VECTOR ANNUAL REPORT 2021 /
Independent Auditor’s Report
The key audit matter
How the matter was addressed in our audit
judgment used to estimate future pricing of the regulated revenue streams beyond the timeframe of the current Commerce Commission regulatory price paths. We considered the impairment assessment of the Metering cash generating unit to be a key audit matter due to significant value of intangible assets in the business which operates across two geographical markets. We considered the impairment assessment of the Gas Trading segments to be a key audit matter due to the competitive margin trading environment and the potential impact of the response on the global climate change.
accepted valuation approaches of NZ IAS 36 Impairment of Assets and within the energy industry; — evaluating the significant future cash flow assumptions by comparing to historical trends, budgets and where applicable, Asset Management Plans, and regulatory pricing models; — comparing the discount rates applied to the estimated future cash flows and the terminal growth rates to relevant benchmarks using our own valuation specialists; — challenging the above assumptions and judgements by performing sensitivity analysis, considering a range of likely outcomes based on various scenarios; — calculating the regulated asset base (‘RAB’) multiple implied by valuation of the Regulated Network cash generated unit and comparing this to the range of RAB multiples observed in the marketplace; and — comparing the group’s net assets as at 30 June 2021 of $2,335.4 million to its market capitalisation of $4,050.0 million at 30 June 2021 which implied total headroom of $1,714.6 million. We found the methodology to be consistent with industry norms, specifically: — the discount and terminal growth rates were in an acceptable industry range; — future cash flow assumptions were supported by comparison to the sources we considered above; and — the overall comparison of the group’s net assets to market capitalisation did not indicate an impairment.
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