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5. Sale of Kapuni Gas interests The sale of Vector’s Kapuni gas interests to Todd Petroleum Mining Company Limited was completed on 31 March 2020. The Kapuni gas interests were classif ied as a disposal group held for sale from December 2019 and its assets and liabilities were presented as a disposal group held for sale at this date. Depreciation and amortisation on the property, plant and equipment ceased from December 2019 due to the held for sale classif ication.
2020 $M
Carrying value of disposal group as at 31 March 2020: Trade and other receivables
0.4
65.8 30.6
Intangible assets (including goodwill)
Property, plant and equipment
(0.4)
Trade and other payables
(21.1)
Provisions
7.0
Deferred tax
Net assets sold
82.3 84.3
Contingent consideration
(1.5)
Costs to sell Gain on sale
0.5
Goodwill
Where an operation within a group of cash generating units (CGUs) to which goodwill has been allocated is disposed of, goodwill attributable to the operation disposed of is included in the disposed assets. Prior to the sale the disposal group consisted a part of the gas trading CGU, which had ceased to exist following completion of the sale (refer to note 10). The goodwill was apportioned by measuring it on the basis of relative values of the operation disposed of and the portion of the CGU retained. Management has determined that a relative valuation method based on each operation’s valuation compared to its carrying value to be the most appropriate method for goodwill allocation purposes. In the group interim f inancial statements for the six-months ended 31 December 2019 the disposal group included goodwill of $36.0 million. Information made available to management subsequent to 31 December 2019 but pertaining to 31 March 2020 changed the valuations of the disposal group and continuing businesses, thus also causing changes in the allocation of goodwill. The fair value of the contingent consideration was estimated by calculating the present value of the future expected cash flows payable by Todd to Vector. The future period of payment is not f ixed by the contract but is dependent on the remaining useful life of the Kapuni gas treatment plant, which is directly correlated to the volume of gas available at the Kapuni gas f ield and the rate at which the gas is extracted. The values of future cash flows are highly dependent on the future sale prices of gas products (LPG and oil) in the market. Underpinning this all is the assumption that there is an active market for processed gas products in the future and government policy relating to the transition of New Zealand to a low carbon economy. Management made the following estimates in calculating the fair value of the contingent consideration at 31 March 2020 completion: — Future available raw gas volume at the Kapuni gas f ield to be approximately 210 PJ based on volume forecasts, as at 1 January 2020; — Future LPG prices in the range of USD $280 per tonne to USD $520 per tonne; — Future oil prices in the range of USD $25 per barrel to US $60 per barrel; — Future FX rate of approximately 1.50 NZD/USD in the long–term; — Discount rate of 8%. Management have re–estimated the same unobservable inputs when calculating the fair value of the contingent consideration at balance date. Refer to note 18 for details and sensitivity analysis around signif icant unobservable inputs used in measuring fair values.
Key accounting estimate
Notes to the Financial Statements
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