interim report 2006

M I G H T Y R I V E R P O W E R L I M I T E D

I N T E R I M R E P O R T 3 1 D E C E M B E R 2 0 0 5

H I G H L I G H T S 2 0 0 5 02

C H A I R A N D C H I E F E X E C U T I V E R E P O R T 0 4

I N T E R I M F I N A N C I A L S T A T E M E N T S 0 9

D I R E C T O R Y 2 0

WORK CONTINUES, AT PACE.

1

35% INCREASER E C O R D G E O T H E R M A L P R O D U C T I O N A T

P L A N T S W E A R E A S S O C I A T E D W I T H

70MWC O N S E N T S S O U G H T F O R A 7 0 M W

$ 2 5 0 M I L L I O N G E O T H E R M A L P L A N T A T K A W E R A U

TURITEA WIND FARMS E L E C T E D B Y P A L M E R S T O N N O R T H C I T Y C O U N C I L

A S P R E F E R R E D D E V E L O P M E N T P A R T N E R

$54.0 MILLIONN E T S U R P L U S A F T E R T A X A T I O N

TOP CALL CENTREM E R C U R Y E N E R G Y T H E B E S T E N E R G Y R E T A I L E R I N 2 0 0 5 C U S T O M E R

R E L A T I O N S H I P M A N A G E M E N T C O N T A C T C E N T R E A W A R D S

323,000 CUSTOMERSR E T A I L C U S T O M E R N U M B E R S C O N T I N U E T O G R O W

2

48.3 P E R C E N T

55.9 P E R C E N T

62.0 P E R C E N T

61.3 P E R C E N T

76.8 P E R C E N T

04

05

03

02

01

T O T A L E Q U I T Y / T O T A L A S S E T S A T 3 1 D E C E M B E R

$14.0 M I L L I O N

$99.8 M I L L I O N

$51.4 M I L L I O N

$77.3 M I L L I O N

$54.0 M I L L I O N

04

05

03

02

01

N E T S U R P L U S A F T E R T A X A T I O N F O R 6 M O N T H S T O 3 1 D E C E M B E R

$20.0 M I L L I O N

$47.4 M I L L I O N

$81.6 M I L L I O N

$123.6 M I L L I O N

$121.3 M I L L I O N

04

05

03

02

01

O P E R A T I N G C A S H F L O W F O R 6 M O N T H S T O 3 1 D E C E M B E R

41.4 P E R C E N T

36.5 P E R C E N T

30.1 P E R C E N T

32.3 P E R C E N T

17.4 P E R C E N T

04

05

03

02

01

N E T D E B T / N E T D E B T + E Q U I T Y A T 3 1 D E C E M B E R

$25.8 M I L L I O N

$79.4 M I L L I O N

$95.3 M I L L I O N

$135.7 M I L L I O N

$106.8 M I L L I O N

04

05

03

02

01

O P E R A T I N G S U R P L U S B E F O R E I N T E R E S T , N O N - R E C U R R I N G I T E M S A N D T A X A T I O N F O R 6 M O N T H S T O 3 1 D E C E M B E R

$241.8 M I L L I O N

$199.6 M I L L I O N

$119.5 M I L L I O N

$87.2 M I L L I O N

$103.9 M I L L I O N

05

04

03

02

01

$187.6 M I L L I O N

$89.0 M I L L I O N

$81.7 M I L L I O N

$77.9 M I L L I O N

$110.3 M I L L I O N

05

04

03

02

01

O P E R A T I N G C A S H F L O W

8.3 P E R C E N T

11.4 P E R C E N T

14.0 P E R C E N T

6.4 P E R C E N T

8.6 P E R C E N T

05

04

03

02

01

R E T U R N O N A V E R A G E S H A R E H O L D E R S ’ E Q U I T Y

* MIGHTY RIVER POWER DOES NOT OWN 100 PERCENT OF THESE ASSETS AND/OR THE PHYSICAL OUTPUT

18.0 P E R C E N T

32.4 P E R C E N T

35.1 P E R C E N T

37.6 P E R C E N T

42.4 P E R C E N T

05

04

03

02

01

N E T D E B T / N E T D E B T + E Q U I T Y

7.0 T I M E S

6.8 T I M E S

4.1 T I M E S

3.5 T I M E S

3.2 T I M E S

05

04

03

02

01

F R E E F U N D S F R O M O P E R A T I O N S / I N T E R E S T E X P E N S E

$200.0 M I L L I O N

$313.8 M I L L I O N

05

04

03

05

04

03

05

04

03

D E B T M A T U R I T Y P R O F I L E > 7 YEARS 4-7 YEARS < 4 YEARS

$113.8 M I L L I O N

$16.0 M I L L I O N

$155.5 M I L L I O N

$98.5 M I L L I O N

$200.0 M I L L I O N

$106.0 M I L L I O N

$164.8 M I L L I O N

2001

2002

2003

2004

G E N E R A T I O N D A T A BIOMASS*GEOTHERMAL*COGENERATIONHYDRO

2005

2000

76.2 P E R C E N T

58.6 P E R C E N T

57.3 P E R C E N T

51.3 P E R C E N T

44.2 P E R C E N T

05

04

03

02

01

T O T A L E Q U I T Y / T O T A L A S S E T S

$121.2 M I L L I O N

$99.8 M I L L I O N

$113.5 M I L L I O N

$47.1 M I L L I O N

$59.1 M I L L I O N

05

04

03

02

01

N E T S U R P L U S A F T E R T A X A T I O N

0 20001000 3000 4000 5000 6000GWh

Previous 2005 annual report graphs

ungrouped

0 50 100 150 200 250 300 350 400

2,124.4

0 500 1000 1500 2000 2500 3000

3

C H A I R A N D C H I E F E X E C U T I V E R E P O R T

$187.6 M I L L I O N

$158.7 M I L L I O N

$112.7 M I L L I O N

$77.9 M I L L I O N

$110.3 M I L L I O N

$68.5 M I L L I O N

$121.2 M I L L I O N

$99.8 M I L L I O N

$113.5 M I L L I O N

$47.1 M I L L I O N

$59.1 M I L L I O N

$41.3 M I L L I O N

05

04

03

02

01

00

05

04

03

02

01

00

OPERATING CASHFLOW - ADJUSTED TO EXCLUDE NON-RECURRING ITEMS$241.8 M I L L I O N

$199.6 M I L L I O N

$119.5 M I L L I O N

$87.2 M I L L I O N

$103.9 M I L L I O N

05

04

03

02

01

O P E R A T I N G S U R P L U S B E F O R E I N T E R E S T , N O N - R E C U R R I N G I T E M S A N D T A X A T I O N

$187.6 M I L L I O N

$89.0 M I L L I O N

$81.7 M I L L I O N

$77.9 M I L L I O N

$110.3 M I L L I O N

05

04

03

02

01

O P E R A T I N G C A S H F L O W

8.3 P E R C E N T

11.4 P E R C E N T

14.0 P E R C E N T

6.4 P E R C E N T

8.6 P E R C E N T

6.5 P E R C E N T

05

04

03

02

01

00

RETURN ON AVERAGE SHAREHOLDERS

8.3 P E R C E N T

11.4 P E R C E N T

14.0 P E R C E N T

6.4 P E R C E N T

8.6 P E R C E N T

05

04

03

02

01

R E T U R N O N A V E R A G E S H A R E H O L D E R S ’ E Q U I T Y

NET SURPLUS AFTER TAXATION

* MIGHTY RIVER POWER DOES NOT OWN 100 PERCENT OF THESE ASSETS AND/OR THE PHYSICAL OUTPUT

18.0 P E R C E N T

32.4 P E R C E N T

35.1 P E R C E N T

37.6 P E R C E N T

42.4 P E R C E N T

05

04

03

02

01

N E T D E B T / N E T D E B T + E Q U I T Y

7.0 T I M E S

6.8 T I M E S

4.1 T I M E S

3.5 T I M E S

3.2 T I M E S

05

04

03

02

01

F R E E F U N D S F R O M O P E R A T I O N S / I N T E R E S T E X P E N S E

$200.0 M I L L I O N

$313.8 M I L L I O N

05

04

03

05

04

03

05

04

03

D E B T M A T U R I T Y P R O F I L E > 7 YEARS 4-7 YEARS < 4 YEARS

$113.8 M I L L I O N

$16.0 M I L L I O N

$155.5 M I L L I O N

$98.5 M I L L I O N

$200.0 M I L L I O N

$106.0 M I L L I O N

$164.8 M I L L I O N

2001

2002

2003

2004

G E N E R A T I O N D A T A BIOMASS*GEOTHERMAL*COGENERATIONHYDRO

2005

76.2 P E R C E N T

58.6 P E R C E N T

57.3 P E R C E N T

51.3 P E R C E N T

44.2 P E R C E N T

05

04

03

02

01

T O T A L E Q U I T Y / T O T A L A S S E T S

$121.2 M I L L I O N

$99.8 M I L L I O N

$113.5 M I L L I O N

$47.1 M I L L I O N

$59.1 M I L L I O N

05

04

03

02

01

N E T S U R P L U S A F T E R T A X A T I O N

0 20001000 3000 4000 5000 6000GWh

** RECORD GEOTHERMAL PRODUCTION

T O T A L G E N E R A T I O N V O L U M E S F O R 6 M O N T H S T O 3 1 D E C E M B E R

BIOMASS*GEOTHERMAL*COGENERATIONHYDRO

2001

2002

2003

GWh

2004

2005

0 500 1000 1500 2000 2500 3000

On behalf of the Board and Management, we are pleased to report on Mighty River Power’s

performance for the six months to 31 December, 2005.

H I G H L I G H T S

The Company’s strong financial performance in recent years has enabled reinvestment in

the business. Diversification and expansion of our generation portfolio continues to help

meet the country’s growing energy requirements. We now have the capability to manage

seasonal changes in demand and weather-related fluctuations in our hydro production

through the improved flexibility of our generation portfolio.

This increased flexibility delivered a sound Net Surplus after Taxation of $54.0 million in the

period to 31 December 2005, despite lower than normal inflow levels into, and production

from, the Waikato hydro system. A significantly higher depreciation charge for the period

($14.2 million) following the revaluation of generation assets as at 30 June 2005 also

impacted on the Net Surplus.

Operating revenue in the period to 31 December 2005 was $171.7 million higher than 2004,

primarily as a result of high spot prices increasing generation sales revenue. This increase

was largely offset by increased purchase cost for energy to service our retail customers and

associated hedge contract settlements. The high spot prices at the end of the period had the

effect of increasing receivables and payables.

Overall, the Net Surplus of $54.0 million and Operating Surplus before Interest,

Non-recurring items and Taxation of $106.8 million were considerably lower than the

comparable period last year ($77.3 million and $135.7 million respectively), when we enjoyed

record hydro production.

A final dividend for the 2005 financial year, of $36.4 million was paid out during the period

under review.

Operating cashflow was stable at $121.3 million compared to $123.6 in the previous

comparable period. Mighty River Power’s focus on diversifying our generation portfolio saw

cash outflows on capital expenditure rise to $65 million, up from $45 million. This follows

the $108 million invested in new energy developments and existing assets in the full 2005

financial year.

5

It was pleasing that in November Standard and Poor’s reaffirmed Mighty River Power’s

long-term credit rating as BBB+ and its short-term rating as A-2. These ratings reflect our

sustained strong financial performance.

G E N E R AT I O N

Our total generation volumes were down 8% to 2,989 GWh (compared with 3,244 GWh) for

the six months to December 2005. Lower than normal inflows in the period resulted in hydro

production of 1,981 GWh, down from 2,631 GWh in the previous corresponding period and

the second lowest in the Company’s history. This reduction was partially offset by increased

output from geothermal plants and the Southdown station.

The decision several years ago to fully acquire Southdown and increase operational

flexibility through renegotiation of our gas supply contracts, enabled us to lift production

in this period when wholesale prices were high. Total generation at Southdown

more than doubled from 224 GWh in the first half of last year to 464 GWh in the six months

under review.

Geothermal plants we are associated with produced 510 GWh, up significantly from the

377 GWh for the same period last year. This result saw record production of 138 GWh at

Rotokawa and 372 GWh at Mokai. The Mokai result was assisted by the commissioning of a

$100 million, 39MW expansion by the Tuaropaki Power Company on 3 July 2005.

The total production volumes achieved were very pleasing given difficult hydro conditions

and demonstrate the significant benefits of Mighty River Power’s transition over the past

six years to a diversified energy company. This diversification and development continues

at pace as we investigate and develop a range of fuel options and technologies to

grow the business to help meet rising energy demand associated with New Zealand’s

economic growth.

We continue to investigate a wide range of potential wind generation sites around the country

and have recently been granted resource consents to begin a wind monitoring programme

at Turitea, 10km south east of Palmerston North.

Mighty River Power is undertaking the largest geothermal exploration and expansion

programme in New Zealand in the past twenty years. As part of this $100 million programme,

we have been investigating the viability of the Kawerau geothermal resource. Data from this

investigation has led to the lodging of an application for resource consents to develop a plant

of approximately 70MW capacity.

6

We also continued our gas exploration joint venture with Swift Energy (NZ) Limited, with

drilling for two further onshore exploration wells in southern Taranaki commencing in

November 2005. The results of this gas exploration activity are expected to be known prior

to the end of the financial year.

In December 2005 we also confirmed the purchase of a 40% stake in a Taranaki-based

petroleum exploration project. We have joined North Taranaki Exploration Ltd (40%) and

Westec Energy New Zealand Ltd (20%) in a joint venture to commence exploration of a

1,000km2 area off the Taranaki coast in 2006.

R E TA I L

Mercury Energy continued to gain customer numbers and market share, with customer

numbers increasing to 323,000 from 317,000 at 3o June 2005. Successful acquisition

campaigns, award winning customer service, and recognition for leading retail performance

have seen us continue a three year trend of succeeding against our competitors in building

market share through winning and retaining retail customers.

Our very successful dual energy programme has continued to deliver growth with

customer numbers exceeding 21,000 and market share now over 25% of the Greater

Auckland market.

Our retail electricity and gas customers are serviced by the market’s best contact/call centre

(2004 & 2005 CRM Contact Centre Awards). We also continue to be a market leading provider

of electricity price risk management solutions to the commercial and industrial markets.

Metrix, our metering business, has continued to maintain significant growth in new

connections, across the Greater Auckland region.

L O O K I N G A H E A D

New Zealand’s energy options are limited, but enough new generation programmes are

under development to meet forecast demand through to the end of the decade. Nationwide,

significant investment in transmission is urgently required to enable renewable generation

options to be developed and to provide customer choice through competition.

7

Mighty River Power has become a diversified energy company and the resources we have

committed to expanding our generation capacity and options, ensure we are playing our part

in providing a sustainable energy supply for New Zealand’s future.

The challenge is to maintain our momentum. Our strong financial position and our recent

financial performances have positioned us well for continuing investment and our thanks go

to the many staff whose efforts and commitment created and maintained this position.

CA R O L E D U R B I NCHAIR

D O U G H E F F E R N A NCHIEF EXECUTIVE

8

I N T E R I M F I N A N C I A L S TAT E M E N T S FOR THE SIX MONTHS ENDING 31 DECEMBER 2005

C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P E R F O R M A N C E 10

C O N S O L I D A T E D S T A T E M E N T O F M O V E M E N T S I N E Q U I T Y 11

C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N 12

C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S 14

N O T E S T O T H E C O N S O L I D A T E D I N T E R I M F I N A N C I A L S T A T E M E N T S 15

9

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P E R F O R M A N C E FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

The notes set out on pages 15 to 19 form part of, and should be read in conjunction with, these Interim Financial Statements.

YEAR ENDED SIX MONTHS SIX MONTHS 30 JUNE ENDED ENDED 2005 31 DECEMBER 31 DECEMBER 2005 2004

AUDITED UNAUDITED UNAUDITED

$000 NOTE $000 $000

895,669 Sales 600,510 414,775

(222,527) Less line and metering charges (128,796) (113,641)

3,649 Interest income 1,003 1,695

7,585 Other revenue 5,814 3,980

684,376 Total Operating Revenue 478,531 306,809

241,762 Operating surplus before interest and non-recurring items 106,772 135,686

3,649 Interest income 1,003 1,695

(36,336) Interest expense (18,092) (18,448)

(22,137) Non-recurring items 2 0 0

1,021 Share of associates net surplus 1,739 (103)

187,959 Surplus Before Taxation 91,422 118,830

(66,732) Taxation expense 3 (37,374) (41,536)

121,227 Net Surplus After Taxation 54,048 77,294

10

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P E R F O R M A N C E FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 C O N S O L I D AT E D S TAT E M E N T O F M O V E M E N T S I N E Q U I T Y FOR THE SIX MONTHS ENDED 31 DECEMBER 2005




$000 $000 $000

886,524 Equity at Beginning of the Period 2,033,315 886,524

121,227 Net surplus after taxation 54,048 77,294

1,055,564 Increase in asset revaluation reserve 0 0

1,176,791 Total Recognised Revenues and Expenses for the Period 54,048 77,294

Distributions to owners:

(30,000) Final dividend paid for 2004 0 (30,000)

0 Final dividend paid for 2005 (36,400) 0

2,033,315 Equity at End of the Period 2,050,963 933,818

11

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N AS AT 31 DECEMBER 2005




$000 $000 $000

Equity

377,561 Share capital 377,561 377,561

1,655,754 Reserves 1,673,402 556,257

2,033,315 2,050,963 933,818

Non-current Liabilities

1,204 Energy contracts 1,204 1,204

469,294 Loans 438,002 365,821

470,498 439,206 367,025

Current Liabilities

136,304 Payables and accruals 136,152 84,417

5,051 Provisions 3,814 3,411

0 Provision for taxation 13,774 22,653

22,913 Deferred taxation 27,845 24,029

0 Loans – current portion 0 89,225

164,268 181,585 223,735

2,668,081 Total Equity and Liabilities 2,671,754 1,524,578

12

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N AS AT 31 DECEMBER 2005 C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N ( C O N T I N U E D ) AS AT 31 DECEMBER 2005




$000 $000 $000

Non-current Assets

2,437,139 Property, plant and equipment 2,447,603 1,380,689

31,152 Investment in associate 32,891 13,278

11,005 Other non-current assets 10,150 13,981

2,479,296 2,490,644 1,407,948

Current Assets

7,013 Cash 6,775 3,707

16,400 Short term deposits 5,000 5,000

160,316 Receivables and prepayments 164,937 104,639

3,054 Inventories 4,398 3,284

2,002 Provision for taxation 0 0

188,785 181,110 116,630

2,668,081 Total Assets 2,671,754 1,524,578

13

C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S FOR THE SIX MONTHS ENDED 31 DECEMBER 2005




$000 NOTE $000 $000

Cash Flows from Operating Activities

Cash was provided from (applied to):

642,965 Receipts from customers 474,508 318,117

2,574 Interest received 414 1,707

(351,134) Payments to suppliers and employees (319,727) (157,051)

(34,835) Interest paid (17,279) (18,151)

(71,966) Taxation paid (16,666) (21,000)

187,604 Net Cash Inflow from Operating Activities 4 121,250 123,622

Cash Flows from Investing Activities


89 Sale of property, plant and equipment 30 41

4,725 Repayment of advances from associates 0 4,725

(78,541) Purchase of property, plant and equipment (65,263) (31,869)

(150) Purchase of other non-current assets 0 0

0 Disposal of other non-current assets 37 0

(29,750) Investment and advances to associate 0 (13,000)

(103,627) Net Cash Outflow from Investing Activities (65,196) (40,103)

Cash Flows from Financing Activities


40,979 Loan advances 0 26,731

0 Loans repaid (31,292) 0

(105,000) Dividends paid (36,400) (105,000)

(64,021) Net Cash Outflow from Financing Activities (67,692) (78,269)

19,956 Net Increase (Decrease) in Cash Held (11,638) 5,250

3,457 Cash Balance at Beginning of the Period 23,413 3,457

23,413 Cash Balance at End of the Period 11,775 8,707

Cash balance comprises:

7,013 Cash 6,775 3,707

16,400 Short term deposits 5,000 5,000

23,413 11,775 8,707

14

C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

1. S TATEMENT OF AC C OUNTING P OLICIE S

The interim financial statements presented here are the unaudited consolidated financial statements of Mighty River Power Limited for the

six months ended 31 December 2005.

These interim financial statements have been prepared in accordance with FRS-24 Interim Financial Statements, and should be read in

conjunction with the Annual Report for the period ended 30 June 2005. The accounting policies used in the preparation of these interim

financial statements are consistent with those used in the annual financial statements and the previously published interim financial

statements.

2 . NON-RECURRING ITEM S



$000 $000 $000

(20,935) Impairment of exploration expenditure 0 0

(1,202) Other 0 0

(22,137) 0 0

IMPA IRMENT OF E X PLOR ATION E X PENDIT URE

Expenditure relating to exploratory drilling has been expensed as a consequence of a review of the economic viability of the expenditure

associated with this drilling. The assessed capacity of the fields involved has been reduced and expected future developments can no longer

support the carrying value of these investments

15

N O T E S T O T H E CO N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( CO N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

3. TA X ATION E X PEN SE



$000 $000 $000

187,959 Surplus before taxation 91,422 118,933

62,026 Taxation at 33 cents 30,169 39,248

Taxation effect of permanent differences:

4,545 Other permanent differences 7,205 2,288

161 Prior year adjustments 0 0

66,732 Taxation expense 37,374 41,536

Analysis of taxation expense:

67,933 Current taxation 32,442 41,621

(1,201) Deferred taxation 4,932 (85)

66,732 37,374 41,536

16

N O T E S T O T H E CO N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( CO N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

4 . REC ONCILI ATION OF NE T SURPLUS A F TER TA X ATION W ITH NE T CA SH FLOW S FROM OPER ATING AC TI V ITIE S



$000 $000 $000

121,227 Net Surplus After Taxation 54,048 77,294

Add (less) non-cash items:

52,750 Depreciation 40,880 26,651

3,672 Amortisation of other non-current assets 818 1,190

20,935 Exploration expenditure 0 0

(1,021) Share of associates net surplus (1,739) 103

(7,291) Other non-cash items 1,495 (6,639)

69,045 41,454 21,305

Add (less) movements in working capital:

(43,667) Decrease (increase) in receivables and prepayments (4,449) 12,010

996 Decrease (increase) in inventories (1,344) 766

45,238 (Decrease) increase in payables and accruals 10,833 (8,289)

(4,034) Increase in provision for taxation 15,776 20,621

(1,201) (Decrease) increase in deferred taxation 4,932 (85)

(2,668) 25,748 25,023

187,604 Net Cash Inflow from Operating Activities 121,250 123,622

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N O T E S T O T H E CO N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( CO N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

5. C OMMITMENT S



$000 $000 $000

Capital Commitments

21,797 Commitments for future capital expenditure 22,732 25,504

Operating Commitments

9,264 Commitments for future operating expenditure 8,188 8,094

31,061 30,920 33,598

6. C ONTINGENCIE S

Mighty River Power and certain subsidiaries have cross-guaranteed the due and punctual payment of each other’s Guaranteed Indebtedness

in relation to bank borrowings under a Standby and Cash Advances Facility and a Revolving Advances Facility.

Mighty River Power Limited has a number of potential obligations under on-going support projects with community based groups.

Mighty River Power Limited has a contingent liability in respect of the Accident Compensation Corporation’s residual claims levy. The levy is

payable annually from May 1999 for up to fifteen years. The Group’s future liability is a function of the Accident Compensation Corporation’s

unfunded liability for past claims and future payments to employees.

Mighty River Power Limited holds land and interests that may be affected by certain claims that have been brought or are pending against

the Crown under the Treaty of Waitangi Act 1975. In the event that a recommendation is made by the Waitangi Tribunal for the return of

some or all of the affected land, and that recommendation is confirmed by the Crown, resumption would be effected by the Crown under the

Public Works Act 1981 and compensation would be payable to Mighty River Power Limited.

7. SUB SEQUENT E V ENT S

There have been no events subsequent to balance date that would affect the fair presentation of these interim financial statements.

8 . INTERN ATION A L FIN A NCI A L REP OR TING S TA NDA RDS

In December 2002 the New Zealand Accounting Standards Review Board (ASRB) announced that New Zealand entities required to comply

with NZ GAAP under the Financial Reporting Act 1993 would be required to apply International Financial Reporting Standards (IFRS) for

financial periods commencing on or after 1 January 2007 with earlier adoption permitted from 1 January 2005. The new standards that have

been approved by the ARSB for application in New Zealand are referred to as New Zealand equivalents to International Financial Reporting

Standards (NZ IFRS) as certain adaptations have been made to reflect New Zealand circumstances.

18

N O T E S T O T H E CO N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( CO N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

8 . INTERN ATION A L FIN A NCI A L REP OR TING S TA NDA RDS ( C ONTINUED )

Mighty River Power Limited intends to adopt NZ IFRS from 1 July 2007. A project team, monitored by a steering committee, has been

established to achieve transition to NZ IFRS reporting. The project involves assessing the impacts of conversion on existing accounting and

reporting policies, procedures, systems and processes, then designing and implementing the changes required to enable the delivery of

financial reporting on an NZ IFRS compliant basis.

The key differences between current NZ GAAP and NZ IFRS identified to date as potentially having a significant effect on the Group’s

financial statements are summarised below.

FINANCIAL INSTRUMENTS

All derivative contracts including electricity hedges will be recorded in the statement of financial position at fair value under NZ IFRS and be

adjusted against opening equity. Any movements in the fair value of these instruments from year to year will have the potential to affect the

statement of financial performance and the statement of financial position, the extent to which will depend on whether hedge accounting

is adopted. The financial impact of the change is not yet reliably estimable.

DEFERRED TAXATION

The IFRS basis of accounting for deferred tax is conceptually different to current GAAP. Under current GAAP deferred taxation is calculated

using an income statement approach whereas under NZ IFRS deferred taxation will be calculated based on a balance sheet approach. This

method recognises deferred tax balances where there is a difference between the carrying value of an asset or liability and its tax base.

The most significant impact for Mighty River Power Limited will be the recognition of a deferred tax liability in relation to the revaluation of

generation assets. The financial impact of this change is not yet reliably estimable.

This summary should not be taken as an exhaustive list of all the differences between current NZ GAAP and NZ IFRS. Further, the effects

of these differences have not yet been quantified by the Group. Accordingly, there can be no assurances that the financial performance and

financial position as disclosed in these financial statements would not be significantly different if determined in accordance with NZ IFRS.

19

D I R E C T O R Y

DIREC TOR S

Carole Durbin, Chair

Ian Fraser, Deputy Chair

John Baird

Caroline Ball

Trevor Janes

David McConnell

Sandy Maier

Tania Simpson

E X ECU TI V E M A N AGEMENT

Doug Heffernan, Chief Executive

John Foote, Group Operations Manager

Stuart Lush, General Manager Generation Development

William Meek, Enterprise Risk Strategist

James Moulder, General Manager Sales

Greg Raasch, General Manager Geothermal

Steve Rawson, General Manager New Business Development

Neil Williams, General Manager External Affairs

GROUP FIN A NCE M A N AGER

Tony Gray

COMPA N Y SECRE TA RY

Tony Nagel

REGIS TERED OFFICE

Level 19, 1 Queen Street, Auckland

TELEPHONE 09 308 8200

FACSIMILE 09 308 8209

EMAIL [email protected]

WEBSITE www.mightyriverpower.co.nz

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interim report 2006

Documents