VECTOR ANNUAL REPORT 2021 /
Notes to the Financial Statements
5. Contingent consideration
2021 $M
NOTE
Carrying value of contingent consideration Balance at 30 June 2020
84.7
6.3
Unwinding of discount Payments received Fair value movement Balance at 30 June 2021
9
(3.4) (5.9)
21.2
81.7
Comprising: Current Non-current
8.2
73.5
Key accounting estimate
The fair value of the contingent consideration was estimated by calculating the present value of the future expected cash flows payable by Todd Petroleum Mining Company Limited 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 (KGTP), 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 have re-estimated the same unobservable inputs when calculating the fair value of the contingent consideration at balance date. Refer to note 19 for details and sensitivity analysis around signif icant unobservable inputs used in measuring fair values.
Payments received
$1.0 million of payments received this year was classif ied as part of trade and other receivables at 30 June 2020. Refer to note 10.
6. Investment held for sale
Vector owns 50% of Tree Scape Limited, an associate of the group whose principal activity is vegetation management. An associate is an entity over which the group has signif icant influence. Signif icant influence is the power to participate in the f inancial and operating policy decisions of the investee but is not control or joint control over those policies. In May 2021, the Vector board resolved to enter into a sale and purchase agreement with other current shareholders of Tree Scape Limited to sell all ordinary and paid up shares in the company to Blair Mill Investments LLC or its nominated subsidiary. Vector’s investment was classif ied as held for sale at the time of board approval, as the board have deemed the sale as highly probable – with an expectation completion would be within one year from May 2021 - and that the investment was available for immediate sale in its present condition. The f inancial results and assets and liabilities of Tree Scape Limited are recognised in these f inancial statements using the equity method of accounting for 11 months of the f inancial year up to and including May 2021. From 1 June 2021, Vector’s investment was measured at the lower of carrying amount and fair value less costs to sell.
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