Eastland Group annual report 2021 by Eastland Group

A SUS TAIN ABLE FUT URE ANNUAL REPORT 2021

EASTLAND GROUP ANNUAL REPORT 2021

page 1

Contents Eastland Group 2021 overview

Chair and chief executive report

Financial performance trends

Locations and portfolio allocation

A sustainable future

Report from our shareholder

Gisborne Airport

Eastland Port

Eastland Network

Eastland Generation

People and performance

Corporate governance

Board of directors

Senior leadership team

Financial statements

F-1

Auditor's report

F-3

Notes to the financial statements

F-12

Company information

F-51

Details from Gisborne Airport Opposite page: Ngā Tararere Kārangaranga a Hinehakirirangi, close up, over the landside entrance of the new terminal. This page: Māhoe, one of the natives planted along the Waikanae Stream at Gisborne Airport.

EASTLAND GROUP ANNUAL REPORT 2021

2021 Overview

» Generated $107.4 million in income with $16.0 million in profit » Returned $10.1 million to our shareholder Trust Tairāwhiti » Asset value increased to $750.8 million » Completed New Zealand’s most sustainable new airport terminal and started major new port project » Company-wide focus on measuring and reducing emissions » Ongoing investigation of sustainable energy generation options for Tairāwhiti

In April 2020, New Zealand was in lockdown due to COVID-19. The businesses we operate were impacted in different ways. Gisborne Airport was closed, construction of the new terminal was on hold, and no logging ships were leaving Eastland Port. Eastland Network concentrated on keeping the power on, while Eastland Generation continued to operate as usual. Strict health and safety protocols were in place for our essential workers; everyone else was carrying on with business as usual from home. The reliable returns from the generation and network sectors ensured the Group’s resilience through these uncertain times. They underpinned a rapid recovery once the alert levels dropped, followed by the port sector roaring back into life during late April and May.

Chair and chief executive report

Eastland Group is now a $750 million company, with our infrastructure assets demonstrating both geographic and sector diversity. We achieved $16.0 million in profit and returned $10.1 million to our shareholder Trust Tairāwhiti, for the benefit of local communities. In any year, these would be results our team could be proud of. But when we pause to consider that April 2020 saw New Zealand locked down due to COVID-19, with several of our businesses effectively closed – the achievements are all the more remarkable.

By any measure, it has been a solidly successful year for Eastland Group. As an infrastructure company headquartered in Gisborne, Tairāwhiti, we have continued to operate critical regional infrastructure efficiently, profitably, safely and sustainably. Gisborne Airport’s new terminal building, the most sustainable in New Zealand, opened to overwhelmingly positive public feedback. It was an honour to partner with mana whenua Ngai Tāwhiri, along with our co-funders: our shareholder Trust Tairāwhiti and the government’s Kānoa – Regional Economic Development and Investment Unit (previously the Provincial Growth Fund).

REGIONAL RECOVERY Matanuku Mahuika Chair

Eastland Port exported just shy of three million tonnes of products and set both cart-in and monthly export records.

April was a time of huge uncertainty, with the airport and port effectively closed. Prudently, we applied for and received $362,000 for the two sectors from the government’s COVID-19 wage subsidy scheme. This ensured that we could keep every single staff member employed. As the sectors recovered we repaid the subsidy in full. Our staff played key roles in local governance groups set up to tackle the impacts of COVID-19, and worked through ways to lessen the impacts on our tenants. Eastland Group and Network were a part of the Tairāwhiti Economic Support Package Redeployment Programme, which provided work and training for people impacted by COVID-19.

Lines company Eastland Network performed reliably once again, meeting price and quality regulations. They also finalised a new asset management plan and new Time of Use pricing. Eastland Generation, our portfolio of geothermal power plants and a hydro scheme, delivered excellent returns and contributed 29% to Eastland Group’s overall revenue.

A SUSTAINABLE FUTURE

Our long-established shared services model carried on delivering financial and operational efficiencies. The centralised, Gisborne-based team of finance, IT, business development, people and performance, and communications provide their expertise to each of our business sectors.

Matt Todd Chief executive officer

Achieving a sustainable future, for our company, our shareholder and our communities has been a strategic direction for Eastland Group for some time now. The pandemic has only reinforced the importance of sector and geographic diversity, while government policies are encouraging a rapid move towards a carbon-neutral New Zealand.

We continued to monitor and report on our emissions as members of the Climate Leaders Coalition.

This year the management team introduced – and the board whole-heartedly endorsed – our first, company-wide sustainability policy. It will inform all our significant projects, as well as how each one of us works day to day.

GROWTH IN SHAREHOLDER EQUITY

$ Millions

It dovetails with Trust Tairāwhiti’s regionwide wellbeing framework, He Rangitapu He Tohu Ora. After wide consultation with the communities of Tairāwhiti, the Trust introduced this important tool to assess, prioritise and measure inter-generational opportunities and outcomes for the region. Eastland Group’s projects are being measured against this framework.

Cumulative distribution since 2003

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

Total equity

The Trust and Eastland Group have also agreed to undertake a review of the Group’s capital structure. This decision was made jointly by both organisations as part of the Trust’s three-yearly ownership review of Eastland Group. The review is to ensure that Eastland Group has the best possible capital structure to meet its commercial objectives and the needs of Trust Tairāwhiti and its current and future beneficiaries. The review is in its preliminary stages.

E nga iwi, e nga mana, e nga hapori katoa o te Tairawhiti whanui tonu, tena rawa atu tatau. Tangihia o tatau tini mate ka tika. Ka ki atu tatau ki a ratau kia haere. Haere ki te tini me te mano e whanga mai ana ki te po. Haere ki te huinga o te kahurangi, hei reira oti atu ai. Ka hoki mai ki a tatau te hunga ora. Na reira, tena ano tatau katoa.

Back at the start of the financial year, we hit the pause button on all significant new initiatives, as customer demand and revenue was suddenly thrown into doubt. With the resurgence of our company and the national economy, we’re moving forward with a number of projects to support and enable regional growth and economic prosperity. These include the port’s new Twin Berth project, which will enable two 185-200 metre long vessels to berth at once and open up the possibilities of containerisation. After years of planning, consulting with the community and customers, and developing meaningful relationships with the hapū of Tairāwhiti, the Environment Court granted the Stage 1 consents late in 2020. This was a huge milestone, and signals the start of the port’s biggest infrastructure upgrades in more than a century. Eastland Network is planning for “the electrification of everything”, which will place big pressures on the existing infrastructure as people change their power consumption habits and EVs increasingly become the norm. And with Eastland Generation, we’re becoming a significant national developer, owner and operator of renewable energy assets. The new Taheke Geothermal Project was awarded $11.9 million from the government’s COVID-19 “shovel-ready” fund, and early in the 2022 financial year we completed on the purchase of the existing TOPP1 geothermal power plant. This puts us well on track to achieve our goal of 100MW of renewable generation by 2025. We’re also looking at opportunities to develop renewable energy right here in Tairāwhiti. To support all this current and future business expansion, in 2020 we implemented a major technology upgrade known as “Project Highway”. Many of the systems that had served us well were nearing end of life, so we made the decision to replace, consolidate and unify the company’s core financial, asset management and geospatial systems with SAP. The new platforms will enable the Group to be strategic and scale for future growth. Of course transformation projects of this nature are challenging under the best of circumstances. Throw COVID-19 lockdowns into the mix, with design workshops and the initial system build having to take place remotely, and Project Highway became even more complex. It’s a testament to everyone that we went live as scheduled in November 2020. Work continues to bed the system in.

OUR PEOPLE Director Tony Gray retired by rotation after more than six years. On behalf of the whole team, we thank him for his invaluable input and contributions to the direction and success of Eastland Group. We welcomed Jim Quinn and Candace Kinser to the board, with both offering exceptional strategic insights, governance experience and business acumen. Most of all, we would both like to thank everyone who works at Eastland Group for the incredible resilience they’ve shown. Our company values are Work Smart, Own It, Be Safe, Mahi Tahi (work together) and Āwhina (to support one another). It has been humbling to see how everyone has pulled together, worked hard, stayed safe, and supported one another throughout this year that’s been like no other. Na maua tahi, na.

Matanuku Mahuika

Matt Todd

Financial performance trends

Eastland Group locations 2017

2018

2019

2020

2021

76.2 (34.6)

84.7 (37.6)

97.0 (39.7)

111.7 (48.2)

107.4 (47.0)

41.6 (15.1) 26.5 (7.8) 1.4 20.1 (5.3) 14.8 25.9

47.1 (15.7) 31.4 (7.2) 1.4 (1.5) 24.1 (6.5) 17.6 29.9

57.2 (18.6) 38.6 (9.2) 1.5 (2.3) 28.7 (8.5) 20.1 37.7

63.5 (22.2) 41.3 (13.4) 1.2 (1.4) (1.8) 25.9 (7.3) 18.5 33.2

60.4 (24.6) 35.8 (12.4) 0.9 (1.2) 23.1 (7.1) 16.0 38.2

Portfolio allocation as at 31 March 2021 ASSETS

Northland Debarking

Eastland Generation Geothermal Developments Ltd (GDL) Te Ahi O Maui

In region $515.0m Out of region $235.8m

GISBORNE REVENUE

2017

2018

2019

2020

2021

481.0 265.7 166.0 30.0 69.7 215.3 34.5%

547.3 315.3 210.0 30.0 75.3 231.9 38.4%

587.4 353.1 227.0 30.0 96.1 234.3 38.6%

670.4 390.3 250.0 30.0 110.3 280.2 37.3%

750.8 428.2 255.0 30.0 143.2 322.6 34.0%

2017

2018

2019

2020

2021

2.1 7.8 9.9 61.9 166.4 228.3 6.5% 11.8%

2.1 8.0 10.1 69.9 183.0 252.9 6.6% 11.5%

2.1 10.0 12.1 79.9 185.4 265.3 6.7% 11.0%

2.1 10.1 12.3 90.0 231.3 321.3 6.8% 11.0%

1.2 8.9 10.1 98.9 273.7 372.6 6.8% 11.3%

Eastland Network Eastland Generation Waihi Hydro Scheme

In region $74.6m Out of region $32.8m

GISBORNE Gisborne Airport Eastland Network Eastland Group Inner Harbour Marina

Eastland Port Eastland Debarking

A sustainable future

This year we introduced our first sustainability policy, to help guide how we operate now and into the future. With our commercial mind and community heart, we must operate essential infrastructure efficiently and deliver agreed returns to our shareholder Trust Tairāwhiti - while also respecting and enhancing the environment and the wellbeing of the communities in which we operate.

Caring for our environment

In short, everything we do must be genuinely sustainable. Our policy is made up of three commitments, six sustainability initiatives covering more than 20 activities, measurement KPIs and targets.

Creating value for our shareholder

Building strong communities

Eastland Group sustainability policy PURPOSE

• Creating value for our shareholder over the long term by:

The purpose of this sustainability policy is to ensure Eastland Group acts in a way that finds the right balance between financial performance, the environment, and the social and cultural wellbeing of the communities we operate in, for the benefit of current and future generations.

This policy applies to all Eastland Group activities and facilities.

Developing and maintaining a diverse workforce and portfolio of businesses and investments.

The following will be implemented so we deliver on our commitments: An overarching framework containing sustainability initiatives, targets and reporting requirements.

COMMITMENTS These are our commitments to make a more sustainable Eastland Group. • To care for the environment by:

Sustainability to be an explicit criterion for evaluating investments, purchasing products and services, and designing assets.

Reducing greenhouse gas emissions and supporting the transition to a low carbon future.

Establish an internal sustainability forum to regularly monitor and review goals, targets and performance.

Improving the quality of water entering our oceans and rivers.

A supplier code of conduct covering ethics, social responsibility, health, safety and wellbeing and environmental protection.

• Building strong communities by: Developing and maintaining meaningful partnerships with the communities we operate in and incorporating their concerns and aspirations into our decisions. EASTLAND GROUP ANNUAL REPORT 2021

Delivering strategic infrastructure that meets the needs of the communities we operate in.

IMPLEMENTATION

SCOPE

page 12

Providing scholarships and training to improve the availability and depth of technical knowledge and skills in the community.

Training so all of us know our responsibilities under this policy and have the tools, capability, information and resources to make informed decisions on sustainability.

EASTLAND GROUP ANNUAL REPORT 2021

Led by Ngati Oneone and supported by Eastland Port, work is underway to restore the Kopuawhakapata Stream. We’ve started by planting hundreds of native shrubs and trees along the catchment area to stabilise the stream edge and purify the water entering the stream. The ultimate aim is to improve the health of the awa and whenua, for the benefit of all of Tairāwhiti.

Caring for our environment EASTLAND GROUP’S CLIMATE COMMITMENT It’s no understatement to say we believe that climate change is the greatest threat facing Tairāwhiti and New Zealand. With the government aiming to achieve carbon neutrality by 2050, Eastland Group and Trust Tairāwhiti are taking a leadership position within the region. After consultation with regional businesses, we submitted on the Climate Change Commission’s draft report to government.

Reducing greenhouse gas emissions

In July 2019, we joined the Climate Leaders Coalition. Together we have set greenhouse gas emission reduction targets and are measuring and publicly reporting on these. Soon we will start working with key suppliers to help them reduce their emissions.

The plants use a system more commonly found in town drinking water processing, and transform run-off from the port’s yards into cleaned, clear water that can be safely released into the ocean. We’re the first port in the world to utilise this technology, and are planning to install our third system in the Southern Log Yard as part of Twin Berth Stage 2. The inner harbour marina now has two Seabins, which filter water to collect rubbish and microplastics. They’re also used to teach local students about the importance of looking after our oceans.

EASTLAND GENERATION COMMITS TO: Carbon neutrality by 2030.

The other part of the equation is continuing to invest in our renewable energy portfolio, and investigating local generation opportunities. See pages 16, 52, 60 and 62 for details.

In September, Eastland Port reached a major milestone: our award-winning stormwater treatment plants had clarified over 150 million litres of stormwater. That’s enough to fill 62 Olympic-sized swimming pools.

Improving water quality

EASTLAND GROUP AND TRUST TAIRĀWHITI COMMIT TO: Reduce absolute Scope 1, 2 and 3 emissions from all businesses (other than Eastland Generation) by 21% by 2025.

These are science-based reduction targets. The Eastland Group and Trust Tairāwhiti target is set using the Absolute Emissions Contraction methodology. Eastland Generation is split out separately and follows the Sector Decarbonisation Approach, which is the standard used in this sector.

We’re also working with EnviroSchools, Wai Restoration and Ngai Tāwhiri on revitalising Waikanae Stream, which runs through the Gisborne Airport precinct.

For our latest emissions report, scan with your phone camera:

ENCOURAGING EV UPTAKE Tairāwhiti and Wairoa are now fully connected with electric vehicle chargers. The project began in 2017, with the support of funding partners Trust Tairāwhiti and EECA. Eastland Network initially installed six EV chargers in Gisborne, Tolaga Bay, Matawai, Te Araroa, Morere and Wairoa. We completed the project this year, with new chargers in Tokomaru Bay, Ruatoria and Mahia, and back-up slow chargers in Te Araroa and Matawai. This will help to reduce the barriers to EV ownership and use in the region, and encourage local uptake of EVs as a low emission transport option. Expanding Eastland’s Pacific Coast electric highway has the added benefit of promoting EV tourism in Tairāwhiti. Nearly 100% of Eastland Group’s noncommercial fleet is now electric, and we’re moving the commercial fleet to electric or hybrid options wherever practical. We’ve even ordered New Zealand’s first electric water truck for the port. We also have electric scooters and electric bikes available for staff to use around Gisborne.

The annual Eastland Group Contestable Grants Scheme is a partnership with the Wairoa District Council. Each year we award a total of $15,000 to Wairoa community groups focusing on restoring the mauri of the Wairoa River. Congratulations to this year’s successful applicants: Wairoa Community Ngahere Nursery, the Wairoa Awa Restoration Project and Hinemihi Marae Nursery.

Building strong communities Increasing technical capability in region Whaia Titirangi, an operation aiming to restore Kaiti Hill/Titirangi to native plantations through kaitiakitanga, has received 150 predator traps sponsored by Eastland Port to help achieve the goal of making the maunga pestfree by 2023. Whaia Titirangi kaitiaki Te Whaitiri Tangohau-Kakau said, “Given the maunga is in the heart of the city, we do see a lot of pests. There are a large number of native plant species that cannot reproduce without the specific involvement of birds — it’s only those certain birds that will eat a seed and disperse it.

Pictured: Eastland Generation intern Martin; Kezia, who interned at Eastland Network; and Eastland Port summer interns Hamish and Ben.

Professional development programmes for staff, and the sharing of expertise and learnings across sectors and regions, helps us contribute to increased technical capability in Tairāwhiti. The Eastland Network team continues to meet with communities up the Coast to share their knowledge about the opportunities and challenges of solar. Eastland Port has established a new role, Environmental Manager, to manage resource consent applications and proactively promote, manage and mitigate the impacts from port operations. Every year we award a number of Tertiary Engineering Scholarships to local students studying engineering. Worth up to $20,000 each over a four year degree, these scholarships encourage young people to develop their knowledge and hopefully come back to Tairāwhiti one day to share their skills. They also have the opportunity to take up summer internships.

“Our ultimate goal is to become pest-free by 2023 so we can reintroduce native birds such as popokatea (whiteheads).”

Nurturing meaningful partnerships

We also continue to strengthen ties with our iwi and hapū partners in geothermal projects in the Bay of Plenty, including Kawerau A8D Ahu Whenua Trust, Ngati Tuwharetoa Geothermal Assets Ltd (NTGA), and The Proprietors of Taheke 8C and Adjoining Blocks Incorporation.

Creating value for our shareholder

Across our business sectors, we sponsor a range of events and local organisations. The success of Eastland Group depends on continuing to develop deeper, more meaningful relationships with iwi, hapū, customers, suppliers, regional stakeholders and communities. This will ensure that all our projects are completed while respecting the unique places where we live and work. Eastland Port is working with Ngati Oneone on a range of environmental initiatives. A consultative partnership with the hapū of Turanganui-a-Kiwa has been established, and the port holds regular meetings with the Community Liaison Group. Mana whenua Ngai Tāwhiri have been at the heart of the airport terminal development. We’re working with Tairāwhiti hapū to develop cultural values frameworks that will be applied to our upcoming developments, including those at the port and airport.

Delivering strategic infrastructure and diversifying for resilience

Eastland Group sponsored the new Environment and Sustainability category at the recent Westpac Business Awards. The category was for a business that has introduced products, services, strategies or initiatives that are helping to reduce the organisation’s impact on the environment and improve its long-term sustainability. We’re also a sponsor of River of Man Adventures, the conservation arm of the Mangaotane Farm Trust, which is run by Waihi Generation Manager Peter Swann. The Trust covers 5,500 hectares at the southern end of the Raukumara Range. Our funding helps the volunteers manage pests and protect native species of nga manu (birds) such as the whio (blue duck) and kiwi. We introduced Mates of Tairāwhiti, the workplace mental health and suicide prevention programme, several years ago. Now set up as a registered charitable trust, this programme by and for locals is being expanded across the region.

With each of our infrastructure projects, we consider the environmental impacts and measure our emissions. For example, Eastland Port has invested in an excavator and crushing head which is being used to crush concrete, as part of a recycling programme that will save tonnes of material going to landfill. Instead, it will be turned into construction materials that will be used back at the port.

Tairāwhiti: a new home for new energy

The Tairāwhiti region is rich in natural resources, with high sunshine hours and consistent winds

We aim to leverage the returns on our out-of-region generation investments, and our specialist

blowing above the ridgelines. We also have plentiful bio-waste created by the ever-expanding

expertise, to assess the possibilities of locally situated solar, wind and waste-to-energy plants.

forestry, horticulture and agriculture industries, as well as everyday municipal waste. Protecting our natural environments, our waters and lands, is important to our communities. At the same time, our economy is booming and demands on power continue to increase. Currently, we rely on a single transmission line with two 110kV circuits to supply electricity to all of Wairoa, Gisborne and the East Coast. Significant industrial investment into areas such as wood processing, the growth in new homes and businesses, and the forecast uptake in electric vehicles, are all predicted to put pressure on this power supply. The communities of Tairāwhiti can’t be expected to fund a second transmission line; we need to look at options that can meet the region’s future energy needs, but mean that people pay less for their power than the counterfactual. There are also the pressing demands of climate change. In November 2019, the New Zealand Government passed the Climate Change Response (Zero Carbon) Amendment Act. The headline goal is to reduce New Zealand’s net emissions of all greenhouse gases (except biogenic methane) to zero by 2050. Trust Tairāwhiti have identified regional climate leadership as a priority in their strategic plan, Te Aka Rautaki Ki Te Tau 2026. Given all these challenges, and all this potential, we are actively exploring opportunities for renewable energy generation, right here in our home region of Tairāwhiti.

Eastland Group have been looking at different options for a number of years. The economics of solar and wind are continuing to improve – what would have been non-commercial a few years ago is more economic now. Eastland Network have already conducted a long term domestic solar trial, and the Gisborne Airport terminal, network offices and new port offices all have solar panels on their roofs. We’re monitoring output and testing efficiencies and performance. The next step is to establish a 5MW solar plant, to gain further learnings and build capability in this space. Studies are currently underway and we hope to commission this in the next 18 months. Wind generation technology continues to advance, and we’re in the early stages of assessing potential sites. This is a long term consideration, one that will require significant wind testing, extensive community consultation and access to funding before any decisions are made. We’re also investigating the feasibility of a new combined heat and power (CHP) plant. This would provide steam and electricity from renewable biomass, which is a combination of timber processing by-products and forest residues that are widely available in Tairāwhiti. Concurrently, Eastland Network is preparing for the ‘electrification of everything”, as detailed on pages 52 - 53. Together, we’re looking forward to a Tairāwhiti with the energy capacity and resilience to power a sustainable future.

It has been a busy year for our shareholder, Trust Tairāwhiti.

Report from our shareholder

The Trust released a five-year strategic plan - Te aka rautaki ki te tau 2026 and also launched He Rangitapu He Tohu Ora - a wellbeing framework unique to Tairāwhiti and backed by extensive community engagement. The continued success of Eastland Group enables Trust Tairāwhiti to deliver wellbeing impacts for all communities across the region. The Trust’s strategic focuses are:

FUTURE GENERATIONS Future generations benefit from the assets of the Trust and a more resilient region.

ECONOMIC DEVELOPMENT Supporting an innovative, inclusive, and circular economy with opportunities for well-paid jobs.

COMMUNITY INITIATIVES Supporting community initiatives that make an impact on community wellbeing.

OPERATIONALISING HE RANGITAPU HE TOHU ORA Supporting people and communities of Tairāwhiti to understand and apply our wellbeing framework.

As the region’s economic development agency, the Trust supports small to medium businesses, employment and developing sectors with real growth potential in Tairāwhiti. Trust Tairāwhiti is the programme manager for the Tairāwhiti Economic Action Plan (TEAP), the framework document for regional growth and economic development. The Trust is also part of the regional forum CARE (Commitment, Action and Reciprocity resulting in Employment), which oversees workforce capacity and capability in Tairāwhiti. In 2021, the Trust and regional partners established the Workforce Development Plan which concentrates on growing the skills of local talent and matching them to local work and career opportunities. Trust Tairāwhiti has a dedicated team focused on regional tourism, events and supporting the accommodation and hospitality sectors. Tairāwhiti tourism performed well and recovered quickly after the first COVID-19 lockdown due to its focus on domestic tourism. Tairāwhiti showed the highest growth in New Zealand for the fourth quarter of 2020 at 16.5 percent and the first quarter of 2021 at 24.1 percent.

Community initiatives

Future generations

Economic development

He Rangitapu He Tohu Ora – Tairāwhiti Wellbeing Framework WELLBEING AND IMPACT In 2020, He Rangitapu He Tohu Ora – Tairāwhiti Wellbeing Framework was launched along with supporting tools to help implement it. The Trust has designed business processes that embed the framework into practice. Now the framework is used internally to assess operational activities and services, so the Trust can better understand impact and areas where they can accelerate positive outcomes. As part of understanding impact, they’re developing a set of baseline indicators to determine how they’re doing across the muka – the wellbeing outcomes across the framework. The Trust is also systemising the collection of data and information in their work internally, as well as what they fund and invest in.

EMPOWERING COMMUNITIES TO MEASURE OUTCOMES Trust Tairāwhiti is proud of He Rangitapu He Tohu Ora and is working towards fully operationalising it, not only within the Trust but also within our communities. The priority now is on data governance and management. To measure impact across the framework, quality data is essential so the Trust is developing a secure, integrated data platform. This focus will ensure stakeholders, iwi and communities can have confidence in the data and that funding decisions are backed by evidence.

BUILDING COMMUNITY CAPABILITY Another priority has been building community capability. The Trust has been researching and developing plans to build capability to measure and report on impact. They will be providing workshops and resources to support communities, hapū, marae and not-for-profit groups to capture their impacts and apply this to funding applications. The Trust is also developing a set of baseline indicators to measure the wellbeing outcomes across the framework.

2021 Overview

» 24,832 take offs and landings » 115,130 passenger movements » New airport terminal officially opened » Public Architecture award-winner

Two days after the start of the financial year, the airport shut. It wasn’t until the middle of May that flights restarted, after COVID-19 alert levels dropped. We opened a new terminal in the midst of a pandemic that was causing global disruption to the travel industry. International borders remained closed. And yet, flight numbers are coming back strongly, reaching 87% of pre-COVID levels by 31 March 2021. This vital regional hub connects Tairāwhiti to the rest of New Zealand and is helping to support regional resilience and recovery.

“The grounded engagement between Ngai Tāwhiri and Eastland Group continues to strengthen the relationship,” said Ngai Tāwhiri’s Thelma Karaitiana.

Trust Tairāwhiti chief executive Gavin Murphy said the Trust is proud to have supported the project with their largest ever financial distribution.

Eastland Group chief executive Matt Todd said the collaborative approach has helped create an iconic building.

“The terminal is a stunning gateway into our region. It represents Tairāwhiti and is something that we can all be proud of. It serves locals and manuhiri alike, and you always know where you are when you are welcomed to, or farewelled from, our region.”

“We acknowledge and thank everyone who has been part of this journey, especially in a challenging year with COVID-19. “Everything about this terminal is uniquely Tairāwhiti, and speaks to the place we call home. It is an important economic and tourism enabler for the region, and keeps Tairāwhiti connected to the rest of New Zealand and the world. “The environment is an important focus for our community, and Gisborne Airport is the most sustainable terminal in New Zealand. Innovative new features include solar panels, rainwater harvesting and rammed earth walls.”

Iconic new airport terminal opens At 4.30am on Wednesday 30 September 2020, a blessing ceremony was held at the newly completed Gisborne airport terminal building. At 5am, the doors opened to the public and the first passengers checked in to the early morning Air New Zealand flight to Wellington. This was followed by the official opening on 4 November, with hundreds turning out to celebrate. Iwi and hapū from across Tairāwhiti, central and local government representatives, Air New Zealand representatives and contractors and many others attended the opening. Mayor Rehette Stoltz described the building as the “coolest airport in Aotearoa”. The work was funded by Eastland Group ($2 million), Trust Tairāwhiti ($5 million) and the government’s Kānoa – Regional Economic Development and Investment Unit, previously called the Provincial Growth Fund ($5.5 million). Throughout the project, airport operators Eastland Group worked closely with Ngai Tāwhiri, who hold mana whenua over the area, architects Tennent Brown and Architects 44, along with consultant Karl Johnstone and artists Sir Derek Lardelli and Tiopira Rauna.

Opening of the new Gisborne Airport terminal:

The new terminal includes an upgraded check-in area, café, and new baggage belt in the arrivals area. Over the main entranceways, airside and landside, visitors are invited inside by pares carved from totara by Tiopira Rauna and his students at Te Wananga o Aotearoa. Soaring across the ceiling is a 42 metre carved tahuhu designed by Sir Derek Lardelli. The tahuhu represents Manaia, the mana of the people, and carries the aspirations of the people.

Award-winning public architecture

The new Gisborne Airport terminal has won the Gisborne and Hawke’s Bay Public Architecture Award at the Te Kāhui Whaihanga New Zealand Institute of Architects (NZIA) Local Awards. The terminal was designed by Tennent Brown Architects and Gisborne-based firm Architects 44, and developed alongside Ngai Tāwhiri. McMillan and Lockwood constructed the building and Civil Project Solutions were the project managers. The judges said: “The new terminal building at Gisborne Airport is a success on many levels. Tairāwhiti people express pride in how the building represents their community and creates a positive first impression for visitors… “The simple, elegant building form is enhanced with cultural references that are meaningful and embedded in their context. These include a CNC-carved tahuhu running the length of the spine of the main space, which is both beautiful and a functional part of the building services reticulation. “The deep commitment to sustainability has resulted in an economical but carefully configured form to maximise passive temperature control measures, and a material palette that minimises energy and carbon impacts.”

Scan with your phone camera and watch 15 months of construction in under 2 minutes:

Wai restoration

Students and the community started coming together in 2019 to plant thousands of native shrubs and trees along the Waikanae Stream in the airport precinct. The students are learning about the environment, developing practical skills, and discovering some of the stories and history of the stream and surroundings. Together, they’re protecting the local environment and helping to improve the health of the awa and whenua. With the new terminal now finished, the airport team are planning to continue uplifting and enhancing the entire precinct. They hope to eventually fence and plant all the waterways within the airport area. Our thanks to everyone who has been involved, particularly Ngai Tāwhiri, Nga Mahi Te Atiao, Tūranga Ararau, Women’s Native Tree Project Trust, EnviroSchools and the Wai Restoration crew.

Scan with your phone camera and watch the 2020 planting day:

Gisborne Airport upgrades complete

New Te Araroa aerodrome

The Gisborne Airport team burned the midnight oil in February, as they put the finishing touches to the new terminal development. Over several nights, once the last flight of the evening landed and passengers disembarked, the airport came alive with activity.

Te Araroa’s new aerodrome is operational, thanks to a partnership between Eastland Group and Te Rimu Trust. An initial contribution from Eastland Group and Trust Tairāwhiti of $23,000 each funded the initial preparation works, and this was followed up with funding of just under $100,000 from the government’s Kānoa – Regional Economic Development and Investment Unit Whenua Māori allocation. The aerodrome is on a block of Te Rimu Trust’s coastal land beside East Cape Manuka Café. It will support business and recreational activities and improve transport resilience, and is part of wider plans for a major regional hub. Eastland Group also helped support an upgrade project, also government-funded, for the Ruatoria aerodrome. With both aerodromes available for private and commercial use, they will help make the East Cape more accessible for locals and visitors.

Airside, parts of the runway were resealed and resurfaced, along with some areas of the taxiway. Landside, outside the front of the terminal, the taxi lane was finished with new asphalt. It was a significant logistical exercise. Up to 20 workers from Higgins and their subcontractors were on site at any one time to get the project finished quickly and efficiently, with minimal disruption to passengers, neighbours and tenants.

Climbing for a good cause: The Gizzy Airport Fire Flyers and the Gizzy Sky Tower Squad tested their mettle in the 2021 Firefighter Sky Tower Stair Challenge. They climbed the second tallest building in the Southern Hemisphere, in full kit, and together raised $12,220 for Leukaemia and Blood Cancer NZ – a record local amount. We were proud to make a donation in support of Quentin Hamilton and TJ Reade, who are based at Gisborne Airport.

Modular housing and heavy transport facilities

Construction company Iconiq Group will be establishing a new modular housing facility at the airport. Some of the homes will be used to help with transitional housing, and some will be sold on the property market. They’re also running a pre-employment programme for rangatahi who want to get into a trade. We provided them with a temporary home at Eastland Port’s Dunstan road site while consents for their new airport location were processed. We’re also establishing three heavy vehicle depots on the western side of the airport. Together, these commercial enterprises will increase and build resilience in airport revenue. A master plan is being created to ensure careful long-term development of the overall site.

Air traffic control review At the start of the financial year, Airways NZ announced they were considering withdrawing air traffic control services at Gisborne Airport and six other regional aerodromes. We’ve spent the last 12 months hearing the views of everyone who uses air traffic control, developing a safety case, and working through options with Airways, the Civil Aviation Authority and other affected airports. As of June 2021, a report from consultants was completed and presented to the Eastland Group board. The outcome will be finalised after further discussions with the CAA and other stakeholders. Our priority remains the ongoing safe operation of the airport.

Health and safety Maintaining the highest standards of health and safety, and complying with all Civil Aviation Authority regulations, is an ongoing responsibility for the airport team. This year they made sure that all Ministry of Health COVID-19 protocols were followed, with travellers being kept informed via Air New Zealand, signage in the terminal and on Facebook. They also developed and implemented a comprehensive new Safety Management System. This is a major piece of work, and includes a new online airside health and safety induction – part of our obligations under the Health and Safety at Work Act.

2021 Overview

» Just under 3 million tonnes of cargo exported » 115 logging ships, 9 produce ships and 1 naval vessel berthed » New daily and monthly cart-in records set » Highest September export month ever » Twin Berth project underway

This year has been one of dramatic extremes. In April 2020 we had no logging ships, the port was stacked high with wood, and all major infrastructure developments were on hold. We finished the financial year by breaking new records and gaining resource consent for Stage 1 of the long-planned Twin Berth development. Thank you to our staff, ISO, our customers, and everyone in the supply chain who have worked so hard to get exports back up and running so successfully. And all this while following the strictest health and safety protocols. Despite the ongoing uncertainties and challenges of the COVID-19 pandemic, Eastland Port is strongly positioned to help underpin Tairāwhiti’s future economic growth.

In April 2020, New Zealand was in COVID-19 Alert Level 4 lockdown and the impacts on the supply chain were starkly visible. The financial year had started as the previous one ended, with no logging ships moving. 106,000 tonnes of harvested logs were sitting at Eastland Port. The port’s exports were less than a third of budget, causing the first monthly financial loss in many years. In mid-April we were granted a dispensation and started moving logs from the Dunstan Road storage facility to the port in a closed loop operation. The first logging vessel arrived on 22 April, and was a welcome sight.

“What a difference a month makes!”

“What a difference a month makes!” said Eastland Group Chief Operating Officer Andrew Gaddum in May. As the region moved out of Level 4, the forestry industry roared into life and was quickly running near an all-time high. Strong cart-in volumes, consistent shipping, fair weather, solid log pricing and bullish international demand saw the port immediately bounce back to a $1.3 million profit for the month. Twelve logging ships (50% more than forecast) and one kiwifruit ship came through in May, with exports reaching 288,000 tonnes. It was the start of a recovery that set the scene for the rest of a very positive financial year - one that had seemed unimaginable in those quiet and unpredictable days of lockdown. In June, exports were 250,000 tonnes. We had the highest September export month ever with 267,000 tonnes exported. The records continued to tumble. In December, we had the highest average daily cart-in in our history, regularly reaching over 15,000 tonnes per day. Eastland Port finished the financial year by achieving record cart-in and shipping volumes in March 2021. We shipped 337,698 tonnes of wood, a new monthly record. Cart-in was 341,673 – yet another record. Despite the unique challenges of COVID-19, and the usual impacts of the weather, we exported: • 2,985,078 tonnes of logs on 115 ships • 10,542 tonnes of squash on 6 ships • 3,510 tonnes of kiwifruit on 3 ships. In total, we exported 2,999,130 tonnes, ahead of 2020’s result of 2,890,730 tonnes. It’s now a common sight for multiple ships to be lined up in the bay, waiting their turn to berth. Despite being the most efficient log-exporting port in New Zealand, we are tapped out and can’t accommodate any more exports across our wharves. That’s why our Twin Berth development is so critical for the future growth of the regional economy. See pages 40 - 41 for details.

Eastland Debarking Eastland Debarking operations Manager Steve O’Dwyer is pictured beside the Nicholson A2 Debarker. The bark is stripped from the logs, and we donate the fine bark mulch to schools and community groups. (Eastland Port does not use methyl bromide.) It was a year of mixed fortunes for our debarking operations. During the COVID-19 lockdown we redeployed staff wherever possible to other business units or shifts. The lockdown impacted volumes, but Eastland Debarking has recovered well heading into the new financial year. Northland Debarking signed a significant new customer, and introduced new pricing, which saw them finish the year strongly. Staff are being recruited and a loader relocated to meet the increasing demand.

Commercial property Starting the new financial year in lockdown, with many of our tenants having to close their doors, the future was uncertain. We worked with our tenants and other license and leaseholders to help ease the impacts, with solutions including rental deferments and abatements. By the end of May, the local hospitality industry was back in full swing, and the month proved to be an exceptional one for new property leases and renewals. Our team moved into the newly completed port offices, which were designed by Architects 44. This refurbishment of an old port building subsequently won an Interior Architecture Award in the Te Kāhui Whaihanga New Zealand Institute of Architects Local Awards 2021. A multi-year programme to strengthen all earthquakeprone buildings within the Cookstores complex was completed, with strengthening work underway on buildings around the inner harbour as required. The Gisborne Tatapouri Sports Fishing Club has 5,000 adult members and brings a real vibrancy to the inner harbour precinct. After signing a Memorandum of Understanding, we’re working together to design a major upgrade and refurbishment of the clubrooms.

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Inner harbour precinct

The inner harbour is part of a working port as well as being a community destination, which gives it a vibrant maritime atmosphere. We’ve created four wharf-groves with native plants, and installed drinking fountains and bike racks, along with new sunshades and bench seats crafted from recycled tōtara. Together with Gisborne District Council’s harbourmaster, Ngati Oneone and Māori wardens, over summer we opened up an area of wharf as a dedicated jumping site for swimmers. This was a trial to see if we could help reduce the issue of people swimming near the boat ramp. It was a success, and we aim to add further landscaping to improve the area.

At Eastland Port we’re preparing for our largest and most significant developments in more than a century.

Over the next few years, it’s estimated that Twin Berth Stage 2 construction alone will result in:

On December 2, the Environment Court signed off the resource consents for Stage 1 of the Twin Berth project: the rebuild of Wharf 7 and the slipway. This is the culmination of a process we started five years ago. It’s a significant milestone for Eastland Port and the Tairāwhiti community, and one we’ve worked together to achieve.

Biggest infrastructure developments in 100 years

Construction will begin later in 2021. The contractors will demolish and then rebuild Wharf 7 so it has the strength to allow mobile harbour cranes to operate on it, berth larger ships and provide a stronger, more resilient lifeline asset for Tairāwhiti. Construction is expected to take approximately 14 months. The port team are working closely with our customers, other port users and the community to make sure they’re kept updated. We’re aiming to manage logistics and minimise the impacts of the construction work as much as possible.

86 additional FTE jobs for locals

Future economic benefits

Once construction of both stages of Twin Berth are complete, the ongoing benefits to Tairāwhiti are even more promising. The project will accommodate the forecast increase in the region’s forestry exports. If it’s also successful in attracting a coastal container service for exporting a significant share of the region’s agricultural and horticultural projects, it’s estimated that Eastland Port will help sustain:

Later this year we will lodge the Stage 2 resource consent application. Community consultation is key, and includes presentations, newsletters, emails, drop-in sessions, a website and other opportunities to share ideas. When completed, the Twin Berth will allow two 185–200 metre long ships to berth, load and unload at once. This will help support Tairāwhiti’s long term economic growth by unlocking the potential of a coastal container service, providing the capacity needed by a thriving forestry industry, offering more opportunities to exporters and importers, and creating more jobs across Tairāwhiti. It will also support the Government’s renewed focus on coastal shipping to help reduce our country’s carbon emissions.

$17.9 million per annum additional revenue spent with Tairāwhiti businesses

Upwards of 40% of Tairāwhiti's economic activity

Around 43% of the region's total employment

Over 5,500 jobs in the region are linked to port activity. An economic impact assessment report carried out by Brown, Copeland and Co. suggests that, by 2028, opening up export and import capacity and opportunities could see the port support the creation of another 3,000 jobs across Tairāwhiti.

Respecting the environment 6 5

8 3 1

STAGE 1

STAGE 2

Slipway reconfiguration

Wharf 8 extension (Dredging and to fit a 185m vessel)

Dredging the outer channel

Wharf 7 rebuild (Dredging and to fit a 200m vessel)

4 5

1.5ha reclamation

Dredging the inner channel

Breakwater repairs

Dredging the turning basin

Scan with your phone camera and learn more about Twin Berth:

Current walkway New walkway

A massive transformation of the Waikahua seawall, which runs along our southern log yard, is currently underway. Consents were granted in 2018 and, after an early morning blessing with Ngati Oneone, port staff and contractors, the project kicked off in June 2021. It will be completed by the end of the year.

Seawall to create new community space

Artist’s impressions

Rising up to seven metres high, the seawall is a vital line of defence that protects the port against disruptive swells, large waves and erosion. It will be significantly strengthened to improve its overall appearance and performance. As part of this upgrade, we saw a unique opportunity to develop it into a space that connects with the sea, for the whole community to enjoy. The work has been broken down into three stages, with the first two focused on making the seawall more functional, and forming the roadway that will be used to service the port in future. The final stage will bring the seawall to life. The stacked logs will be moved back from the public area, which will feature outdoor furniture, fishing facilities and picnic spots surrounded by native trees and plants. A boardwalk will connect Waikahua to the Turanga walking track around the base of Titirangi, which we built and opened in 2019. Waikahua is the name given to the swell that covers the Kaiti reefs.

“Supporting local water-based athletes is something Eastland Port is passionate about,” says chief operating officer Andrew Gaddum.

Sponsorship in action

“With port operations centred around Tūranganui-a-Kiwa/Poverty Bay, we are always looking for new opportunities to encourage our communities to enjoy and experience the bay.” This year we introduced our inaugural water sports sponsorship fund. Six young local athletes each received $1,000 to help them with their costs.

A piece of port history

Congratulations to the successful applicants: kayakers Emma Brownlie and Quaid Thompson, triathlete Josiah Ney, surfing siblings Finn and Saffi Vette, and surf lifesaver/swimmer Lachie Falloon.

The Tairāwhiti waka hourua is carrying a piece of port history in the form of a 120 year old totara beam. The totara was discovered during excavations for Eastland Port’s wharfside log yard in 2018 and was originally part of the old wharf structure. The beam has been used to hold the waka’s tender Ariā securely in place and lift it higher so it’s safe in big swells. Master carver Matahi Brightwell has given them some guidance and helped them to lash it on the back of the waka. Reconnecting the people of Tairāwhiti with waka voyaging is the core purpose behind Tairāwhiti waka hourua, which has been operating since 2017. The waka’s dedicated berth in the marina was purpose built by Eastland Port, as part of our support for this unique recreation of local voyaging history.

Emma said the funding would be a huge help. “I’m really grateful to receive this funding and to know that Eastland Port is backing local athletes from our region. After such an unusual and challenging year, it means a lot to me to get something positive that I can put back into my sport.”

Onboard the Ariā are Eastland Port commercial manager and trustee of the Tairāwhiti Voyaging Trust Hayden Green, Orohena Brightwell and Jorge Sanchez.

We also sponsored several high profile surf lifesaving events. In January, over 400 youngsters from around New Zealand competed in the Eastland Port Eastern Regional Junior Surf Life Saving Championships at Midway Beach. Our sponsorship helps to keep entry fees as low as possible. Also in January, we were a sponsor of the Ocean Warrior board paddling and swim series for surf lifeguards. Four Ocean Warrior kaiārahi (leaders), some of the biggest names in the sport, mentored over 60 talented surf athletes aged 11-17.

Supporting the steam train After a year of disruptions caused by COVID-19, Gisborne City Vintage Railway is back on track and running excursions throughout the year. Eastland Port is helping to make this possible by providing sponsorship again this year. The sponsorship is valued at $10,000 and will go towards maintaining the length of railway that links the Inner Harbour and rail bridge with the city and main line south. We are proud to support GCVR and help ensure the iconic Wa165 steam train can continue to offer this special tourism experience in Tairāwhiti.

2021 Overview

» 284.3 GWh distributed across the network » 25,783 total connections » New Time of Use pricing introduced » New Asset Management Plan implemented » Full compliance with quality regulations

The year started with almost everyone at home, so keeping their power on was our priority. Fortunately, April saw fewer faults than usual, with settled weather. We followed all industry protocols to keep our staff safe and locked down our control room. As we moved down the alert levels, we restarted asset inspections, repairs and some urgent tree work, followed by our pole replacement programme. Despite the unusual patterns of power consumption during lockdown, our total energy distributed across Wairoa and Tairāwhiti was up on 2020’s 283 GWh, and demand continues to grow.

A year of change This year we delivered 284.3 GWh of power to 20,236 domestic and 5,547 non-domestic consumers across 12,000 square kilometres. This is compared with 282.7 GWh in 2020. We achieved full compliance with service quality regulations once again, for both SAIDI (System Average Interruption Duration index) and SAIFI (System Average Interruption Frequency Index). Operationally, the network has undergone a year of change, reorganisation and improvements. We have undertaken one of the most significant pieces of work in our history, with the complete overhaul of the asset management plan. A committee was formed to oversee and undertake this process. The plan identifies the most effective ways to allocate spending on asset maintenance and upgrades, and has further enhanced our asset inspection regime. Our vegetation management plan was updated, with electronic checklists developed to ensure the data is captured consistently. New asset inspection protocols were peer reviewed. Adopting the DNO Common Asset Indices Methodology was a major undertaking. The Network Public Safety Management Systems audit was completed and we continue to maintain our levels of compliance.

Eastland Tree Clearance Project

We also introduced new efficiencies and continued to improve our 24/7 responsiveness to outages. We brought the Eastech faults team in-house, ensured we had the right resources and skills through our partnership with Electrinet, and extended our control room hours and staffing levels. Major Matawai upgrades were completed, with new poles installed and new automation capability – instead of dispatching a faultman to manually switch over during faults, this will be undertaken remotely.

The Eastland Tree Clearance Project was part of the $23.755 million Tairāwhiti Economic Support Package’s Redeployment Programme. This was funded through the Ministry of Business, Innovation and Employment and managed by Gisborne District Council.

Work began on replacing the Patutahi substation, one of the three 60+ year old single phase transformer banks left in our network. This will increase capacity from 5MW to 12.5MW at the substation, which will accommodate the growth being seen in horticultural areas. Work is also underway to split the Kaiti and Coast 50kV feeders, which will significantly reduce the SAIFI and SAIDI for outages on the Coast line. Advanced Tree Solutions’ Paul Brown and Toni Sadlier from Eastland Tree Care joined in the graduation ceremony at Eastland Network.

Storm damage and outages

It came in response to the immediate effects of COVID-19 on Tairāwhiti. The intention was to redeploy people who were out of work, unemployed or underemployed due to the impacts of COVID-19. The Eastland Tree Clearance Project was a collaboration between Eastland Group, Eastland Network and local tree contractors Advanced Tree Solutions (ATS) and Eastland Tree Care. It has been a life-changing experience for the 25 people who took part. They received certificates acknowledging the work done and skills gained through the project at a special graduation ceremony.

While it’s been a year of change at Eastland Network, the causes of power outages remain the same: largely, bad weather and vegetation on lines. Winter was a busy time with planned and unplanned outages. Areas north of Tolaga Bay, in particular, sustained large amounts of rain in a short period of time, with the team taking seven days to make all the repairs safely.

Thirteen candidates were redeployed into new jobs during the project and seven more were redeployed at its completion. Five of the candidates who gained full-time employment have taken on apprenticeships with the assistance of the Mana in Mahi MSD scheme.

In September we had a Major Event for SAIDI caused by extreme winds. We were impacted with outages right across Wairoa and Tairāwhiti, and crews worked extended hours over several days to get the power back on to everyone.

New Zealand Energy Awards Eastland Network’s Asset Planning Manager Mikaere Ngarimu has led our asset management plan development and implementation. Highly regarded by his workmates and the wider industry, Mikaere is one of our rising stars. His achievements were recognised when he was one of the three finalists in the Young Energy Professional of the Year category at the New Zealand Energy Excellence Awards. After being postponed a year due to COVID, the awards were held in early May 2021 in Wellington.

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EASTLAND GROUP ANNUAL REPORT 2021

Mikaere is pictured top row, 7th from left, with his family and colleagues from Eastland Network and Eastland Group.

EASTLAND GROUP ANNUAL REPORT 2021

Watch our video entry for the awards here:

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The Commerce Commission regulates the default pricequality paths (DPPs) that apply to 15 electricity distribution businesses around New Zealand, including Eastland Network. We are now in the second year of our five year DPP. Operating within the allowable revenues set by the Commerce Commission, we review our pricing and tariff structures annually.

New pricing introduced

On average, Eastland Network’s line charges (a combination of transmission and distribution charges) make up around 30-40 percent of the total cost on an electricity bill, although this does vary depending on different retailer offers. We have long focused on ensuring simple pricing structures and stable distribution prices, providing a secure power supply for the region at a reasonable price. With people spending more time at home during the higher COVID alert levels, we saw high power consumption in the domestic sector. Due to this, variable tariffs were temporarily reduced from December 2020 to March 2021 by up to 38%. Our new annual pricing came into effect from 1 April 2021. There was a small reduction in Network’s distribution charges for 72% of residential customers, compared with the previous year. Domestic high power users saw a slight increase in distribution charge, and there was no rise in transmission costs.

New Time of Use (T0U) tariff

For help picking a plan go to Consumer NZ’s powerswitch.org.nz For more details on our new pricing visit eastland.nz/eastland-network/new-pricing

The world is changing, and Eastland Network is getting ready to change with it. We have to be ready for future increases in the demand for electricity, and how and when people across Tairāwhiti and Wairoa will be using their power.

Preparing for “the electrification of everything”

In other words, the electrification of everything. So, we’re preparing for the rapidly increasing pace of energy transformation. This is coming as a result of the improving economics of new technology and in response to climate change. It will involve growth in the installation of small-scale distributed generation like solar PV and batteries and an increasing uptake of electric vehicles across the network. “We predict our region will be slower than the rest of the country in terms of EV uptake because of our demographic but we still have to be ready,” says Eastland Network general manager Jarred Moroney. “At peak times we are already close to capacity, so imagine if every second household came home and plugged in their cars at the same time.

Three key projects In order to meet the region’s baseline load growth, Eastland Network is working on three incremental projects which are detailed in our asset management plan: 1. Increasing MW capacity to 57.5MW by the end of the 2025 financial year. To do this the Network will install four 6MVAr 50kV capacitor banks. 2. The thermal upgrade of the Tuai-Gisborne 110kV lines to address the potential issue of overheating as a result of increased demand. The upgrade includes clearing high points under the tower line; increasing the height of the twin pole structures; increasing the height of the towers; and tower and foundation strengthening and insulator replacement. 3. Installing two additional 6MVAr 50kV capacitor banks which will increase regional electricity capacity to 68MW by the end of the 2034 financial year.

“We’re already starting to see what used to be our peak demand occurring over winter now starting to be modelled during summer. This is being caused by the increase in heat pumps and people not only using them to warm their houses but to cool them on summer nights. “We have to make sure our assets are ready for these increases in demand. “We’re also getting prepared for large scale industrial load growth to ensure it can support regional economic development.”

More power to Mahia

Additionally, the Network is tackling the long-time moratorium on new power connections in Mahia. With peak period demand now above our transformer and line capacity on the peninsula, we can’t supply any new connections until we’ve addressed this. We’ve committed to purchasing a new transformer this year, and are aiming to have a new substation built and the line upgraded within three years - as long as we can secure the required land. In the meantime, we’re replacing or reconductoring a series of poles, and carrying out planned maintenance to strengthen the capacity of the existing network.

Together with Eastland Group, Eastland Generation and local stakeholders, the Network is investigating a range of renewable generation opportunities in Tairāwhiti. See pages 16 - 17 for further details.

Exploring new opportunities

All of the power generated using these alternative methods would go through Eastland Network’s Gisborne substation and be distributed from there. “We’re also exploring the viability of an alternative transmission line as another option,” Mr Moroney says. “Building another transmission line would be complex and extremely time consuming but we need to make sure this piece of work is included in the overall review of demand requirements for this region.”

Addressing climate change The challenge of increased future demand for electricity and the pressures this will place on infrastructure - is being faced by networks across the country. We are a member of the Electricity Networks Association and as an industry we’re working on solutions. All electricity distribution businesses need to be ready when the government announces new regulations to address climate change.

The most testing part for the Network team is understanding what these regulations will involve and ensuring any development work is not done on a ‘just-in-time’ basis. But we are already making changes now, by building improvements into our work so we’re modelling the load and considering upsizing for step-change growth.

EASTLAND GROUP ANNUAL REPORT 2021

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Many of Eastland Network’s staff have a background in science, technology, engineering or maths (STEM). So each year, we encourage students across the region to get involved in STEM learning in fun, inventive and collaborative ways. EPro8 is the inter-school science and engineering competition. Over 10,000 students across New Zealand take part each year, with teams of four tackling a range of real world challenges. Eastland Network sponsored the Tairāwhiti competition for the first time in 2021. General manager Jarred Moroney and engineer George Whakatope presented trophies to Challenge Champions Years 7 & 8, the Typical Top Hats from Ilminster Intermediate, and Challenge Champions Years 5 & 6, Frasertown 1. We’re also the name sponsors of the Science and Technology Fair, which has been going strong in Tairāwhiti for more than four decades. It was cancelled in 2020 due to COVID, but is back in 2021 with a new vision, location and categories. The more holistic and inclusive format includes new categories such as ‘science through art’, featuring sculpture and installations, and ‘technology through art’ where students can enter a working model. The Eastland Network Science and Technology Fair is run by a committee of seven volunteers who are passionate about STEM.

STEM for students

2021 Overview

» Generated enough renewable energy to power 28,000 homes » Contributed 29% to Eastland Group revenue » Reinforced the importance of a diverse asset portfolio » New geothermal power plant projects underway

At the start of the financial year, huge uncertainty about the impacts of COVID-19 hung over the country and several of our business sectors. It was a time when our Eastland Generation portfolio demonstrated the true worth of sector and geographic diversity. As lifeline utilities, the plants continued to generate electricity, and income, throughout lockdown and beyond. Their steady performance provided a solid financial bedrock for our entire organisation, and helped drive a strong overall resurgence as alert levels were eased.

At the start of this financial year, Eastland Generation owned two plants on the Kawerau geothermal field: the 9MW Geothermal Developments Ltd (GDL) and the 25MW Te Ahi O Maui. We also own the 5MW Waihi Hydro Scheme at Lake Ruapapa northwest of Wairoa, which holds approximately two million cubic metres of water. Eastland Group’s generation portfolio is largely based out of region, to ensure industry and geographic diversity.

100MW of renewable generation by 2025

By the end of this year, we were close to completing the purchase of a third, 26MW geothermal power plant, and making plans to drill an exploration well for a fourth. (See overleaf for further information.) Combined, they see us accelerating towards 100MW of renewable generation by 2025.

Electricity spot prices and sales

It was another volatile year for electricity spot prices. In April during the COVID-19 lockdown, spot prices averaged $43.80/MWh at Kawerau, with fluctuations between day and night time prices. By mid May, as COVID-19 restrictions were relaxed and demand soared, spot prices had doubled. By June, they had risen again to an average of $152/MWh. Eastland Generation actively manages its hedge portfolio, marketing and selling electricity to manage electricity price risk. We made five electricity sales in June and July alone. A highlight was a sale to Electric Kiwi, meaning Eastland Generation now supplies three independent electricity retailers. Two sales in August and September took advantage of relatively high futures prices, six hedges were put in place in September, and further sales were made through the rest of the financial year.

This, quite simply, is our generation strategy. We envisage this portfolio to consist largely of out of region geothermal power plants, plus other types of renewable energy generation located in our home region of Tairāwhiti. In the meantime, our existing plants have continued to operate strongly throughout the year, making an important - and growing - financial contribution to the Group’s overall returns. Off the back of strong electricity spot prices, Te Ahi O Maui, GDL and Waihi delivered 29% of Eastland Group’s revenue in 2021, up from 20% in 2020. Our total output for the year was 285 GWh, compared with 258 GWh in 2020. This is enough to power 28,000 homes.

GDL also had excellent availability, achieving 100% for well over half the year. In June we carried out work on the transmission line, generator and circuit breaker systems. In September, a planned two day shut allowed us to take care of essential plant maintenance, with a focus on the inspection and verification of safety critical elements. Repairs were also undertaken on the back up diesel generator and UPS systems.

Geothermal Developments Ltd (GDL)

Te Ahi O Maui

Waihi Hydro Scheme

Te Ahi O Maui’s availability was consistent throughout the year, and it continued to generate good returns. In May, we achieved some peak cold day outputs of 27MW.

The weather had noticeable effects on Waihi’s results this year. Early in 2021, a 76% decrease in monthly average rainfall affected reservoir storage and generation output, but by June good rainfall contributed to a strong output of 1,340 MWh.

In October, a two day planned shut was undertaken to inspect and verify safety-critical elements and carry out some preventative maintenance. No significant issues were identified.

Divers completed upstream dredging of all sluice gates and intake screens. The first stage of the turbine cooling repairs was finished, along with the maintenance and repainting of the penstocks. Easement and resource consent reviews continued throughout the year. We began planting native seedlings on land above the high water line, to help regenerate this remote area.

In April 2020, in the middle of New Zealand’s COVID-19 lockdown, the Government tasked a group of industry leaders to seek out infrastructure projects that were ready to start as soon as the construction industry returned to normal. This was to help reduce the economic impacts of the COVID-19 pandemic. The Infrastructure Reference Group received just under 2,000 submissions on “shovel-ready” projects, with Government stimulus funding awarded to a range of approved initiatives following due diligence. One of the successful funding recipients was the new Taheke Geothermal Project. This is a partnership between Eastland Generation and The Proprietors of Taheke 8C & Adjoining Blocks Incorporation. The goal is to build a new power plant that unlocks and develops the geothermal resource beneath Taheke 8C’s whenua, which is located northeast of Lake Rotorua. The project was awarded $11.9 million as a suspensory concessionary loan. This will cover the enabling portion of the project - the design, consenting, civil works and well pads, and the drilling of an exploratory geothermal well. “As Kaitiaki, Taheke 8C administer our land sustainably and profitably,” said Tawhiri Morehu, Chairperson of The Proprietors of Taheke 8C & Adjoining Blocks Incorporation. “This is a significant milestone for our shareholders and future generations. Once constructed, the geothermal power station will enable Taheke 8C to continue to financially support the cultural, social and economic goals of our Māori shareholders. It will also support our goal to provide renewable electricity security for our region.” The Taheke Geothermal Project reinforces Eastland Group’s ongoing commitment to building a portfolio that’s truly diversified, in terms of both industry and geography. This diversification helps support the resilience of our company and our local communities. The past months have been spent working with The Proprietors of Taheke 8C & Adjoining Blocks Incorporation, finalising financing details, and planning the start of operations – including securing a drilling rig and confirming the spud date.

Government funding towards new project

Communities to benefit from new investments “Our generation investments out of region bring an enormous amount of value back to Tairāwhiti,” said Mr Todd. “Firstly, they provide strong sector and geographical diversity. They deliver excellent returns to our sole shareholder Trust Tairāwhiti, to support regional wellbeing and economic growth. “Plus, we’re leveraging the returns on these investments and our specialist expertise to explore new renewable generation opportunities in Tairāwhiti itself – including solar, wind, and waste to energy plants.”

Alignment to the Trust’s wellbeing framework

As the financial year came to a close, negotiations to buy a new geothermal power station were well advanced. On 2 June 2021, we announced that Eastland Generation had purchased the 26MW Kawerau TOPP1 geothermal power station from Ngāti Tūwharetoa Geothermal Assets (NTGA).

New plant added to portfolio

We also entered into long term geothermal fuel supply agreements that will underpin plant performance, as well as provide options to collectively develop new power stations in the future. The purchase price paid was $83 million, with Eastland Generation taking over ownership of TOPP1 on 30 June 2021. Eastland Generation and NTGA share natural alignments in terms of our trust ownership structures, our kaupapa of development, and our focus on a transition to a low carbon future. We’re committed to the sustainable management of the Kawerau reservoir, and champion a kaitiakitanga approach to operations. The sale sees both organisations furthering ambitions for expansion in the renewable energy space and decarbonising the New Zealand electricity market. In the announcement, Eastland Group Chief Executive Matt Todd said it was an important next step in the company’s growth plans.

“This adds scale to our portfolio and means we are becoming a truly significant developer, owner and operator of renewable energy in the New Zealand market. TOPP1 will provide operational synergies across our three geothermal plants. Importantly, our agreement with NTGA also gives us further development options on the Kawerau field.” NTGA is the largest direct use steam supplier in the world, and are a wholly owned commercial entity of the Ngāti Tūwharetoa (Bay of Plenty) Settlement Trust (NTST). Their energy supply business provides long-term socioeconomic benefits for Ngāti Tūwharetoa ki Kawerau, the wider Kawerau community, and the Bay of Plenty Region. The Chair of NTST, Karilyn Te Riini, said: “This transaction allows the Tūwharetoa group to grow the scale of our steam supply business. It also increases our financial capacity to both diversify our commercial interests and increase the level of support provided to our owners.”

Living our values

At 31 March 2021, across all of our business sectors, we employed a total of 116 permanent staff. This is an increase of five on the same time last year, and includes the new port protection team, who we have now brought in-house.

Work smart Own it Be safe Mahi tahi Āwhina

NEW INDUCTION PROCESS

STAFF ENGAGEMENT SURVEY 2020

Inducting new team members, helping them become fully engaged with their role and Eastland Group, now includes a bespoke process. For all new employees, their first few hours of their first day are spent with the People and Performance team. Key policies, what Eastland Group does, and how we all contribute to making things happen are discussed. It’s an interactive, informative and welcoming way to start their new role with us.

There were many positive findings in the latest staff engagement survey, with responses showing that people think Eastland Group is a great place to work.

We also send an email and photo to all staff, introducing the newest member of the team.

HEALTH AND SAFETY We continue to focus on improving health and safety protocols and outcomes, both to meet the requirements of regulators across the industries in which we operate, and to ensure that everyone who works here goes home safely every day. As we operate lifeline businesses, we saw COVID-19 requirements for staff and public change a number of times, and made sure everyone was aware of complying with requirements. We worked with Hauora Tairāwhiti, the regional health board, to implement mandatory COVID-19 testing of border-facing workers at the port.

NEW INTEGRATED MANAGEMENT SYSTEM (IMS) The purpose of the new IMS is to improve performance in operations, health and safety and environmental practices, and ensure greater consistency across Eastland Group sectors. It was developed by the People and Performance team with input from staff across the Group, and contains easy to follow processes and tools.

NEW STAFF NEWSLETTER As COVID-19’s impacts began to be felt, we started regular COVID-19 updates from our chief executive to all staff. They helped to keep everyone connected through lockdown and shared important information. Building on this, we launched an email staff newsletter in August 2020: Rōpū Kōrero. It continued to go from strength to strength in 2021. It features newsworthy events across the sectors, and has a section called Community Heart which focuses on some of the inspiring things our people do outside of work. There are also fun competitions and a safe driver segment.

Health and Safety scored very highly, showing that staff are aware of and confident in procedures, and take responsibility for their own health and safety as well as others in their teams.

POST-LOCKDOWN SURVEY Another survey was conducted to see how staff were feeling after the COVID-19 lockdown last year. This was done to get feedback on how supported people felt by the company during lockdown and as a gauge of general staff wellbeing.

STAFF WELLBEING We continue to look at the best ways to look after the wellbeing of our staff in this ever-changing world. We have put a greater emphasis on communication to keep staff engaged and looking out for each other. We brought in new flexible working guidelines and continue to encourage and promote healthy initiatives for staff. Due to COVID-19, training has changed and we are supporting and encouraging staff to engage with training online and via webinars as we progress into a new way of learning.

Throughout the year our staff supported and raised funds for a range of charities and community initiatives, such as Movember (raising awareness of men’s health issues), Pink Shirt Day (standing together to stop bullying), and Loud Shirt Friday (a new monthly tradition at Eastland Port).

HEALTH AND SAFETY The health and safety of every employee, contractor, supplier and customer, as well as the wider community, is of paramount importance.

THE BOARD’S ROLE The Eastland Group Limited board is appointed by the trustees of the company’s sole shareholder, Trust Tairāwhiti. Governance practices and objectives are prescribed in the Owner’s Expectation Manual.

Together with the senior leadership team, the board seeks to continuously improve the company’s performance across all aspects of health and safety. Along with Public Safety Management Systems that are specific to each business sector, a new Group-wide Integrated Management System was recently implemented.

Board members must have an appropriate range of proficiencies, skills and experience to provide informed leadership and direction for the company. This is detailed overleaf. The board is responsible for setting and monitoring the strategic direction and policies of the company, while the day-to-day management is delegated to the group chief executive.

The board receives and reviews comprehensive health and safety reports at every board meeting. A staff wellbeing programme continues to evolve, and has been an essential support during the uncertainties of COVID-19.

The full board meets with Eastland Group’s senior leadership team at least 10 times during each financial year. There are also scheduled committee meetings and strategy sessions, and the chair and chief executive meet on a regular basis.

COMPLIANCE Eastland Group’s infrastructure businesses operate in complex environments, each with its own regulations, legislation and compliance requirements. The board reviews compliance on an ongoing basis across all aspects of the company.

The shareholder and board endorse the principles set out in the NZX Corporate Governance Code and the Institute of Directors Code of Practice for Directors.

BOARD COMMITTEES

FINANCIAL POLICY

The Audit, Finance and Risk Committee is responsible for reviewing the company’s accounting policies, financial management and performance, budgets, internal and external risk management assessments and functions, and the treasury policy. It oversees compliance with legal and regulatory requirements across all the business sectors the company operates in. It reviews the appointment of the external auditor, auditor relationship and fees. The committee also works with management to create shareholder value. The Remuneration Committee assists the board in developing and reviewing the remuneration policy and packages of executive managers, including the group chief executive. Impartial external advice is utilised as part of this process. The board promotes remuneration of directors and executives that is transparent, fair and reasonable in a competitive market for the skills, knowledge and experience required by the company.

SUSTAINABILITY AND THE ENVIRONMENT The board endorses the company’s membership of the Climate Leaders Coalition, and its commitment to measuring and reducing greenhouse gas emissions across the business sectors. In 2021 the board approved the company’s first sustainability policy. This will help inform future strategic decisions about investments, new projects and business expansion.

RISK MANAGEMENT The board oversees a formal risk management policy and framework, and is responsible for reviewing and ratifying the company’s risk management practices and internal controls. The company has programmes in place that ensure key operational and financial risks are identified, considered and mitigated. Detailed risk reports are provided to the Audit, Finance and Risk Committee, and external advice is sought where required.

The directors’ policy is to preserve a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The directors monitor the return on capital on a regular basis. This involves the management of reserves and issued capital.

Corporate governance

The directors also monitor the level of dividends to the shareholder, Trust Tairāwhiti. Triennial reviews with the shareholder see the Eastland Group board consider the capital structure and how the company is positioned to fund future growth.

STATEMENT OF CORPORATE INTENT A Statement of Corporate Intent for the coming financial year is submitted annually to the shareholder. This outlines the company’s overall and sector-specific objectives, intentions and financial performance targets. This is also used to keep staff informed of the company’s strategic direction and goals for the year.

INDEMNIFICATION AND INSURANCE The companies are entitled to indemnify directors and officers and to effect insurance for them in respect of certain liabilities arising from their positions. This must be in accordance with the Companies Act.

INFORMATION USED BY DIRECTORS Information relating to items to be discussed by the directors at a meeting is provided to the directors beforehand. Directors must not use the information received in their capacity as director, which would not otherwise be available to them, without the prior consent of the board.

Board meeting attendance register for 1 April 2020 to 31 March 2021 BOARD MEETING ATTENDANCE

15/04 22/04 29/04 08/05 27/05 24/06 24/07 16/09 21/10

18/11

10/12 09/02 24/03

V/C

A/C

John Rae

•

Jon Nichols

Wendie Harvey

Candace Kinser

•

Jim Quinn

Tony Gray

Matanuku Mahuika

AUDIT, FINANCE AND RISK COMMITTEE

6/04 16/04 23/04 26/05 21/10

18/11 22/02 24/03 • Leave of absence

Jon Nichols

A/C

John Rae

•

C Chairman

Candace Kinser

•

- Nil attendance

V/C

Tony Gray

2020-2021 STRATEGY SESSIONS

A/C

John Rae

Jon Nichols

Wendie Harvey

Candace Kinser

Jim Quinn

Directors' information Matanuku Mahuika

John Rae

Wendie Harvey

Jon Nichols

Candace Kinser

Jim Quinn

LLB (Hons)

LLB, BCom, CMinstD

LLB

FCA

MMgmt, CMInstD

CMInstD

Gisborne

Auckland

Hawkes Bay

Auckland

V Video conference

2020-2021 REMUNERATION COMMITTEE

20/10 22/02

20/10 22/02 Matanuku Mahuika

A Attended

A/C

Matanuku Mahuika

Jim Quinn

Wendie Harvey

Hawkes Bay

4.5

10.2

1.5

0.7

14.10.2016

01.02.2011

16.10.2019

01.08.2020

01.07.2019

01.07.2019*

2021

2022

2023

Jim Quinn Director Remuneration Committee Member Jim is a highly experienced director, chief executive and executive manager. He is currently chair at Payments NZ, ComplyPro and SmartCo Ltd. He is chair and a shareholder in Tubman Heating and a director at Ubiquitome. He is also a partner in QLG Advisory. His previous governance experience includes roles as chair of Lyttleton Port, Ngai Tahu Tainui Go Bus, MCom and Intilecta. Jim’s executive career included being the inaugural CEO of KiwiRail and Chief of Strategy at Auckland Council.

Matanuku Mahuika Chair Remuneration Committee Member Matanuku is a lawyer and a founding partner of the law firm Kahui Legal. He has also held a wide variety of board roles. These include being the former deputy chair of Aotearoa Fisheries Limited and chairman of Sealord Group Limited. He is the current Chairman of Ngati Porou Holding Company Limited, the company that oversees Ngati Porou’s commercial interests. He is also a director of the NZ Merino Company Limited, a member of the board of Callaghan Innovation, and a former Trustee of Trust Tairāwhiti.

Wendie Harvey Director Remuneration Committee Chair Wendie has wide-ranging experience as a director, trustee, lawyer, executive manager and business consultant. Her governance experience encompasses the public and private sectors, local government and not for profit organisations. Her current governance roles include board appointments to Aurora Energy Limited, Fire and Emergency New Zealand, Hawke’s Bay Airport, chair of Hawke’s Bay Airport Construction and the Electrical Training Company. She was a director of Port of Napier for six years and Wairoa-based Quality Roading and Services (QRS) for seven years.

Board of directors

Senior leadership team From left to right:

Matt Todd Group Chief Executive Matt moved to Gisborne when he was appointed as chief executive of Eastland Group in 2003. He has more than 30 years’ experience in the utilities and infrastructure sectors. Originally studying as an engineer, he has augmented this with post graduate business qualifications from University of Auckland, University of Otago and Harvard Business School. Matt has worked in New Zealand, Australia, the United Kingdom, Southeast Asia, South America, the USA and the Pacific Islands.

Alice Pettigrew

Debbie Anstis

Jarred Moroney

Steferl Gordon

Steven Follows

General Manager Business Development Alice began her career in finance roles across Australia and in London before returning to New Zealand and her home town of Gisborne. Alice joined Eastland Group in 2007, where she spent seven years in finance. In 2014 Alice was seconded to assist with the establishment and operations of Activate Tairāwhiti Limited and then returned to Eastland Group’s business development division. Alice undertakes valuation modelling and analysis, project management, and investment due diligence and negotiations.

General Manager People and Performance Debbie has a wide-ranging background in strategic, operational and procedural human resources management, and health and safety. She has worked in New Zealand and Australia in various industries, including banking, finance, agriculture, transport, software development and education. Debbie believes people are the most important asset a business has, and this is her primary focus at Eastland Group.

General Manager Networks Jarred has spent more than 15 years specialising in health and safety management and business systems, with a focus on the forestry industry and, more recently, the energy sector. This included establishing and operating Integrated Safety Solutions, an occupational health and safety company. Following his previous role as general manager people and performance at Eastland Group, Jarred was appointed general manager of Eastland Network.

Executive Assistant Steferl joined Eastland Group in 2011. Prior to this, her varied work experience ranged from 25 years in the graphic design industry to real estate sales. She combines her diverse skills in a varied role that encompasses all sectors of the business. She is also involved with many volunteer organisations, revolving around her passion for mountain biking.

General Manager Energy Solutions Steven is an international specialist in emerging technologies, with a particular focus on renewables, power storage and power markets. He has established large scale geothermal, solar and wind projects across Asia and the Middle East. He previously worked at Saudi Aramco, where he led the development of renewable energy projects for Saudi Arabia’s 9.5 GW by 2023 National Renewable Energy Program.

Phil Wallingford Group Technology Manager Phil has spent over 20 years leading IT transformation and digital change within the corporate sector in New Zealand and abroad. Phil joined Eastland Group in 2018 as group technology manager. He is responsible for delivering on IT strategy as well as all aspects of information and communications technology.

Ben Gibson General Manager Generation Ben joined Eastland Group in 2004 following time in the UK in commercial roles in the public transport sector. In 2011 Ben took the role of project manager for the Te Ahi O Maui Geothermal project. In 2017 he became general manager for the growing generation sector.

Andrew Gaddum Chief Operating Officer Born on the East Coast, Andrew has been involved in the local forestry industry from an early age. He worked offshore in various project management positions before returning home to New Zealand to complete a Masters in Engineering Management. He started with Eastland Group in 2004. After being general manager ports for a number of years, in mid-2019 he was promoted to the role of chief operating officer. This encompasses the ports sector and all non-energy related infrastructure projects and businesses.

EASTLAND GROUP • ANNUAL REPORT 2021

Eastland Group Limited Consolidated Financial Statements For the year ended 31 March 2021

The directors are pleased to present the consolidated financial statements of Eastland Group Limited for the year ended 31 March 2021.

Director Chair 23 June 2021

PAGE F - 1

Director Chair of Audit, Finance and Risk Committee

PAGE F - 2

EASTLAND GROUP • ANNUAL REPORT 2021

Independent Auditor’s Report To the Shareholder of Eastland Group Limited Opinion

We have audited the consolidated financial statements of Eastland Group Limited and its subsidiaries (the ‘Group’), which comprise the Consolidated Statement of Financial Position as at 31 March 2021, and the Consolidated Statement of Financial Performance, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements, on pages F - 7 to F - 50, present fairly, in all material respects, the consolidated financial position of the Group as at 31 March 2021, and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Company in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Other than in our capacity as auditor and the provision of assurance services related to regulatory disclosure statements and Unique Emissions Factors, we have no relationship with or interests in the Company or any of its subsidiaries. These services have not impaired our independence as auditor of the Company and Group.

Key audit matter

How our audit addressed the key audit matter

Valuation of property, plant and equipment

Applicable to the port land and buildings, wharves, walls and surfaces and the Waihi Hydroelectric Scheme:

As disclosed in note 5 of the consolidated financial statements, the Group has a policy of revaluing land and buildings, electricity distribution equipment, electricity generation equipment (excluding wells) and port wharves, walls and surfaces. All other assets are carried at historic cost. Land and building revaluations are carried out on a cyclical basis that does not exceed three years while electricity distribution equipment, electricity generation equipment and wharves, walls and surfaces revaluations are carried out on a cyclical basis not exceeding five years. All valuations are performed by external valuers. As at 31 March 2021, the Group has revalued the port land and buildings to $51.9 million, and wharves, walls and surfaces and associated other plant and equipment to $168.4 million. An uplift of $65.4 million is recognised through other comprehensive income in the revaluation reserve. An impairment of $5m was recognised in relation to the Waihi Hydroelectric Scheme through other comprehensive income.

We consider materiality primarily in terms of the magnitude of misstatement in the financial statements of the Group that in our judgement would make it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced (the ‘quantitative’ materiality). In addition, we also assess whether other matters that come to our attention during the audit would in our judgement change or influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

• We read the valuation reports for the assets subject to revaluation and impairment at year end in order to understand the changes in key assumptions, and considered the Group’s process for challenging the valuation reports to ensure they reflect individual characteristics of the particular assets. • We assessed the competence, capabilities and objectivity of the Group’s independent valuers. • We assessed the valuation methodologies used and challenged the appropriateness of the key assumptions to current performance and historical trends as applicable; and • Using our internal valuation specialists, we: – Challenged the forecasted wholesale energy price path utilised in the impairment assessment of the Waihi Hydroelectric Scheme; and

The port land and buildings have been valued by an independent valuer. All non-specialised land assets and other buildings were valued using a market-based approach. For other buildings a comparison was made of contract income to capitalised market yield. The key assumptions applied in the valuations are:

– Assessed the reasonableness of the discount rates applied to valuations and impairment assessment in the current period.

• Market Capitalisation rate; and

Applicable to all other assets carried at valuation, but not valued in the current period:

• Rate per square metre.

Our audit procedures included the following:

• Contract income;

The wharves walls and surfaces have been valued by an independent valuer using the optimised depreciated replacement cost method. The key assumptions applied in the valuation are:

• We considered the Group’s assessment as to whether there had been any material changes that would impact on valuation inputs this year.

• Unit rates for specific asset types using best available data; Audit materiality

Our audit procedures included the following:

• We compared the key assumptions used in prior year valuations to current market data and other sources of evidence.

• Capitalisation allowances for on-costs; and • Asset useful lives and residual values. The Waihi Hydroelectric Scheme was written down to its new recoverable amount and this was valued by an independent valuer using a discounted cash flow valuation method. The key assumptions applied in the valuation are: • Electricity Price path; • Plant output; and

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial satements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and do we not provide a separate opinion on these matters.

• Discount rate. At each reporting period the Group considers whether there are any changes to economic or business conditions that may impact key assumptions used in previous asset valuations and other circumstances that might indicate that property, plant and equipment is not held at fair value. The valuation of property, plant and equipment is considered to be a key audit matter due to the significance of the assets revalued and impaired to the Group’s consolidated results and due to the judgement involved in the assessment of the fair value and useful lives of these assets.

PAGE F - 3

PAGE F - 4

EASTLAND GROUP • ANNUAL REPORT 2021

Other information

EASTLAND GROUP • ANNUAL REPORT 2021

The directors are responsible on behalf of the Group for the other information. The other information comprises the highlights, overviews and trends in the Annual Report that accompanies the consolidated financial statements and the audit report. The Annual Report is expected to be made available to us after the date of this auditor's report. Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. Our responsibility is to read the other information identified above when it becomes available and consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the other information in the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and consider further appropriate actions.

Directors’ responsibilities for the consolidated financial statements

The directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located on the External Reporting Board’s website at: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditorsresponsibilities/audit-report-3/ This description forms part of our auditor’s report.

Restriction on use

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

Auckland, New Zealand 23 June 2021

PAGE F - 5

PAGE F - 6

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Statement of Financial Performance

Consolidated Statement of Financial Position

FOR THE YEAR ENDED 31 MARCH 2021

AS AT 31 MARCH 2021

2021

2020

Notes

$’000

107,370

111,744

1, 3

(47,019)

(48,210)

60,351

63,534

(24,547)

(22,225)

35,804

41,309

Notes

Operating revenue Operating expenditure Earnings before interest, income tax, depreciation and Depreciation and amortisation

5, 7, 20

Earnings before interest and income tax (EBIT)

2020 $’000

ASSETS Current assets Cash and cash equivalents

amortisation (EBITDA)

2021 $’000

Trade and other receivables Inventory

Derivative financial instruments Total current assets

6,690

9,049

19,249

11,527

232

219

3,166

26,390

23,826

591,463

Net finance expenses

(12,417)

(13,443)

Share of profit of joint venture

910

1,242

Share of loss of associate

(1,200)

(1,431)

Non-current assets

Impairment of investment in associate

(1,812)

Property, plant and equipment

649,997

23,097

25,865

Investment properties

29,890

25,361

(7,089)

(7,331)

Intangible assets

16,117

10,392

16,008

18,534

Profit before income tax Income tax expense

Profit

Derivative financial instruments

1,723

659

Investment in associate

10,483

5,864

1,004

1,095

Right of use assets

9,230

11,778

Investment in joint venture Attributable to: Equity holders of the parent Non-controlling interest

15,856

18,772

Lease receivable

5,959

152

(238)

Total non-current assets

724,403

646,612

16,008

18,534

TOTAL ASSETS

750,793

670,438

13,351

10,625

LIABILITIES Current liabilities 9

Payables and accruals Income tax

1,212

333

1,722

2,350 246

Consolidated Statement of Comprehensive Income

Employee entitlements

Lease liabilities

FOR THE YEAR ENDED 31 MARCH 2021

225

Derivatives financial instruments

19,395

772

35,905

14,326

Total current liabilities 2021

2020

$’000

16,008

Profit

18,534

Other comprehensive income

Revaluation of property, plant and equipment

65,368

47,477

Impairment of property, plant and equipment

(4,997)

(13,546)

(13,294)

46,825

34,183

Items that will be reclassified subsequently to profit or loss: Revaluation of cashflow hedges Tax on revaluation of cashflow hedges Share of associate other comprehensive income Tax on share of associate other comprehensive income

Loans

255,000

250,000

Capital notes

30,000

Deferred tax

74,612

65,491

Derivative financial instruments

18,466

15,428

Employee entitlements

2,823

1,313

Income in advance

Items that will not be reclassified subsequently to profit or loss:

Tax on revaluation of property, plant and equipment

Non-current liabilities

(23,546)

5,444

6,593

(1,524)

(16,953)

3,920

7,096

(1,083)

(1,987)

303

5,109

(780)

Other comprehensive income, net of income tax

34,981

37,323

Total comprehensive income

50,989

55,857

50,837

54,129

Lease liabilities

Restoration costs

229

276

9,501

11,875

1,666

1,560

Total non-current liabilities

392,297

375,943

TOTAL LIABILITIES

428,202

390,269

322,591

280,169

319,753

277,846

NET ASSETS EQUITY Equity holders of the parent Non-controlling interest TOTAL EQUITY

2,838

2,323

322,591

280,169

Attributable to: Equity holders of the parent Non-controlling interest

152

1,728

50,989

55,857

These financial statements should be read in conjunction with notes and accounting policies on pages F-13 to F-50

PAGE F - 7

PAGE F - 8

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

FOR THE YEAR ENDED 31 MARCH 2021

2021 Issued capital $’000 Balance at beginning of period - 1 April 2020 Profit

Hedge reserve $’000

Asset revaluation reserve $’000

Retained earnings $’000

Noncontrolling interest $’000

Cash flows from operating activities: Total equity $’000

15,400

(8,806)

167,315

103,937

2,323

280,169

15,856

152

16,008

Other comprehensive income: -

(23,546)

5,109

(18,437)

Disposals of property, plant and equipment

(2,210)

2,210

Revaluation of property, plant and equipment

65,368

Impairment of property, plant and equipment

(4,997)

comprehensive income

6,593

(13,546)

(6,953)

Total comprehensive income

(16,953)

44,615

23,175

152

50,989

Income tax relating to components of other

2020 $’000

Cash provided from:

98,398

Receipts from customers Interest received

103,620

98,400

103,632

(43,530)

(47,882)

(12,215)

(13,227)

Cash applied to: Payments to suppliers and employees Interest paid

Net change in fair value of cash flow hedges

2021 $’000

Interest paid on leases Income tax paid

Net cash flows from operating activities

(430)

(720)

(4,042)

(8,570)

(60,217)

(70,399)

38,183

33,233

Cash flows from investing activities: Cash provided from:

Transactions with owners

Proceeds from government grants

Movement in non-controlling interest

Dividend

Total transactions with owners

15,400

(25,759)

211,930

118,182

Balance at end of period - 31 March 2021

363

(8,930)

Proceeds from sale of property, plant and equipment

(8,930)

363

(8,567)

Distributions from joint venture

2,838

322,591

Proceeds from trust grant

100

5,400

5,000

901

1,348

1,061

11,780

Cash applied to: Purchase of intangibles Purchase of property, plant and equipment 2020 Issued capital $’000

Hedge reserve $’000

Asset revaluation reserve $’000

Retained earnings $’000

15,400

(12,726)

135,098

Net change in fair value of cash flow hedges

5,444

Disposals of property, plant and equipment

Revaluation of property, plant and equipment

Balance at beginning of period - 1 April 2019 Profit

Noncontrolling interest $’000

Total equity $’000

95,930

595

234,297

18,772

(238)

18,534

(780)

4,664

(135)

44,881

2,731

47,612

Other comprehensive income:

(660)

Purchase of investment properties

(337)

(2,268)

(37,028)

(52,102)

(35,967)

(40,322)

5,000

28,000

5,000

28,000

(5,000)

Net cash flows used in investing activities Cash flows from financing activities: Cash provided from:

Cash applied to: Repayment of bank borrowings Dividend paid

comprehensive income

(1,524)

(12,529)

(765)

(14,818)

Total comprehensive income

3,920

32,217

17,992

1,728

55,857

(2,153) (47,681)

Purchase of investments

Proceeds from bank borrowings

Income tax relating to components of other

(5,693) (30,338)

Dividend paid - subvention payment

(8,930)

(8,150)

(1,970)

(645)

(233)

(9,575)

(15,353)

Net cash flow used in/from financing activities

(4,575)

12,647

Net cash flow used in/from continuing operations

(2,359)

5,558

Net (decrease)/increase in cash and cash equivalents

(2,359)

5,558

Lease principal payments

Transactions with owners De-recognition of asset revaluation reserves

135

Dividend

(8,150)

Dividend - subvention payment

(1,970)

Total transactions with owners

(9,985)

15,400

(8,806)

167,315

103,937

2,323

280,169

Balance at end of period - 31 March 2020

Cash and cash equivalents at beginning of period

9,049

3,491

Cash and cash equivalents at end of period

6,690

9,049

These financial statements should be read in conjunction with notes and accounting policies on pages F-13 to F-50

PAGE F - 9

PAGE F - 10

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Statement of Cash Flows

Consolidated Notes to the Financial Statements

FOR THE YEAR ENDED 31 MARCH 2021

Reconciliation of the profit for the period with net cash from operating activities

Table of Contents Financial performance 2021

2020

$’000

Profit

16,008

18,534

23,954

21,647

593

578

Adjustments for: Depreciation and amortisation Depreciation on right of use assets Vested assets Bad debts written off Loss on sale or disposal of property, plant and equipment Capital contribution Income from joint venture Change in fair value of investment property

(1,552)

(1,338)

442

428

(5,000)

(810)

(1,126)

(1,705)

(2,293)

1,200

3,243

153

(50)

105

Lease payments

205

Impairment loss - property, plant and equipment

240

Interest capitalised to fixed assets

(293)

(456)

Deferred tax expense

2,168

2,643

24,718

18,388

Losses and impairment in associate Amortisation of lease receivable Accrued interest Restoration provision interest

Our financial statements

F - 13

Significant transactions and events

F - 14

1. Segments

F - 17

2. Revenue

F - 21

3. Specific expenses

F - 22

4. Taxation

F - 22

Operating assets and liabilities 5. Property, plant and equipment

F - 25

6. Investment properties

F - 31

7. Intangible assets

F - 31

8. Trade and other receivables

F - 32

9. Payables and accruals

F - 32

Group structure 10. Investment in subsidiaries

F - 33

11. Investment in associate

F - 33

12. Investment in joint venture

F - 34

Movement in working capital: (Increase)/decrease in trade and other receivables (Increase) in inventory Increase in employee entitlements

(7,790)

538

(148)

(52)

882

1,533

Increase/(decrease) in income tax payable

879

(3,883)

(Decrease) in income in advance

(47)

(46)

3,681

(1,779)

(2,543)

(3,689)

38,183

33,233

Increase/(decrease) in payables and accruals Net cash from operating activities

Funding and risk 13. Loans

F - 35

14. Finance expenses

F - 36

15. Financial assets and liabilities

F - 37

16. Price risk

F - 38

17. Liquidity risk

F - 42

18. Credit risk

F - 43

19. Capital management

F - 43

20. Leases

F - 44

Governance of Cash Flows π Statement The following terms are used in the Statement of Cash Flows: • Cash and cash equivalents include cash on hand and in banks and, net of outstanding bank overdrafts. • 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

21. Our shareholder

F - 47

22. Directors’ information

F - 47

23. Management compensation

F - 49

24. Other related party transactions

F - 49

25. Employee entitlements

F - 50

26. Subsequent events

F - 50

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

These financial statements should be read in conjunction with notes and accounting policies on pages F-13 to F-50

PAGE F - 11

PAGE F - 12

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

Our financial statements

d) Standards not yet effective The following amendments which will impact Eastland Group, come into effect for periods commencing on or after 1 January 2021:

a) General information Eastland Group Limited is a company domiciled in New Zealand and registered under the Companies Act 1993. The address of Eastland Group Limited's registered office is 37 Gladstone Road, Gisborne. Eastland Group Limited and its subsidiaries, associate and joint venture consolidated (“Eastland Group”), is a Tier 1 reporting entity for the purposes of the Financial Reporting Act 2013 and the Companies Act 1993. These financial statements have been prepared in accordance with and comply with the

• NZ IFRS 16 Leases - Covid-19 related rent concessions. The amendment provides an exemption from assessing whether a Covid-19 related rent concession is a lease modification if certain conditions are met. Eastland Group has made several rent concessions to property tenants due to Covid-19. The value of these concessions is not material. • NZ IFRS 9 Financial Instruments, NZ IAS 39 Financial Instruments: Recognition and Measurement, NZ IFRS 7 Financial

requirements of these Acts. The financial statements of Eastland Group are for the year ended 31 March 2021 and were authorised

Instruments: Disclosures and NZ IFRS 16 Leases. This amendment enables entities to reflect the effects of transitioning from

for issue by the directors on 23 June 2021.

benchmark interest rates, such as interbank offer rates (BOR’s) to alternative benchmark interest rates without giving rise

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

to accounting impacts that would not provide useful information to users of financial statements. This is not expected to impact Eastland Group. • NZ IAS 16 Property, plant, and equipment – Proceeds before intended use. This standard is not expected to impact

Our financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice as appropriate for profit-oriented entities. They comply with the New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”), and International Financial Reporting Standards. Our financial statements have been prepared on the historical cost basis modified by the revaluation of property, plant and equipment, investment property and financial instruments.

Eastland Group. • NZ IAS 37 Onerous Contracts – Costs of fulfilling a contract. The amendment clarifies that the costs of fulfilling a contract are both the incremental costs and an allocation of other costs such as overheads. This comes into effect on 1 January 2022 and is not expected to have a material impact on Eastland Group. • NZ IAS 1 Presentation of Financial Statements and NZ IAS 8 Accounting Policies – Classification of Liabilities as Current or

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

Non-Current. These amendments seek to clarify the conditions regarding the classification and affect only the presentation of liabilities in the Statement of Financial Position. This comes into effect on 1 January 2023 and is not expected to have a material impact on Eastland Group.

b) Use of estimates and judgments

Significant transactions and events in the financial year

The preparation of financial statements requires management to make judgments that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Estimates and associated assumptions are based on historical experience and other factors that are

The following significant transactions and events affected the financial performance and position of Eastland Group for the year ended 31 March 2021.

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

a) Port infrastructure and land & buildings Port property, plant and equipment were revalued at 31 March 2021 in accordance with Eastland Group’s accounting policy of cyclical revaluation of infrastructure assets every five years. The land and buildings were also revalued on their three-yearly cycle. Refer to Note 5.

Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies are

b) Bank facility

designated by an π symbol within the following notes: • Note 5 Property plant and equipment (estimates and judgment)

Eastland Group renewed Tranche A of its $210 million bank facility on 31 July 2020. The facility was extended to 1 April 2022 for $30 million and 1 April 2023 for $180 million. New facility terms and maturities are detailed in Note 13.

• Note 15 Financial assets and liabilities (estimates) • Note 16 Price risk (estimates)

c) Flick Energy Limited On 24 June 2020 Eastland Group invested $660,016 in convertible notes issued by Flick Energy Limited. The convertible notes

c) Significant accounting policies

have a coupon of 10% paid on maturity on earlier of 31 March 2023 or completion of a capital raising by Flick Energy Limited

Accounting policies are disclosed within each of the applicable notes to these financial statements and are designated by a π

(Redemption Date). Eastland Group have the option to receive shares at 80% of the value of Flick Energy Limited’s share value

symbol. The principal accounting policies have been applied consistently to all periods. FRS-44 Going concern disclosures have

on 23 March 2023 or Redemption Date. Refer to Note 11.

been made regarding the Covid-19 pandemic.

d) Novel coronavirus Covid-19 The New Zealand Government (“the Government”) announced a State of National Emergency on 25 March 2020 in response to the World Health Organisation (“WHO”) declaring COVID–19 as a global pandemic on 11 March 2020, signalling the beginning of a countrywide lockdown period (Alert Level 4) from midnight 25 March, which lasted until 28 April 2020. All non–essential services were suspended during this period, while a limited number of essential services could continue trading under guidelines from the Government.

PAGE F - 13

PAGE F - 14

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2021

While the pandemic has impacted parts of the group’s businesses operationally, the financial impact in the current financial year has been limited. Eastland Group’s generation and distribution of electricity were considered essential businesses and continued to trade through Alert Level 4. Eastland Port and Gisborne Airport’s business were suspended in line with the Government’s guidelines. As New Zealand moved out from Alert Level 4 and the subsequent Alert Level 3 periods in mid-May, all of Eastland Group’s businesses were resumed.

e) Purchase of geothermal powerplant (subsequent event) On 26 May 2021 Eastland Generation Limited purchased a 23.8 MWh geothermal power plant from Ngati Tuwharetoa Holdings Limited (“NTHL”) for $83 million. The expected settlement date is 30 June 2021. Eastland Generation Limited also entered into a steam supply agreement with NTHL to supply fuel and re-inject steam for the plant. The agreement has an initial term of 35 years during which NTHL is required to supply an annual volume of steam and brine.

f) Increase in bank facilities (subsequent event) On 26 May 2021 Eastland Group increased its bank facilities by $120 million with the following terms.

Maturity

Facility amount

Margin on BKBM

Tranche E1

1 April 2024

$45 million

1.11% - 1.51%

Tranche E2

1 April 2026

$75 million

1.05% - 1.20%

PAGE F - 15

PAGE F - 16

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

1. Segments Eastland Group’s operating segments reported to the Board and Group Chief Executive (“GCE”), consist of: 50 45

2021

35 30 25

2020

2021

distribution and contracting business, and diesel gensets.

2021

Networks – Ownership and management of electricity line

14%

2021

20 15

24% 29%

10 Generation – Ownership and management of geothermal

2021

33%

Port Network Generation All other segments

electricity generation at Kawerau and Waihi hydro-generation. NETWORKS

GENERATION

PORTS

ALL OTHER

-8% 61%

Ports – Ownership or management of port, airport, cool store,

40%

investment property and debarker operations. 7% 2020

2021

-10%

2021

53%

All other segments – Corporate activities, business development

36%

2021

corporate costs), are included in All other segments.

2021 Port Network Generation All other segments

2021

and energy solutions. All other revenues and costs (including

21%

NETWORKS

GENERATION

PORTS

ALL OTHER

The segment results disclosed are based on management’s judgment as to the classification of the products and services reported to the GCE and Board. Our management reporting focuses on the above businesses which are the Group’s operating segments reported in accordance with NZ IFRS 8 Operating Segments. Revenue and expenses are reported before intersegment 350

eliminations, which differs from external financial reporting.

2021

The segments are grouped according to the management of the business units and the provision of related services. Intersegment transactions, included in the operating revenues and expenditures for each segment, are on an arm's length basis.

2020 2021

All segment information presented is prepared in accordance with Eastland Group's accounting policies.

2021

40%

2021 24%

2021

32%

NETWORKS

PAGE F - 17

GENERATION

PORTS

ALL OTHER

PAGE F - 18

Port Network Generation All other segments

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

2021

Statement of Financial Performance

2020

Networks

Generation

Ports

All other segments

Intersegment

Total

$’000

305

2,267

External revenue: Operating revenue Other income Intersegment revenue Intersegment dividend received Segment revenue

31,150

32,902

40,746

105,103

$’000

Operating revenue Other income

41,170

22,856

39,337

384

103,747

209

7,599

189

7,997

3,737

4,814

508

7,324

(16,383)

10,120

(10,120)

45,116

27,670

47,444

18,017

(26,503)

111,744

527

8,867

(14,116)

Intersegment revenue

8,930

(8,930)

Intersegment dividend received

31,294

37,991

42,871

18,260

(23,046)

107,370

(18,920)

Operating expenditure

(10,781)

(5,422)

(3,788)

(19,991)

(16,023)

Personnel expenditure

(3,006)

(1,184)

(4,887)

(5,330)

(14,407)

(12,076)

Administrative expenditure

(1,480)

(3,580)

(4,376)

(13,812) (48,210)

Segment revenue External expenditure:

(10,657)

(4,400)

(3,863)

(3,222)

(3,962)

(3,636)

(47,019)

(2,054)

(6,077)

(3,391)

(2,442)

13,964

(17,073)

(15,470)

(16,584)

(11,856)

13,964

6,404

(9,082)

(939)

5,465

(9,082)

910

Earnings before interest, income tax,

Intersegment expenditure

(6,232)

(6,375)

(2,913)

(673)

16,193

(21,499)

(16,561)

(15,964)

(10,379)

16,193

depreciation and amortisation (EBITDA)

23,617

11,109

31,480

7,638

(10,310)

63,534

Depreciation and amortisation

(7,123)

(8,107)

(6,202)

(793)

(22,225)

41,309

Operating expenditure Earnings before interest, income tax,

14,221 (6,756)

22,521 (9,732)

26,287 (7,120)

60,351 (24,547)

Segment earnings before interest

Segment earnings before interest 7,465

12,789

19,167

Share of profit from joint venture

810

100

Share of loss from associate

(1,200)

Dividend paid

(4,465)

(8,930)

8,930

and income tax (EBIT)

16,494

3,002

25,278

6,845

(10,310)

Share of profit from joint venture

1,126

116

1,242

(1,200)

Share of loss from associate

(1,431)

(8,930)

Impairment in investment in associate

(1,812)

(1,812) (10,120)

35,804

Dividend paid Statement of Financial Position

(4,455)

(1,615)

(4,050)

(10,120)

10,120

Statement of Financial Position 179,716

237,137

Liabilities

30,451

53,951

Borrowings

76,177

95,371

Segment capital expenditure

$’000

5,089

(1,256)

Capital notes

$’000

(367)

Administrative expenditure

Assets

$’000

158

(5,778)

and income tax (EBIT)

Total

$’000

1,598

(5,368)

Depreciation and amortisation

Intersegment

(1,771)

depreciation and amortisation (EBITDA)

All other segments

511

(3,106)

Operating expenditure

Ports

Personnel expenditure Intersegment expenditure

Generation

External revenue:

External expenditure: Operating expenditure

Statement of Financial Performance

Networks

30,491

750,793

Assets

179,865

240,535

220,814

29,224

670,438

44,473

299,327

428,202

Liabilities

32,815

27,566

29,907

299,981

390,269

99,135

(15,683)

255,000

Borrowings

82,759

93,253

92,449

(18,461)

250,000

30,000

37,039

12,064

4,855

22,068

2,041

41,028

303,449

30,000

10,886

3,964

17,296

4,893

PAGE F - 19

Capital notes Segment capital expenditure

PAGE F - 20

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

2. Revenue

2021

2020

$’000

3. Specific expenses

2020 $’000

2021 $’000

Electricity distribution revenue

28,366

37,683

Bad debt write-offs on trade receivables

Electricity generation

32,926

23,750

Direct operating expenditure arising on investment properties

Logistics revenue

38,186

37,003

that generated rental income

Rental income

2,546

2,421

Management fees

299

313

Customer contributions

316

Other revenue

2,464

2,525

Total revenue

105,103

103,747

498

894

Auditor’s remuneration to Deloitte comprises: 267

282

audit reporting to the Commerce Commission

audit relating to emissions

audit of financial statements

Loss on revaluation of property, plant and equipment

240

Loss on sale or disposal of property, plant and equipment

442

428

Other Income Other income

503

312

5,000

Grant from Trust Tairāwhiti

391

1,705

2,293

Total other income

2,267

7,997

Operating revenue

107,370

111,744

Insurance proceeds Impairment losses recovered Increase in fair value of investment property

4. Taxation Income Tax Expense

2021

2020

$’000

Current tax expense 5,371

Current period

4,838

Adjustment for prior periods

(450)

(150)

Total current tax expense

4,921

4,688

Temporary differences for the year

1,721

2,517

in a contract with a customer and exclude amounts collected on behalf of third parties. Revenue is

Adjustment for prior periods

447

126

recognised when all performance obligations have been satisfied by transfer of goods or services to

Total deferred tax expense

2,168

2,643

the customer and for the consideration that is probable to be collected.

Total income tax expense

7,089

7,331

π Revenue Revenue is measured based on the consideration to which Eastland Group expects to be entitled i.

Regulated electricity distribution and electricity generation sales

Deferred tax expense

Revenue from electricity distributed and generated is recognised in the Statement of Financial Performance when the electricity has been distributed or sold to customers. ii.

Logistics revenue

Revenue from the sales of logistics services is recognised in the Statement of Financial Performance in the accounting period in which the services are rendered, by reference to completion of the specific transfer of goods or service. iii.

Rental income

Rental income on operating leases is recognised in the Statement of Financial Performance on a straightline basis 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. iv.

Customer contributions

Revenue from customer contributions is recognised in the Statement of Financial Performance as revenue when all obligations to the customer are satisfied. v. Grants Grants are recognised as revenue when the performance criteria for receiving the grant have been fulfilled. Grants received from Trust Tairāwhiti are recognised as revenue when the judgment is that receipt by Eastland Group is in the capacity as a beneficiary of the Trust. vi.

Other revenue

Other forms of revenue outside of those detailed in this policy that are not material as an individual transaction.

PAGE F - 21

PAGE F - 22

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2021

A reconciliation of income tax expense to the statutory income tax rate, is as follows: 2020

2021

Accounting profit before income tax

23,097

At the statutory income tax rate of 28%

(6,467)

(28.0%)

years

Subvention payment

(288)

$’000

25,865 (7,242)

(28.0%)

0.0%

0.1%

0.0%

552

2.1%

(1.2%)

(991)

(3.8%)

Adjustments in respect of current income tax of previous

Non-deductible expenses Non assessable income Share of net profit and loss of associate and joint venture

0.0%

729

2.8%

(336)

(1.5%)

(401)

(1.6%)

(7,089)

(30.7%)

(7,331)

(28.3%)

Deferred Tax Assets and Liabilities

Balance at beginning of the period

2021 Property, plant and equipment $’000

Provisions and accruals $’000

Investment property $’000

Hedge reserve $’000

Other $’000

Total $’000

(70,005)

1,107

133

3,350

(75)

(65,491)

(1,426)

394

(689)

(1,721)

(454)

(447)

Amounts recognised in the statement of financial performance: Relating to the current period Prior period adjustments recognised in the current period Amounts recognised directly in other comprehensive income Net deferred tax liabilities

(13,546)

6,593

(6,953)

(84,970)

1,047

(556)

9,942

(75)

(74,612)

2020

Balance at beginning of the period

Property, plant and equipment $’000

Provisions and accruals $’000

Investment property $’000

Hedge reserve $’000

Other $’000

Total $’000

(53,636)

675

133

4,874

(75)

(48,029)

(2,949)

432

(2,517)

(126)

(13,294)

(1,524)

(14,818)

(70,005)

1,107

133

3,350

(75)

(65,491)

Group deferred tax net liability The $74.6 million (2020: $65.5 million) net deferred tax liability includes $85 million (2020: $70.0 million) that relates to accounting depreciation on property, plant and equipment that has been revalued, with the remaining relating to differences between accounting and tax depreciation rates. As the network, port and generation assets are held for the long term, it is the view of the directors that this liability is unlikely to be realised.

PAGE F - 23

PAGE F - 24

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

5. Property, plant and equipment

Other assets at cost include airport assets, geothermal wells and other land and leasehold improvements. These assets are not revalued. For presentation purposes these separate asset classes have been combined. The current year value includes geothermal well costs of

2021 Land and buildings

Electricity distribution equipment

Other assets at cost

Electricity generation equipment

Wharves walls and surfaces

$’000

54,899

162,194

72,840

2,504

10,556

$43 million, airport asset costs of $11 million (which includes $3.6 million of additions) and other leasehold improvements of $1 million

Floating plant

Other plant and equipment

Work in progress

Total

$’000

175,996

125,139

18,699

27,702

14,026

651,495

3,555

377

6,796

3,495

9,419

36,702

(2020: $61.4 million total). Transfers of $6.1 million were made to lease receivable during the year, refer to Note 20. Revalued property, plant and equipment is categorised as level 3 in the NZIFRS 13 fair value hierarchy. There have been no transfers between levels.

As at 1 April 2020, Cost or fair value Additions Disposals Revaluation Impairment Transfers

(403)

(9)

(465)

(877)

14,757

32,193

(305)

46,645

(704)

(5,637)

(6,341)

(2,487)

(9,055)

(5,737)

(17,279)

In the year to 31 March 2021 $0.3 million (2020: $0.5 million) of interest has been capitalised. The weighted average capitalisation rate on funds borrowed was 4.24% (2020: 4.31%).

and buildings, electricity distribution, electricity generation equipment (excluding wells) and walls, wharves and π Land surfaces are recognised at cost and are subsequently stated at revalued amounts, less any subsequent accumulated depreciation and impairment losses. Land and buildings, electricity distribution, electricity generation equipment

As at 31 March 2021, 68,969

Cost or fair value

172,347

67,340

170,727

164,128

18,699

30,427

17,708

710,345

(excluding wells) and walls wharves and surfaces are revalued with sufficient regularity to ensure that the carrying amount of these items does not significantly differ from that which would be determined using fair value at the date

As at 1 April 2020

of the financial statements. The directors review the assumptions annually to ensure that fair value is fairly stated for 1,278

13,007

11,365

1,468

13,591

6,138

13,185

60,032

these assets.

938

5,743

3,723

6,156

3,761

907

2,239

23,467

Property, plant and equipment is revalued on a cyclical basis. Valuations are performed by registered valuers. For

(54)

(4)

(323)

(381)

electricity distribution and electricity generation equipment assets and wharves, walls and surfaces, revaluations are

Impairment

(194)

(1,149)

(1,343)

carried out on a cyclical basis not exceeding five years, by independent valuers. Land and buildings revaluations are

Revaluation

(980)

(16,429)

(1,074)

(18,483)

(2,943)

(1)

(2,944)

Accumulated depreciation Depreciation charge for the year Disposals

Transfers

carried out on a cyclical basis not exceeding three years. Any movement on revaluation is reflected through equity reserves for that class of asset unless there is insufficient reserve in which case that would flow through to the Statement of Financial Performance. All other plant and equipment including geothermal wells is valued at historical cost.

As at 31 March 2021, 1,042

accumulated depreciation

18,696

12,145

6,471

923

7,045

14,026

60,348

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items or components of property, plant and equipment.

As at 31 March 2021, net of accumulated depreciation

67,927

153,651

55,195

164,256

163,205

11,654

16,401

17,708

649,997

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised in 'other income' or 'other administrative expenses', depending on whether there is 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 other

2020

comprehensive income.

Land and buildings

Electricity distribution equipment

Other assets at cost

Electricity generation equipment

Wharves walls and surfaces

Floating plant

Other plant and equipment

Work in progress

Total

$’000

48,822

153,354

6,500

201,967

110,068

18,039

25,093

19,717

583,560

Additions

4,868

9,166

5,945

5,324

15,584

674

2,890

(5,691)

38,760

Disposals

(11)

(326)

(113)

(4,500)

(513)

(14)

(281)

(5,758)

35,498

All exploration and evaluation costs, including directly attributable overheads, general permit activity, resource consents,

1,220

60,508

(62,293)

(565)

geological testing, geophysical testing and drilling are initially capitalised as work in progress, pending the determination

Government Grants received for the construction or purchase of an asset are deducted from the asset value recognised.

As at 1 April 2019, Cost or fair value

Revaluation Transfers

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

of the success of the area. Costs are expensed where the area of interest does not result in a successful discovery.

As at 31 March 2020, Cost or fair value

Exploration and evaluation expenditure

54,899

162,194

72,840

175,996

125,139

18,699

27,702

14,026

651,495

Exploration and evaluation expenditure is partially or fully capitalised where either: • the expenditure is expected to be recovered through the successful development and exploration of the area

As at 1 April 2019

of interest (or alternatively by its sale); or

635

7,369

1,900

14,531

10,701

5,242

11,136

51,514

643

5,671

448

8,222

3,361

910

2,169

21,424

Disposals

(33)

(90)

(471)

(14)

(120)

(728)

Revaluation

(12,114)

Capitalised costs are reviewed at the end of each reporting period to determine whether economic quantities of reserves

Transfers

9,107

(9,171)

(64)

have been found or whether further exploration and evaluation work is underway or planned to support the continued

Accumulated depreciation Depreciation charge for the year

reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

carry forward of the capitalised costs. Exploration and evaluation expenditure is impaired in the Statement of Financial

As at 31 March 2020, accumulated depreciation

• the exploration and evaluation activities in the area of interest have not, at the end of each reporting period,

1,278

13,007

11,365

1,468

13,591

6,138

13,185

60,032

Performance under the successful efforts method of accounting in the period that exploration work demonstrates that an area of interest is no longer prospective for economically recoverable reserves or when the decision to abandon an area of interest is made. Land access rights for exploration activities are amortised over the life of the right.

As at 31 March 2020, net of accumulated depreciation

53,621

149,187

61,475

174,528

PAGE F - 25

111,548

12,561

14,517

14,026

591,463

PAGE F - 26

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

Classification of expenditure in relation to property, plant and equipment

Revaluations

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

Land and buildings

Port land and buildings were revalued on 31 March 2021 (total fair value of $51.9 million) by an independent valuer; Telfer Young. The method of valuation was market-based for non-specialised land assets. The values ranged from $36m2 - $364m2 in the port location and $21m2 for rural storage sites. For other buildings a comparison was made of contract income to capitalised market yield rates. The range was from $115m2 - $3,305m2. The per square metre rates were affected by building size and locational factors. The valuation at 31 March 2021 was $51.9 million. The net book value of port land and buildings, which includes the $1.6 million of port related land and buildings revalued as part of the infrastructure valuation in iv below, is $53.5 million. (2020: $36.6 million). Network operational land and buildings were valued on 31 March 2019 (total fair value of $7.4 million) by an

Valuation and impairment of property, plant and equipment

independent valuer; AON New Zealand Limited. The method of valuation was the market approach. The methods

Management must also consider whether any indicators of impairment have occurred which might require impairment

used were direct comparison, income based, capitalisation and the capitalisation rate or yield. In addition to this

testing of the current carrying values of property, plant and equipment. Assessing whether individual assets or a

valuation, land and buildings of $7.3 million net book value at 31 March 2019 were revalued as part of the distribution

grouping of related assets (which generate cash flows co-dependently) are impaired may involve estimating the

asset valuation in 2018. The net book value at 31 March 2021 for operational and electricity distribution land and

future cash flows that those assets are expected to generate. This will in turn involve assumptions, including rates

buildings was $12.6 million (2020: $14.7 million).

of expected revenue growth or decline, expected future margins and the selection of an appropriate discount rate (Weighted average cost of capital – WACC) for discounting future cash flows. The standard assumptions across all

These asset classes are combined for presentation purposes. ii.

valuations are inflation of 2% and a tax rate of 28%.

Electricity distribution equipment

Electricity distribution assets and related land and buildings were last revalued on 30 November 2017 (fair value $146.7 million) by PricewaterhouseCoopers ("PwC"). The net book value at 31 March 2021 was $153.7 million (2020: $149.2 million). The valuation method used was a discounted cash flow basis, using the following assumptions: • Forecast revenue and operating costs Valuation technique

Fair value measurement sensitivity to

Valuations affected

• Default Price Quality Path (WACC) assumptions 6.19% - 7.28%

significant unobservable input

by input change

• Closing 2030 Regulatory Asset Base used as the terminal value and discounted back to valuation date • Forecast capital projects

Discounted cash flow model Price path

An estimated 1% change in price path would

Generation equipment

iii.

Electricity generation equipment

Electricity generation equipment (“Gensets”), owned by Eastland Network Limited, were revalued at 31 March 2020

result in a material change in the fair value. Weighted Average Cost of Capital

An estimated 1% (multiplicative) change in WACC

Generation equipment,

(“WACC”)

would result in a material change in the fair value.

Distribution equipment

Plant outputs/Revenue

An estimated 1% change in output or revenue

Distribution equipment,

would result in a material change in the fair value.

Generation equipment

(total fair value of $1.7 million) by an independent valuer; PwC. The net book value as at 31 March 2021 was $1.5 million (2020: $1.7 million). The valuation method used was a discounted cash flow basis, using the following assumptions: • A nominal post-tax discount rate (WACC) of 7.0%, however annual WACC’s are applied each year due to short

Optimised Depreciated replacement cost Cost of construction

spot price at time of generation. An estimated 1% change in construction costs

Wharves, walls and

The Waihi Hydroelectric Scheme, owned by Eastland Generation Limited, was impaired as at 31 March 2021 (total fair

would result in a material change in the fair value.

surfaces

value of $0.8 million) by an independent valuer; PwC. Due to forecast changes in Commerce Commission rules, the Waihi assets have required impairment at 31 March 2021. The impairment calculations were made using a discounted

Market capitalisation Gross market rent

cash flow basis, using the following assumptions: An estimated 10% change in rent received would

Land & buildings

result in a material change in the fair value. Market capitalisation rate

term cashflows • Revenue forecasts were based on the terms of a supply agreement together with assumptions on electricity

An estimated 1% change in market capitalisation

• Outputs were based on an average plant availability of 25.5% of capacity resulting in an average production of 1085 MWh.

Land & buildings

rate would result in a material change in the

• PwC price path • A nominal post-tax discount rate (WACC) of 6.56% which is reflective of the expectation an investor would

fair value.

expect to receive on private generation projects.

Direct sales comparison Rate per square metre

An estimated 10% change in rate per square

Land & buildings

metre would result in a material change in the fair value.

PAGE F - 27

PAGE F - 28

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2021

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued) FOR THE YEAR ENDED 31 MARCH 2021

The geothermal plant, owned by Te Ahi o Maui Limited Partnership, was revalued at $181.9 million less the carrying

2021 $’000

Depreciation

value of steam wells, at $146.8 million as at 31 March 2020 by an independent valuer, PwC. The net book value at 31 March 2021 was $143.1 million (2020: $146.8 million). The valuation used was a discounted cash flow basis using the

Depreciation of property, plant and equipment

2020 $’000

23,467

21,424

following assumptions: • Net output of 216.3 GWh • PwC price path • Capital expenditure was derived from the plant’s asset management plan, with two new re-injection wells expected to be drilled in 2029. • A nominal post-tax discount rate (WACC) of 7.00% which was reflective of the return an investor in this asset would expect to receive on private generation projects.

is recognised in the Statement of Financial Performance on a straight-line basis considering the π Depreciation estimated useful life of each part of an item of property, plant and equipment and it’s residual value. Land is not depreciated. The estimated useful lives for significant classes of assets for the current and comparative periods are as follows:

The geothermal plant, owned by Geothermal Developments Limited was revalued at $30.2 million less the carrying

Buildings 40-50 years

value of steam wells, at $20.0 million as at 31 March 2020 by an independent valuer, PwC. The net book value at 31

Electricity distribution equipment

March 2021 was $18.8 million. The valuation used was a discounted cash flow basis using the following assumptions:

Other assets at cost:

10-70 years

Wells 15 years

• Net output 69.9 GWh

Airport assets and other improvements

• PwC price path

Electricity generation equipment

• Capital expenditure was derived from the plant’s asset management plan, with a new re-injection well expected to be drilled in 2029.

would expect to receive on private generation projects • The terminal value was based on free cash flow at 2041 with the valuation tested at terminal value growth rates of 1.5 - 3.5%.

10-50 years

Other plant and equipment: Plant and equipment

• A nominal post-tax discount rate (WACC) of 7.00% which was reflective of the return an investor in this asset

5-50 years

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.

The restoration provision has been amortised to account for interest from its initial value of $1.6 million to $1.7 million. iv.

Wharves, walls and surfaces

The port wharves, walls and surfaces, land and buildings and other plant and equipment were revalued on 31 March 2021 (total fair value $168.4 million) by independent valuers, WSP New Zealand Limited. The net book value at 31 March 2021 was $166.8 million (excluding land and buildings) (2020: $111.5 million). The method of valuation

Commitments As at 31 March 2021, Eastland Group had total capital commitments payable within the next 12 months of $11.1 million (2020: $6.6 million).

was optimised depreciated replacement cost which was supported by a discounted cash flow valuation. The key assumptions for these valuations were: ODRC: • Unit rates for specific asset types using best available data • Capitalisation allowances for on-costs aligned with discounted cashflow valuation • Asset lives and residual values reassessed Discounted cash flow: • Revenues were based on management's best estimate of cargo volumes (predominantly logs) over the years to 2036 with these 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 2027 to support the capital expenditure programme • Capital expenditures include both maintenance and growth capital expenditure to support the estimated volumes • The post-tax discount rate (WACC) of 7.10% was used • The terminal value was estimated using the ODRC asset values as at 31 March 2036 as a capitalised earnings approach was not used.

PAGE F - 29

PAGE F - 30

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

6. Investment properties

8. Trade and other receivables 2021

2020

$’000 Opening balance at 1 April Additions Transfers from operational property Transfers to operational property Fair value adjustment Closing balance at 31 March

$’000

25,361

22,020

337

2,268

2,487

(1,220)

1,705

2,293

29,890

25,361

2021

2020

$’000

Trade receivables

13,153

7,453

Other receivables

6,096

4,074

19,249

11,527

Total trade and other receivables

Trade receivables are stated net of expected credit loss of $68,064 (2020: $59,083). Eastland Group has recognised a loss allowance of 100% against all receivables over three months past due, because historical experience has indicated these receivables are generally not recoverable. As detailed in note 18, Eastland Group assesses credit risk and recognises credit losses on recognition of a receivable and when a loss is probable. No expected credit losses have been recognised on related party receivables. There has been no change in the estimation techniques or significant assumptions made during the current reporting period.

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

9. Payables and accruals

They are measured at fair value, based on an annual valuation by an independent valuer; Telfer Young. These valuations were completed at 31 March 2021. The valuations comply with approved/accepted valuation standards.

Trade payables

of current property sales is also assessed in determining the value. The investment property that has been revalued is categorised as level 3 in

Non-trade payables and accrued expenses

the fair value hierarchy. There have been no transfers between levels and no change to valuation techniques in the current year.

Interest payable GST payable Total payables and accruals

property is property held either to earn rental income or for capital appreciation or for both, but not for π Investment sale in the ordinary course of business, use in the production or supply of goods or services or for administrative

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

2021

2020

$’000

Geothermal development rights

3,999

4,110

Vended assets

2,093

1,785

2,137

2,180

710

Access rights

1,228

1,257

Software

5,579

371

350

16,117

10,392

Total

The intangible asset groups shown above are amortised over their assessed lives. The goodwill relating to the weighbridge and Inner Harbour Marina however is not amortised, but is reviewed for impairment on an annual basis. The directors are comfortable with the carrying values. The amortisation charge relating to resource consents, access rights and other intangible assets for the year was $486,904 (2020: $216,691).

PAGE F - 31

696

917

13,351

10,625

other payables approximates fair value because the amounts due will be settled within 12 months and are interest free.

date of reclassification becomes its cost for subsequent accounting.

3,145

708

Trade and other payables generally have terms of 30 days and are interest free. The directors consider the carrying amount of trade and

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the

7. Intangible assets

6,737

4,537

Eastland Group.

Performance within administrative expenses or other income and disclosed separately in the financial statements.

Other

7,189

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

purposes. Investment property is measured at fair value with any change recognised in the Statement of Financial

Goodwill

2020 $’000

The fair value is based on a discounted cashflow model using expected market rentals for the highest and best use of the property. An analysis

Resource consents

2021 $’000

PAGE F - 32

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

This associate is accounted for using the equity method. The following summarised financial information in respect of the Group’s

Subsidiary Eastland Port Limited Eastland Network Limited

Parent Eastland Group Limited Eastland Group Limited

Business Port services Electrical distribution

Country of incorporation

Ownership Interest (%)

New Zealand

2021

2020

100%

Group’s share of:

100%

Loss from continuing operations

100%

New Zealand

interest in the immaterial associate is set out below. 2020 $’000

(1,200)

Other comprehensive income

Eastech Limited

Eastland Group Limited

Contracting

New Zealand

100%

Eastland Generation Limited

Eastland Group Limited

Electrical generation

New Zealand

100%

Eastland Investment Properties Limited

Eastland Group Limited

Investment property

New Zealand

100%

Reconciliation of the interest in the associate recognised in the consolidated

Gisborne Airport Limited

Eastland Group Limited

Eastland Energy Solutions Limited

2021 $’000

Share of gain/(loss) in associate

(1,431)

5,109

(780)

3,909

(2,211)

financial statements:

Eastland Group Limited

Airport services Energy solutions

100%

New Zealand New Zealand

100%

Eastland Port Debarking Limited

Eastland Port Limited

Debarker services

New Zealand

100%

Northland Debarking Limited

Eastland Port Debarking Limited

Debarker services

New Zealand

100%

Inner Harbour Marina Limited

Eastland Investment Properties Limited

Harbour services

New Zealand

100%

Geothermal Developments Limited

Eastland Generation Limited

Geothermal generation

New Zealand

100%

Te Ahi O Maui Limited Partnership

Eastland Generation Limited

Geothermal generation

New Zealand

94%

Te Ahi O Maui General Partnership Limited

Eastland Generation Limited

Non-trading

ROOPU Whakarite Mahi Limited Partnership

Eastland Generation Limited

Geothermal generation

Te Turapa Wai Ariki Limited

Eastland Generation Limited

Non-trading

94%

New Zealand

Share of change in net assets (share of loss in associate) at 20.63% Impairment of associate

5,864

9,887

(1,200)

(1,431)

(1,812)

Share of associate - other comprehensive income

5,109

(780)

Carrying amount of the Group’s interest in the associate

9,773

5,864

12. Investment in joint venture Details of the Group’s joint venture at the end of the reporting period is as follows:

Proportion of ownership interest and voting

Name of Joint Venture

Principal activity

Place of Incorporation

Eastland Debarking

Debarking and anti-sap stain

New Zealand

rights held by the Group

94%

85%

New Zealand

Opening balance

treatment of export logs stored

85%

2021

2020

50%

at the port in Gisborne 85%

New Zealand

85% This joint venture is accounted for using the equity method. The following summarised financial information in respect of the Group’s interest in the immaterial joint venture is set out below. Eastland Debarking Joint Venture

2021

2020

$’000

Investment in associate Convertible note (see "Significant transactions and events" (c)) Investment in Flick Energy Limited Number of shares owned Book value per share

9,773

5,864

710

10,483

5,864

11,967,627

$0.82

$0.49

2020 $’000

Group’s share of:

1,126

Profit from continuing operations

810

Group eliminations

100

116

Share of profit of joint venture

910

1,242

2,008

2,190

Net assets of the joint venture Proportion of the Group’s ownership interest in the joint venture Carrying amount of the Group’s interest in the joint venture

The increase in the book value per share is attributable to an increase in the value of electricity derivatives used by Flick Energy Limited to manage electricity price risk. Details of the Group’s immaterial associate at the end of the reporting period is as follows:

2021

PAGE F - 33

2021 $’000

PAGE F - 34

50%

1,004

1,095

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

13. Loans

14. Finance expenses

This note provides information about the contractual terms of Eastland Group’s interest-bearing loans and borrowings.

2021

2020

$’000

The borrowings are repayable as follows:

2021

2020

$’000

Interest income on cash and cash equivalents

Total finance income

11,902

12,735

From one to two years

60,000

210,000

Interest expense

Within two to five years

195,000

40,000

Interest on restoration costs

Total bank borrowings

255,000

250,000

105

430

720

Total finance expense

12,437

13,455

Net finance expenses

12,417

13,443

Interest on leases

Classified as follows: Non-current liabilities

255,000

250,000

Total bank borrowings

255,000

250,000

Drawn

Undrawn

$’000

Facility A - Tranche A maturing 1 April 2023

180,000

Facility A - Tranche B maturing 1 April 2022

30,000

Facility A - Tranche C maturing 1 April 2023

15,000

35,000

As at 31 March 2021

Facility A - Tranche D maturing 1 April 2022

30,000

255,000

35,000

expenses comprise of interest expense on borrowings, changes in the fair value of financial assets at fair value π Finance through the Statement of Financial Performance, impairment losses recognised on financial assets (except for trade receivables), 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 are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for use. All other borrowing costs are recognised in the Statement of Financial Performance in the period which they are incurred.

As at 31 March 2020 Facility A - Tranche A maturing 1 April 2021

210,000

Facility A - Tranche B maturing 1 April 2022

30,000

Facility A - Tranche C maturing 1 April 2023

40,000

10,000

Facility B maturing 30 June 2021

15,000

55,000

250,000

Eastland Group Limited has arranged bank funding from the ANZ, ASB and BNZ Banks (“Syndicate”) on behalf of Eastland Group and its subsidiaries. As at 31 March 2021 there were total bank facilities of NZD $290 million (2020: $305 million) which are unsecured and subject to a Deed of Negative Pledge. The borrowings are in the name of Eastland Group Limited. The guaranteeing subsidiaries of the Eastland Group debt held by the Parent entity are as follows: Eastland Port Limited

Eastland Port Debarking Limited

Eastland Network Limited

Northland Debarking Limited

Eastech Limited

Inner Harbour Marina Limited

Eastland Generation Limited

Geothermal Developments Limited

Eastland Investment Properties Limited

Te Ahi O Maui Limited Partnership

Gisborne Airport Limited

These borrowings are rolled over at 90 day intervals spread throughout the year. The interest rate on these borrowings is the BKBM rate at the rollover date plus a margin of 0.76% to 2.08% (2020: 0.76% to 1.21%). As at 31 March 2021, the BKBM rates on borrowings range from 0.33% to 0.395% (2020: 1.30% to 2.34%). Facilities with the Syndicate have expiry dates of 1 April 2023 Tranche A ($180 million), 1 April 2022 Tranche B ($30 million), 1 April 2023 Tranche C ($50 million), 1 April 2022 Tranche D ($30 million). There have been no defaults during the period of principal, interest, sinking fund, covenants or redemption terms of those loans payable during the period.

PAGE F - 35

PAGE F - 36

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

15. Financial assets and liabilities

π Valuation of financial assets and liabilities

This note discloses Eastland Group’s financial assets and liabilities, how they are valued and managed.

The following methods and assumptions were used to estimate the carrying amount and fair value of each asset class

Eastland Group’s financial assets and liabilities are presented below:

of financial instrument carried at fair value. Where financial instruments are measured at fair value they have been classified at the following levels. 2021

Notes Financial assets

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

Fair value through profit loss $’000

Assets measured at amortised cost $’000

Liabilities at amortised cost $’000

Fair Value $’000

6,690

contracts. These are based on Level 2 fair value methodologies and were calculated using valuation models applying

19,249

observable market data such as forward rates and contract rates, discounted at a rate that reflects the credit risk of

1,942

710

6,690

1,942

710

19,249

28,591

Cash and cash equivalents $’000

Fair value through other comprehensive income $’000

6,690

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

Derivative financial instruments used by Eastland Group include interest rate swaps and foreign currency forward

Cash and cash equivalents 8

Trade and other receivables Derivative financial instruments

Convertible notes

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

Total financial assets

various counterparties. Electricity derivatives used by Eastland Group are contract for differences. These are based on level 3 fair value methodologies and were calculated using valuation models applying forward price rates and discount at a rate that reflects the credit risk of various counterparties.

Financial liabilities Payables and accruals

(13,351)

Employee entitlements

(4,545)

Electricity derivatives

(26,545)

Derivative financial instruments

(11,316)

Loans

(255,000)

Capital notes

(30,000)

(37,861)

(302,896)

(340,757)

6,690

(35,919)

710

19,249

(302,896)

(312,166)

Total financial liabilities

16. Price risk Interest rate risk Eastland Group‘s loans predominantly have floating interest rates. Eastland Group actively manages interest rate exposures in accordance with the treasury management policy and they are regularly reviewed by the Board. In this respect, at least fifty percent

Total net financial assets/(liabilities)

of interest costs must be fixed using interest rate swaps, forward rate agreements, options and other derivative instruments. The main objectives are to minimise the cost of total debt, control variations in the interest expense of the loans and to match the interest rate risk profile of debt with the expected return on Eastland Group’s assets. The treasury management policy sets parameters for managing the interest rate risk profile.

2020

Financial assets

Eastland Group has elected to apply cash-flow hedging to all of its interest rate swaps, a notional value totalling $160 million (2020: $180 million) with terms or maturity dates between 4 and 101 months. Interest on a floating rate swapped to fixed interest is

$’000

Assets measured at amortised cost $’000

Liabilities at amortised cost $’000

Fair Value $’000

9,049

11,527

3,825

Average

9,049

3,825

11,527

24,401

contract rate

Notional Amount

contract rate

$’000

Cash and cash equivalents Notes $’000

Fair value through other comprehensive income $’000

Fair value through profit loss

9,049 -

between 0.53% to 5.53% (2020: 2.03% to 5.94%). The last cash-flow hedge swap matures on 30 August 2029.

interest expense is recognised on the retrospective borrowings. The hedge relationships are expected to be highly effective over the life of the swaps. All current hedges are effective.

Cash and cash equivalents Trade and other receivables

The interest rate swaps that have been designated as cash-flow hedges affect profit and loss at the same time as the underlying

Electricity derivatives Total financial assets Financial liabilities

2021

Interest rate swaps (floating to fixed)

Payables and accruals

Employee entitlements

(10,625) (3,663)

(10,625)

2020 Average

Maturing in less than 1 year

2.33

15,000

4.04

3.86

25,000

2.33

15,000

4.78

70,000

4.59

65,000

1.14

50,000

3.49

40,000

(3,663)

Maturing between 1 and 2 years

Electricity derivatives

(36)

Maturing between 2 and 5 years

Derivative financial instruments

(16,164)

(250,000)

(30,000)

average

(294,288)

(310,488)

contract rate

(294,288)

(286,087)

Capital notes

(16,200)

9,049

(12,375)

11,527

Total financial liabilities Total net financial assets/(liabilities)

PAGE F - 37

$’000

Loans

Notional Amount

Maturing after 5 years

Weighted

Total notional interest rate swaps

3.27

PAGE F - 38

60,000

Weighted

160,000

3.97

180,000

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

Electricity price risk

π Hedge accounting and sensitivity analysis

Eastland Group is exposed to electricity price risk through the sale of electricity on the wholesale electricity market, where prices are determined every half-hour. Derivatives, mainly Contracts for Differences, may be used to fix the price at which Eastland Group sells

The sensitivity analysis has been determined based on the exposure to interest rates and foreign exchange rates

any exposure to electricity price risks. The electricity price risk management policy sets parameters for managing the electricity price

for both derivatives and non-derivative instruments at balance date. It is assumed that the amount of the liability at

risk profile.

balance date was outstanding for the whole year. A one percent increase or decrease is used for interest rates and these changes represent management’s current assessment of the reasonably possible change over a year.

Electricity price derivatives are designated as cashflow hedges and are recognised in profit and loss at the same time as the underlying spot price revenue is recognised on the retrospective electricity sales. The hedge relationships are expected to be highly

Interest rate swaps hedging the floating rate debt are hedge accounted and treated as cash flow hedges and hence

effective over the life of the hedging instrument. All current hedges are effective.

any changes in interest rates would have no material impact on profits as changes in the fair value of these swaps are taken through other comprehensive income where the hedge is an effective hedge. The fair value of these interest

The maturity of the hedging instruments at 31 March are:

rate swaps is a $11.3 million loss (2020: $10.0 million loss). A fall of 1% in interest rates would result in a loss in other 2021

Electricity revenue swaps

comprehensive income of $3.5 million (2020: $3.4 million) whereas an increase of 1% in interest rates would result in

2020

a gain in other comprehensive income of $3.3 million (2020: $3.2 million).

Average

Notional

Average

Notional

contract rate

Amount

contract rate

Amount

MWH

Maturing in less than 1 year

122.94

79,248

109.91

92,832

Maturing between 1 and 2 years

95.09

114,144

102.09

72,144

Maturing between 2 and 5 years

106.19

157,584

102.87

22,368

350,976

187,344

Forward starting interest rate swaps hedging the forecasted floating rate debt are also hedge accounted and are recognised as cash flow hedges and hence any changes in interest rates would have no material impact on profit as changes in the fair value of these swaps are recognised through other comprehensive income where the hedge is effective. The fair value of these interest rate swaps is $1.7 million gain (2020: $6.1 million loss). A reduction of 1% in interest rates would result in a loss in other comprehensive income of $1.6 million (2020: $1.7 million) whereas an increase of 1% in interest rates would result in a gain in other comprehensive income of $1.4 million (2020: $1.6 million). Electricity derivatives hedge the forecasted revenues from electricity generation and are recognised as cash flow hedges, and hence any changes in electricity prices would have no material impact on profit as changes in fair value

Maturity dates of the hedging instruments are between 0 and 42 months. Prices for contracts for differences (floating spot price

are recognised through other comprehensive income where the hedge is effective. The fair value of the electricity

swapped to fixed price) are between $72.70 to $154.25 (2020: $72.50 to $155.51) with the last cash-flow hedge maturing on 30

derivatives is $26.5 million loss (2020: $3.8 million gain). A reduction of 10% in electricity prices would result in a gain

September 2024.

in other comprehensive income of $6,258,900, (2020: $1,554,140) whereas an increase of 10% in electricity prices would result in a loss in other comprehensive income of $6,258,900 (2020: $1,554,130).

Foreign currency risk

Electricity contracts for differences that have been designated as cash-flow hedges affect profit and loss at the same

Eastland Group is exposed to foreign exchange risk through the contracts for construction of assets denominated in US dollars.

time as the underlying electricity revenue is recognised. The hedge relationships are expected to be highly effective

Foreign exchange risk is primarily managed through derivative forward contracts. The treasury management policy requires that

over the life of the contract for differences and no ineffectiveness has been recognised in the statement of financial

all foreign currency commitments are hedged from NZD at the time of making the commitment.

performance.

Eastland Group has elected to apply cash-flow hedging to all of its derivative forward contracts, a notional value totalling USD$7.9 million (2020: USD$Nil) with terms or maturity dates between 6 and 24 months, exchange rates between 0.7099 to 0.7135 (2020: Nil). The last cash-flow hedge swap matures on 31 March 2023. The derivative forward contracts that have been designated as cash-flow hedges affect the project cost at the same time as the underlying expense is recognised on the retrospective contracts. The hedge relationships are expected to be highly effective over the life of the swaps. All current hedges are effective. 2021

2020

Average

Notional

Average

contract rate

Amount

contract rate

Notional Amount

USD $000 Forward exchange contracts Maturing in less than 1 year Maturing between 1 and 2 years

USD $000

0.7127

7,431

0.7111

437

7,868

PAGE F - 39

PAGE F - 40

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

Hedging derivatives

17. Liquidity risk

The following is a reconciliation of derivative balances and their movements.

The risk that Eastland Group will not be able to meet its financial obligations as they fall due is described as liquidity risk. Eastland Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet

2021 Interest

2020

Foreign

Interest

rate currency Electricity

Eastland Group's reputation.

rate currency Electricity

swaps forwards

CFD's

Total

$’000

its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to

Foreign

swaps forwards

CFD's

Total

$’000

Opening balance

(16,169)

3,791 (12,373)

(13,029)

(4,788)

Eastland Group manages its cash commitments at a Group level with all cash transactions and funding taking place as part of Eastland Group’s treasury function. Eastland Group Limited has sufficient funding and banking facilities available to meet it's liquidity requirements.

(17,817)

Recognised in the Statement

2021

of Financial Performance: Interest expense of contract settlements

(4,551)

(5)

(4,556)

(3,360)

(3,720)

(2,073)

11,112

233

(26,616)

(15,271)

220

10,652

10,877

Closing balance

(9,608)

233

(26,545) (35,920)

(16,169)

3,791 (12,373)

Hedge reserve balances Statement of Changes in Equity

(6,814)

167

(19,112) (25,759)

(11,538)

2,729

Electricity sales of contract settlements Change in fair value recognised in other comprehensive income

Financial assets

Notes

<6 months $’000

6 -12 months $’000

1-3 years $’000

3-5 years $’000

>5 years $’000

6,690

19,249

189

1,709

1,942

710

25,969

189

724

1,709

28,591

Cash and cash equivalents Trade and other receivables Derivative financial instruments

(8,806)

Total $’000

Convertible note Total financial assets Financial liabilities

Derivatives summary

Interest rate swaps

2021

Assets

Liabilities

Assets

Liabilities

$’000

(11,316)

233

(26,545)

3,826

(36)

1,942

(37,861)

3,831

(16,205)

1,709

Foreign currency swaps Electricity revenue swaps

Current Non-current

2020

(16,169) -

219

(19,395)

3,172

(777)

1,723

(18,466)

659

(15,428)

1,942

(37,861)

3,831

(16,205)

Payables and accruals

(13,351)

Employee entitlements

(1,722)

(1,412)

(1,411)

(4,545)

(13,651)

(5,587)

(7,307)

(26,545)

(157)

(3,459)

(6,921)

(779)

(11,316)

(255,000)

Electricity derivatives Derivative financial instruments Loans

Capital notes

Total financial liabilities Liquidity gap

(30,000)

(28,881)

(5,587)

(267,178)

(8,332)

(30,779)

(340,757)

(2,912)

(5,398)

(266,454)

(8,332)

(29,070)

(312,166)

2020

<6 months $’000

6 -12 months $’000

1-3 years $’000

3-5 years $’000

>5 years $’000

Total $’000

9,049

11,527

Electricity derivatives

2,169

997

659

3,825

Total financial assets

22,745

997

659

24,401

Notes Financial assets

Cash and cash equivalents Trade and other receivables

Financial liabilities Payables and accruals

(10,625)

Employee entitlements

(2,350)

(658)

(655)

(3,663)

(4)

(29)

(3)

(36)

(565)

(175)

(2,220)

(6,735)

(6,469)

(16,164) (250,000)

Electricity derivatives Derivative financial instruments Loans

(250,000)

Capital notes

(30,000)

(13,544)

(204)

(252,881)

(7,390)

(36,469)

(310,488)

9,201

793

(252,222)

(7,390)

(36,469)

(286,087)

Total financial liabilities Liquidity gap

PAGE F - 41

PAGE F - 42

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

18. Credit risk

20. Leases

Eastland Group’s business transactions are largely with large wholesale intermediaries or agents representing a number of exporting clients. Sales transactions are typically settled intra-month resulting in relatively low receivable balances. Our businesses incur credit risk in the following ways:

π Leases i. as lessee

• Networks – distributes electricity selling to electricity retailers, who settle on the 20th of the month. Historically, there have been no defaults by electricity retailers.

In assessing whether an arrangement is, or contains a lease, Eastland Group considers whether the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. In considering the

• Ports – Export agents and logistics companies represent customers who ship product through Eastland Port using a variety of

lease and its term, the group applies judgment in determining whether it is reasonably certain that an extension or

port services. These agents generally settle transactions intra-month while settling sale proceeds with their customers.

termination option will be exercised. Also, on assessing the lease, allowable exemptions are taken if the lease is of a low

Historically there have been no defaults by these agents.

value or a short term.

Airport landing charges paid by Air New Zealand represent 80% of Gisborne Airport's revenue. These landing charges are

Right of use (“ROU”) assets are initially recognised at cost, comprising the initial amount of the lease liability less

typically settled on the 20th of the month.

any unamortised lease incentives. ROU assets are subsequently depreciated using the straight-line method from the

• Generation – The majority of power generated is sold through the NZX and settled on the 20th of the month. The NZX acts as

commencement date to the end of the lease term.

clearing agent ensuring the cash settlement of electricity sold. Where electricity revenue is hedged, through the use of contracts

On initial introduction of the NZ IFRS 16 Leases standard, lease liabilities were measured at the present value of

for differences, counterparty credit risk may exist. Contract for differences are with multiple counterparties and are settled

remaining lease payments, discounted by the Group’s incremental borrowing rate as at 1 April 2019. For any new leases

monthly, reducing this credit risk. Historically there have been no defaults on electricity sales.

entered into, the present value of remaining lease payments will be discounted using the rate implicit in the lease. In

Credit risk and expected credit losses are assessed on recognition of revenue. The credit risk of a debtor is assumed to have increased significantly since initial recognition if the contractual obligations are over 90 days past due. Eastland Group assesses increases in

instances where the rate implicit in the lease is not readily determinable, the present value of remaining lease payments will be discounted by the Group’s incremental borrowing rate determined at the inception of the lease.

credit risk through consideration of changes in a debtor’s industry or adverse changes in the debtor’s environment that result in

After initial recognition of the lease, the liability is reduced over time by payment of interest and principal of the lease

significant decreases in the debtor's ability to meet its obligations. Where there is information indicating that the debtor is in severe

through the required lease payments.

financial difficulty and there is no realistic prospect of recovery, e.g. placed in liquidation or has entered into bankruptcy proceedings, the debt will be impaired and recognised as a bad debt in the Statement of Financial Performance. A central treasury function is provided by Eastland Group to all the subsidiary companies. Credit risk exposure in relation to the

Interest and depreciation are recognised in the Statement of Financial Performance relating to these lease transactions. ii. as lessor

subsidiaries is not considered to be significant, and no specific risk management policies have been put in place in relation to inter-

Assets leased under operating leases are included in Investment property in the Statement of Financial Position. Rental

group balances.

income (net of any incentives given to lessees) is recognised on a straight line basis over the lease term. For more

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

details see the Investment property policy (note 6).

Eastland Group recognises expected credit losses on trade and other receivables that are believed to be irrecoverable. The expected credit loss at 31 March 2021 was $68,064 (2020: $59,083). Actual bad debts written off in the Statement of Financial Performance were $9,505 (2020: $61,589) and there was no adjustment to the specific expected credit loss.

19. Capital management The Directors' policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor the return on capital on a regular basis. This involves the management of reserves and issued capital. The Directors also monitor the level of dividends to it's shareholders. The Directors seek to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

PAGE F - 43

PAGE F - 44

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

a) Leases receivable

d) Lease liabilities maturity analysis and commitments

Eastland Group has leased certain investment properties (refer to Note 6) and some other land and buildings. These are recognised

The average remaining lease term for land and buildings is 26.5 years and 2.3 years for office equipment.

under Rental income in the Statement of Financial Performance. The average lease period for leases receivable is 3.49 years. 2020

2021

b) Lease receivable asset Lease liability $’000

On 1 May 2020 an agreement was entered into regarding the supply of geothermal fluid and the transfer of operation and management of the KA24 well to Ngati Tuwharetoa Geothermal Assets Limited (NTGAL). This has resulted in the de-recognition of production wells as property plant and equipment and the recognition of a lease receivable asset. The lease receivable is amortised over the life of the agreement. No gain or loss on disposal was recognised.

Interest $’000

Fixed lease payments $’000

Lease liability $’000

Interest $’000

Fixed lease payments $’000 953

Year one

225

(555)

780

246

(707)

Year two

241

(543)

784

258

(694)

952

Year three

257

(529)

786

275

(681)

956

2021

2020

$’000

Year four

261

(515)

776

292

(666)

958

Year one

3,691

2,482

Year five

275

(500)

775

299

(649)

948

Year two

2,950

1,664

More than five years

8,467

(6,417)

14,884

10,751

(8,926)

19,677

Year three

2,052

855

Total

9,726

(9,059)

18,785

12,121

(12,323)

24,444

Year four

1,362

726

Current portion

225

(555)

780

246

(707)

953

Year five

815

424

Non-current portion

9,501

(8,504)

18,005

11,875

(11,616)

23,491

Total

9,726

(9,059)

18,785

12,121

(12,323)

24,444

The maturity profile of the leases receivable is below:

667

426

Total leases receivable

11,537

6,577

Lease receivable asset

5,959

More than five years

The Group does not face significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group's

c) Right of use assets Opening net book value 1 April 2019 Additions

Land and buidings

Other plant and equipment

Total

$’000

12,252

12,345

(554)

(24)

(578)

Closing net book value at 31 March 2020

11,698

11,778

Opening net book value 1 April 2020

11,698

11,778

127

137

Additions

Disposals

(2,175)

Depreciation for the period

(558)

(35)

(593)

Closing net book value at 31 March 2021

9,175

9,230

10,045

101

10,146

(870)

(46)

(916)

Depreciation for the period

Adjustment re calculation method

Cost Accumulated depreciation

PAGE F - 45

financial management function.

e) Lease expenses included in profit or loss

2021

2020

$'000

Short term/low value leases

291

115

Depreciation on ROU assets

593

578

Interest on lease liabilities

430

720

f) Lease cashflows included in cashflow statement 2021

2020

$'000

Interest payments

430

720

Principal payments

645

318

1,075

1,038

Total cash outflow in relation to leases

PAGE F - 46

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

21. Our shareholder

Total fee pool

$463,500

Board Fees $

Audit, Finance & Risk Committee $

Performance & Remuneration Committee $

Total $

2020 $

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

Notes

There are no restrictions on the distribution of dividends and the repayment of capital.

Current Directors

Dividends paid

M Mahuika

116,233

2,098

118,331

111,792

Board Chair

Dividends of $8.93 million were paid during the year (2020: $10.12 million). There was no subvention payment during the year (2020:

W Harvey

59,447

4,030

63,477

27,854

Chair of Performance and Remuneration Committee

Imputation credits

C Kinser

39,984

3,292

43,276

Appointed 1 August 2020

As at 31 March 2021, the imputation credits available to the shareholders of the parent and Eastland Group total $26 million

J Nichols

59,447

10,090

69,537

32,000

J Quinn

39,980

1,098

41,078

J Rae

62,064

3,295

65,359

62,860

$1.97 million). The dividend per share is $8,930 (2020: $10,120).

(2020: $25.6 million). Capital notes Eastland Group issued capital notes on 1 April 2010 of $30 million to Trust Tairāwhiti. The notes have a perpetual term and are subject to repayment, on receipt of 15 months notice. Eastland Group may elect at any time to redeem all or part of the notes for equity or cash. The capital notes incur interest at 4.00% (2020: 7.10%).

Other transactions Eastland Group provides finance, human resource and information technology services to Trust Tairāwhiti and subsidiary companies. Management fees for these services were $234,000 (2020: $234,000).

19,333

4,000

23,333

65,595

K Devine

9,667

Resigned 8 May 2019

M Glover

9,000

Resigned 8 May 2019

F Mules

9,667

Resigned 8 May 2019

K Sutton

11,367

Resigned 8 May 2019

396,488

20,677

7,226

424,391

339,802

Total

22. Directors’ information

Appointed 1 August 2020

Former Directors T Gray

Interest paid for the year ended 31 March 2021 was $1.2 million (2020: $2.1 million).

Chair of Audit, Finance and Risk Committee

Retired 31 July 2020

Interests Register

Directors are appointed by our shareholder, Trust Tairāwhiti. They are appointed as Directors of Eastland Group Limited, Eastland Network Limited, Gisborne Airport Limited and Eastland Port Limited. Directors' fees are paid by Eastland Group Limited to the directors, as the directors of the Eastland Group. Total fees paid were $424,391 (2020: $339,802). There are no separate fees paid to these directors in respect of the subsidiaries.

Directors may be appointed to boards of various organisations, which may transact on a commercial basis, with Eastland Group and its subsidiaries. The following entries were on record in the interests register as at 31 March 2021 of general disclosures of interest. There were no specific disclosures made during the year of transactions entered into by Eastland or any of its subsidiaries.

2021

2020

$’000

Mr Matanuku Mahuika

Ms Wendie Harvey

Board chair

124

110

Callahan Innovation

Aurora Energy Limited

Board member

Futurity Group Limited Advisory Board

Centralines Limited (Resigned 21 October 2020)

Audit, finance and risk committee - Chair

(Appointed 16 September 2020)

Electrical Training Company Limited

Audit, finance and risk committee - Member 6

JP Ferguson Trustee Company Limited

Excellence in Business Solutions Limited

Remuneration committee - Chair

Hauiti Berries GP Limited

Fire and Emergency New Zealand

Remuneration committee - Member

Kahui Legal

Hawkes Bay Airport Limited

New Zealand Geographic Board (Resigned 22 April 2020)

Hawkes Bay Airport Construction Limited

Ngati Porou Berries Limited

New Zealand Gambling Commission

Ngati Porou Holding Company Limited Ngati Porou Wind Farms Limited NPWF Holdings Limited Pakihiroa Farms Limited Paraumu A1 Pohewa Limited (Resigned 2 March 2021) St Mary’s Church & Cemetery Trust Te Runanganui O Ngati Porou Trustee Limited (Resigned 30 November 2020) Te Tira Toi Whakanga O Limited The NZ Merino Company Limited Trust Tairāwhiti Investment Committee (Resigned 27 May 2020)

PAGE F - 47

Ms Candace Kinser Cancer Society of New Zealand Northland Livestock Improvement Corporation LIC Agritechnology Company Limited New Zealand Health Partnerships (Appointed 01 February 2021) Regional Facilities Auckland Limited Sagitas Consulting Limited Ultrafast Fibre Limited UFF Holdings Limited WEL Networks Limited

PAGE F - 48

EASTLAND GROUP • ANNUAL REPORT 2021

Consolidated Notes to the Financial Statements (continued)

FOR THE YEAR ENDED 31 MARCH 2021

25. Employee entitlements

Mr Jon Nichols

Mr John M Rae

Centralines Limited (Retired 21 October 2020)

Abodo Wood Limited

Electra Limited and Subsidiaries (Appointed 20 August 2020)

Cavalier Corporation and associated companies

Hastings District Council

F J Hawkes & Co Limited and associated companies

Hawkes Bay Airport Limited (Appointed 1 September 2020)

Gobble Limited and associated companies

Annual leave

Hawkes Bay Airport Construction (Appointed 1 September 2020)

Jacks Co Advisory Board

Post-employment benefits

Maungaharuru Tangitu Trust

JR Family Trust

Other benefits

Nichols Consulting Limited

New Zealand Government Provincial Growth Fund

Total employee entitlements

Palmerston North Airport Limited

(Retired 28 February 2021)

Tregaskis Brown Limited (Associate)

Ngapuhi Asset Holding Company Limited and

Expenses recognised in profit or loss:

subsidiary companies

Wages and salaries

Mr Jim Quinn

Smart Environmental Limited and associated companies

Contributions to defined contribution plans

Complypro Software Limited & Associated Entities

Te Tumu Paeroa (Retired 31 December 2020)

Total personnel expenses

J & D Quinn Family Trust

Thos Corson Holdings Limited and subsidiary companies

Ministry of Transport Review of the Import/Export Supply Chain

Trust Tairāwhiti Investment Committee

by Sea (Appointed 09 February 2021 - Retired 31 March 2021)

WET Gisborne Limited

Provisions for:

2021

2020

$’000

1,287

1,131

3,176

2,452

4,545

3,663

15,310

13,794

713

613

16,023

14,407

Eastland Group operates a long-term incentive plan, which remunerates the senior leadership team over a five year period, based on the financial performance of the Group.

Ngāti Whātua Orākei Whai Rawa Limited and Associated Entities

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

(Appointed 18 November 2020)

Mr Tony Gray (Resigned effective 31 July 2020)

Payments New Zealand Limited

2021

2020

Artemis Nominees Limited

QLG Advisory Limited

Total

Civic Assurance Property Pool

Q Services Limited

100,000 - 109,999

Civic Financial Services Limited

SmartCo Limited

110,000 - 119,999

Hastings District Council

Tubman Heating Limited

120,000 - 129,999

Local Government Mutual Fund Trustees Limited

Ubiquitome Bio Limited

130,000 - 139,999

Ngati Pukenga Investments Limited

140,000 - 149,999

Quality Roading and Services (Wairoa) Limited

150,000 - 159,999

Tatau Tatau O Te Wairoa Commercial Limited

160,000 - 169,999

170,000 - 179,999

180,000 - 189,999

190,000 - 199,999

200,000 - 209,999

210,000 - 219,999

230,000 - 239,999

Key management compensation comprises of the Chief Executive, Chief Financial Officer, Chief Operating Officer and the members of

240,000 - 249,999

the senior leadership team:

250,000 - 259,999

2020

260,000 - 269,999

$’000

270,000 - 279,999

280,000 - 289,999

300,000 - 309,999

310,000 - 319,999

330,000 - 339,999

340,000 - 349,999

350,000 - 359,999

360,000 - 369,999

390,000 - 399,999

480,000 - 489,999

540,000 - 549,999

680,000 - 689,999

830,000 - 839,999

23. Management compensation

2021 $’000 Short term employee benefits Kiwisaver and other contributions Total key management compensation

3,682

3,355

286

240

3,968

3,595

24. Other related party transactions Eastland Group Limited operates a shared services model and is responsible for the management of all Eastland Group debtors and creditors. There are no parent guarantees of subsidiary liabilities. Electricity was distributed to Flick Energy Limited during the year of $691,178 (2020: $598,880). Settlements of electricity derivatives with Flick Energy Limited were made of $1,231,570 (2020: $1,262,103). Refer to the electricity derivatives policy in Note 15.

26. Subsequent events

Purchases of electricity from Flick Energy Limited as a consumer were made of $209,266 during the year (2020: $128,463).

As described in note 1 (d), the outbreak of novel coronavirus (Covid-19) and the business and government response to it,

The Chief Executive Officer is a director of Flick Energy Limited and was paid director fees of $54,000 (2020: $54,000).

continues to influence Eastland Group’s businesses and people. The Gisborne Airport operation is affected by changes in alert levels that the government makes where it impacts the number of allowable flights. Eastland Port operations are affected by

There are no other material transactions with employees, directors or joint ventures.

log demand in countries where Covid-19 causes disruption of supplies.

Directors and management may transact with Eastland Group in the ordinary course of business on an arm’s length basis.

As described in note 1 (e), on 26 May 2021 Eastland Generation Limited purchased a geothermal power plant for $83 million. This was funded by an increase in Eastland Group’s bank facility, as described in note 1 (f).

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EASTLAND GROUP • ANNUAL REPORT 2021

EASTLAND GROUP LIMITED COMPANY INFORMATION AS AT 31 MARCH 2021 Board of Directors Matanuku Mahuika (Chair) Wendie Harvey Candace Kinser Jon Nichols Jim Quinn John Rae

Chief Executive Matt Todd

Chief Financial Officer Aaron Snodgrass

Chief Operating Officer Andrew Gaddum

Senior Leadership Team Debbie Anstis Steven Follows Ben Gibson Steferl Gordon Jarred Moroney Alice Pettigrew Philip Wallingford Suzanne Winterflood

Auditors Deloitte Limited

Lawyers Chapman Tripp

Bankers ANZ ASB Bank of New Zealand

Registered Office 37 Gladstone Rd PO Box 1048 Gisborne 4040, New Zealand T: 06 986 4800 F: 06 867 8563 E: info@eastland.nz W: www.eastland.nz

PAPER STOCK: Printed on Forest Stewardship Council (FSC) credited paper stock, using eco-friendly vegetable inks. WoodFree From Sustainable Forests: these papers are totally derived from resources which are managed to ensure their sustainability for generations to come. Elemental Chlorine Free: pulp is bleached using processes that do not use elemental chlorine gas, reducing significantly the amount of toxins released. ISO 14001: the International Organisation of Standardisation (ISO) specifies requirements for an environmental management system to enable an organisation to develop and implement policies and objectives. PHOTO CREDITS: Andy Spain, Strike Photography, Cinema East, Briar Hunter, Trust Tairāwhiti. page 126