-monthproject was a huge undertaking involvingmany people, heavy machinery and vehicles.Together with lead contractor Downer, weare proud of the fact we spent more than34,000 man hours on this project and notone person suffered a Medical Treatmentor Lost-Time Injury.

To beautify the area, thousands of nativetrees and shrubs were planted along theexternal walls and large panels and waka-inspired carvings designed by local artistNick Tupara were erected. Carefullypositioned in the gardens and alcoves atintervals along the Crawford Road andParau Street wall, the eleven pou representconnections between past and present,land, water, people and culture. They areintegral to the yard's landscaped exteriorand are part of a collaborative projectbetween Ngati Oneone and the port.


Exports By Tonne/YearLAST TEN YEARS

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We make it happenfor exports

Graham makes it happenfor Eastland Port

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Murray makes it happenfor Gisborne Airport

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Port development

Design and consenting work for thewharfside log yard is progressing withthe application planned for lodgementwith Gisborne District Council early in thenext financial year. Construction of thisyard is planned for the summer of 2016/17and, once complete, will mean all of theports log yards are sealed with stormwater treatment in place. This will be asignificant milestone for the port and forthe region as a whole.

Concept planning is also underway forthe slipway refurbishment, this project isthe first step in enabling the twin logberth project, which will ultimately meanthe port can berth two logs shipsalongside at one time. The newlyconfigured slipway will also provide thelanding point for a proposed pedestrianbridge from the other side of theTuranganui River, as part of theNavigations Project. When complete thiswill be a significant community asset,providing residents and visitors alike witha unique experience.

At the end of the financial year the portpurchased a second hand pilot boat outof Brisbane, Australia, the vessel willreplace the 30 year old Turanganui.Renamed the Rere Moana the new pilotboat will provide a faster and safer pilottransfer option.

Eastland Debarking

Eastland Port’s joint venture with HikurangiForest Farms processed 301,000 tonnesof logs (2015 - 320,000 tonnes). Whileprocessed volumes were down onprevious years, the plant itself ran wellwith very limited unplanned downtime.The business had a significant focus onimprovements in health and safetyperformance and continues to develop itssystems and processes in this area.

The coming year will see a furtherdiversification of the plant’s customer base,which should help contribute to animproved financial position for the business.

Northland Debarking

Our 1.1 hectare operation at NorthPortnear Whangarei has gone from strengthto strength since it opened in May 2015.It now employs five people and providesdebarking and anti-sap staining servicesto Northland forestry customers. In thetwelve months to 31 March 2016, the plantprocessed 121,000 tonnes of logs (2015- 74,000). The business purchased itsown loader, which has improvedperformance and helped meet thegrowing demand for the plant’s services.The customer base continues to expandand – just as importantly – stabilise, witha number of customers now processingsolid monthly volume through the plant.

The coming year will see a change in shiftpatterns on the plant which will furtherimprove processing efficiency, and reducecongestion within the yard. This changewill also help to meet the increasingdemand from Resources New Zealandand their growing square log operation.

Cookstores

Eastland Port’s Cookstores operationcomprises the largest cold storage sitein Gisborne, supplying services to HeinzWattie, Cedenco and numerous smalleroperators. The operation also contains alarge dry storage facility, servicing anumber of the region’s primary producersand manufacturers. The business had asuccessful year and continues tocontribute positively.

Gisborne Airport

In April we celebrated our ten yearanniversary of managing Gisborne Airport,on lease from Gisborne District Council.Since 1 April 2005, the council hasremained the asset owner, but EastlandGroup has operated, managed anddeveloping the airport.

The anniversary coincided with thecompletion of a project to reseal theairport’s runway. The $2.5 million runwayproject was awarded to Downer after atender process, with work taking placeat night to minimise disruption, andinvolved 40,000 square metres of asphaltbeing laid.

Back in 2005 when we first took over theoperation, Gisborne Airport was costingGisborne ratepayers’ money. TodayGisborne Airport makes a smallcommercial profit and has beenimmeasurably improved. Our original cafémakeover has been enhanced by newterminal windows, carpet and interiordirectional signage, as well asimprovements to security and lighting atthe airport carpark.

In the past twelve months there has beena further shift in the aircraft fleet servicingthe district with a greater number of 50seat Q300 planes being used by Air NewZealand, resulting in a decline in the 19 seatBeech 1900s. From early August 2016, theBeech 1900s will be retired and replacedby the larger 50 seat Q300 aircraft.

Overall the change has resulted in a slightdecrease in total aircraft movements atthe airport with a total of 15,629 aircraftmovements (take-offs and landings) inthe twelve months to 31 March 2016 (2015- 15,8970). Total passenger movementsthrough the airport have increased threepercent on the previous year to a total of141,085 for the year ended 31 March 2016.

The ability of the current terminal tocomfortably accommodate the arrivaland departure of two Q300 aircraft willbe tested, so a review of GisborneAirport’s future terminal needs isunderway and we will liaise with theEastland Community Trust and GisborneDistrict Council over funding.

The switch to an all Q300 schedule alsohas regulatory and legal implications.CAA requires a Rescue Fire Service ifthere are more than 700 aircraftmovements (a landing and take-off = twomovements) in the busiest three monthsof the year.

In the coming year the airport will reviewits five yearly landing charges pricing asrequired by the Airport Authorities Act –we will be consulting with key customerson this. Plans are underway to replace theairport car park system, in order to improvethe experience for airport customers.


Andrew and Deane make it happenfor Eastland Port

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Looking ahead

As the region’s harvest has grown sohas interest from new parties inexporting through the port. The yearstarted with three exporters throughthe port and ended with the seventhand eighth exporters scheduled tostart exporting in May 2016. Theincrease in exporters was encouragedby the port this year in order toprovide the best possible returns tothe region’s forest owners andsubsequently encourage furtherexport volume.

Eastland Port is growing side by sidewith the region’s forestry sector. Wewill continue to work with forestrycustomers to ensure efficientmanagement of the huge volume oflogs predicted to go across the portin the next ten to twenty years.Eastland Group also remainscommitted to continuing to invest inGisborne Airport.

Like the port, Gisborne Airport isgrowing to meet the demands of thegrowing number of people whoregularly travel in and out of theregion. Both the port and airport arethe region’s vital links to the rest ofthe country. Because of ourgeographic isolation, they are criticalpieces of infrastructure, and both areessential to economic developmentand improved prosperity.

Eastland Group’s focus is on theprovision of efficient infrastructurethat allows our customers, and theregion as a whole, to competeeffectively on the global market.

Annual Report 2016 Eastland Group

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We make it happenfor our community

2016 Sponsorships

Eastland Group Raceway (Gisborne Speedway Club)

Eastland Group Speaker Series (Gisborne Chamber of Commerce)

Eastland Port 2016 Harbour Party

Engineering Tertiary Scholarships

Accounting Tertiary Study Scholarships

Tairawhiti Enviroschools Action Fund

Eastland Wood Council Forestry Awards

Gisborne Regional Wine Awards

Eastern Region Junior Surf LifesavingChampionships

Poverty Bay Kayak Club

Gisborne Trampoline Club

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Eastland Group makes it happenfor the Eastland Group Raceway

Eastland Group makes it happenfor the Eastland Group Speaker Series

Eastland Group makes it happenfor the Gisborne Regional Wine Awards

Eastland Group makes it happenfor Sam Godwin who won the TertiaryEngineering Scholarship

We make it happenfor our community

Eastland Group is proud to be Gisborneborn and bred, and we’re workingtowards greater prosperity for everyonewho calls the East Coast home. We thinkof ourselves as a company with acommercial mind and a community heart,and we sponsor community events, localclubs and business initiatives designedto grow Gisborne’s regional economy.

As part of our commitment to this vision,Eastland Group’s main sponsorshippartnerships include:

Eastland Group Raceway

Eastland Group Raceway is home toGisborne’s Speedway Club. Our ten yearpartnership with the club has seen it gofrom strength to strength. The club stageda dozen meetings at Eastland GroupRaceway this season; 16 nights of racingin all. Highlights included the New ZealandStreetstocks Grand Prix, the New Zealandstockcar and streetstock teamschampionships and the New ZealandSaloon Car Championships. These eventsattracted both visitors and locals andencouraged the kind of spending thatboosts regional economic activity.

Eastland Group Speaker Series

Another of our key sponsorships is ourpartnership with Gisborne’s Chamber ofCommerce. In the past five years EastlandGroup’s Speaker Series has brought manyof the country’s biggest business namesto Gisborne to deliver thought-provokingtalks to sold-out audiences. The 2016 line-up included race relations commissionerand former world women’s squashchampion Dame Susan Devoy, Spark CEOSimon Moutter, who oversaw the rebrandfrom Telecom and the launch of Spark’snew internet TV service Lightbox, andDame Wendy Pye, founder of one of theworld’s most successful educationalexport companies and the first livingwoman inducted into the New ZealandBusiness Hall of Fame. Our aim is for theseries to foster local conversations notonly about how to make sure Gisbornebusinesses succeed, but also how to boostprosperity across the entire region.

Eastland Port 2016 Harbour Party

In association with Gisborne’s TatapouriSports Fishing Club, we staged a harbourparty in November to celebrate the club’s50th Jubilee. The day’s activities includeda family fishing competition, and anafternoon and evening of bands playingon the port’s barge, carefully positionedin the inner harbour. In addition, the port’sfloating plant team on board the Waimataperformed the region’s first ever ‘tugballet’ display.

Engineering Tertiary Scholarships

Each year Eastland Group awards $5000to an Eastland student undertakingtertiary study in the field of civil,mechanical or electrical engineering,subjects that complement EastlandGroup’s operations. In 2016 twoscholarships were awarded – KelseyCoronno has just started her electricalengineering studies at AucklandUniversity. Sam Godwin has been arecipient of the Eastland Groupscholarship three years in a row. Acommitted rugby player, he put hisstudies on hold last year to focus on thesport. Now back in fulltime study for hisfinal year studying for a Bachelor ofEngineering (Hons) Sam is specialising inCivil Engineering at Canterbury University.

Accounting Tertiary Study Scholarships

Eastland Group also contributes annuallyto a scholarship fund administered by theChartered Accountants Australia NewZealand (CAANZ). Each year CAANZawards a scholarship to Gisborne tertiaryaccounting students. This year JordanCribb, Ashley Johnson and Crystal Otene-Kereama are the recipients of scholarshipsfrom Eastland Group and CAANZ.

Enviroschools

Eastland Port’s partnership with theTairawhiti Action Fund helps make $4000available each year for student-led actionprojects. We have been providing schoolswith bark from the port’s debarking plantfor some time, but the Action Fund, nowin its second year, allows individualschools to turn their visions into reality.

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Eastland Wood Council Forestry Awards

The seventh annual Eastland WoodCouncil Awards celebrates the localforestry industry, recognising individualsand businesses who perform at thehighest level. The aim of the awards is tomotivate excellence and innovation acrossthe sector.

Gisborne Regional Wine Awards

An annual celebration of our localvineyards and winemakers, this event’sformal awards dinner is a well-establishedhighlight of the region’s wine calendar.

Eastern Region Junior Surf LifesavingChampionships

The Eastern Regional JuniorChampionships (ERC's) has a proudhistory of being not only one of thebiggest junior surf lifesaving events inNew Zealand, but one of the mostcompetitive. More than 500 youngathletes competed in Gisborne this yearat a competition which offered almost allthe events available at the 2016 U14 NZChampionships, and drew upon the bestof the best to determine the EastlandPort 2016 Eastern Regional JuniorChampions and Top Club.

Poverty Bay Kayak Club

Eastland Port supports the Poverty BayKayak Club, a centre for local paddlingenthusiasts. Since its beginnings in 1978,the club has played home to paddlerswho have gone on to reign supreme onnational and international stages.

We make it happenfor our region

Eastland Group LimitedFinancial StatementsFor the year ended31 March 2016

Nelson Cull

Director

Chairman

Tony Gray

Director

Chair of Audit and Finance Committee

25 May 2016

The directors are pleased to present the consolidated financialstatements of Eastland Group Limited for the year ended 31 March 2016.

For and on behalf of the Board of Directors.

F 1

F2 Eastland Group Annual Report 2016

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Eastland Group Limited andits subsidiaries (‘the Group’) on pages F4 to F46, which comprise the consolidated statement offinancial position as at 31 March 2016, and the consolidated statement of financial performance,statement of comprehensive income, statement of changes in equity and statement of cash flows forthe year then ended, and a summary of significant accounting policies and other explanatory information.

This report is made solely to the company’s shareholder, in accordance with Section 207B of theCompanies Act 1993. Our audit has been undertaken so that we might state to the company’sshareholder those matters we are required to state to them in an auditor’s report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone other than the company’s shareholder, for our audit work, for this report, or for the opinionswe have formed.

Board of Directors’ Responsibility for the Consolidated Financial Statements

The Board of Directors are responsible on behalf of the company for the preparation and fairpresentation of these consolidated financial statements, in accordance with New Zealand Equivalentsto International Financial Reporting Standards and International Financial Reporting Standards, andfor such internal control as the Board of Directors determine is necessary to enable the preparationof consolidated financial statements that are free from material misstatement, whether due to fraudor error.

Auditor’s Responsibilities

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing and InternationalStandards on Auditing (New Zealand). Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgement,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internalcontrol relevant to the entity’s preparation and fair presentation of the consolidated financialstatements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Anaudit also includes evaluating the appropriateness of the accounting policies used and thereasonableness of accounting estimates, as well as the overall presentation of the consolidatedfinancial statements.

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

Other than in our capacity as auditor and the provision of other assurance services relating to theaudit of regulatory disclosure statements, we have no relationship with or interests in EastlandGroup Limited or any of its subsidiaries.

Independent Auditor’s Report

To the Shareholder ofEastland Group Limited

These financial statements should be read in conjunction with notesand accounting policies on pages F4-F46


F3Annual Report 2016 Eastland Group

Opinion

In our opinion, the consolidated financial statements on pages F4 to F46 present fairly, in all materialrespects, the financial position of Eastland Group Limited and its subsidiaries as at 31 March 2016,and their financial performance and cash flows for the year then ended in accordance with NewZealand Equivalents to International Financial Reporting Standards and International FinancialReporting Standards.

Chartered Accountants

25 May 2016

Wellington, New Zealand

This audit report relates to the consolidated financial statements of Eastland Group Limited for the year ended 31 March 2016 includedon Eastland Group Limited’s website. The Board of Directors is responsible for the maintenance and integrity of Eastland GroupLimited’s website. We have not been engaged to report on the integrity of the Eastland Group Limited’s website. We accept noresponsibility for any changes that may have occurred to the consolidated financial statements since they were initially presentedon the website. The audit report refers only to the consolidated financial statements named above. It does not provide an opinionon any other information which may have been hyperlinked to/from these consolidated financial statements. If readers of this reportare concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy ofthe audited consolidated financial statements and related audit report dated 25 May 2016 to confirm the information included inthe audited consolidated financial statements presented on this website. Legislation in New Zealand governing the preparation anddissemination of financial statements may differ from legislation in other jurisdictions.

Statement of Financial PerformanceFOR THE YEAR ENDED 31 MARCH 2016

2016 2015Notes $’000 $’000

Revenue 71,632 73,005

Other income 2,242 862

Total income 6 73,874 73,867

Electricity distribution expenses 5 (8,538) (11,883)

Electricity generation expenses 5 (2,428) (1,087)

Logistics operating expenses 5 (3,180) (3,066)

Personnel expenses 18 (9,101) (8,609)

Administrative expenses 7 (8,422) (9,747)

Operating expenditure (31,669) (34,392)

Earnings before interest, income tax, depreciation and amortisation (EBITDA) 42,205 39,475

Depreciation and amortisation 7 (14,845) (12,703)

Profit before interest and income tax (EBIT) 27,360 26,772

Finance income 8 13 408

Finance expenses 8 (8,374) (8,784)

Share of profit of joint venture 15 1,442 1,403

Profit before income tax 20,441 19,799

Income tax expense 9 (5,214) (5,496)

Profit from continuing operations 15,227 14,303

(Loss) from discontinued operations (45) (185)

Total profit 15,182 14,118

Attributable to:

Equity holders of the parent 15,203 14,171

Non-controlling interest (21) (53)

15,182 14,118

Statement of Comprehensive IncomeFOR THE YEAR ENDED 31 MARCH 2016

2016 2015 $’000 $’000

Total profit 15,182 14,118

Other comprehensive income

Cash flow hedges (9,780) (4,174)

Revaluation of property, plant and equipment 17,328 (1,490)

Tax on comprehensive income (2,165) 926

Other comprehensive income, net of income tax 5,383 (4,738)

Total comprehensive income 20,565 9,380

Attributable to:


Non-controlling interest (21) (53)

20,565 9,380

F4 Eastland Group Annual Report 2016 These financial statements should be read in conjunction with notesand accounting policies on pages F4-F46

Statement of Financial PositionAS AT 31 MARCH 2016

2016 2015Notes $’000 $’000

ASSETS

Current assets

Cash and cash equivalents 10 2,253 1,226

Trade and other receivables 11 8,305 9,018

Inventory 38 72

Assets held for sale - 840

Total current assets 10,596 11,156

Non-current assets

Property, plant and equipment 12 385,826 351,777

Investment properties 13 16,350 15,698

Intangible assets 16 6,341 6,307

Investment in joint venture 15 861 722

Investments 2,229 -

Derivative financial instruments 24 - 24

Total non-current assets 411,607 374,528

TOTAL ASSETS 422,203 385,684

LIABILITIES

Current liabilities

Payables and accruals 17 7,067 5,479

Income tax 1,120 1,772

Employee entitlements 18 1,767 1,521

Derivatives financial instruments 24 3,219 41

Total current liabilities 13,173 8,813

Non-current liabilities

Loans and borrowings 23 114,000 105,000

Capital notes 20 30,000 30,000

Deferred tax 9 47,320 45,823

Derivative financial instruments 24 12,345 5,767

Income in advance 465 515

Total non-current liabilities 204,130 187,105

TOTAL LIABILITIES 217,303 195,918

NET ASSETS 204,900 189,766

EQUITY


Non-controlling interest 483 434

TOTAL EQUITY 204,900 189,766



Statement of Changes in EquityFOR THE YEAR ENDED 31 MARCH 2016

2016

Asset Non-Issued Hedge revaluation Retained controlling Totalcapital reserve reserve earnings interest equity

$'000 $'000 $'000 $'000 $'000 $'000

Balance at beginning of period - 1 April 2015 15,400 (4,061) 119,783 58,210 434 189,766

Comprehensive income - Net profit for the period - - - 15,203 (21) 15,182

Net change in fair value of cash flow hedges - (9,780) - - - (9,780)

Disposals of property, plant and equipment - - (118) - - (118)

Revaluation of property, plant and equipment - - 17,446 - - 17,446

Income tax relating to components of comprehensive income - 2,738 (4,903) - - (2,165)

Total comprehensive income - (7,042) 12,425 15,203 (21) 20,565

Transactions with owners

Movement in non-controlling interest - - - - 70 70

De-recognition of reserves - - - 116 - 116

Joint venture distributions - - - (2) - (2)

Dividends - - - (5,615) - (5,615)

Total transactions with owners - - - (5,501) 70 (5,431)

Balance at end of period - 31 March 2016 15,400 (11,103) 132,208 67,912 483 204,900

2015

Asset Non-Issued Hedge revaluation Retained controlling Totalcapital reserve reserve earnings interest equity

$'000 $'000 $'000 $'000 $'000 $'000

Balance at beginning of period - 1 April 2014 15,400 (1,056) 116,701 54,193 1,154 186,392

Comprehensive income - Net profit for the period - - - 14,171 (53) 14,118

Net change in fair value of cash flow hedges - (4,174) - - - (4,174)

Disposals of property, plant and equipment - - (54) - - (54)

Revaluation of property, plant and equipment - - 3,379 (4,815) - (1,436)

Income tax relating to components of comprehensive income - 1,169 (243) - - 926

Total comprehensive income - (3,005) 3,082 9,356 (53) 9,380

Transactions with owners

Movement in non-controlling interest - - - - (1,038) (1,038)

Acquisition of non-controlling interest - - - (371) 371 -

De-recognition of reserves - - - 52 - 52

Joint venture distributions - - - (20) - (20)

Dividends - - - (5,000) - (5,000)

Total transactions with owners - - - (5,339) (667) (6,006)

Balance at end of period - 31 March 2015 15,400 (4,061) 119,783 58,210 434 189,766




Statement of Cash FlowsFOR THE YEAR ENDED 31 MARCH 2016

2016 2015 $’000 $’000

Cash flows from operating activities:

Cash provided from:

Receipts from customers 74,095 71,107

Interest received 13 252

74,108 71,359

Cash applied to:

Payments to suppliers and employees (29,707) (33,210)

Interest paid (9,246) (9,207)

Income tax paid (6,534) (5,841)

(45,487) (48,258)

Net cash flows from operating activities 28,621 23,101

Cash flows from investing activities:

Cash provided from:

Proceeds from sale of property, plant and equipment 97 480

97 480

Cash applied to:

Purchase of intangibles (90) (1,925)

Purchase of property, plant and equipment (30,416) (28,519)

Purchase of investments (2,229) -

Purchase of investment properties (244) (278)

(32,979) (30,722)

Net cash flows used in investing activities (32,882) (30,242)

Cash flows from financing activities:

Cash provided from:

Proceeds from bank borrowings 9,000 10,500

Distributions from associates 1,164 1,970

10,164 12,470

Cash applied to:

Equity dividends paid (5,615) (5,000)

(5,615) (5,000)

Net cash flows from financing activities 4,549 7,470

Net cash flows from continuing operations 288 329

Net cash flows from/(used in) discontinued operations 739 (54)

Net increase in cash and cash equivalents 1,027 275

Cash and cash equivalents at beginning of period 1,226 951

Cash and cash equivalents at end of period 2,253 1,226

Statement of Cash FlowsFOR THE YEAR ENDED 31 MARCH 2016

Reconciliation of the Profit for the Period with Net Cash from Operating Activities

2016 2015 $’000 $’000

Profit for the period 15,182 14,118

Adjustments for:

Depreciation and amortisation 14,845 12,703

Customer contributions and vested assets (143) (1,576)

Impairment loss 258 1,425

Loss on sale of property, plant and equipment 293 54

Income from joint venture (1,306) (1,264)

Change in fair value of investment property (408) 383

Net operating cash flow from discontinued operations (795) 54

Interest capitalised to fixed assets (688) (486)

Deferred tax expense (669) (131)

11,387 11,162

Movement in working capital:

Decrease/(increase) in trade and other receivables 685 (1,291)

Decrease in inventory 34 129

(Increase) in aircraft (discontinued operations) - (135)

Decrease in assets held for sale 840 131

Increase/(decrease) in employee entitlements 246 (52)

(Decrease) in income tax payable (652) (214)

(Decrease) in income in advance (50) -

Increase in joint venture working capital - 22

(Decrease) in payables and accruals 949 (769)

2,052 (2,179)

Net cash from operating activities 28,621 23,101


Notes to the Financial StatementsFOR THE YEAR ENDED 31 MARCH 2016

1 REPORTING ENTITY

Eastland Group Limited is a company domiciled in New Zealand and registered under the Companies Act 1993. The addressof Eastland Group Limited's registered office is 37 Gladstone Road, Gisborne. Eastland Group Limited and its subsidiaries(“Eastland Group”) consolidated, is a reporting entity for the purposes of the Financial Reporting Act 2013 and its financialstatements comply with the requirements of that Act. The financial statements of Eastland Group are for the year ended 31March 2016 and were authorised for issue by the directors on 25 May 2016.

Eastland Group is a profit-oriented entity whose primary operations include electricity distribution and generation, the operationof Gisborne’s port and airport and the ownership of strategically located investment property. Eastland Group is owned bythe Eastland Community Trust.

2 BASIS OF PREPARATION

(a) Statement of compliance

The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), andother applicable Financial Reporting Standards, as appropriate for Tier 1 for-profit entities. They also comply withInternational Financial Reporting Standards.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following:

• derivative financial instruments are measured at fair value;

• land and buildings, electrical distribution assets, electrical generation assets and logistics assets, are measured at revaluedamounts;

• certain other property, plant and equipment are measured at revalued amounts; and

• investment properties are measured at fair value.

(c) Functional and presentation currency

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

(d) Use of estimates and judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results maydiffer from these estimates.

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

Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that havethe most significant effect on the amount recognised in the financial statements are described below.

Revenue recognition

The timing of customer payments for services does not always coincide with the timing of delivery of these services. Forexample customers may pay for services a period of time after the services are delivered. Customers may also prepay forservices. Judgment is therefore required in deciding when revenue is to be recognised. Where the relationship between thepayments and multiple services delivered under the related contract is not immediately clear, management must apply judgmentin unbundling elements of the contract and allocating payments to the respective services before applying the revenuerecognition accounting policy.

Sales of services are recognised at fair value of the consideration received or receivable as the services are delivered or toreflect the percentage completion of the related services where delivered over time.

Third party contributions towards the construction of property, plant and equipment are recognised in the Statement ofFinancial Performance. Revenue is recognised when all obligations to perform are satisfied.

Classification of investments

Classifying investments as either subsidiaries, associates, joint ventures or available-for-sale financial assets requires managementto judge the degree of influence which the Group holds over the investee. Management look at many factors in making thesejudgments, such as examining the constitutional documents that govern decision making, governance around current andfuture representation amongst the Board of Directors, and also other less formal arrangements which can lead to havinginfluence on the operating and financial policies. These judgments impact upon the basis of consolidation accounting whichis used to recognise the Group’s investments in the consolidated financial statements. Further information regarding the basisof consolidation is included in the following section on significant accounting policies.



2 BASIS OF PREPARATION (continued)

Classification of expenditure in relation to property, plant and equipment

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

Valuation of goodwill and property, plant and equipment

The carrying value of goodwill is assessed at least annually to ensure that it is not impaired. Performing this assessment requiresmanagement to estimate future cash flows to be generated by operating segments to which goodwill has been allocated.Estimating future cash flows entails making judgements including the expected rate of growth of revenues, margins expectedto be achieved, the level of future maintenance expenditure required to support these outcomes and the appropriate discountrate to apply when discounting future cash flows. Note 16 of these financial statements provides more information surroundingthe assumptions management have made in this area.

Property, plant and equipment is revalued by management on a cyclical basis as described in the notes. Valuations areperformed by registered valuers. Depreciation is recognised on a straight-line basis considering the estimated useful life ofthe asset and its residual value.

Management must also consider whether any indicators of impairment have occurred which might require impairment testingof the current carrying values of property, plant and equipment. Assessing whether individual assets or a grouping of relatedassets (which generate cash flows co-dependently) are impaired may involve estimating the future cash flows that those assetsare expected to generate. This will in turn involve assumptions, including rates of expected revenue growth or decline, expectedfuture margins and the selection of an appropriate discount rate for discounting future cash flows.

Valuation of financial instruments

Management have estimated the fair value of Eastland Group's financial instruments based on valuation models that useobservable market inputs. Note 24 of these financial statements provides a list of the key observable inputs that managementhave applied in reaching their estimates of the fair values of financial instruments and also provides a sensitivity analysisdetailing the potential future impacts of reasonably possible changes in those observable input over the next financial period.

Notes to the Financial Statements (continued)FOR THE YEAR ENDED 31 MARCH 2016


2 BASIS OF PREPARATION (continued)

Classification of expenditure in relation to property, plant and equipment

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

Valuation of goodwill and property, plant and equipment

The carrying value of goodwill is assessed at least annually to ensure that it is not impaired. Performing this assessment requiresmanagement to estimate future cash flows to be generated by operating segments to which goodwill has been allocated.Estimating future cash flows entails making judgements including the expected rate of growth of revenues, margins expectedto be achieved, the level of future maintenance expenditure required to support these outcomes and the appropriate discountrate to apply when discounting future cash flows. Note 16 of these financial statements provides more information surroundingthe assumptions management have made in this area.

Property, plant and equipment is revalued by management on a cyclical basis as described in the notes. Valuations areperformed by registered valuers. Depreciation is recognised on a straight-line basis considering the estimated useful life ofthe asset and its residual value.

Management must also consider whether any indicators of impairment have occurred which might require impairment testingof the current carrying values of property, plant and equipment. Assessing whether individual assets or a grouping of relatedassets (which generate cash flows co-dependently) are impaired may involve estimating the future cash flows that those assetsare expected to generate. This will in turn involve assumptions, including rates of expected revenue growth or decline, expectedfuture margins and the selection of an appropriate discount rate for discounting future cash flows.

Valuation of financial instruments

Management have estimated the fair value of Eastland Group's financial instruments based on valuation models that useobservable market inputs. Note 24 of these financial statements provides a list of the key observable inputs that managementhave applied in reaching their estimates of the fair values of financial instruments and also provides a sensitivity analysisdetailing the potential future impacts of reasonably possible changes in those observable input over the next financial period.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements:

(a) Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled, directly or indirectly by Eastland Group. The financial statements of subsidiaries areincluded in the consolidated financial statements using the acquisition method of consolidation.

Associates

Associates are entities in which Eastland Group has significant influence but not control over the operating and financialpolicies. Investments in associates are accounted for using the equity method. Eastland Group's share of the profit ofassociates is recognised in the Statement of Financial Performance after adjusting for differences, if any, between theaccounting policies of Eastland Group and the associates. Eastland Group's share of any other gains and losses of associatescharged directly to equity is recognised in the Statement of Financial Performance. Dividends received from associatesare credited to the carrying amount of the investment in associates in the consolidated financial statements.

Joint ventures

Joint ventures are contractual arrangements with other parties which establish joint control for each of the parties overthe related operations, assets or entity. Eastland Group is jointly and severally liable in respect of costs and liabilities,and shares in any resulting profit/(loss) or output. The Group accounts for these using the equity method.

Acquisition or disposal during the period

Where a business becomes or ceases to be a part of Eastland Group during the period, the results of the business areincluded in the consolidated results from the date that control or significant influence commenced or until the date thatcontrol or significant influence ceased. Where a business is acquired all identifiable assets, liabilities and contingentliabilities are recognised at their fair value at acquisition date. The fair value does not take into consideration any futureintentions by Eastland Group.

Goodwill arising on obtaining control of a subsidiary or an associate




Where an acquisition results in obtaining control of a subsidiary or an associate for the first time, the carrying amountof any previous non-controlling interest held by Eastland Group is first re-measured to fair value and the differencebetween the carrying amount and the re-measured fair value is recognised in the Statement of Financial Performance.Goodwill is then calculated as the sum of the fair value of the consideration paid, the re-measured fair value of the non-controlling interest previously held by the acquirer and the recognised amount of any remaining non-controlling interestin the acquiree held by third parties less the fair value of the total identifiable assets and liabilities of the acquiree at thedate of the acquisition.

If the fair value of the total identifiable assets and liabilities acquired exceeds the sum of the fair value of the considerationpaid, the re-measured fair value of the non-controlling interest previously held by the acquirer and the recognised amountof any remaining non-controlling interest in the acquiree held by third parties, then a gain representing a bargain purchaseis recognised in the Statement of Financial Performance.

Goodwill arising on acquisition of an additional interest in an associate while retaining significant influence

Where an acquisition results in Eastland Group obtaining an additional non-controlling interest in an associate whileretaining significant influence, goodwill is calculated as the difference between the fair value of the consideration paidand the amount of Eastland Group’s acquired incremental share of the fair values of the total identifiable assets andliabilities of the acquiree at the date of the acquisition.

If Eastland Group’s acquired incremental share of the fair values of the acquiree’s total identifiable assets and liabilitiesexceeds the fair value of the consideration paid, the excess is included in the share of net profit from associates in theStatement of Financial Performance.

Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions– that is, as transactions with the owners in their capacity as owners. The difference between fair value of any considerationpaid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded as equity. Gainsor losses on disposals to non-controlling interests are also recorded in equity.

Subsequent measurement of goodwill

Subsequent to initial recognition goodwill is tested annually for impairment. In respect of associates, the carrying amountof goodwill is included in the carrying amount of the investment.

Transactions eliminated on consolidation

Intra-group advances to and from subsidiaries are recognised at amortised cost within current assets and current liabilitiesin the separate financial statements of the parent. Subsidiaries advances from and to the parent are repayable on demand.Any interest income and interest expense incurred on these advances is eliminated in the Statement of FinancialPerformance on consolidation. All intra-group advances are eliminated on consolidation.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Financial instruments

i. Non-derivative financial instruments

Financial assets

Financial assets consist of cash and cash equivalents, loans and receivables.

Cash and cash equivalents, loans and receivables

Trade receivables, loans, cash and cash equivalents and other receivables are initially recorded at fair value andsubsequently measured at amortised cost less impairment. Fair value is estimated as the present value of future cashflows, discounted at the market rate of interest at the inception of the loan or receivable.

Discounting is not undertaken when the receivable is expected to be collected within twelve months. A provisionfor doubtful debts is recognised to allow for the reduction in fair value attributable to expected doubtful or delayedcollection of receivables.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when,and only when, Eastland Group has a legal right to offset the amounts and intend to either settle on a net basis orrealise the asset and settle the liability simultaneously. Cash and cash equivalents comprise cash on hand, cash inbanks and short term deposits maturing within three months. Bank overdrafts that are repayable on demand andform an integral part of Eastland Group's cash management are included as a component of cash and cash equivalentsfor the purpose of the Statement of Cash Flows.

Financial liabilities

Borrowings are recorded initially at fair value, net of transaction costs.

Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial




recognised amount and the redemption value being recognised in finance costs in the Statement of FinancialPerformance over the period of the borrowing using the effective interest rate method.

Other financial liabilities comprise trade and other payables. Discounting is not undertaken when the payable isexpected to be paid within twelve months.

Eastland Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when,and only when, Eastland Group has a legal right to offset the amounts and intend to either settle on a net basis orrealise the asset and settle the liability simultaneously.

ii. Derivative financial instruments

Eastland Group enters into a variety of derivative financial instruments to manage its exposure to interest rate andforeign exchange rate risk, including interest rate and foreign exchange forwards, swaps and options. Derivativesare initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measuredto their fair value at each balance date. The resulting gain or loss is recognised in the Statement of FinancialPerformance immediately unless the derivative is designated and effective as a hedging instrument, in which eventthe timing of the recognition in the Statement of Financial

Performance depends on the nature of the designated hedge relationship. Eastland Group designates certainderivatives as either hedges of the fair value of recognised assets, liabilities or firm commitments (fair value hedges),or hedges of highly probable forecast transactions (cash flow hedges). At the inception of the transaction EastlandGroup documents the relationship between hedging instruments and hedged items, as well as its risk managementobjectives and strategy for undertaking various hedge transactions. Eastland Group also documents its assessment,both at hedge inception and on an on-going basis, of whether the derivatives used in hedging transactions are highlyeffective in offsetting changes in fair values or cash flows of hedged items.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in theStatement of Financial Performance immediately, together with any changes in the fair value of the hedged assetor liability that is attributable to the hedged risk. The gain or loss relating to both the effective and the ineffectiveportion of interest rate swaps hedging fixed rate borrowings is recognised in the Statement of Financial Performancewithin finance costs. Changes in the fair value of the underlying hedged fixed rate borrowings attributable to interestrate risk are also recognised in the Statement of Financial Performance within finance costs.

Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longerqualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising fromthe hedged risk is amortised through the Statement of Financial Performance from that date.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedgesare recognised in other comprehensive income. The gain or loss relating to the ineffective portion, if any, is recognisedimmediately in the Statement of Financial Performance within finance costs.

Amounts accumulated in equity are recognised as finance costs in the Statement of Financial Performance in theperiods when the hedged item is recognised in the Statement of Financial Performance. The gain or loss relatingto the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the Statement ofFinancial Performance within finance costs, when the underlying transaction affects earnings.

However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in equity are transferred from equity and included in





the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or nolonger qualifies for hedge accounting. Thereafter, any cumulative gain or loss previously recognised in equity is onlyrecognised in the Statement of Financial Performance when the forecast transaction is ultimately recognised in theStatement of Financial Performance. When a forecast transaction is no longer expected to occur, the cumulativegain or loss that was previously recognised in equity is recognised immediately in the Statement of FinancialPerformance.

Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivativeinstruments that do not qualify for hedge accounting are recognised immediately in the Statement of FinancialPerformance within finance costs.

Non-derivative financial instruments comprise of trade and other receivables, cash and cash equivalents, relatedparty borrowings, capital notes, and payables and accruals.

iii. Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of thecontractual arrangement. If there is no contractual obligation to deliver cash or another financial asset, then theinstrument is classified as equity. All other instruments are classified as liabilities.

Compound financial instruments

Capital notes issued by Eastland Group can be converted to share capital or redeemed for cash at the option ofEastland Group.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liabilitythat does not have an equity conversion option. The equity component is recognised initially as the differencebetween the fair value of the compound financial instrument as a whole and the fair value of the liability component.Any directly attributable transaction costs are allocated to the liability and equity components in proportion to theirinitial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortisedcost using the effective interest method. The equity component of a compound financial instrument is not remeasuredsubsequent to initial recognition.

Interest and dividends

Interest paid and dividends paid are classified as expenses or as distributions of profit consistent with the Statementof Financial Position classification of the related debt or equity instruments.


(c) Property, plant and equipment

i. Recognition and measurement

Property, plant and equipment are tangible assets expected to be used during more than one financial period andinclude spares held for the servicing of property, plant and equipment.

The initial cost of purchased property, plant and equipment is the value of the consideration given to acquire theproperty, plant and equipment and the value of other directly attributable costs, which have been incurred in bringingthe property, plant and equipment to the location and condition necessary for the intended service.

The initial cost of self-constructed property, plant and equipment includes the cost of all materials used in construction,direct labour on the project, financing costs that are attributable to the project, costs of ultimately dismantling andremoving the items and restoring the site on which they are located (where an obligation exists to do so) and anappropriate proportion of the other directly attributable overheads incurred in bringing the items to working conditionfor their intended use. Costs cease to be capitalised as soon as the property, plant and equipment is ready forproductive use and do not include any costs of abnormal waste.

Subsequent expenditure relating to an item of property, plant and equipment is added to its gross carrying amountwhen such expenditure can be measured reliably and either increases the future economic benefits beyond itsexisting service potential, or is necessarily incurred to enable future economic benefits to be obtained, and thatexpenditure would have been included in the initial cost of the item had the expenditure been incurred at that time.The costs of day-to-day servicing of property, plant and equipment are recognised in the Statement of FinancialPerformance as incurred.

Land and buildings, electricity distribution, electricity generation equipment and walls, wharves and surfaces are


subsequently stated at revalued amounts, less any subsequent accumulated depreciation and impairment losses.Land and buildings, electricity distribution and electricity generation equipment are revalued with sufficient regularityto ensure that the carrying amount of these items does not significantly differ from that which would be determinedusing fair value at the date of the financial statements.

Land and building revaluations are carried out on a cyclical basis that does not exceed three years, by independentvaluers. For electricity distribution and electricity generation equipment assets and wharves, walls and surfaces,revaluations are carried out on a cyclical basis not exceeding five years, by independent valuers. The basis of valuationis discussed in note 12.

Any movement on revaluation is reflected through equity reserves for that class of asset unless there is insufficientreserve in which case that would flow through to the Statement of Financial Performance.

All other plant and equipment are valued at historical cost.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separateitems (major components) of property, plant and equipment.

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

ii. Depreciation

Depreciation is recognised in the Statement of Financial Performance on a straight-line basis over the estimateduseful life of each part of an item of property, plant and equipment. Land is not depreciated.

The estimated useful lives for significant classes of assets for the current and comparative periods are as follows:

Buildings 40-50 years

Electricity distribution equipment 10-70 years

Electricity generation equipment 15-50 years

Plant and equipment 3-20 years

Motor vehicles 5-10 years

Wharves, walls and surfaces 3-100 years

Floating plant 2-25 years

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

(d) Investment property

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

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

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

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

(e) Exploration and evaluation expenditure

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

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

Exploration and evaluation expenditure is partially or fully capitalised where either:






(f) Impairment

i. Financial assets

The carrying amount of financial assets are reviewed at balance date to determine whether there is any evidenceof impairment. Where assets are deemed to be impaired, the impairment loss is the amount that the carrying amountexceeds its recoverable amount. Impairment losses reduce the carrying amount of assets and are recognised as anexpense in the Statement of Financial Performance within administrative expenses.

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had anegative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial assetmeasured at amortised cost is calculated as the difference between its carrying amount, and the present value ofthe estimated future cash flows discounted using the effective interest method.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assetsare assessed collectively in groups that share similar credit risk characteristics. For trade receivables which are notsignificant on an individual basis, collective impairment is assessed on a portfolio basis based on numbers of daysoverdue, and taking into account the historical loss experience in portfolios with a similar amount of days overdue.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairmentloss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the Statementof Financial Performance within administrative expenses.

ii. Non-financial assets

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverableamount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largelyindependent from other assets and groups. Impairment losses are recognised in the Statement of Financial Performancewithin administrative expenses. Impairment losses recognised in respect of cash-generating units are allocated toreduce the carrying amount of the assets in the unit (group of units) on a pro-rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value lesscosts to sell. In assessing value in use, the estimated future cash flows are discounted to their present value usinga pre-tax discount rate that reflects current market assessments of the time value of money and the risks specificto the asset.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the losshas decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates usedto determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carryingamount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairmentloss had been recognised. Impairment losses are not reversed on goodwill.

(g) Provisions

A provision is recognised if, as a result of a past event, Eastland Group has a present legal or constructive obligation thatcan be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current marketassessments of the time value of money and the risks specific to the liability.

(h) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to Eastland Group and therevenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

i. Regulated electricity distribution and electricity generation sales

Revenue from electricity distributed and sold is recognised in the Statement of Financial Performance when theelectricity has been distributed or sold to the customers. The revenue is net of returns, trade discounts and volumerebates.

ii. Logistics revenue

Revenue from the sales of logistics services is recognised in the Statement of Financial Performance in the accountingperiod in which the services are rendered, by reference to completion of the specific transaction assessed on thebasis of the actual service provided as a proportion of the total services to be provided.

iii. Rental income

Rental income from investment property is recognised in the Statement of Financial Performance on a straight-linebasis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income,over the term of the lease.

Rental income arising from line rentals is recognised as income in the periods in which it is earned, based on usagerates of the relevant customer.


iv. Customer contributions

Revenue from customer contributions is recognised in the Statement of Financial Performance as revenue when allobligations to the customer are satisfied.

(i) Finance income and expenses

Finance income comprises of interest income on funds invested, changes in the fair value of financial assets at fair valuethrough the Statement of Financial Performance and gains on hedging instruments that are recognised in the Statementof Financial Performance. Interest income is recognised as it accrues, using the effective interest method. Foreign exchangegains and losses are further detailed in the foreign currency transactions policy below.

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

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

(j) Income tax expense

Income tax expense is made up of current and deferred tax. Income tax expense is recognised in the Statement of FinancialPerformance except to the extent that it relates to items recognised directly in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantivelyenacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, which provides for temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferredtax is not recognised for the following temporary differences:

• The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit.

• Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when theyreverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available againstwhich temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reducedto the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability topay the related dividend is recognised.

(k) Intangible assets

i. Goodwill

Goodwill represents the excess of the cost of the acquisition over Eastland Group's interest in the fair value of theidentifiable assets, liabilities and contingent liabilities of the purchase. When the excess is negative (negative goodwill),it is recognised immediately in the Statement of Financial Performance. Impairment losses are not reversed. Gainsand losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to thosecash-generating units or groups of cash-generating units that are expected to benefit from the business combinationin which the goodwill arose.

The useful lives of goodwill are assessed as indefinite and tested for impairment each year.

ii. Other intangibles

Other intangibles are amortised over the defined finite life of the intangible asset.







(l) Employee benefits

i. Short-term benefits

Short-term benefits, payable within 12 months, are measured on an undiscounted basis and are expensed as therelated service is provided. This includes wages, salaries, retirement benefits, annual leave and sick leave.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plansif Eastland Group has a present legal or constructive obligation to pay this amount as a result of past service providedby the employee, and the obligation can be estimated reliably.

ii. Termination benefits

Termination benefits are recognised as an expense when Eastland Group is demonstrably committed, without realisticpossibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date.Termination benefits for voluntary redundancies are recognised if Eastland Group has made an offer encouragingvoluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimatedreliably.

(m) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Eastland Group entities atexchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at thereporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gainor loss on monetary items is the difference between amortised cost in foreign currency at the beginning of the period,adjusted for effective interest and payments during the period.

The amortised cost in foreign currencies that are measured at fair value are retranslated to the functional currency atthe exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslationare recognised in the Statement of Financial Performance.

(n) Leases

Finance leases

Property, plant and equipment under finance leases, where the Group as lessee assumes substantially all the risks andrewards of ownership, are recognised as non-current assets in the Statement of Financial Position. Leased property, plantand equipment are recognised initially at the lower of the present value of the minimum lease payments or their fair value.A corresponding liability is established and each lease payment apportioned between the reduction of the outstandingliability and the finance expense. The finance expense is charged to the Statement of Financial Performance in each periodduring the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Leasedproperty, plant and equipment are depreciated over the shorter of the lease term and the useful life of equivalent ownedproperty, plant and equipment.

Operating leases

i. as lessee

Payments made under operating leases, where the lessors effectively retain substantially all the risks and benefitsof ownership of the leased property, plant and equipment are recognised in the Statement of Financial Performanceon a straight-line basis over the lease term. Lease incentives received are recognised as an integral part of the totallease expense over the term of the lease. Property, plant and equipment used by Eastland Group under operatingleases are not recognised in Eastland Group’s Statement of Financial Position.

ii. as lessor

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

Leasehold improvements

The cost of improvements to leasehold property are capitalised and depreciated over the unexpired period of the leaseor the estimated useful life of the improvements, whichever is the shorter.

(o) Goods and Services Tax (GST)

The Statement of Financial Performance has been prepared so that all components are stated exclusive of GST. All itemsin the Statement of Financial Position are stated net of GST, with the exception of receivables and payables, which includeGST.


(p) Joint ventures

Joint ventures are accounted for through inclusion of Eastland Group's share of the joint venture's operations in thefinancial statements, using the equity method of consolidation. Under the equity method of accounting, interests in jointventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisitionprofits or losses and movements in the Statement of Financial Performance. Where the Group's share of losses in a jointventure equals or exceeds its interests in the joint venture (which includes any long-term interests that, in substance,form part of the Group's net investment in the joint venture), the Group does not recognise further losses, unless it hasincurred obligations or made payments on behalf of the joint venture. Unrealised gains on transactions between the Groupand its joint ventures are eliminated to the extent of the Group's interest in the joint ventures. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of thejoint venture are consistent with the policies adopted by the Group.

(q) Statement of Cash Flows

For the purpose of the Statement of Cash Flows, cash and cash equivalents include cash on hand and in banks andinvestments in money market instruments, net of outstanding bank overdrafts. The following terms are used in theStatement of Cash Flows;

• Operating activities are the principal revenue producing activities of Eastland Group and other activities that are not investing or financing activities;

• Investing activities are the acquisition and disposal of long term assets and other investments not including cash equivalents; and

• Financing activities that result in change in the size and composition of the contributed equity and borrowings of the entity.

(r) Non-current assets held for sale

Individual non-current non-financial assets (and disposal groups) are classified as held for sale if they are available forimmediate sale in their present condition subject only to the customary sales terms of such assets (and disposal groups)and their sale is considered highly probable. For a sale to be highly probable, management must be committed to a salesplan and actively looking for a buyer. Furthermore, the assets (and disposal groups) must be actively marketed at areasonable sales price in relation to their current fair value and the sale should be expected to be completed within oneyear. Non-current non-financial assets (and disposal groups) which meet the criteria for held for sale classification aremeasured at the lower of their carrying amount and fair value less costs to sell and are presented within assets held forsale in the Statement of Financial Position. The comparatives are not re-presented when non-current assets (and disposalgroups) are classified as held for sale. If the disposal group contains financial instruments, no adjustment to their carryingamounts is permitted.

(s) Reclassification

On 31 March 2015 the geothermal plant, owned by Geothermal Developments Limited, was revalued to fair value, for thefirst time since it was acquired in January 2010, therefore aligning with the valuation policy for existing infrastructureassets. All asset components including goodwill have been incorporated into the plant’s value.

(t) Implementation of new reporting standards

No new reporting standards were adopted in the current reporting period. NZ IFRS 9: Financial Instruments - was adoptedby Eastland Group from 1 April 2014. The Standard adds requirements related to the classification and measurement offinancial assets and financial liabilities, and de-recognition of financial assets and financial liabilities and replaces thehedging requirements of NZ IAS 39. The revised Standard aligns hedge accounting more closely with risk managementand establishes a more principles based approach to hedge accounting. There has been no material impact on the adoptionof this standard.

4 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards and amendments to standards and interpretations have come into effect during the period ending31 March 2016. While these may impact some disclosures, none of these are expected to have a material effect on theconsolidated financial statements of the Group.




5 SEGMENT REPORTING

The Group’s internal reporting to the Group Chief Executive ("GCE") and Board is focused on the following businesses whichare the Group’s operating segments reported in accordance with NZ IFRS 8 Operating Segments. Revenue and expenses arereported before intersegment eliminations, which differs from external financial reporting. These operating segments consist of:

• Eastland Network – Ownership and management of electricity line distribution and contracting business, Eastech.

• Eastland Generation – Ownership and management of electricity generation; including Waihi hydrogeneration andgeothermal generation at Kawerau.

• Eastland Port – Ownership and/or management of port, airport, cool store and debarker operations.

• All Other Segments – Corporate activities, business development and investment property.

All other revenues and costs (including corporate costs) are included in All Other Segments.

Intersegment transactions included in the operating revenues and expenditures for each segment are on an arm's length basis.All segment information presented is prepared in accordance with Eastland Group's accounting policies. Monthly internalreporting to the GCE and Board is also prepared on this basis. Segment profit reported to the GCE and Board is profit beforeinterest and income tax. All financing costs and finance income are incorporated within Corporate activities and are notallocated to the segments.

2016

All other Inter- Notes Network Generation Port segments segment Total

$'000 $'000 $'000 $'000 $'000 $'000

Statement of Financial Performance

External revenue:

Operating revenue 34,230 6,135 29,879 1,388 - 71,632

Other income 83 1,200 494 465 - 2,242

Intersegment revenue 2,159 2,172 70 11,537 (15,938) -

Segment revenue 36,472 9,507 30,443 13,390 (15,938) 73,874

External operating expenditure:

Operating expenditure (8,538) (2,428) (3,180) - - (14,146)

Personnel expenditure (2,933) (340) (3,016) (2,812) - (9,101)

Other administrative expenditure (760) (1,516) (2,547) (3,599) - (8,422)

Intersegment expenditure (6,635) (631) (2,201) (698) 10,165 -

Operating expenditure (18,866) (4,915) (10,944) (7,109) 10,165 (31,669)

Earnings before interest, income tax, depreciationand amortisation (EBITDA) 17,606 4,592 19,499 666 (158) 42,205

Depreciation and amortisation (5,902) (2,671) (5,738) (534) - (14,845)

Segment profit before interest and income tax (EBIT) 11,704 1,921 13,761 132 (158) 27,360

Share of profit from joint venture - - 1,306 - 136 1,442

Loss from discontinued operations - - - (45) - (45)

Dividend paid (2,300) (1,000) (2,315) (5,615) 5,615 (5,615)

Statement of Financial Position

Assets 144,120 71,000 174,765 32,318 - 422,203

Liabilities 24,493 12,779 23,727 156,304 - 217,303

Segment capital expenditure 6,740 6,573 18,419 796 - 32,528




5 SEGMENT REPORTING (continued)

2015

All other Inter- Notes Network Generation Port segments segment Total

$'000 $'000 $'000 $'000 $'000 $'000

Statement of Financial Performance

External revenue:

Operating revenue 35,707 7,289 28,472 1,537 - 73,005

Other income 85 763 14 - - 862

Intersegment revenue 2,535 4,226 74 10,954 (17,789) -

Segment revenue 38,327 12,278 28,560 12,491 (17,789) 73,867

External operating expenditure:

Operating expenditure (11,883) (1,087) (3,066) - - (16,036)

Personnel expenditure (2,639) (560) (2,896) (2,514) - (8,609)

Other administrative expenditure (1,039) (1,284) (2,235) (5,189) - (9,747)

Intersegment expenditure (7,822) (1,940) (2,131) (730) 12,623 -

Operating expenditure (23,383) (4,871) (10,328) (8,433) 12,623 (34,392)

Earnings before interest, income tax,depreciation and amortisation (EBITDA) 14,944 7,407 18,232 4,058 (5,166) 39,475

Depreciation and amortisation (5,272) (1,761) (5,177) (493) - (12,703)

Segment profit before interest and income tax (EBIT) 9,672 5,646 13,055 3,565 (5,166) 26,772

Share of profit from joint venture - - 1,264 - 139 1,403

Profit from discontinued operations - - - (185) - (185)

Dividend paid (2,200) (1,000) (1,800) 5,000 (5,000) (5,000)

Statement of Financial Position

Assets 146,597 66,698 144,963 27,426 - 385,684

Liabilities 23,909 13,877 19,086 139,046 - 195,918

Segment capital expenditure 17,583 235 16,622 772 - 35,212




6 TOTAL INCOME

2016 2015 $’000 $’000

Revenue

Electricity distribution revenue 32,826 33,255

Logistics revenue 27,632 26,402

Energy sales 5,906 6,905

Property rentals 3,538 3,308

Management fees received from related parties 81 80

Customer contributions 143 1,576

Other revenue 1,506 1,479

Total revenue 71,632 73,005

Other Income

Other income 1,827 853

Impairment losses recovered 7 9

Increase in fair value of investment property 408 -

Total other income 2,242 862

Total income 73,874 73,867




7 ADMINISTRATIVE AND OTHER EXPENSES

2016 2015Notes $’000 $’000

Administrative expenses 7,126 7,096

Impairment losses and bad debt write-offs on trade receivables 28 33

Direct operating expenditure arising on investment properties 433 482that generated rental income

Auditor's remuneration to Deloitte comprises:

audit of financial statements 253 247

audit of commerce commission reporting 55 60

other services 4 -

7,899 7,918

Other expenses

Decrease in fair value of investment property - 383

Loss on revaluation of property, plant and equipment 230 177

Loss on sale of property, plant and equipment 293 54

Impairment of investment - 1,215

523 1,829

Total administrative and other expenses 8,422 9,747

Donations of $285 were made during the financial year (2015: $13,589).

2016 2015Notes $’000 $’000

Depreciation and amortisation

Depreciation of property, plant and equipment 12 14,790 12,676

Amortisation 16 55 27

Total depreciation and amortisation 14,845 12,703




8 FINANCE INCOME AND EXPENSES

2016 2015 $’000 $’000

Interest income on cash and cash equivalents 13 390

Net foreign exchange gains - 18

Total finance income 13 408

Interest expense 8,331 8,784

Net foreign exchange losses 43 -

Total finance expense 8,374 8,784

9 INCOME TAX

2016 2015 $’000 $’000

INCOME TAX EXPENSE

Current tax expense

Current period 5,882 5,986

Adjustment for prior periods 1 (445)

Total current tax expense 5,883 5,541

Deferred tax expense

Temporary differences for the year (462) (387)

Adjustment for prior periods (207) 256

Total deferred tax (income) (669) (131)

Subvention payment - 86

Total income tax expense 5,214 5,496

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

2016 2015$'000 % $'000 %

Accounting profit before income tax 20,441 19,799

At the statutory income tax rate of 28% (5,724) (28.0%) (5,544) (28.0%)

Adjustments in respect of current income tax of previous years 206 1.0% 189 1.0%

Subvention payment - 0.0% (86) (0.4%)

Non-deductible expenses (32) (0.2%) (405) (2.0%)

Tax exempt income 336 1.6% 350 1.8%

(5,214) (25.5%) (5,496) (27.8%)




DEFERRED TAX ASSETS AND LIABILITIES

2016

Property Provisions plant and and Investment Hedge

Notes equipment accruals property reserve Other Total

$'000 $'000 $'000 $'000 $'000 $'000

Deferred tax

Balance at beginning of the period (47,765) 325 190 1,502 (75) (45,823)

Amounts recognised in the statementof comprehensive income

- Relating to the current period 540 34 (112) - - 462

- Prior period adjustments recognised 221 (15) - - - 206 in the current period

Amounts recognised directly in (4,903) - - 2,738 - (2,165)other comprehensive income

Net deferred tax liabilities (51,907) 344 78 4,240 (75) (47,320)

2015

Property Provisions plant and and Investment Hedge

Notes equipment accruals property reserve Other Total

$'000 $'000 $'000 $'000 $'000 $'000

Deferred tax

Balance at beginning of the period (42,448) 260 207 364 (75) (41,692)

Amounts recognised in the statementof comprehensive income

- Relating to the current period 387 (9) (17) (30) - 331

- Prior period adjustments recognised in the current period (275) 74 - - - (201)

Deferred tax on goodwill reclassification 12, 16 (5,186) - - - - (5,186)

Amounts recognised directly in (243) - - 1,168 - 925other comprehensive income

Net deferred tax liabilities (47,765) 325 190 1,502 (75) (45,823)

Group deferred tax net liability

The $47.3 million (2015: $45.8 million) net deferred tax liability includes $52.0 million (2015: $47.8 million) that relates toaccounting depreciation on property, plant and equipment that has been revalued, with the remaining relating to differencesbetween accounting and tax depreciation rates. As the network and port assets are held for the long term, this liability isunlikely to be realised.






10 CASH AND CASH EQUIVALENTS

2016 2015 $’000 $’000

Current accounts 160 (990)

Call deposits 2,093 2,216

Total cash and cash equivalents 2,253 1,226

Bank balances earn interest at floating rates based on daily bank deposit rates. Refer to Note 23 for further discussion onEastland Group’s funding facilities.

Eastland Group is party to funding and banking facilities which are made available to related companies. Related companiescash receipts and payments are made through the bank accounts of Eastland Group Limited, which provides treasury servicesto Eastland Group.

The effective interest rate on call deposits is NZD denominated 2.25% (2015: 3.50%).

A guarantee of $800,000 is in place for potential claims of subsidence relating to the site used for our geothermal plant atKawerau. The likelihood of such a claim is viewed as remote.

11 TRADE AND OTHER RECEIVABLES

2016 2015 $’000 $’000

Trade receivables 7,317 7,030

GST receivable - 443

Other receivables 988 1,545

Total trade and other receivables 8,305 9,018

Trade receivables are stated net of impairment loss allowances of $19,979 (2015:$36,956). Trade receivables that are less thanthree months past due are not considered impaired, unless there is evidence to the contrary. For an aging analysis of tradereceivables see Note 24. No impairment losses have been recognised on related party receivables.


12 PROPERTY, PLANT AND EQUIPMENT

2016

Electricity Wharves, OtherLand and Electricity generation walls and Floating plant and Work in buildings distribution equipment surfaces Plant equipment progress Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

As at 1 April 2015, Cost or fair value 54,557 142,856 56,861 89,929 17,431 17,789 8,578 388,001

Additions 2,866 6,338 511 14,935 3 2,444 5,187 32,284

Disposals (18) (355) - (272) - (408) - (1,053)

Revaluation/reclassification (455) - - 1,410 - (508) - 447

As at 31 March 2016,Cost or fair value 56,950 148,839 57,372 106,002 17,434 19,317 13,765 419,679

Accumulated depreciationas at 1 April 2015 1,029 10,186 1,807 13,787 2,175 7,240 - 36,224

Depreciation charge for the year 837 5,386 2,616 3,284 1,048 1,619 - 14,790

Disposals (10) (44) - - - (335) - (389)

Revaluation/reclassification (135) - - (16,017) - (620) - (16,772)

As at 31 March 2016,accumulated depreciation 1,721 15,528 4,423 1,054 3,223 7,904 - 33,853

As at 31 March 2016,net of accumulated depreciation 55,229 133,311 52,949 104,948 14,211 11,413 13,765 385,826

2015

Electricity Wharves, OtherLand and Electricity generation walls and Floating plant and Work in buildings distribution equipment surfaces Plant equipment progress Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

As at 1 April 2014, Cost or fair value 48,541 128,521 46,843 88,896 6,688 13,437 8,724 341,650

Additions 2,764 14,673 94 1,041 11,829 4,680 (146) 34,935

Disposals (11) (331) - - (1,086) (377) - (1,805)

Revaluation/Reclassification 2,468 - 10,990 - - - - 13,458

Transfers 795 (7) (1,066) (8) - 49 - (237)

As at 31 March 2015,Cost or fair value 54,557 142,856 56,861 89,929 17,431 17,789 8,578 388,001

Accumulated depreciationas at 1 April 2014 1,262 5,352 8,321 10,708 2,083 6,175 - 33,901

Depreciation charge for the year 636 4,871 1,719 3,071 927 1,452 - 12,676

Disposals (2) (37) - - (835) (347) - (1,221)

Revaluation/reclassification (942) - (8,180) - - - - (9,122)

Transfers 75 - (53) 8 - (40) - (10)

As at 31 March 2015,accumulated depreciation 1,029 10,186 1,807 13,787 2,175 7,240 - 36,224

As at 31 March 2015,net of accumulated depreciation 53,528 132,670 55,054 76,142 15,256 10,549 8,578 351,777




12 PROPERTY, PLANT AND EQUIPMENT (continued)

There are no restrictions on title, and property, plant and equipment pledged as security for liabilities. There is no restrictionon the distribution of this balance to our shareholder. There has been no impairment of property, plant and equipment duringthe current year.

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

In the year to 31 March 2016 $687,710 (2015: $476,105) of interest has been capitalised.

Land and buildings

Network operational land and buildings were valued on 31 March 2016 (total fair value of $4.3 million) by an independentvaluer; AON New Zealand Limited. The method of valuation was the market approach. The methods used were directcomparison, income based, capitalisation and the capitalisation rate or yield.

Port land and buildings were revalued on 31 March 2015 (total fair value of $38.7 million) by an independent valuer; CrightonAnderson. The method of valuation was market-based value for non-specialised assets. The approaches used were directcomparison, income based, capitalisation and the capitalisation rate or yield.

Electricity distribution

Electricity distribution assets and related land and buildings were last revalued on 1 April 2013 (fair value $127.5 million) byPricewaterhouseCoopers ("PwC") using the discounted cash flow method.

The key assumptions of the valuation for the discounted cash flows over the period FY14-FY25 are:

• CPI ranging from 1.62% - 2.03%

• Revenue growth of 0.50%

• Default Price Quality Path WACC assumptions 7.12% - 8.77%

• Closing 2025 Regulatory Asset Base used as the terminal value and discounted back to valuation date

• Net working capital $1.14 million

Electricity generation equipment

Electricity generation equipment were revalued at 31 March 2015 (total fair value of $2.2 million) by an independent valuer;Jacobs New Zealand Limited. The valuation method used was a discounted cash flow basis, using the following assumptions:

• A nominal post tax discount rate of 8.59%

• Forecast operating costs are based on current operating costs adjusted for inflation of 2%

• A corporate tax rate of 28%

• Revenue forecasts are based on the terms of the Contact Energy agreement together with assumptions on electricityspot price at time of generation

The Waihi Hydroelectric Scheme was revalued as at 1 April 2012 (total fair value of $16.8 million) by an independent valuer;Sinclair Knight Merz. The valuation used was a discounted cash flow basis, using the following assumptions:

• Outputs are based on an average plant availability of 26% of capacity

• Wholesale electricity prices are based on the Gisborne reference nodal price path estimates prepared by an independentconsultant; Energylink in October 2012

• Forecast operating costs are based on current operating costs adjusted for inflation of 2%

• A major half-life overhaul of the generator and turbine equipment has been assumed in the forecast of capital expenditure


• A nominal post tax discount rate of 9.6% which is reflective of the expectation an investor would expect to receive onprivate generation projects

The geothermal plant, owned by Geothermal Developments Limited, was revalued at $38.6 million as at 31 March 2015 by anindependent valuer, Jacobs New Zealand Limited. The valuation used was a discounted cash flow basis using the followingassumptions:

• Net generation capacity of 8.37 MW

• Wholesale electricity prices are based on the existing Power Purchase Agreement currently in place and the Kaweraureference nodal price estimates prepared by management taking into consideration independent price path forecastsand prices obtained for long term power purchase agreements

• Operating costs have been derived from historical data adjusted for inflation of 2%

• Capital expenditure has been derived from the plant’s asset management plan, with a new production well expected tobe drilled in 2020, control and instrument replacement and refurbishment in 2024, 2029 and 2034


• A nominal post tax discount rate of 8.59% which is reflective of the return an investor in this asset would expect to receiveon private generation projects

All components from the acquisition of the plant, including goodwill, have now been incorporated into the plant value.




Wharves, walls and surfaces

The port wharves, walls and surfaces and some other plant and equipment were revalued on 31 March 2016 (total fair value$105.9 million) by independent valuers, Opus International Consultants Ltd. The method of valuation was depreciated replacementcost which is supported by a discounted cash flow valuation prepared, using the following assumptions:

• Revenues are based on management's best estimate of cargo volumes (predominantly logs) over the years to 2030 withthese estimates supported in the case of log exports by external reports and customer forecasts of likely log volumes

• Port charges for all log cargos increase from 1 April 2017 following a customer consultation period

• Operating costs are based on current operating cost to volume ratios plus inflation of 2% per annum

• Capital expenditures include both maintenance and growth capital expenditure to support the estimated volumes


• The post-tax discount rate of 8.5% is the weighted average cost of capital (WACC)

• The terminal value is based on free cash flow at 2030 with the valuation tested at terminal value growth rates of 1.5 -3.5%

The carrying values of revalued items of property, plant and equipment that would have been recognised had the assets beenrecognised on the historic cost model is as follows:

2016 2015 $’000 $’000

Land and buildings 23,503 21,300

Electricity distribution 79,794 75,740

Wharves, walls and surfaces 45,372 31,990

148,669 129,030




13 INVESTMENT PROPERTIES

2016 2015 $’000 $’000

Opening balance at 1 April 15,698 15,700

Additions 244 277

Transfers in from operational property - 104

Fair value adjustment 408 (383)

Closing balance at 31 March 16,350 15,698

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

They are measured at fair value, based on an annual valuation by an independent valuer; Aon New Zealand.

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

14 INVESTMENT IN SUBSIDIARIES

Subsidiary Parent Pincipal activity Country of Ownership incorporation Interest (%)

2016 2015

Geothermal Developments Limited Eastland Generation Limited Geothermal generation New Zealand 100% 100%

Te Ahi O Maui Limited Partnership Eastland Generation Limited Geothermal generation New Zealand 94% 94%

Te Ahi O Maui General Partnership Limited Eastland Generation Limited Geothermal generation New Zealand 94% 94%

Eastland Port Limited Eastland Group Limited Port services New Zealand 100% 100%

Eastland Network Limited Eastland Group Limited Electrical distribution New Zealand 100% 100%

Eastech Limited Eastland Group Limited Contracting New Zealand 100% 100%

Eastland Generation Limited Eastland Group Limited Electrical generation New Zealand 100% 100%

Eastland Holdings 1 Limited Eastland Group Limited Holding company New Zealand - 100%

Eastland Holdings 2 Limited Eastland Group Limited Holding company New Zealand - 100%

Eastland Investment Properties Limited Eastland Group Limited Investment property New Zealand 100% 100%

Gisborne Airport Limited Eastland Group Limited Airport services New Zealand 100% 100%

Inner Harbour Marina Limited Eastland Investment Properties Limited Harbour services New Zealand 100% 100%

Northland Debarking Limited Eastland Port Debarking Limited Debarker services New Zealand 100% 100%

Eastland Port Debarking Limited Eastland Port Limited Debarker services New Zealand 100% 100%

Eastland Energy Solutions Limited Eastland Group Limited Energy solutions New Zealand 100% -

There are no restrictions in place on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends orto repay loans or advances. Eastland Group provides funding and treasury services to these subsidiaries.

Eastland Hawaii Inc. was dissolved on 4 August 2015.

Eastland Energy Solutions Limited was formed on 15 December 2015.

Eastland Holdings 1 and 2 Limited were liquidated on 31 March 2016.




15 INVESTMENT IN JOINT VENTURE

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

Proportion of ownership interestand voting rights held by the Group

Name of Joint Venture Principal activity Place of Incorporation 2016 2015

Eastland Debarking Debarking and anti-sap treatment of New Zealand 50% 50%export logs stored at the port in Gisborne

This joint venture is accounted for using the equity method. Summarised financial information in respect of the Group’s materialjoint venture is set out below. The summarised financial information below represents amounts shown in the joint venture’sfinancial statements prepared in accordance with IFRS (adjusted by the Group for equity accounting purposes).

Eastland Debarking Joint Venture

2016 2015 $’000 $’000

Current assets 1,489 1,331

Current liabilities (250) (305)

Non-current assets 483 419

Net assets 1,722 1,445

The above amounts of assets and liabilities include the following:

Cash and cash equivalents 1,040 752

Revenue 5,025 4,795

Profit from continuing operations 2,612 2,529

Profit for the year 2,612 2,529

Total comprehensive income for the year 2,612 2,529

Profit share at 50% 1,306 1,264

Group eliminations 136 139

Share of profit of joint venture 1,442 1,403

Distributions made to joint venture partners 2,333 3,980

The above profit/loss for the year included the following:

Depreciation and amortisation 77 59

Interest income 14 27

Reconciliation of the above summarised financial information to the carrying amountof the interest in the joint venture recognised in the consolidated financial statements:

Net assets of the joint venture 1,722 1,445

Proportion of the Group's ownership interest in the joint venture 50% 50%

Carrying amount of the Group's interest in the joint venture 861 722

Significant restrictions

There are no significant restrictions on the ability of the joint venture to transfer funds to the Group in the form of profit sharing.

Commitments

As at for the year ended 31 March, total capital expenditure committed but not yet incurred was $Nil (2015: $Nil).

Contingent liabilities

As at for the year ended 31 March, total contingent liabilities were $Nil (2015:$Nil).

Impairment

No assets employed in the jointly controlled operations were impaired during the year.




16 INTANGIBLE ASSETS

2016

Development Vended Resource Access rights assets consent Goodwill rights Other Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Cost

Balance at beginning of period 1,774 1,791 567 1,000 1,398 117 6,647

Acquisitions - 70 - - - 19 89

Disposals - - - - - (22) (22)

Balance at end of the period 1,774 1,861 567 1,000 1,398 114 6,714

Accumulated amortisation and impairment losses

Balance at beginning of period - - 19 290 - 31 340

Amortisation for the period - - 16 - 28 11 55

Disposals - - - - - (22) (22)

Balance at end of the period - - 35 290 28 20 373

As at 31 March 2016 1,774 1,861 532 710 1,370 94 6,341

2015Development Vended Resource Access

rights assets consent Goodwill rights Other Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Cost

Balance at beginning of period 1,770 1,232 602 18,937 - 117 22,658

Reclassification - - - (17,937) - - (17,937)

Acquisitions 4 559 (35) - 1,398 - 1,926

Balance at end of the period 1,774 1,791 567 1,000 1,398 117 6,647

Accumulated amortisation and impairment losses

Balance at beginning of period - - 3 290 - 20 313

Amortisation for the period - - 16 - - 11 27

Balance at end of the period - - 19 290 - 31 340

As at 31 March 2015 1,774 1,791 548 710 1,398 86 6,307

The board has reviewed the intangible asset costs above for the Te Ahi o Maui project and concluded that the developmentrights and vended assets, are reasonable. Amortisation of the development right will commence on the commissioning of theplant over a period of up to forty years.

Amortisation and impairment charge

The amortisation of the airport obstruction survey is over a five year period. The berth licences are amortised over the periodup until 2026. These are included in other intangible assets.

Impairment testing for cash-generating units containing goodwill

Goodwill is allocated to Eastland Group's operating divisions, which represent cash generating units, the lowest level withinEastland Group at which the goodwill is monitored for internal management purposes.




The aggregate carrying amounts of goodwill allocated to each division are as follows:

2016 2015 $’000 $’000

Port Weighbridge (owned by Eastland Port Limited) 500 500

Inner Harbour Marina Limited 210 210

Total goodwill 710 710

The recoverable amounts attributable to impairment testing of goodwill is calculated on the basis of value in use usingdiscounted cash flow models. Key assumptions used are as follows:

Port Weighbridge

Future cash flows are projected based on expected cash flows using estimates of log volume over the next five years. Costsincrease at an assumed inflation rate of 1.0%. Discount rates used ranged from 6.7% to 8.7%.

Inner Harbour Marina Limited

Future cash flows are projected based on expected cash flows based on budget forecasts for this business unit over the nextfive years. Costs are expected to increase at an assumed inflation rate of 1.0%. Discount rates used ranged from 6.46% to 8.46%.

The recoverable amount of each division exceeds the net assets plus goodwill allocated. Therefore Eastland Group hasdetermined that no impairment to goodwill has occurred during the period.

17 PAYABLES AND ACCRUALS

2016 2015 $’000 $’000

Trade payables 4,975 3,554

Non-trade payables and accrued expenses 1,628 1,323

Interest payable 420 602

GST payable 44 -

Total trade and other payables 7,067 5,479

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

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




18 EMPLOYEE ENTITLEMENTS

2016 2015 $’000 $’000

Provisions for:

Annual leave 689 702

Short-term benefits 998 721

Post-employment benefits 80 98

Total employee benefit liability 1,767 1,521

Expenses recognised in profit or loss:

Wages and salaries 8,674 8,189

Contributions to defined contribution plans 427 420

Total employee entitlement expenses 9,101 8,609

During the year the following number of employees received remuneration of at least $100,000.

2016 2015

100,000 - 109,999 4 1

110,000 - 119,999 3 2

120,000 - 129,999 4 6

130,000 - 139,999 5 5

140,000 - 149,999 1 1

160,000 - 169,999 1 1

170,000 - 179,999 1 1

190,000 - 199,999 1 1

200,000 - 209,999 1 -

220,000 - 229,999 - 1

230,000 - 239,999 1 -

250,000 - 259,999 2 1

260,000 - 269,999 - 1

300,000 - 319,999 - 1

320,000 - 329,999 1 -

500,000 - 529,999 - 1

540,000 - 550,000 1 -

19 COMMITMENTS

As at 31 March 2016, Eastland Group had total capital commitments payable within the next 12 months of $2.1 million (2015: $12.0 million).




20 TRANSACTIONS WITH OWNER

(a) Issued capital

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

(b) Dividends paid

Dividends of $5.6 million were paid during the year (2015: $5.0 million). The dividend per share is $5,615 (2015: $5,000).

(c) Imputation credits

As at 31 March 2016, the imputation credits available to the shareholders of the parent and the Eastland Group total $15.1 million(2015: $14.4 million).

(d) Capital notes

Eastland Group issued capital notes on 1 April 2010 of $30 million to the Eastland Community Trust. The notes have a perpetualterm and are subject to repayment, after 31 March 2020, on receipt of 15 months’ notice. Eastland Community Trust electedto renew the capital notes on 1 April 2015. Eastland Group may elect at any time to redeem all or part of the notes for equityor cash. The capital notes incur interest at 7.10% (2015: 8.60%), which is fixed until 31 March 2020.

Interest paid for the year ended 31 March 2016 was $2.1 million (2015: $2.6 million).

21 OPERATING LEASES

(a) Operating leases receivable

Eastland Group has leased certain investment properties (refer to Note 13) and some other land and buildings, under operatingleases. The future minimum lease payments receivable under non-cancellable leases are as follows:

2016 2015 $’000 $’000

Less than one year 1,551 3,090

Between one and five years 1,796 2,110

More than five years 345 542

Total operating leases receivable 3,692 5,742

(b) Operating leases payable

Eastland Group leases land and/or buildings in Gisborne, Kawerau, Whakatane and Northland, as well as some other officeequipment and vehicles. Eastland Group leases land sites throughout the East Coast for the right to lay and maintain powercables and radio transmissions on these sites.

2016 2015 $’000 $’000

Less than one year 866 841

Between one and five years 3,328 3,499

More than five years 12,701 6,323

Total operating leases payable 16,895 10,663

Operating lease payments of $767,087 were made during this financial year (2015: $688,092).






22 CONTINGENCIES

Waihi Dam

In September 2015 our dam located on the Waihi River sustained damage resulting from unprecedented levels of rain fall. Thedamage and subsequent repairs resulted in the release of debris and sediment into the Waihi River and Waiau river systems.

The Hawke’s Bay Regional Council have laid two charges against Eastland Network Limited under the Resource ManagementAct for disturbance of the lake /river bed and the discharge of contaminants (sediment) into water. We are yet to receive thefull details of this prosecution. The maximum penalty for these charges in aggregate is $600,000, plus any fine for on-goingoffences and potential clean-up orders. We are assessing our response to those charges.

We are also aware that claims from the Wairoa District Council and other third parties are likely to be made against EastlandGeneration and Eastland Group. The overall extent of these claims is not currently known.

Eastland Group maintains Third Party Liability and Statutory Liability insurance and these policies are expected to cover claimsmade against us. Costs to repair the dam and legal costs incurred to balance date have been recognised in the current financialyear. These costs are subject to an insurance claim, which is expected to be progressed in the next financial year.

23 LOANS AND BORROWINGS

This note provides information about the contractual terms of Eastland Group’s interest-bearing loans and borrowings. Formore information about Eastland Group’s exposure to interest rate and foreign currency risk, see Note 24.

2016 2015 $’000 $’000

The borrowings are repayable as follows:

Within two to five years 114,000 105,000

Total bank borrowings 114,000 105,000

Classified as follows:

Non-current liabilities 114,000 105,000

Total bank borrowings 114,000 105,000

Drawn Undrawn$'000 $'000

As at 31 March 2016

Facility A maturing 1 April 2021 114,000 36,000

Facility B maturing 30 June 2017 - 15,000

114,000 51,000

As at 31 March 2015

Tranche A maturing 1 April 2019 105,000 15,000

Tranche B maturing 30 June 2016 - 15,000

105,000 30,000


Eastland Group Limited has arranged bank funding from the ANZ Bank, ASB and BNZ on behalf of Eastland Group. As at 31March 2016 there were total bank facilities of NZD $165 million (2015 :$135 million) which are unsecured and subject to a Deedof Negative Pledge. In 2015 this facility included a USD facility of $3 million. The borrowings are in the name of Eastland GroupLimited. The guaranteeing subsidiaries of the Group debt held by the Parent entity are as follows:

Gisborne Airport Limited Geothermal Developments Limited

Eastland Port Limited Inner Harbour Marina Limited

Eastland Port Debarking Limited Eastland Network Limited

Eastland Investment Properties Limited Eastech Limited

Eastland Generation Limited Northland Debarking Limited

These borrowings are rolled over at 90 day intervals spread throughout the year. The interest rate on these borrowings is theBKBM rate at the rollover date plus a margin of 0.87% (2015: 0.87%). As at 31 March 2016, the rates on borrowings range from3.14% to 3.58% (2015: 4.54% to 4.60%). Facilities with the ANZ Bank have expiry dates of 1 April 2021 Tranche A ($150 million)and a perpetual facility of $15 million which expires 18 months from drawdown (2015: $120 million and $15 million). There havebeen no defaults during the period of principal, interest, sinking fund, covenants or redemption terms of those loans payableduring the period.




24 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Eastland Group has a comprehensive treasury policy approved by the directors to manage the risks of financial instruments.The policy outlines the objectives and approach Eastland Group applies in its financial risk management processes. The policycovers, among other things, management of credit risk, interest rate risk, funding risk, liquidity risk, currency risk and operationalrisk. Non-derivative financial liabilities are categorised as 'amortised cost'. Derivative financial instruments are categorised as'fair value through profit and loss' unless hedge accounting is applied. Hedge accounting is applied for all derivative financialinstruments.

(a) Financial assets and liabilities2016

Other Cash and liabilities at Total

cash Cash-flow Loans and amortised carrying Notes equivalents hedges receivables cost amount Fair value

$'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Trade and other receivables 11 - - 8,305 - 8,305 8,305

Cash and cash equivalents 10 2,253 - - - 2,253 2,253

Total financial assets 2,253 - 8,305 - 10,558 10,558


Derivative financial instruments 24 - (15,564) - - (15,564) (15,564)

Loans and borrowings 23 - - - (114,000) (114,000) (114,000)

Payables and accruals 17 - - - (7,067) (7,067) (7,067)

Employee entitlements 18 - - - (1,767) (1,767) (1,767)

Capital notes 20 - - - (30,000) (30,000) (30,000)

Total financial liabilities - (15,564) - (152,834) (168,398) (168,398)

Total net financial assets/(liabilities) 2,253 (15,564) 8,305 (152,834) (157,840) (157,840)

2015Other

Cash and liabilities at Total cash Cash-flow Loans and amortised carrying

Notes equivalents hedges receivables cost amount Fair value

$'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Trade and other receivables 11 - - 9,018 - 9,018 9,018

Derivative financial instruments 24 - 24 - - 24 24

Cash and cash equivalents 10 1,226 - - - 1,226 1,226

Total financial assets 1,226 24 9,018 - 10,268 10,268


Derivative financial instruments 24 - (5,808) - - (5,808) (5,808)

Loans and borrowings 23 - - - (105,000) (105,000) (105,000)

Payables and accruals 17 - - - (5,479) (5,479) (5,479)

Employee entitlements 18 - - - (1,521) (1,521) (1,521)

Capital notes 20 - - - (30,000) (30,000) (30,000)

Total financial liabilities - (5,808) - (142,000) (147,808) (147,808)

Total net financial assets/(liabilities) 1,226 (5,784) 9,018 (142,000) (137,540) (137,540)




(b) Fair value measurements recognised in the Statement of Financial Position

The following methods and assumptions were used to estimate the carrying amount and fair value of each asset classof financial instrument carried at fair value. Where financial instruments are measured at fair value they have been classifiedat the following levels.

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

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

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

The valuation of derivative financial instruments are based on Level 2 fair value hierarchy, and were calculated usingvaluation models applying observable market data. Some of the key observable market data is presented as below.

Derivative instruments

The total carrying amount of derivative instruments is the same as the fair value and includes interest accrued.

The calculation of fair value for each financial instrument for either measurement or disclosure purposes are explainedbelow. In each case, interest accrued is included separately in the statement of financial position either in receivables orprepayments for interest payable.

Loans and receivables, trade payables and other creditors, cash and cash equivalents and short term deposits

The total carrying amounts of these items is equivalents to their fair value. Loans include the principal and interest accrued.Bank overdrafts are set-off against cash balances pursuant to any right of set-off. Receivables are net of doubtful debtsprovided.

Bank loans, working capital loans and floating rate notes

The total carrying amount includes the principal, interest accrued and unamortised costs.

Capital notes

The total carrying amount includes the principal, interest accrued and unamortised costs.

(c) Interest rate risk

Eastland Group actively manages interest rate exposures in accordance with treasury policy. In this respect, at least fiftypercent of all current debt must be at fixed interest rates or effectively fixed using interest rate swaps, forward rateagreements, options and other derivative instruments. The main objectives are to minimise the cost of total debt, controlvariations in the interest expense of the debt portfolio from year to year and to match where practicable the interest raterisk profile of debt with the risk profile of Eastland Group’s assets. The treasury policy sets parameters for managing theinterest rate risk profile.

Eastland Group enters into interest rate swaps, collars and caps to hedge its exposures to changes in the floating interestrates on loans. Eastland Group has elected to apply cash-flow hedging to all of its interest rate swaps, collars and capstotalling $175 million (2015:$105 million) in compliance with IFRS 9 ($90 million of these have start dates ranging from30 June 2016 to 30 July 2020).

Interest rate swaps, collars and caps have terms or maturity dates which are between 24 and 84 months and swap intereston a floating rate for fixed interest of between 2.87% to 5.94% (2015: 3.40% to 5.94%). The last cash-flow hedge swapmatures on 30 July 2025.

The interest rate swaps, collars and caps that have been designated as cash-flow hedges affect profit and loss at thesame time as the underlying interest expense is recognised on the retrospective borrowings (see Note 23). Any ineffectiveportion of cash-flow hedges is removed from equity and recognised immediately in the Statement of Financial Performance2016: $Nil (2015: $Nil). The hedge relationships are expected to be highly effective over the life of the swaps.

2016 2015

Notional Amount Notional Amount$’000 $’000

Interest rate swaps (floating to fixed)

Maturing in less than 1 year 15,000 5,000

Maturing between 1 and 2 years 25,000 15,000

Maturing between 2 and 5 years 60,000 15,000

Maturing after 5 years 75,000 70,000

175,000 105,000




24 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)

(d) Foreign currency risk

Eastland Group is exposed to exchange risk through the Te Ahi o Maui construction project. Foreign exchange exposureis primarily managed through entering into derivative forward contracts. The board of directors require that all foreigncurrency borrowings are hedged into NZD at the time of commitment. Hence, at balance date there is no significantexposure to foreign currency risk.

(e) Liquidity risk

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

Eastland Group’s cash management function is managed at Group level with all cash transactions and funding takingplace as part of Eastland Group’s treasury function. Eastland Group Limited has sufficient funding and banking facilitiesavailable to meet the liquidity requirements of Eastland Group. For details of the funding and banking facilities arrangedby Eastland Group Limited, please refer to Note 23. Eastland Group has entered into interest rate swaps, caps and collarsto hedge its exposure to variability in interest rate payments on these borrowings. This is discussed further below.




2016

6-12Notes <6 months months 1-3 years 3-5 years >5 years Total

$'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Trade and other receivables 11 8,305 - - - - 8,305

Cash and cash equivalents 10 2,253 - - - - 2,253

Total financial assets 10,558 - - - - 10,558


Derivative financial instruments 24 (1,666) (1,553) (2,048) (3,983) (6,314) (15,564)

Bank borrowings: long term 23 - - - - (114,000) (114,000)

Payables and accruals 17 (7,067) - - - - (7,067)

Employee entitlements 18 (1,767) - - - - (1,767)

Capital notes 20 - - - - (30,000) (30,000)

Total financial liabilities (10,500) (1,553) (2,048) (3,983) (150,314) (168,398)

Liquidity gap 58 (1,553) (2,048) (3,983) (150,314) (157,840)

2015

6-12Notes <6 months months 1-3 years 3-5 years >5 years Total

$'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Derivative financial instruments 24 - - 24 - - 24

Trade and other receivables 11 9,018 - - - - 9,018

Cash and cash equivalents 10 1,226 - - - - 1,226

Total financial assets 10,244 - 24 - - 10,268


Derivative financial instruments 24 (41) - (627) - (5,140) (5,808)

Bank borrowings: long term 23 - - - (105,000) - (105,000)

Payables and accruals 17 (5,479) - - - - (5,479)

Employee entitlements 18 (1,521) - - - - (1,521)

Capital notes 20 - - - (30,000) - (30,000)

Total financial liabilities (7,041) - (627) (135,000) (5,140) (147,808)

Liquidity gap 3,203 - (603) (135,000) (5,140) (137,540)




24 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)

(f) Credit risk

Credit risk is the risk of financial loss to Eastland Group if a customer or counterparty to a financial instrument fails tomeet its contractual obligations, and arises principally from the cash and cash equivalents, trade receivables and relatedparty balances.

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

Credit risk in relation to customers is spread across Eastland Group with the largest customers by dollar value being inthe energy and logistics sectors. The retailers are of good credit standing and management believes that Eastland Groupis not exposed to any undue risk, which is supported by past history of payment by these customers. The credit risk inrelation to the remaining trade receivables is not considered to be significant.

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

Eastland Group recognises impairment losses on trade and other receivables that are believed to be irrecoverable. Specificimpairment losses are made for individually significant exposures that are known at year end. The impairment loss allowanceat 31 March 2016 was $19,979 (2015: $36,956). Actual bad debts written off in the Statement of Financial Performance were$28,505 (2015: $32,400) and there was no adjustment to the specific allowance. A collective impairment loss componentis established for groups of similar receivables in respect of losses that have been incurred but not yet identified. Thecollective loss allowance is determined based on historical data of payment statistics for similar financial assets.

2016

1-60 61-90 91-180 Over 180 Current days days days days Total

$'000 $'000 $'000 $'000 $'000 $'000

Maturity ProfileAs at 31 March 2016

Trade receivables 6,404 795 43 9 86 7,337

Total due 6,404 795 43 9 86 7,337

Impaired

Trade and other receivables

Trade receivables - - - - 20 20

Total impaired financial assets - - - - 20 20

The above receivables are determined to be impaired due to the nature of the debtor and the lack of payment to date.

2015

1-60 61-90 91-180 Over 180 Current days days days days Total

$'000 $'000 $'000 $'000 $'000 $'000

Maturity ProfileAs at 31 March 2016

Trade receivables 5,953 836 48 66 164 7,067

Total due 5,953 836 48 66 164 7,067

Impaired

Trade and other receivables

Trade receivables - - - 11 26 37

Total impaired financial assets - - - 11 26 37

The above receivables are determined to be impaired due to the nature of the debtor and the lack of payment to date.




(g) Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect Eastland Group’s income or the valueof its holdings of financial instruments. The objective of market risk management is to manage market risk exposureswithin acceptable parameters, while optimising the return. Those risks include:

i. Cash flow interest rate risk

Eastland Group's main interest rate risk exposure arises on external borrowings (see Note 23). All borrowings areat variable interest rates, which expose Eastland Group to cash flow interest rate risk.

Eastland Group adopts a policy of ensuring that a portion of its exposure to changes in interest rates on borrowingsis on a fixed rate basis. This is achieved by entering into interest rate swaps, caps and collars. For further details oninterest rate swaps, caps and collars refer to Note 24 (c).

Eastland Group is exposed to interest rate risks on that portion of external loans not swapped to fixed rates, gainsor losses arising from the differences between variable rates and fixed rates on the swap instruments in place, andinterest payable on the loans and capital notes. At balance date, an increase of 100 basis points on borrowings wouldresult in a decrease in profit before tax of $290,000 (2015: $400,000). A decrease of 100 basis points on borrowingswould result in an increase in profit before tax of $290,000 (2015: $400,000).

ii. Price risk

Eastland Group is exposed to price risk on bank facilities when they mature and capital notes on their election dateif the capital notes are not redeemed for cash or converted to ordinary shares. The price for new bank facilities andcapital notes is determined when they are refinanced or reissued and reflects market pricing at that time. At balancedate, an increase of 25 basis points on bank lending costs would result in a decrease in profit before tax of $412,500(2015: $337,500). A decrease of 25 basis points on bank lending costs would result in an increase in profit beforetax of $412,500 (2015: $337,500).

(h) Capital management

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

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

There were no changes in Eastland Group’s approach to capital management during the current or prior year. EastlandGroup is not subject to externally imposed capital requirements.

(i) Hedge accounting and sensitivity analysis

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

Interest rate swaps and collars hedging the floating rate debt are hedge accounted and treated as cash flow hedges andhence any changes in interest rates would have no material impact on profits as changes in the fair value of these swapsand collars are taken through other comprehensive income where the hedge is an effective hedge. The fair value of theseinterest rate swaps is a $5.7 million loss (2015: $4.4 million loss). A fall of 1% in interest rates would result in a loss in othercomprehensive income of $1.8 million (2015: $3.1 million) whereas an increase of 1% in interest rates would result in a gainin other comprehensive income of $1.7 million (2015: $2.9 million).

Forward starting interest rate swaps and collars hedging the forecasted floating rate debt are also hedge accounted andtreated as cash flow hedges and hence any changes in interest rates would have no material impact on profits as changesin the fair value of these swaps are taken through comprehensive income where the hedge is an effective hedge. The fairvalue of these interest rate swaps and collars is a $5.0 million loss (2015: $1.4 million loss). A fall of 1% in interest rateswould result in a loss in other comprehensive income of $4.8 million loss (2015: $1.0 million loss) whereas an increase of1% in interest rates would result in a gain in other comprehensive income of $4.3 million (2015: $1.1 million).




25 RELATED PARTIES

(a) Parent and ultimate controlling party

Eastland Group Limited is fully owned by Eastland Community Trust (ECT). Payments were made during the year of $2.1 million(2015: $2.6 million) of interest on capital notes of $30 million, and paid dividends of $5.6 million (2015: $5.0 million).

(b) Key management personnel compensation

Key management personnel compensation comprises of:

2016 2015 $’000 $’000

Short term employee benefits 1,711 1,638

KiwiSaver and other contributions 128 122

Total key management personnel compensation 1,839 1,760

(c) Directors’ fees

Directors' fees are paid by Eastland Group Limited to the directors, as the directors of the Group. Total fees paid were $308,069(2015: $291,214). There are no separate fees paid in respect of the subsidiaries.

J Clarke $42,365 Chairman of Remuneration Committee

N Cull $85,240 Board Chairman

M Glover $42,365

T Gray $47,343 Chairman of Audit and Finance Committee

J Rae $45,154

K Devine $26,379 Appointed 20/08/2015

A Blackburn $19,223 Retired 31/08/2015

Directors are appointed by our shareholder, the Eastland Community Trust. They are appointed as Directors of Eastland GroupLimited, Eastland Network Limited, Eastland Airport Limited and Eastland Port Limited. In addition, they may be appointedto boards of various organisations, which may transact on a commercial basis, with Eastland Group and its subsidiaries. Thefollowing entries were on record in the interests register as at 31 March 2016:

Mr N J P Cull gave general notice that he is a director and/or officer of the following companies and will therefore be interestedin all transactions between any of them and Eastland Group

MSC Consulting Group Limited

Mr W J Clarke gave general notice that he is a director and/or officer of the following companies and will therefore be interestedin all transactions between any of them and Eastland Group

Eastwood Hill Trust Board

New Zealand Winegrowers

Sunrise Foundation

NZW Wines General Partner Limited

Mr J M Rae gave general notice that he is a director and/or officer of the following companies and will therefore be interestedin all transactions between any of them and Eastland Group

Playtime Holdings Limited

Taku Honey Limited

EC Credit Control Limited

My Angel Investment Limited

Kingyo Foods Limited

Gobble Limited

NZ Council for Infrastructure Development

F J Hawkes & Co Limited




Jaffa Holdings Limited

Smart Environmental Limited

National Infrastructure Advisory Board

The Lines Company Limited

Tairawhiti Economic Development Agency

Ngapuhi Asset Holding Company Limited

Cavalier Corporation and associated companies

Mr M J Glover gave general notice that he is a director and/or officer of the following companies and will therefore be interestedin all transactions between any of them and Eastland Group

Goldpine Properties Limited

FSL Foods Limited

Simla Holdings Limited

Kihilla Properties Limited

Richmond Glass (2014) Limited

Rio Dolores (2006) Limited

Goldpine Industries Limited

Cold Storage Nelson Limited

Goldpine Group Limited

Mr K J Devine gave general notice that he is a director and/or officer of the following companies and will therefore be interestedin all transactions between any of them and Eastland Group

Centre for Advanced Engineering

Natural Hazards Research Platform Strategic Advisory Group

Mr A T Gray gave general notice that he is a director and/or officer of the following companies and will therefore be interestedin all transactions between any of them and Eastland Group

Ngati Apa Developments Limited

New Zealand Local Government Insurance Corporation Limited

Maungaharuru-Tangitu Limited

Omarunui LFG Generation Limited Partnership

Civic Assurance Property Pool

Ngati Pukenga Investments Limited

Artemis Nominees Limited

(d) Chief Executive

Mr M Todd, Group Chief Executive Officer, leases an aircraft hangar and uses the landing services at Gisborne Airport. Landingcharges and the terms of Mr Todd's lease are on a commercial arm’s length basis. The annual rental paid for the hangar andlanding charges is $5,650 (2015: $5,664). Mr Todd also uses his own aircraft for Eastland Group business charging the equivalentto the ruling aero club hire charge for a similar aircraft. Payments made during the year totalled $8,235 (2015: $4,830).




(e) Other related party transactions

There are no guarantees held regarding subsidiary balances. The management of all Eastland Group debtors and creditors iscarried out by Eastland Group Limited.

2016 2015 $’000 $’000

Transactions with associates and joint ventures

Oncharge of costs to Debarking Joint Venture 821 808

26 SUBSEQUENT EVENTS

As described in Note 22 – Contingencies, Eastland Group has been advised of charges laid under the Resource ManagementAct for disturbance of the lake/river bed and the discharge of contaminants into water.

Eastland Group is unaware of other significant events between the preparation and authorisation of these financial statementsas at 25 May 2016.




Eastland Group Limited

Company InformationFor the year ended 31 March 2016

F48

Board of Directors

Nelson Cull (CHAIRMAN)

John Clarke

Kieran Devine

Michael Glover

Tony Gray

John Rae

Chief Executive

Matt Todd

Chief Financial Officer

Aaron Snodgrass

Senior Leadership Team

Andrew Gaddum

Ben Gibson

Brent Stewart

Gavin Murphy

Jarred Moroney

Kathy McVey

Maria Wikstrom

Auditors

Deloitte

Lawyers

Chapman Tripp

Bankers

ANZ

ASB

Bank of New Zealand

Westpac Banking Corporation

Registered Office

37 Gladstone Rd, PO Box 1048 Gisborne, 4040, New Zealand

T: 06 986 4800

E: [email protected]

W: www.eastland.nz

mailto:[email protected]

http://www.eastland.nz

eastland.nz/AR2016


Eastland Annual Report 2016

Documents

Transcript of Eastland Annual Report 2016