Finacial Statement Annual

1999 Annual Report

This page contains highlights from the 1999 Annual Report. Please contact the company if you would like to request a full copy of the report.

This is the annual report of WEL Energy Group Ltd

Dated this 29th day of October 1999

Signed for and on behalf of the Board of Directors

Sir D. T. Spring Rodger Fisher

Chairman Deputy Chairman

This Year's Highlights

Record post tax surplus of $113.4 million.
Net operating surplus (after abnormals) of $25.7 million, in a year of moderate temperatures and limited sales growth.
A fully imputed dividend of 33.89 cents per share, payable on 15 December 1999, giving a total full year dividend of $2.99 per share.
There was no increase in lines tariffs for a third year in succession. Lines prices reduced as a result of energy/line price rebalancing in March.
Retail business sold to NGC for a near record return.
Company became a distribution lines business from 1 March 1999.
Business reconfigured with a new management and operational structure.
Integrated, best practice information and control system completed, on time and within budget.
Investment of $12.9 million made in network upgrades to provide expanded capacity and increased reliability.
To reinforce supply to Hamilton, WEL's network has been integrated with Contact Energy's Te Rapa generation plant. This will increase reliability of supply and allows excess energy to be transported to the national grid.

Chairman's Report

Overview - The past year has been a particularly turbulent one for WEL Energy Group, but also one of its most successful.

Following the industry restructuring required by the Electricity Industry Reform Act 1998, the company embarked on a new chapter in its history as a stand-alone lines business, with an emphasis on technology and innovation.

The reforms forced companies to decide in which sector of the industry they wanted to operate - lines or retail and generation - and this precipitated a restructuring of shareholdings nationwide.

In October 1998, in an agreement between our major shareholders, Mercury Energy through a subsidiary purchased UtiliCorp's 40% shareholding. This was consolidated with the existing Mercury Energy shareholding of 2%. Early in 1999, the WEL Energy Trust purchased Mercury's share under a prior agreement to become the pre-eminent shareholder, holding 95% of the shares in WEL Energy.

Contemporaneously with these changes, WEL Energy sold its 8% stake in Power New Zealand to UtiliCorp for $76.9 million, realising a capital profit of $25.55 million.

Chief Executive Officer's Report

Overview - WEL Energy has faced an extraordinary number of changes and challenges during the past year as competition intensified following legislation that forced the disposal of our retail business. On top of that, warm weather and reduced GDP growth meant we did not achieve our expected increase in sales. However, out of this adversity a tightly focused innovative organisation has emerged, producing an exceptional profit result.

At $92.1 million, total revenue was 15.7% lower than the previous year. This was due to a combination of factors, including the sale of the retail business at the end of February, demand that was just 1.1% ahead of the previous year, and lower energy pricing resulting from contract restructuring to meet future competition.

Surplus before taxation, excluding gain on sale of investments, was $25.7 million - 6.7% behind the previous year, partially driven by volatile electricity prices that increased sharply in January and February.

Directors

Sir Dryden Spring (Chairman)

Sir Dryden Spring became Chairman of the WEL Energy Group in 1998, after a long and distinguished career in the dairy industry. He was Chairman of the NZ Co-operative Dairy Company Ltd from 1982 to 1989, during which time the company's turnover more than doubled. He became Chairman of the New Zealand Dairy Board in 1989 and, during his 10 year leadership, turnover almost tripled to NZ$7.8 billion. Sir Dryden is also Chairman of Goodman Fielder New Zealand Ltd, Ericsson Communications Ltd (NZ) and the Asean New Zealand Combined Business Council. He is a director of Fernz Corporation Ltd, The National Bank of New Zealand Ltd, Maersk New Zealand Ltd and Fletcher Challenge Ltd. In 1994/95 he was a member of the APEC Eminent Persons Group, which drafted the APEC Vision. He was knighted in 1994 for services to New Zealand and the dairy industry.

Rodger Fisher (Deputy Chairman)

Rodger Fisher has spend the past 12 years as managing director of the Owens Group Ltd, a position from which he has just retired. He is chairman of the Civil Aviation Authority, the Aviation Security Service and Independent Reefer Services (Auckland) Ltd, and a director of Waitemata Health Ltd, the Auckland Rugby Football Union and the Eden Park Trust Board of Control. Rodger is a fellow of the Chartered Institute of Secretaries, the Institute of Directors, the New Zealand Institute of Management and the member of the Logistics Management Association of New Zealand.

Brooke Des Forges

Brooke Des Forges has been a dairy farmer at Whitikahu, near Taupiri, for 40 years. He has been a director of WEL Energy since 1988 and previously served on the Central Waikato Electric Power Board. He was a Waikato County Councillor for 12 years and then deputy chairman of the Waikato District Council for three years. He also served on the former Waikato Valley Authority and was chairman of the Taupiri River and Drainage Board for 14 years. Brooke is a JP, life member of the New Zealand Land Drainage Association, deputy chairman of the Waikato Show Trust and vice patron of the NZ Fieldays Society.

John Foote

John Foote has more than 21 years experience in the construction industry in New Zealand, Britain, Europe, the United States and Saudi Arabia. He also spent seven years in electric utility management at Power New Zealand Ltd, where he was chief operations manager. Previously he worked at Mainzeal Group Ltd for 10 years, where he was general manager construction. John has a BSc and BEng (civil) from Auckland University and is also a director of Watercare Services Ltd.

Shane Solomon

Shane Solomon is a senior legal adviser to the Tainui Maori Trust Board and a member of its secretariat. Since 1994, he has specialised in legal and tribal research for the Centre of Maori Studies and Research at Waikato University. He was part of the negotiating team responsible for settling the Waikato Raupatu claim and helped draft the Raupatu Settlement Legislation. He is currently principal researcher for the Waikato River Claim. Shane has a law degree from Auckland University and is a director of Health Waikato.

Brian Walsh

Brian Walsh is an Auckland-based financial consultant specialising in capital raising and equity valuations. He is a former director of investment banking at Merrill Lynch (New Zealand) Ltd and member of the New Zealand Stock Exchange. Previously, he held senior management positions with Countrywide Bank and was a director of its operating lease subsidiary, Fleetlease Ltd. He holds several other directorships and has an MA (Hons) in Economics and a law degree from Otago University. He is a member of the Institute of Chartered Accountants.

Company Directory

Registered Office

WEL Energy House
Cnr Victoria and London Streets
PO Box 925
Hamilton
New Zealand

Telephone: 64-7-838 1399
Facsimile: 64-7-858 1451
Website: www.wel.co.nz
Email: connect@wel.co.nz

Auditors

PricewaterhouseCoopers, Auckland

Solicitors

Rudd Watts & Stone, Auckland

Share Registry

Computershare Registry Services Ltd, Newmarket, Auckland

Insurance Brokers

Willis Ltd, Auckland

Directors

Sir Dryden T. Spring - Chairman
Rodger Fisher - Deputy Chairman
Brooke Des Forges
John L. Foote
Shane R. Solomon
Brian V. Walsh

Chief Executive

C. Graham Coxhead be (elect) (retired)
Mike Underhill BE (elect), Mcom (Hons), FIPENZ

Executive Officers

Neil P. Simmonds BE (elect), MIPENZ General Manager, Networks
Tim J. Whiteley LLB (Hons) Legal/Regulatory Manager
Kevin J. Palmer BMS, CA Financial Controller
Peter A. G. Burgess NZCE, REA Operations Manager
Keith A. Edmonds NZCE, Dip BS Network Manager
Jacqui A. Thorby BMS (Hons) Strategic Marketing Manager
John H. A. Versluys BSV (Tech), BE (Hons), MIPENZ IS Manager
Brian J. Rayner IT Development Manager
John O'Hara Dip Intl Marketing (Hons), Dip Export, MMINZ CEO WEL Technology

Last updated: Thursday, 26 October 2006