The Lines Company Limited Presentation to Commerce Commission 11 April 2005

Issues Disclosure to assess relative performance Tax treatment concerns

Relative Performance S57V – Commission required to publish analysis of disclosed information for the purpose of promoting greater understanding of the relative performance…… Presumed such analysis should be consistent with C2 factors

Current C2 factors Current C2 factors reflect the combination of load density and Load factor, not performance. Due to attempt to override odv figures insufficient data on which to analyse opex performance.

C2 factors vs density

C2 continued Due to attempt to override odv figures insufficient data on which to analyse opex performance Capex efficiency already part of the odv process – inefficient investment is optimised out – engineering assessment weighing all factors.

Capex performance Capex efficiency already part of the odv process Inefficient investment is optimised out – engineering assessment weighing all factors. Further disclosure should be part of the ODV or Asset Management Plan process

Opex performance Influencers Line length and customer numbers Asset age – measured by ratio of odv to replacement cost Trees – measure or deemed efficient –speed of vegetation growth Ruggedness of country – measured by % of line deemed rugged in odv report – also influences customer problems Climate Distance from contractors depots Road controlling authority demands Connected generation – size and output

Relative performance If the commission is to seriously analyse relative performance it needs good data on the factors that actually influence performance.

Tax Analysis shown in attached spreadsheet For the Commission’s revenue formula to work need to adjust for non- deductibility of depreciation on revaluations Can be done by adjusting tax to tax paid – commission’s approach or Adjusting revaluation adjustment add back

Difficulties with actual tax paid Over-rides government incentive signals through tax system Has a perverse effect on acquisitions Penalises line renewals – see spreadsheet

Difficulties with actual tax paid And for trust owned companies Lowers borrowing ability Existing customers must pay for asset upgrades – intergenerational inequity.