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**As filed with the Securities andExchange Commission on November 23, 2010**

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 20-F/A**

**(AMENDMENT NO. 1)**

 

**(MarkOne)**

 

| **o**      | **REGISTRATION STATEMENT PURSUANT  TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**                                    |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                            |
| **OR**     |
| ** ** | ** **                                                                                                                                            |
| **x**      | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2009** |
| ** ** | ** **                                                                                                                                            |
| **OR**     |
| ** ** | ** **                                                                                                                                            |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                               |
| ** ** | ** **                                                                                                                                            |
| **OR**     |
| ** ** | ** **                                                                                                                                            |
| **o**      | **SHELL COMPANY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                            |

 

Commissionfile number 001-33632

 
| **BROOKFIELD INFRASTRUCTURE PARTNERS L.P.**                                             |
|-----------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                  |
|                                                                                    |
| **Bermuda**                                                                             |
| (Jurisdiction of incorporation or organization)                                         |
|                                                                                    |
| **Canon’s Court**

**22 Victoria Street**

**Hamilton HM 12**

**Bermuda**         |
| (Address of principal executive offices)                                                |
|                                                                                    |
| **7 Reid Street, 4th Floor**

**Hamilton, HM 11, Bermuda**

**+1 441 296-4480**         |
| (Name, Telephone, Email and/or Facsimile number and Address of  Company Contact Person) |

 

Securitiesregistered or to be registered pursuant to Section 12(b) of the Act:

 

| Title of each  class      |   | Name of each  exchange on which registered |
|---------------------------|--------|--------------------------------------------|
| Limited Partnership Units |   | The New York Stock Exchange                |
|                      |   | Toronto Stock Exchange                     |

 

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act: **None**

 

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Securitiesfor which there is a reporting obligation pursuant to Section 15(d) ofthe Act: **None**

 

Numberof Limited Partnership Units outstanding as of December 31, 2009: **63,155,680**

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.

x Yes   o No

 

Ifthis report is an annual or transition report, indicate by check mark, if theregistrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934.

o Yes   x No

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

x Yes   o No

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files).

x Yes   o No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. 

 

| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer x |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicateby check mark which basis of accounting the registrant has used to prepare thefinancial statements included in this filing:

 

| U.S. GAAP x |   | International Financial Reporting Standards as issued  by the International Accounting Standards Board o |   | Other o |
|-------------|--------|----------------------------------------------------------------------------------------------------------|--------|---------|

 

If“Other” has been checked in response to the previous question, indicate bycheck mark which financial statement item the registrant has elected to follow:

o Item 17   o Item 18

 

Ifthis is an annual report, indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

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**EXPLANATORY NOTE**

 

ThisAmendment No. 1 on Form 20-F/A (the “Form 20-F/A”) is beingfiled by Brookfield Infrastructure Partners L.P. (the “Registrant”) to amend theRegistrant’s Annual Report on Form 20-F for the fiscal year ended December 31,2009, filed with the Securities and Exchange Commission on June 1, 2010(the “Form 20-F”).  This Form 20-F/Ais being filed solely to supplement Item 18 of the Form 20-F with theinclusion of the financial statements of Prime Infrastructure Holdings Limitedfor the fiscal year ended June 30, 2010 (the “Prime Financial Statements”).

 

Asrequired by Rule 12b-15 under the Exchange Act of 1934, as amended,updated certifications of our principal executive officer and our principalfinancial officer are being filed as exhibits to the Form 20-F/A.  The Form 20-F/A also includes Exhibit 15.4,which contains the consent of Deloitte Touche Tohmatsu with respect to thePrime Financial Statements.

 

ThisForm 20-F/A consists solely of a cover page, this explanatory note, thePrime Financial Statements, updated certifications of our principal executiveofficer and our principal financial officer, Exhibit 15.4 and a signaturepage.

 

Exceptas described above, this Form 20-F/A does not amend, update or restate theinformation in any other item of the Form 20-F, or reflect any events thathave occurred after the original filing of the Form 20-F.

 

 

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**ITEM18. FINANCIAL STATEMENTS**

 

Thefollowing financial statements are included in this Form 20-F/A:

 

(1) AuditedConsolidated Financial Statements for the Year Ended June 30, 2010 ofPrime Infrastructure Holdings Limited.

 

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Prime Infrastructure Holdings Limited

(formerly Babcock & Brown InfrastructureLimited)

ACN 100 364 234

 

Annual Report for the Year Ended30 June 2010

 

PRIMEINFRASTRUCTURE ANNUAL FINANCIAL REPORT 2010

 

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| ** **                        | **Page number** |
|-----------------------------------|----------------------|
| ** **                        |                 |
| Income Statement                  | 6                    |
|                              |                 |
| Statement of Comprehensive Income | 7                    |
|                              |                 |
| Statement of Financial Position   | 8 - 9                |
|                              |                 |
| Statement of Changes in Equity    | 10 - 11              |
|                              |                 |
| Statement  of Cash Flows          | 12                   |
|                              |                 |
| Notes to the Financial Statements | 13 - 115             |
|                              |                 |
| Independent Audit Report          | 116                  |

 

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INCOME STATEMENT

for the year ended30 June 2010

 
| ** **                                                                                                        | ** ** | ** ** | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                                                        | ** ** | **Note**   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Revenue                                                                                                           |       | 4          |       | 499,231              |       | 533,024 |   |
| Other income                                                                                                      |       | 6(a)       |       | 404,889              |       | 16,344 |   |
| **Total  income**                                                                                                 | ** ** | ** ** | ** ** | **904,120**          | ** ** | **549,368** | ** ** |
| Share of (losses)/profits  from associates and jointly controlled entities accounted for using the  equity method |       | 14         |       | (185,055             | )          | 6,828 |   |
| Employee benefit expense                                                                                          |       |       |       | (80,646              | )          | (57,045 | ) |
| Transmission and direct  costs                                                                                    |       |       |       | (131,515             | )          | (146,260 | ) |
| Depreciation, amortisation  and impairment charge                                                                 |       | 6(b)       |       | (128,818             | )          | (161,754 | ) |
| Finance costs                                                                                                     |       | 5(a)       |       | (164,207             | )          | (317,545 | ) |
| Operating and management  charges                                                                                 |       |       |       | (58,368              | )          | (66,891 | ) |
| Net hedge income/(expense)                                                                                        |       | 5(b)       |       | 19,650               |       | (112,894 | ) |
| Impairment of related  party loans                                                                                |       | 6(b)       |       | (95,658              | )          | — |   |
| Other expense                                                                                                     |       |       |       | (46,267              | )          | (30,324 | ) |
| **Total  expense**                                                                                                | ** ** | ** ** | ** ** | **(870,884**         | **)**      | **(885,885** | **)** |
| **Profit/(loss)  before income tax (expense)/benefit**                                                            | ** ** | ** ** | ** ** | **33,236**           | ** ** | **(336,517** | **)** |
| Income tax  (expense)/benefit                                                                                     |       | 7          |       | (941                 | )          | 83,656 |   |
| **Profit/(loss)  from continuing operations**                                                                     | ** ** | ** ** | ** ** | **32,295**           | ** ** | **(252,861** | **)** |
| Loss from discontinued  operations                                                                                |       | 38         |       | (980,892             | )          | (724,269 | ) |
| **Loss for  the year**                                                                                            | ** ** | ** ** | ** ** | **(948,597**         | **)**      | **(977,130** | **)** |
| **Attributable  to:**                                                                                             |       |       |       |                 |       |   |   |
| Equity holders of the  parent entity                                                                              |       |       |       | (959,457             | )          | (953,899 | ) |
| Non-controlling interest                                                                                          |       |       |       | 10,860               |       | (23,231 | ) |
| ** **                                                                                                        |       |       | ** ** | **(948,597**         | **)**      | **(977,130** | **)** |
| **Loss per  Security from continuing and discontinued operations**                                                |       |       |       |                 |       |   |   |
| Basic and diluted (cents  per Security)                                                                           |       | 29         |       | (448.3               | )          | (595,906.3 | ) |
| **Profit/(loss)  per Security from continuing operations**                                                        |       |       |       |                 |       |   |   |
| Basic and diluted (cents  per Security)                                                                           |       | 29         |       | 15.0                 |       | (158,770.8 | ) |

 

Notes to the Financial Statements are includedon pages 10 to 112.

 

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STATEMENT OF COMPREHENSIVE INCOME

for the year ended30 June 2010

 
| ** **                                                                            | ** ** | ** ** | ** ** | **Consolidated**     | ** ** |
|---------------------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                            | ** ** | **Note**   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Loss for  the year**                                                                | ** ** | ** ** | ** ** | **(948,597**         | **)**      | **(977,130** | **)** |
| **OTHER  COMPREHENSIVE INCOME**                                                       |       |       |       |                 |       |   |   |
| Other comprehensive income  reclassified from equity relating to assets held for sale |       |       |       | 36,810               |       | — |   |
| Exchange differences  arising on translation of foreign operations                    |       |       |       | 26,024               |       | 34,204 |   |
| Transfer of reserves to  profit or loss on disposal of operations                     |       |       |       | (35,672              | )          | 5,211 |   |
| Loss on cash flow hedges  taken to equity                                             |       |       |       | (23,033              | )          | (217,998 | ) |
| Gain on cash flow hedges  transferred to income                                       |       |       |       | 27,971               |       | (47,555 | ) |
| Other reserves recognised  in the year                                                |       |       |       | 24,035               |       | (12,399 | ) |
| Share of other  comprehensive income of associates                                    |       |       |       | (61,243              | )          | (9,603 | ) |
| Income tax relating to  components of other comprehensive income                      |       |       |       | 9,938                |       | 73,043 |   |
| **Other  comprehensive income/(expense) for the year**                                | ** ** | ** ** | ** ** | **4,830**            | ** ** | **(175,097** | **)** |
| **Total  comprehensive expense of the year**                                          | ** ** | ** ** | ** ** | **(943,767**         | **)**      | **(1,152,227** | **)** |
| **Total  comprehensive expense attributable to:**                                     |       |       |       |                 |       |   |   |
| Owners of the parent                                                                  |       |       |       | (954,627             | )          | (1,128,996 | ) |
| Non-controlling interests                                                             |       |       |       | 10,860               |       | (23,231 | ) |
| ** **                                                                            | ** ** | ** ** | ** ** | **(943,767**         | **)**      | **(1,152,227** | **)** |

 

Notes to the Financial Statements are includedon pages 10 to 112.

 

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STATEMENT OF FINANCIAL POSITION

as at 30 June 2010

 
| ** **                                                                           | ** ** | ** ** | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                           | ** ** | **Note**   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CURRENT ASSETS**                                                                   |       |       |       |                 |       |   |   |
| Cash and cash equivalents                                                            |       | 41(a)      |       | 430,752              |       | 257,873 |   |
| Trade and other  receivables                                                         |       | 9          |       | 82,130               |       | 172,991 |   |
| Other financial assets                                                               |       | 10         |       | 67,030               |       | 67,573 |   |
| Inventories                                                                          |       | 11         |       | 14,713               |       | 18,687 |   |
| Current tax receivables                                                              |       | 7          |       | 10                   |       | 10,356 |   |
| Other                                                                                |       | 12         |       | 8,300                |       | 16,590 |   |
| Non-current assets  classified as held for sale                                      |       | 38         |       | 1,913,118            |       | 2,223,734 |   |
| **Total  current assets**                                                            | ** ** | ** ** | ** ** | **2,516,053**        | ** ** | **2,767,804** | ** ** |
| **NON-CURRENT  ASSETS**                                                              |       |       |       |                 |       |   |   |
| Trade and other  receivables                                                         |       | 9          |       | 4,917                |       | 9,440 |   |
| Other financial assets                                                               |       | 10         |       | 898,541              |       | 705,712 |   |
| Cash held on restricted  deposit                                                     |       | 13         |       | 29,853               |       | 104,316 |   |
| Investments accounted for  using the equity method                                   |       | 14         |       | 397,988              |       | 650,509 |   |
| Property, plant and  equipment                                                       |       | 15         |       | 1,734,717            |       | 3,876,533 |   |
| Investment property                                                                  |       | 16         |       | —               |       | 174,672 |   |
| Goodwill                                                                             |       | 17         |       | 160,893              |       | 378,563 |   |
| Other intangible assets                                                              |       | 18         |       | 6,565                |       | 3,045,531 |   |
| Deferred tax assets                                                                  |       | 7          |       | 249,078              |       | 735,598 |   |
| Other                                                                                |       | 12         |       | 77,144               |       | 63,984 |   |
| **Total  non-current assets**                                                        | ** ** | ** ** | ** ** | **3,559,696**        | ** ** | **9,744,858** | ** ** |
| **Total  assets**                                                                    | ** ** | ** ** | ** ** | **6,075,749**        | ** ** | **12,512,662** | ** ** |
| **CURRENT  LIABILITIES**                                                             |       |       |       |                 |       |   |   |
| Trade and other payables                                                             |       | 19         |       | 160,095              |       | 332,189 |   |
| Borrowings                                                                           |       | 20         |       | 721,650              |       | 493,760 |   |
| Other financial  liabilities                                                         |       | 21         |       | 4,859                |       | 117,116 |   |
| Current tax payable                                                                  |       | 7          |       | 847                  |       | 1,377 |   |
| Provisions                                                                           |       | 22         |       | 6,190                |       | 16,249 |   |
| Other                                                                                |       | 23         |       | 34,088               |       | 9,865 |   |
| Liabilities directly  associated with non-current assets classified as held for sale |       | 38         |       | 1,958,130            |       | 1,907,155 |   |
| **Total  current liabilities**                                                       | ** ** | ** ** | ** ** | **2,885,859**        | ** ** | **2,877,711** | ** ** |

 

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STATEMENT OF FINANCIAL POSITION

as at 30 June 2010

 
| ** **                                                                               | ** ** | ** ** | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                               | ** ** | **Note**   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **NON-CURRENT  LIABILITIES**                                                             |       |       |       |                 |       |   |   |
| Trade and other payables                                                                 |       | 19         |       | 16,223               |       | 3,290 |   |
| Borrowings                                                                               |       | 20         |       | 567,455              |       | 6,485,945 |   |
| Other financial  liabilities                                                             |       | 21         |       | 152,001              |       | 207,334 |   |
| Deferred tax liabilities                                                                 |       | 7          |       | 61,173               |       | 945,399 |   |
| Provisions                                                                               |       | 22         |       | 4,315                |       | 67,513 |   |
| Other                                                                                    |       | 23         |       | 153,570              |       | 205,097 |   |
| **Total  non-current liabilities**                                                       | ** ** | ** ** | ** ** | **954,737**          | ** ** | **7,914,578** | ** ** |
| **Total liabilities**                                                                    | ** ** | ** ** | ** ** | **3,840,596**        | ** ** | **10,792,289** | ** ** |
| **Net  assets**                                                                          | ** ** | ** ** | ** ** | **2,235,153**        | ** ** | **1,720,373** | ** ** |
| **EQUITY**                                                                               |       |       |       |                 |       |   |   |
| Issued capital                                                                           |       | 26         |       | 4,332,865            |       | 2,811,318 |   |
| Reserves                                                                                 |       | 27         |       | (177,617             | )          | (157,610 | ) |
| Accumulated losses                                                                       |       | 28         |       | (1,958,823           | )          | (999,366 | ) |
| Amounts recognised  directly in equity to non-current assets classified as held for sale |       |       |       | (25,574              | )          | (36,810 | ) |
| **PARENT ENTITY  INTEREST**                                                              |       |       | ** ** | **2,170,851**        | ** ** | **1,617,532** | ** ** |
| Non-controlling interest                                                                 |       |       |       | 64,302               |       | 102,841 |   |
| **Total  equity**                                                                        | ** ** | ** ** | ** ** | **2,235,153**        | ** ** | **1,720,373** | ** ** |

 

Notes to the Financial Statements are includedon pages 10 to 112.

 

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STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2010

 
| **Consolidated**                                                 | ** ** | **Issued  capital  $’000** | ** ** | **Hedge  reserve  $’000** | ** ** | **Foreign  currency  translation  reserve  $’000** | ** ** | **Other  reserve  $’000** | ** ** | **General  reserve  $’000** | ** ** | **Retained  earnings  $’000** | ** ** | **Equity  associated  with assets  held for sale  $’000** | ** ** | **Attributable  to owners of  the parent  entity  $’000** | ** ** | **Non  controlling  interest  $’000** | ** ** | **Total  $’000** | ** ** |
|------------------------------------------------------------------|------------|---------------------------------|------------|--------------------------------|------------|---------------------------------------------------------|------------|--------------------------------|------------|----------------------------------|------------|------------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|--------------------------------------------|------------|-----------------------|------------|
| Balance at 1  July 2009                                     |       | 2,811,318                       |       | (77,622                        | )          | (82,112                                                 | )          | 2,124                          |       | —                           |       | (999,366                           | )          | (36,810                                                                       | )          | **1,617,532**                                                                 |       | 102,841                                    | ** ** | **1,720,373**         | ** ** |
| Loss for the year                                                |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | (959,457                           | )          | **—**                                                                    | ** ** | **(959,457**                                                                  | **)**      | 10,860                                     | ** ** | **(948,597**          | **)**      |
| Amounts recognised in the  current period                        |       | —                          |       | (23,033                        | )          | 26,024                                                  |       | 24,035                         |       | —                           |       | —                             |       | 36,810                                                                        | ** ** | **63,836**                                                                    |       | —                                     | ** ** | **63,836**            | ** ** |
| Income tax relating to  components of other comprehensive income |       |                            |       | 9,938                          |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **9,938**                                                                     |       | —                                     | ** ** | **9,938**             | ** ** |
| Differences arising on  disposal of subsidiary                   |       | —                          |       | (28,792                        | )          | (15,752                                                 | )          | —                         |       | 8,872                            |       | —                             |       | —                                                                        | ** ** | **(35,672**                                                                   | **)**      | —                                     | ** ** | **(35,672**           | **)**      |
| Transferred to profit or  loss                                   |       | —                          |       | 27,971                         |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **27,971**                                                                    |       | —                                     | ** ** | **27,971**            | ** ** |
| Share of reserves of  associates                                 |       | —                          |       | (39,135                        | )          | 937                                                     |       | —                         |       | (23,045                          | )          | —                             | ** ** | **—**                                                                    | ** ** | **(61,243**                                                                   | **)**      | —                                     | ** ** | **(61,243**           | **)**      |
| **Total  comprehensive income for the period**                   | ** ** | **—**                      | ** ** | **(53,051**                    | **)**      | **11,209**                                              | ** ** | **24,035**                     | ** ** | **(14,173**                      | **)**      | **(959,457**                       | **)**      | **36,810**                                                                    | ** ** | **(954,627**                                                                  | **)**      | **10,860**                                 | ** ** | **(943,767**          | **)**      |
| Securities issued during  the period                             |       | 1,784,866                       |       | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **1,784,866**                                                                 |       | —                                     | ** ** | **1,784,866**         | ** ** |
| Issue costs (net of tax)                                         |       | (106,882                        | )          | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **(106,882**                                                                  | **)**      | —                                     | ** ** | **(106,882**          | **)**      |
| Return of capital to  stapled security holders                   |       | (103,671                        | )          | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **(103,671**                                                                  | **)**      | —                                     | ** ** | **(103,671**          | **)**      |
| **Total**                                                        | ** ** | **4,385,631**                   | ** ** | **(130,673**                   | **)**      | **(70,903**                                             | **)**      | **26,159**                     | ** ** | **(14,173**                      | **)**      | **(1,958,823**                     | **)**      | **—**                                                                    | ** ** | **2,237,218**                                                                 | ** ** | **113,701**                                | ** ** | **2,350,919**         | ** ** |
| Minority interests  disposed of or acquired during the period    |       | —                          |       | —                         |       | —                                                  |       | —                         |       | (13,601                          | )          | —                             | ** ** | **—**                                                                    | ** ** | **(13,601**                                                                   | **)**      | (45,171                                    | )          | **(58,772**           | **)**      |
| Distributions paid from  capital                                 |       | (52,766                         | )          | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **(52,766**                                                                   | **)**      | —                                     | ** ** | **(52,766**           | **)**      |
| Dividends paid from  retained earnings                           |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             | ** ** | **—**                                                                    | ** ** | **—**                                                                    |       | (4,228                                     | )          | **(4,228**            | **)**      |
| Transferred to assets held  for sale                             |       | —                          |       | 23,901                         |       | 1,673                                                   |       | —                         |       | —                           |       | —                             |       | (25,574                                                                       | )          | **—**                                                                    |       | —                                     | ** ** | **—**            | ** ** |
| **Total  equity at 30 June 2010**                      | ** ** | **4,332,865**                   | ** ** | **(106,772**                   | **)**      | **(69,230**                                             | **)**      | **26,159**                     | ** ** | **(27,774**                      | **)**      | **(1,958,823**                     | **)**      | **(25,574**                                                                   | **)**      | **2,170,851**                                                                 | ** ** | **64,302**                                 | ** ** | **2,235,153**         | ** ** |

 

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STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2010

 
| **Consolidated**                                                 | ** ** | **Issued  capital  $’000** | ** ** | **Hedge  reserve  $’000** | ** ** | **Foreign  currency  translation  reserve  $’000** | ** ** | **Other  reserve  $’000** | ** ** | **General  reserve  $’000** | ** ** | **Retained  earnings  $’000** | ** ** | **Equity  associated  with assets  held for  sale $’000** | ** ** | **Attributable  to owners  of the  parent  entity  $’000** | ** ** | **Non  controlling  interest  $’000** | ** ** | **Total  $’000** | ** ** |
|------------------------------------------------------------------|------------|---------------------------------|------------|--------------------------------|------------|---------------------------------------------------------|------------|--------------------------------|------------|----------------------------------|------------|------------------------------------|------------|-------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------|------------|-----------------------|------------|
| Balance at 1  July 2008                                     |       | 2,790,483                       |       | 70,213                         |       | (98,619                                                 | )          | 13,822                         |       | 220                              |       | 13,926                             |       | —                                                                        | ** ** | **2,790,045**                                                             |       | 170,230                                    | ** ** | **2,960,275**         | ** ** |
| Loss for the year                                                |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | (953,899                           | )          | —                                                                        | ** ** | **(953,899**                                                              | **)**      | (23,231                                    | )          | **(977,130**          | **)**      |
| Amounts recognised in the  current period                        |       | —                          |       | (217,998                       | )          | 34,204                                                  |       | (11,698                        | )          | (701                             | )          | —                             |       | —                                                                        | ** ** | **(196,193**                                                              | **)**      | —                                     | ** ** | **(196,193**          | **)**      |
| Income tax relating to  components of other comprehensive income |       | —                          |       | 73,043                         |       | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **73,043**                                                                |       | —                                     | ** ** | **73,043**            | ** ** |
| Differences arising on  disposal of subsidiary                   |       | —                          |       | 15,403                         |       | (10,192                                                 | )          | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **5,211**                                                                 |       | —                                     | ** ** | **5,211**             | ** ** |
| Transferred to profit or  loss                                   |       | —                          |       | (47,555                        | )          | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **(47,555**                                                               | **)**      | —                                     | ** ** | **(47,555**           | **)**      |
| Share of reserves of  associates                                 |       | —                          |       | (9,603                         | )          | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **(9,603**                                                                | **)**      | —                                     | ** ** | **(9,603**            | **)**      |
| **Total  comprehensive income for the period**                   | ** ** | **—**                      | ** ** | **(186,710**                   | **)**      | **24,012**                                              | ** ** | **(11,698**                    | **)**      | **(701**                         | **)**      | **(953,899**                       | **)**      | **—**                                                                    | ** ** | **(1,128,996**                                                            | **)**      | **(23,231**                                | **)**      | **(1,152,227**        | **)**      |
| Securities issued during  the period                             |       | 20,835                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **20,835**                                                                |       | —                                     | ** ** | **20,835**            | ** ** |
| Issue costs (net of tax)                                         |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **—**                                                                |       | —                                     | ** ** | **—**            | ** ** |
| Return of capital to  stapled security holders                   |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **—**                                                                |       | —                                     | ** ** | **—**            | ** ** |
| **Total**                                                        | ** ** | **2,811,318**                   | ** ** | **(116,497**                   | **)**      | **(74,607**                                             | **)**      | **2,124**                      | ** ** | **(481**                         | **)**      | **(939,973**                       | **)**      | **—**                                                                    | ** ** | **1,681,884**                                                             | ** ** | **146,999**                                | ** ** | **1,828,883**         | ** ** |
| Minority interests  disposed of or acquired during the period    |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | —                             |       | —                                                                        | ** ** | **—**                                                                |       | (42,967                                    | )          | **(42,967**           | **)**      |
| Distributions paid from  retained earnings                       |       | —                          |       | —                         |       | —                                                  |       | —                         |       | —                           |       | (59,393                            | )          | —                                                                        | ** ** | **(59,393**                                                               | **)**      | (6,150                                     | )          | **(65,543**           | **)**      |
| Transferred to assets held  for sale                             |       | —                          |       | 38,875                         |       | (7,505                                                  | )          | —                         |       | 481                              |       | —                             |       | (36,810                                                                       | )          | **(4,959**                                                                | **)**      | 4,959                                      | ** ** | **—**            | ** ** |
| **Total  equity at 30 June 2009**                           | ** ** | **2,811,318**                   | ** ** | **(77,622**                    | **)**      | **(82,112**                                             | **)**      | **2,124**                      | ** ** | **—**                       | ** ** | **(999,366**                       | **)**      | **(36,810**                                                                   | **)**      | **1,617,532**                                                             | ** ** | **102,841**                                | ** ** | **1,720,373**         | ** ** |

 

Notes to the FinancialStatements are included on pages 10 to 112.

 

11

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Table ofContents

 

STATEMENT OF CASH FLOWS

for the Financial Year ended30 June 2010

 
| ** **                                                                          | ** ** | ** ** | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                          | ** ** | **Note**   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CASH FLOWS  FROM OPERATING ACTIVITIES**                                           |       |       |       |                 |       |   |   |
| Receipts from customers                                                             |       |       |       | 1,085,374            |       | 2,819,626 |   |
| Payments to suppliers and  employees                                                |       |       |       | (678,648             | )          | (2,079,126 | ) |
| Interest received                                                                   |       |       |       | 61,641               |       | 142,560 |   |
| Interest and other costs  of finance paid                                           |       |       |       | (448,746             | )          | (632,182 | ) |
| Income tax paid                                                                     |       |       |       | (13,633              | )          | (19,084 | ) |
| Net stamp duty paid                                                                 |       | 33         |       | (46,494              | )          | — |   |
| **Net cash  (used in)/provided by operating activities**                            | ** ** | **41(g)**  | ** ** | **(40,506**          | **)**      | **231,794** | ** ** |
| **CASH FLOWS  FROM INVESTING ACTIVITIES**                                           |       |       |       |                 |       |   |   |
| Payment for property,  plant & equipment                                   |       |       |       | (214,220             | )          | (681,286 | ) |
| Proceeds from sale of  property, plant and equipment                                |       |       |       | 3,036                |       | 6,992 |   |
| Net proceeds from deposits                                                          |       |       |       | 7,629                |       | 24,844 |   |
| Proceeds from sale of  investments                                                  |       | 41(c)      |       | 129,371              |       | 415,882 |   |
| Return on equity from  equity accounted investments                                 |       |       |       | 10,703               |       | 44,560 |   |
| Payment for investments                                                             |       |       |       | (34,415              | )          | (1,453 | ) |
| Proceeds from loans with  associates                                                |       |       |       | 85,649               |       | — |   |
| Repayment of loans to  associate entities                                           |       |       |       | (39,960              | )          | — |   |
| Payment for businesses                                                              |       | 41(b)      |       | —               |       | (185,420 | ) |
| Dividends received                                                                  |       |       |       | 26,483               |       | 24,877 |   |
| **Net cash  used in investing activities**                                          | ** ** | ** ** | ** ** | **(25,724**          | **)**      | **(351,004** | **)** |
| **CASH FLOWS  FROM FINANCING ACTIVITIES**                                           |       |       |       |                 |       |   |   |
| Distributions paid to  Stapled Securityholders                                      |       |       |       | (130,054             | )          | (59,393 | ) |
| Dividends paid to minority  interests                                               |       |       |       | (4,228               | )          | (6,198 | ) |
| Proceeds from issue of  securities                                                  |       |       |       | 1,500,000            |       | — |   |
| Security issue costs paid                                                           |       |       |       | (109,207             | )          | — |   |
| Proceeds from borrowings                                                            |       |       |       | 366,032              |       | 1,337,632 |   |
| Loan establishment costs  paid                                                      |       |       |       | (16,537              | )          | (18,319 | ) |
| Repayment of borrowings                                                             |       |       |       | (1,352,117           | )          | (1,067,545 | ) |
| **Net cash  provided by financing activities**                                      | ** ** | ** ** | ** ** | **253,889**          | ** ** | **186,177** | ** ** |
| **NET INCREASE  IN CASH AND CASH EQUIVALENTS**                                      |       |       |       | 187,659              |       | 66,967 |   |
| **Cash and  cash equivalents at the beginning of the financial year**               |       |       |       | 344,034              |       | 298,479 |   |
| Effects of exchange rate  changes on the balance of cash held in foreign currencies |       |       |       | (4,841               | )          | (21,412 | ) |
| **Cash and  cash equivalents at the end of the financial year**(1)                  | ** ** | **41(a)**  | ** ** | **526,852**          | ** ** | **344,034** | ** ** |

 

----

(1)     Cashand cash equivalents at the end of the financial period includes cash and cashequivalents from assets that are included within discontinued operations.

 

Notes to the Financial Statements are includedon pages 10 to 112.

 

12

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Table ofContents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 
| **Note** | ** ** | **Contents**                                                              |
|----------|------------|---------------------------------------------------------------------------|
| 1        |       | Significant accounting policies                                           |
| 2        |       | Adoption of new and revised Accounting Standards                          |
| 3        |       | Critical accounting judgements and key sources of  estimation uncertainty |
| 4        |       | Revenue                                                                   |
| 5        |       | Finance costs                                                             |
| 6        |       | Loss for the year                                                         |
| 7        |       | Income taxes                                                              |
| 8        |       | Remuneration of auditors                                                  |
| 9        |       | Trade and other receivables                                               |
| 10       |       | Other financial assets                                                    |
| 11       |       | Inventories                                                               |
| 12       |       | Other assets                                                              |
| 13       |       | Cash held on restricted deposit                                           |
| 14       |       | Investments in associates                                                 |
| 15       |       | Property, plant and equipment                                             |
| 16       |       | Investment property                                                       |
| 17       |       | Goodwill                                                                  |
| 18       |       | Other intangible assets                                                   |
| 19       |       | Trade and other payables                                                  |
| 20       |       | Borrowings                                                                |
| 21       |       | Other financial liabilities                                               |
| 22       |       | Provisions                                                                |
| 23       |       | Other liabilities                                                         |
| 24       |       | Retirement benefit plans                                                  |
| 25       |       | Capitalised borrowing costs                                               |
| 26       |       | Issued capital                                                            |
| 27       |       | Reserves                                                                  |
| 28       |       | Accumulated losses                                                        |
| 29       |       | Loss per Security                                                         |
| 30       |       | Distributions                                                             |
| 31       |       | Parent entity disclosures                                                 |
| 32       |       | Commitments for expenditure                                               |
| 33       |       | Contingent liabilities                                                    |
| 34       |       | Leases                                                                    |
| 35       |       | Subsidiaries                                                              |
| 36       |       | Acquisition of businesses                                                 |
| 37       |       | Segment information                                                       |
| 38       |       | Discontinued operations                                                   |
| 39       |       | Key Management Personnel remuneration                                     |
| 40       |       | Related party disclosures                                                 |
| 41       |       | Subsequent events                                                         |
| 42       |       | Notes to the Statement of Cash Flows                                      |
| 43       |       | Financial instruments                                                     |
| 44       |       | Additional Company information                                            |

 

13

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES**

 

**STATEMENT OF COMPLIANCE**

 

These Financial Statements are General Purpose FinancialStatements which have been prepared in accordance with Accounting Standards andInterpretations, and comply with other requirements of the law.

 

The Financial Statements comprise the consolidatedFinancial Statements of the Group.

 

Accounting Standards include Australian equivalents toInternational Financial Reporting Standards (A-IFRS). Compliance with A-IFRSensures that the Financial Statements and notes of the Company and the Groupcomply with International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board.

 

The Financial Statements were authorised for issue by theDirectors on 18 November 2010.

 

**BASIS OF PREPARATION**

 

The Financial Statements have been prepared on the basisof historical cost, except for the revaluation of certain non-current assetsand financial instruments. Cost is based on the fair values of theconsideration given in exchange for assets. All amounts are presented inAustralian dollars, unless otherwise noted.

 

The Company is a company of the kind referred to in ASIC Class Order98/0100, dated 10 July 1998, and in accordance with that Class Orderamounts in the Financial Statements are rounded off to the nearest thousanddollars, unless otherwise indicated.

 

**STAPLED SECURITY**

 

The shares of Prime Infrastructure Holdings Limited(formerly Babcock & Brown Infrastructure Limited) and the units inPrime Infrastructure Trust (formerly Babcock & Brown InfrastructureTrust) and Prime Infrastructure Trust 2 (formerly BBI SPARCS Trust)(collectively ‘the Trusts’) are combined and issued as Tripled StapledSecurities in the Prime Infrastructure Group (‘the Group’). The shares in theCompany and the units of the Trusts cannot be traded separately and can only betraded as Stapled Securities.

 

Prime Infrastructure Trust 2 joined the Stapled Group aspart of the recapitalisation of Prime Infrastructure in November 2009. Theequity and reserves of Prime Infrastructure 2 have been included as part of thetotal equity of the consolidated group rather than being disclosed as aminority interest in order to maintain consistency with the stapling treatmentof the Company and the Trust.

 

**GROUP FORMATION AND TERMINATION**

 

On 29 April 2002, the Company was incorporated andPrime Infrastructure Trust was formed. On 18 June 2002, the units of theTrust and the shares of the Company were stapled (the Stapled Securities). Onthis date the Stapled Securities were issued to the public through an InitialPublic Offering and were listed on the Australian Securities Exchange on 24 June 2002.

 

On 20 November 2009, as part of the recapitalisationof the Group, Prime Infrastructure 2 became a party to the Stapling Deed,resulting in Prime Infrastructure becoming a Tripled Stapled Security listed onthe Australian Securities Exchange.

 

The shares in the Company and the units of the Trustswill remain stapled until the earlier of the Company ceasing to exist or beingwound up, or the Trust being dissolved in accordance with the provisions of theTrust Constitution.

 

**CURRENT ASSET DEFICIENCY**

 

The Group has net current liabilities as at 30 June 2010of $324.8 million excluding those assets and liabilities that are classified asheld for sale within current assets and current liabilities.  The net current liability position isimpacted by the inclusion of debt relating to WestNet Rail of $619.5 millionwhich is due for repayment in June 2011. Subsequent to year end, WestNet Rail has refinanced with its existing lenders$619.0 million of facilities (out of January 2014) including the repaymentof $165.0 million.

 

In addition, Prime Infrastructure has a $300.0 millioncorporate debt facility which remains undrawn as at balance date.

 

The Financial Report is prepared on a going concern basiswhich contemplates the continuity of normal business activities and therealisation of assets and the settlement or refinancing of liabilities in theordinary course of business.

 

**(a) Consolidatedaccounts**

 

Interpretation 1013 ‘Consolidated Financial Reports inrelation to Pre-Date-of-Transition Stapling Arrangements’ requires one of thestapled entities of an existing stapled structure to be identified as theparent entity for the purpose of preparing consolidated financial reports. Inaccordance with this requirement, Prime Infrastructure Holdings Limited hasbeen identified as the parent entity of the consolidated Group comprising PrimeInfrastructure Holdings Limited and its controlled entities, PrimeInfrastructure Trust and its controlled entities and Prime Infrastructure Trust2 and its controlled entities.

 

The Financial Statements of the consolidated Group shouldbe read in conjunction with the publicly available separate FinancialStatements of Prime Infrastructure Trust and Prime Infrastructure Trust 2 forthe year ended 30 June 2010.

 

14

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(b) Principlesof consolidation**

 

The consolidated Financial Statements incorporate theassets and liabilities of all subsidiaries of the Prime Infrastructure Group asat 30 June 2010 and the results of all subsidiaries for the year thenended.

 

Subsidiaries are all those entities (including specialpurpose entities) controlled by the Company and the Trusts (its subsidiaries)(referred to as ‘the Group’ in these Financial Statements). Control is achievedwhere the Group has the power to govern the financial and operating policies ofan entity so as to obtain benefits from its activities.

 

The results of subsidiaries acquired or disposed ofduring the year are included in the Income Statement and Statement ofComprehensive Income from the effective date of acquisition and up to theeffective date of disposal, as appropriate.

 

Where necessary, adjustments are made to the FinancialStatements of subsidiaries to bring their accounting policies into line withthose used by other members of the Group.

 

All intra-group transactions, balances, income andexpenses are eliminated in full on consolidation.

 

Non-controlling interests in subsidiaries are identifiedseparately from the Group’s equity therein. The interests of non-controllingshareholders may be initially measured either at fair value or at thenon-controlling interests’ proportionate share of the fair value of theacquiree’s identifiable net assets. The choice of measurement basis is made onan acquisition by acquisition basis. Subsequent to acquisition, the carryingamount of non-controlling interests is the amount of those interests at initialrecognition plus the non-controlling interests’ share of subsequent changes inequity. Total comprehensive income is attributed to non-controlling interestseven if this results in the non-controlling interests having a deficit balance.

 

When the Group loses control of a subsidiary, the profitor loss on disposal is calculated as the difference between (i) theaggregate of the fair value of the consideration received and the fair value ofany retained interest and (ii) the previous carrying amount of the assets(including goodwill), and liabilities of the subsidiary and any non-controllinginterests. Amounts previously recognised in other comprehensive income inrelation to the subsidiary are accounted for (i.e. reclassified to profit orloss or transferred directly to retained earnings) in the same manner as wouldbe required if the relevant assets or liabilities were disposed of. The fairvalue of any investment retained in the former subsidiary at the date whencontrol is lost is regarded as the fair value on initial recognition forsubsequent accounting under AASB 139 Financial Instruments: Recognition andMeasurement or, when applicable, the cost on initial recognition of aninvestment in an associate or jointly controlled entity.

 

**(c) Businesscombinations**

 

Acquisitions of subsidiaries and businesses are accountedfor using the acquisition method. The consideration of each acquisition ismeasured at the aggregate of the fair values (at the date of exchange) ofassets given, liabilities incurred or assumed, and equity instruments issued bythe Group in exchange for control of the acquiree. Acquisition related costsare recognised in profit or loss as incurred.

 

Where applicable, the consideration for the acquisitionincludes any asset or liability resulting from a contingent considerationarrangement, measured at its acquisition-date fair value. Subsequent changes infair values are adjusted against the cost of acquisition where they qualify asmeasurement period adjustments. All other subsequent changes in the fair valueof contingent consideration classified as an asset or liability are accountedfor in accordance with relevant Standards. Changes in the fair value ofcontingent consideration classified as equity are not recognised.

 

Where a business combination is achieved in stages, theGroup’s previously held interests in the acquired entity are remeasured to fairvalue at the acquisition date, that is, the date the Group attains control andthe resulting gain or loss, if any, is recognised in profit or loss. Amountsarising from interests in the acquiree prior to the acquisition date that havepreviously been recognised in other comprehensive income are reclassified toprofit or loss, where such treatment would be appropriate if that interest weredisposed of.

 

If the initial accounting for a business combination isincomplete by the end of the reporting period in which the combination occurs,the Group reports provisional amounts for the items for which the accounting isincomplete. Those provisional amounts are adjusted during the measurementperiod, or additional assets or liabilities are recognised, to reflect newinformation obtained about facts and circumstances that existed as of theacquisition date that, if known, would have affected the amounts recognised asof that date.

 

The measurement period is the period from the date ofacquisition to the date the Group obtains complete information about facts andcircumstances that existed as of the acquisition date. The measurement periodis subject to a maximum of one year.

 

**(d) Investmentin associates**

 

An associate is an entity over which the Group hassignificant influence that is neither a subsidiary nor an interest in a jointventure. Significant influence is the power to participate in the financial andoperating policy decisions of the investee but is not control or joint controlover those policies.

 

15

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(d) Investmentin associates (continued)**

 

The results and assets and liabilities of associates areincorporated in these Financial Statements using the equity method ofaccounting, except when the investment is classified as held for sale, in whichcase it is accounted for in accordance with AASB 5 Non-current Assets Held forSale and Discontinued Operations. Under the equity method, investments inassociates are carried in the consolidated statement of financial position at cost,adjusted for post-acquisition changes in the Group’s share of the net assets ofthe associate, less any impairment in the value of individual investments.Losses of an associate in excess of the Group’s interest in that associate(which includes any long-term interests that, in substance, form part of theGroup’s net investment in the associate) are recognised only to the extent thatthe Group has incurred legal or constructive obligations or made payments onbehalf of the associate.

 

Any excess of the cost of acquisition over the Group’sshare of the net fair value of the identifiable assets, liabilities andcontingent liabilities of the associate recognised at the date of theacquisition is recognised as goodwill. The goodwill is included within the carryingamount of the investment and is assessed for impairment as part of theinvestment. Any excess of the Group’s share of the net fair value of theidentifiable assets, liabilities and contingent liabilities over the cost ofthe acquisition, after reassessment, is recognised immediately in profit orloss.

 

Where a group entity transacts with an associate of theGroup, profits and losses are eliminated to the extent of the Group’s interestin the relevant associate.

 

**(e) Interestsin joint ventures**

 

A joint venture is a contractual arrangement whereby theGroup and other parties undertake an economic activity that is subject to jointcontrol such as when the strategic financial and operating policy decisionsrelating to the activities of the joint venture require the unanimous consentof the parties sharing control.

 

Interests in jointly controlled entities in which theGroup is a venturer (and so has joint control) are accounted for under theequity method in the consolidated Financial Statements and the cost method inthe company Financial Statements.

 

When a group entity transacts with a jointly controlledentity of the Group, unrealised profits and losses are eliminated to the extentof the Group’s interest in the joint venture.

 

**(f) Property,plant and equipment**

 

Land and buildings, plant and equipment, leaseholdimprovements and equipment under finance lease are stated at cost lessaccumulated depreciation and subsequent accumulated impairment losses. Costincludes expenditure that is directly attributable to the acquisition of theitem. In the event that settlement of all or part of the purchase considerationis deferred, cost is determined by discounting the amounts payable in thefuture to their present value as at the date of acquisition.

 

Depreciation is provided on property, plant andequipment, including freehold buildings but excluding land. Depreciation iscalculated on a straight-line basis and diminishing value so as to write-offthe net cost of each asset over its expected useful life to its estimatedresidual value. Leasehold improvements are depreciated over the period of thelease or estimated useful life, whichever is the shorter, using thestraight-line method. The estimated useful lives, residual values anddepreciation method are reviewed at the end of each annual reporting period,with the effect of any changes recognised on a prospective basis.

 

Assets held under finance lease are depreciated overtheir expected useful lives on the same basis as owned assets or, whereshorter, the term of the relevant lease.

 

The assets residual values and useful lives are reviewed,and adjusted if appropriate, at each reporting date. An assets carrying amountis written down immediately to its recoverable amount if the assets carryingamount is greater than its recoverable amount.

 

The gain or loss arising on disposal or retirement of anitem of property, plant and equipment is determined as the difference betweenthe sales proceeds and the carrying amount of the asset and is recognised inprofit or loss.

 

The following estimated useful lives are used in thecalculation of depreciation:

 
| · | Buildings (straight-line)     | 25 to 100 years |   |
|--------|-------------------------------|-----------------|--------|
|   |                          |            |   |
| · | Buildings (diminishing value) | 50 years        |   |
|   |                          |            |   |
| · | Leasehold improvements        | 6 to 49 years   |   |
|   |                          |            |   |
| · | Plant and equipment           | 3 to 25 years   |   |
|   |                          |            |   |
| · | Network systems               | 10 to 65 years  |   |
|   |                          |            |   |
| · | Track lease premium           | 42 years        |   |

 

Lease premiums represent the initial amount paid foraccess to the rail infrastructure assets in Western Australia. These premiumsare being amortised over the period of the leases to which they relate, being42 years.

 

Subsequent acquisitions of leasehold assets are shown asleasehold improvements.

 

16

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(g) Intangibleassets**

 

Intangible assets acquired in a business combination andrecognised separately from goodwill are initially recognised at their fairvalue at the acquisition date (which is regarded as their cost).

 

Subsequent to initial recognition, intangible assetsacquired in a business combination are reported at cost less accumulatedamortisation and accumulated impairment losses, on the same basis as intangibleassets acquired separately.

 

Concession arrangements acquired as part of a businesscombination are recognised at their fair value. These intangible assets relateto the right to control and use a specific port for a contractual length oftime. These concession arrangements are amortised over the life of thecontractual arrangement.

 

In previous periods, concession arrangements relating toDBCT were classified as property, plant and equipment and depreciated over thelease life of the asset.  On initialadoption of AASB-1, these were subsequently transferred to intangible assetsand continued to be amortised over the lease life of the asset.

 

The conservancy right was acquired as part of the acquisitionof PD Ports, (and subsequently disposed of on 20 November 2009) wasrecorded at its fair value. The right is not amortised as it is a right inperpetuity issued by the Statutory Harbour Authority in the UK.

 

Intangible assets acquired separately are carried at costless accumulated amortisation and accumulated impairment losses. Amortisationis recognised on a straight-line basis over their estimated useful lives. Theestimated useful life and amortisation method are reviewed at the end of each annualreporting period, with the effect of any changes in estimate being accountedfor on a prospective basis.

 

**(h) Impairmentof long-lived assets excluding goodwill**

 

At the end of each reporting period, the Group reviewsthe carrying amounts of its tangible and intangible assets to determine whetherthere is any indication that those assets have suffered an impairment loss. Ifany such indication exists, the recoverable amount of the asset is estimated inorder to determine the extent of the impairment loss (if any). Where the assetdoes not generate cash flows that are independent from other assets, the Groupestimates the recoverable amount of the cash-generating unit to which the assetbelongs. Where a reasonable and consistent basis of allocation can beidentified, corporate assets are also allocated to individual cash-generatingunits, or otherwise they are allocated to the smallest group of cash-generatingunits for which a reasonable and consistent allocation basis can be identified.

 

Intangible assets with indefinite useful lives andintangible assets not yet available for use are tested for impairment annually,and whenever there is an indication that the asset may be impaired.

 

Recoverable amount is the higher of fair value less coststo sell and value in use. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risksspecific to the asset for which the estimates of future cash flows have notbeen adjusted.

 

If the recoverable amount of an asset (or cash-generatingunit) is estimated to be less than its carrying amount, the carrying amount ofthe asset (cash-generating unit) is reduced to its recoverable amount. Animpairment loss is recognised immediately in profit or loss, unless therelevant asset is carried at revalued amount, in which case the impairment lossis treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carryingamount of the asset (cash-generating unit) is increased to the revised estimateof its recoverable amount, but only to the extent that the increased carryingamount does not exceed the carrying amount that would have been determined hadno impairment loss been recognised in prior years. A reversal of an impairmentloss is recognised immediately in profit or loss, unless the relevant asset iscarried at fair value, in which case the reversal of the impairment loss istreated as a revaluation increase.

 

**(i) Goodwill**

 

Goodwill arising from a business combination isrecognised as an asset at the date that control is acquired (the acquisitiondate). Goodwill is measured as the excess of the sum of the considerationtransferred, the amount of any non-controlling interests in the acquiree, andthe fair value of the acquirer’s previously held equity interest in theacquiree (if any) over the net of the acquisition-date amounts of theidentifiable assets acquired and liabilities assumed.

 

If, after reassessment, the Group’s interest in the fairvalue of the acquiree’s identifiable net assets exceeds the sum of theconsideration transferred, the amount of any non-controlling interests in theacquiree and the fair value of the acquirer’s previously held equity interestin the acquiree (if any), the excess is recognised immediately in profit orloss as a bargain purchase gain.

 

Goodwill is not amortised but is reviewed for impairmentat least annually. For the purpose of impairment testing, goodwill is allocatedto each of the Group’s cash-generating units expected to benefit from thesynergies of the business combination. Cash-generating units to which goodwillhas been allocated are tested for impairment annually or more frequently whenthere is an indication that the unit may be impaired.

 

17

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(i) Goodwill(continued)**

 

If the recoverable amount of the cash-generating unit isless than the carrying amount, the impairment loss is allocated first to reducethe carrying amount of any goodwill allocated to the unit and then to the otherassets of the unit pro-rata on the basis of the carrying amount of each assetin the unit. An impairment loss recognised for goodwill is recognisedimmediately in profit or loss and is not reversed in a subsequent period.

 

On disposal of a subsidiary, the attributable amount ofgoodwill is included in the determination of the profit or loss on disposal ofthe operation.

 

The Group’s policy for goodwill arising on theacquisition of an associate is described in note 1(d) above.

 

**(j) Cashand cash equivalents**

 

Cash comprises cash on hand and demand deposits. Cashequivalents are short-term, highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to an insignificantrisk of changes in value.

 

Bank overdrafts are shown within borrowings in currentliabilities in the Statement of Financial Position.

 

**(k) Inventories**

 

Inventories are stated at the lower of cost and netrealisable value. Net realisable value represents the estimated selling priceless all estimated costs of completion and costs necessary to make the sale.

 

**(l) Non-currentassets held for sale**

 

Non-current assets and disposal groups are classified asheld for sale if their carrying amount will be recovered principally through asale transaction rather than through continuing use. This condition is regardedas met only when the sale is highly probable and the non-current asset (ordisposal group) is available for immediate sale in its present condition.Management must be committed to the sale, which should be expected to qualifyfor recognition as a completed sale within one year from the date ofclassification.

 

When the Group is committed to a sale plan involving lossof control of a subsidiary, all of the assets and liabilities of thatsubsidiary are classified as held for sale when the criteria described aboveare met, regardless of whether the Group will retain a non-controlling interestin its former subsidiary after the sale.

 

Non-current assets (and disposal groups) classified asheld for sale are measured at the lower of their previous carrying amount andfair value less costs to sell.

 

Non-current assets classified as held for sale and theassets of a disposal group are presented separately from other assets in theStatement of Financial Position. The liabilities of a disposal group classifiedas held for sale are presented separately from other liabilities in theStatement of Financial Position.

 

**(m) Financialassets**

 

All financial assets are recognised and derecognised onthe trade date where the purchase or sale of a financial asset is under acontract whose terms require delivery of the financial asset within thetimeframe established by the market concerned, and are initially measured atfair value, plus transaction costs, except for those financial assetsclassified as at fair value through profit or loss, which are initiallymeasured at fair value.

 

Investments are recognised and derecognised on the tradedate where the purchase or sale of an investment is under a contract whoseterms require delivery of the investment within the timeframe established bythe market concerned, and are initially measured at fair value, net oftransaction costs except for those financial assets classified as at fair valuethrough profit or loss which are initially measured at fair value.

 

Financial assets are classified into the followingspecified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity’investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’.The classification depends on the nature and purpose of the financial assetsand is determined at the time of initial recognition.

 

***Effective interest method***

 

The effective interest method is a method of calculatingthe amortised cost of a debt instrument and of allocating interest income overthe relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash receipts through the expected life of the debtinstrument, or where appropriate, a shorter period, to the net carrying amounton initial recognition.

 

Income is recognised on an effective interest rate basisfor debt instruments other than those financial assets classified as ‘at fairvalue through profit or loss’.

 

18

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(m) Financialassets (continued)**

 

***Financial assets at fair value through profit or loss***

 

Financial assets are classified as financial assets atfair value through profit or loss when the financial asset is either held fortrading or it is designated as at fair value through profit or loss.

 

A financial asset is classified as held for trading if:

 

·             it has been acquired principally for the purpose ofselling in the near term; or

 

·             on initial recognition it is a part of a portfolio ofidentified financial instruments that the Group manages together and has arecent actual pattern of short-term profit taking; or

 

·             is a derivative that is not designated and effectiveas a hedging instrument.

 

Financial assets at fair value through profit or loss arestated at fair value, with any gains or losses arising on remeasurementrecognised in profit or loss. The net gain or loss recognised in profit or lossincorporates any dividend or interest earned on the financial asset.

 

***Held to maturity investments***

 

Bills of exchange and term deposits with fixed or determinablepayments and fixed maturity dates that the Group has the positive intent andability to hold to maturity are classified as held to maturity investments.Held to maturity investments are measured at amortised cost using the effectiveinterest method less any impairment, with revenue recognised on an effectiveyield basis.

 

***Loans and receivables***

 

Trade receivables, loans and other receivables that havefixed or determinable payments that are not quoted in an active market areclassified as ‘loans and receivables’. Loans and receivables are measured atamortised cost using the effective interest method, less any impairment.

 

Interest income is recognised by applying the effectiveinterest rate, except for short-term receivables when the recognition ofinterest would be immaterial.

 

***Impairment of financial assets***

 

Financial assets, other than those at fair value throughprofit or loss, are assessed for indicators of impairment at each reportingdate. Financial assets are considered to be impaired where there is objectiveevidence that as a result of one or more events that occurred after the initialrecognition of the financial asset, the estimated future cash flows of theinvestment have been affected.

 

For financial assets carried at amortised cost, theamount of the impairment loss recognised is the difference between the asset’scarrying amount and the present value of estimated future cash flows,discounted at the financial asset’s original effective interest rate.

 

The carrying amount of financial assets are reduced bythe impairment loss directly for all financial assets with the exception oftrade receivables, where the carrying amount is reduced through the use of anallowance account. When a trade receivable is considered uncollectible, it is writtenoff against the allowance account. Subsequent recoveries of amounts previouslywritten off are credited against the allowance account. Changes in the carryingamount of the allowance account are recognised in profit or loss.

 

***Derecognition of financial assets***

 

The Group derecognises a financial asset only when thecontractual rights to the cash flows from the asset expire, or when ittransfers the financial asset and substantially all the risks and rewards ofownership of the asset to another entity. If the Group neither transfers norretains substantially all the risks and rewards of ownership and continues tocontrol the transferred asset, the Group recognises its retained interest inthe asset and an associated liability for amounts it may have to pay.

 

**(n) Investmentproperty**

 

Investment property, which is property held to earnrental yields and/or capital appreciation, is measured initially at its cost,including transaction costs. Subsequent to initial recognition, investmentproperty is measured at fair value, based on active market prices. Thesevaluations are reviewed annually by a qualified property valuer. Gains andlosses arising from changes in the fair value of investment property areincluded in profit or loss in the period in which they arise.

 

**(o) Leasedassets**

 

Leases are classified as finance leases when the terms ofthe lease transfer substantially all the risks and rewards incidental toownership of the leased asset to the lessee. All other leases are classified asoperating leases.

 

***Group as lessee***

 

Assets held under finance leases are initially recognisedas assets of the Group at their fair value at the inception of the lease or, iflower, at the present value of the minimum lease payments. The correspondingliability to the lessor is included in the Statement of Financial Position as afinance lease obligation.

 

19

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(o) Leasedassets (continued)**

 

***Group as lessee (continued)***

 

Lease payments are apportioned between finance expensesand reduction of the lease obligation so as to achieve a constant rate ofinterest on the remaining balance of the liability. Finance expenses arerecognised immediately in profit or loss, unless they are directly attributableto qualifying assets, in which case they are capitalised in accordance with theGroup’s general policy on borrowing costs (refer to note 1(r)).

 

Operating lease payments are recognised as an expense ona straight line basis over the lease term, except where another systematicbasis is more representative of the time pattern in which economic benefitsfrom the leased asset are consumed.

 

***Lease incentives***

 

In the event that lease incentives are received to enterinto operating leases, such incentives are recognised as a liability. Theaggregate benefits of incentives are recognised as a reduction of rentalexpense on a straight line basis, except where another systematic basis is morerepresentative of the time pattern in which economic benefits from the leasedasset are consumed.

 

***Group as lessor***

 

Rental income from operating leases is recognised on astraight line basis over the term of the relevant lease.

 

**(p) Tradeand other payables**

 

Trade and other payables are recognised when the Groupbecomes obliged to make future payments resulting from the purchase of goodsand services.

 

**(q) Borrowings**

 

Borrowings are recorded initially at fair value, net oftransaction costs.

 

Subsequent to initial recognition, borrowings aremeasured at amortised cost with any difference between the initial recognisedamount and the redemption value being recognised in profit and loss over theperiod of the borrowing using the effective interest rate method. Fees paid onthe establishment of loan facilities, which are not an incremental costrelating to the actual draw-down of the facility, are recognised as prepaymentsand amortised on a straight-line basis over the term of the facility.

 

After initial recognition for those interest bearingborrowings where fair value hedge accounting is applied, the borrowings areadjusted for gains and losses attributable to the risk being hedged.

 

Preference shares, which are mandatorily redeemable on aspecific date, are classified as liabilities. The dividends on these preferenceshares are recognised in the profit or loss as finance costs.

 

Borrowings are classified as current liabilities unlessthe Group has an unconditional right to defer settlement of the liability forat least 12 months after the reporting date.

 

**(r) Borrowingcosts**

 

Borrowing costs directly attributable to the acquisition,construction or production of qualifying assets, which are assets thatnecessarily take a substantial period of time to get ready for their intendeduse or sale, are added to the cost of those assets, until such time as theassets are substantially ready for their intended use or sale.

 

Investment income earned on the temporary investment ofspecific borrowings pending their expenditure on qualifying assets is deductedfrom the borrowing costs eligible for capitalisation.

 

All other borrowing costs are recognised in profit orloss in the period in which they are incurred.

 

**(s) Employeebenefits**

 

A liability is recognised for benefits accruing toemployees in respect of wages and salaries, annual leave and long service leavewhen it is probable that settlement will be required and they are capable ofbeing measured reliably.

 

Liabilities recognised in respect of short-term employeebenefits, are measured at their nominal values using the remuneration rateexpected to apply at the time of settlement.

 

Liabilities recognised in respect of long-term employeebenefits are measured as the present value of the estimated future cashoutflows to be made by the Group in respect of services provided by employeesup to reporting date.

 

***Defined contribution plans***

 

Contributions to defined contribution retirement benefitplans are recognised as an expense when employees have rendered serviceentitling them to the contributions.

 

20

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(s) Employeebenefits (continued)**

 

***Defined benefit plans***

 

For defined benefit retirement plans, the cost ofproviding benefits is determined using the ‘Corridor Approach’, with valuationsbeing carried out when there are significant changes to components of the plan.Gains and losses are recognised in full in the profit or loss in the period inwhich they occur to the extent the movement is outside the corridor.

 

Past service cost is recognised immediately to the extentthat the benefits are already vested, and otherwise is amortised on a straightline basis over the average period until the benefits become vested.

 

The retirement benefit obligation recognised in theStatement of Financial Position represents the present value of the definedbenefit obligation as adjusted for unrecognised actuarial gains and losses andunrecognised past service cost, and as reduced by the fair value of the planassets. Any asset resulting from this calculation is limited to unrecognisedactuarial losses and past service cost, plus the present value of availablerefunds and reductions in future contributions to the plan.

 

The assets of the relevant schemes are held independentlyof the Group by trustee companies and are invested by professional fundmanagers.

 

**(t) Provisions**

 

Provisions are recognised when the Group has a presentobligation (legal or constructive) as a result of a past event, it is probablethat the Group will be required to settle the obligation, and a reliableestimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimateof the consideration required to settle the present obligation at the end ofthe reporting period, taking into account the risks and uncertaintiessurrounding the obligation. Where a provision is measured using the cash flowsestimated to settle the obligation, its carrying amount is the present value ofthose cash flows.

 

When some or all of the economic benefits required tosettle a provision are expected to be recovered from a third party, thereceivable is recognised as an asset if it is virtually certain thatreimbursement will be received and the amount of the receivable can be measuredreliably.

 

***Onerous contracts***

 

Present obligations arising under onerous contracts arerecognised and measured as provisions. An onerous contract is considered toexist where the Group has a contract under which the unavoidable cost ofmeeting the obligations under the contract exceed the economic benefitsestimated to be received under it.

 

***Contingent liabilities acquired in a business combination***

 

Contingent liabilities acquired in a business combinationare initially measured at fair value at the date of acquisition. At the end ofsubsequent reporting periods, such contingent liabilities are measured at thehigher of the amount that would be recognised in accordance with AASB 137Provisions, Contingent Liabilities and Contingent Assets and the amountinitially recognised less cumulative amortisation recognised in accordance withAASB 118 Revenue.

 

***Provision for restoration and rehabilitation***

 

A provision for restoration and rehabilitation isrecognised when there is a present obligation as a result of productionactivities undertaken, it is probable that an outflow of economic benefits willbe required to settle the obligation, and the amount of the provision can bemeasured reliably. The estimated future obligations include the costs ofremoving the facilities and restoring the affected areas.

 

**(u) Derivativefinancial instruments**

 

The Group enters into a variety of derivative financialinstruments to manage its exposure to interest rate and foreign exchange raterisk, including foreign exchange forward contracts and interest rate swaps.Further details of derivative financial instruments are disclosed in note 43.

 

Derivatives are initially recognised at fair value on thedate a derivative contract is entered into and are subsequently remeasured totheir fair value at the end of each reporting period. The resulting gain orloss is recognised in profit and loss immediately unless the derivative isdesignated and effective as a hedging instrument, in which event the timing ofthe recognition in profit or loss depends on the nature of the hedgerelationship.

 

The Group designates certain derivatives as either:

 

·             hedges of the fair value of recognised assets orliabilities or firm commitments (fair value hedges);

 

·             hedges of highly probable forecast transactions orhedges of foreign currency risk of firm commitments (cash flow hedges); or

 

·             hedges of net investments in foreign operations.

 

A derivative with a positive fair value is recognised asa financial asset; a derivative with a negative fair value is recognised as afinancial liability. A derivative is presented as a non-current asset ornon-current liability if the remaining maturity of the instrument is more than12 months and it is not expected to be realised or settled within 12 months.Other derivatives are presented as current assets or current liabilities.

 

21

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(u) Derivativefinancial instruments (continued)**

 

***Embedded derivatives***

 

Derivatives embedded in other financial instruments or otherhost contracts are treated as separate derivatives when their risks andcharacteristics are not closely related to those of host contracts and the hostcontracts are not measured at fair value through the profit or loss.

 

***Hedge accounting***

 

The Group designates certain hedging instruments, whichinclude derivatives, embedded derivatives and non-derivatives in respect offoreign currency risk, as either fair value hedges, cash flow hedges, or hedgesof net investments in foreign operations. Hedges of foreign exchange risk onfirm commitments are accounted for as cash flow hedges.

 

At the inception of the hedge relationship, the entitydocuments the relationship between the hedging instrument and hedged item,along with its risk management objectives and its strategy for undertakingvarious hedge transactions. Furthermore, at the inception of the hedge and onan ongoing basis, the Group documents whether the hedging instrument that isused in a hedging relationship is highly effective in offsetting changes infair values or cash flows of the hedged item.

 

Note 43 set out details of the fair values or thederivative instruments used for hedging purposes.

 

***Fair value hedges***

 

Changes in the fair value of derivatives that aredesignated and qualify as fair value hedges are recognised in profit or lossimmediately, together with any changes in the fair value of the hedged asset orliability that are attributable to the hedged risk.

 

Hedge accounting is discontinued when the Group revokesthe hedging relationship, when the hedging instrument expires or is sold,terminated, or exercised, or no longer qualifies for hedge accounting. The fairvalue adjustment to the carrying amount of the hedged item arising from thehedged risk is amortised to profit or loss from that date.

 

***Cash flow hedges***

 

The effective portion of changes in the fair value ofderivatives that are designated and qualify as cash flow hedges are deferred inother comprehensive income. The gain or loss relating to the ineffectiveportion is recognised immediately in profit or loss as part of expenses orincome.

 

Amounts previously recognised in other comprehensiveincome and accumulated in equity are reclassified to profit or loss in theperiods when the hedged item is recognised in profit or loss, in the same lineof the income statement as the recognised hedged item. However, when theforecast transaction that is hedged results in the recognition of anon-financial asset or a non-financial liability, the gains and lossespreviously accumulated in equity are included in the initial measurement of thecost of the non-financial asset or non-financial liability.

 

Hedge accounting is discontinued when the Group revokesthe hedging relationship, when the hedging instrument expires or is sold,terminated, or exercised, or no longer qualifies for hedge accounting. Any gainor loss accumulated in equity at that time remains in equity and is recognisedwhen the forecast transaction is ultimately recognised in profit or loss. Whena forecast transaction is no longer expected to occur, the gain or lossaccumulated in equity is recognised immediately in profit or loss.

 

**(v) Contributedequity and preference shares**

 

Ordinary Stapled Securities are classified as equity.Mandatorily redeemable preference shares including Prime InfrastructureNetworks (NZ) Subordinated Prime Adjusting Reset Convertible Securities(SPARCS) are classified as liabilities (note 20).

 

Incremental costs directly attributable to the issue ofnew Stapled Securities are shown in equity as a deduction, net of tax, from theproceeds. Incremental costs directly attributable to the issue of new StapledSecurities for the acquisition of a business are not included in the cost ofthe acquisition as part of the purchase consideration.

 

***Interest and distributions***

 

Interest on preference shares and distributions areclassified as expenses or as distributions consistent with the Statement ofFinancial Position classification of the related debt or equity instruments.

 

**(w) Dividendsand distributions**

 

Provision is made for the amount of any dividend ordistribution declared, being appropriately authorised and no longer at thediscretion of the entity, on or before the end of the Financial Year but notdistributed at balance date.

 

**(x) Foreigncurrencies**

 

The individual financial statements of each group entityare presented in the currency of the primary economic environment in which theentity operates (its functional currency). For the purpose of the consolidatedFinancial Statements, the results and financial position of each group entityare expressed in Australian dollars ($), which is the functional currency ofPrime Infrastructure Holdings Limited and the presentation currency for theconsolidated Financial Statements.

 

22

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANTACCOUNTING POLICIES (CONTINUED)**

 

**(x) Foreigncurrencies (continued)**

 

In preparing the Financial Statements of the individualentities, transactions in currencies other than the entity’s functionalcurrency (foreign currencies) are recognised at the rates of exchangeprevailing at the dates of the transactions. At end of each reporting period,monetary items denominated in foreign currencies are re-translated at the ratesprevailing at that date. Non-monetary items that are measured in terms ofhistorical cost in a foreign currency are not re-translated.

 

Exchange differences are recognised in profit or loss inthe period which they arise except for exchange differences on monetary itemsreceivable from or payable to a foreign operation for which settlement isneither planned or likely to occur, which forms part of the net investment in aforeign operation, and which are recognised in the foreign currency translationreserve, and reclassified from equity to profit or loss on disposal or partialdisposal of the net investment.

 

For the purpose of presenting consolidated FinancialStatements, the assets and liabilities of the Group’s foreign operations areexpressed in Australian dollars using exchange rates prevailing at the end ofthe reporting period. Income and expense items are translated at the averageexchange rates for the period, unless exchange rates fluctuated significantlyduring that period, in which case the exchange rates at the dates of thetransactions are used. Exchange differences arising are classified asrecognised in other comprehensive income and accumulated in equity (attributedto non-controlling interests as appropriate).

 

On the disposal of a foreign operation (i.e. a disposalof the Group’s entire interest in a foreign operation, or a disposal involvingloss of control over a subsidiary), all of the accumulated exchange differencesin respect of that operation attributable to the Group are reclassified toprofit or loss. Any exchange differences that have previously been attributedto non-controlling interests are derecognised, but they are not reclassified toprofit or loss.

 

Goodwill and fair value adjustments arising on theacquisition of a foreign operation are treated as assets and liabilities of theforeign operation and translated at the closing rate.

 

**(y) Revenuerecognition**

 

Revenue is measured at the fair value of theconsideration received or receivable. Amounts disclosed as revenue are net ofcustomer returns, trade allowances, rebates and other similar allowances.

 

The Group recognises revenue when the amount of revenuecan be reliably measured, it is probable that future economic benefits willflow to the entity and specific criteria have been met for each of the Group’sactivities as described below.

 

***Rendering of services***

 

Revenue from a contract to provide services is recognisedas follows:

 

***Terminal infrastructure charge and handling charges (DBCT)***

 

·             Terminal Infrastructure Charge (TIC) is charged at aset rate per tonne of coal based on each customer’s annual contracted referencetonnage and is recognised as revenue on a pro-rata basis each month. The totalTIC revenue for the Financial Year is approved by the QCA and is also known asthe revenue cap;

 

·             handling charges (fixed) are based on the DBCTindependent operator’s fixed operating costs and are recognised as income on apro-rata basis at the end of each month;

 

·             handling charges (variable) are charged to each userat a variable rate per tonne based on the DBCT independent operator’s variableoperating costs and the total amount of coal shipped through DBCT.

 

***Distribution and transmission income***

 

Energy distribution and transmission income is recognisedwhen services are provided and are rendered based upon usage or volumethroughput during that period. Gas energy distribution income is recognised onan accruals basis.

 

***Freight services revenue***

 

Freight services revenue comprises revenue earned (net ofrefunds, discounts and allowances) from the provision of services to entitiesoutside the Group. Revenue is recognised at the time services are provided tocustomers.

 

***Maintenance contracts***

 

Revenue from time and material contracts is recognised atthe contractual rates as labour hours are delivered and direct expensesincurred.

 

***Interest revenue***

 

Interest revenue is recognised when it is probable thatthe economic benefits will flow to the Group and the amount of revenue can bemeasured reliably. Interest revenue is accrued on a time basis, by reference tothe principal outstanding and at the effective interest rate applicable, whichis the rate that exactly discounts estimated future cash receipts through theexpected life of the financial asset to that asset’s net carrying amount oninitial recognition.

 

23

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

 

**(y) Revenue recognition (continued)**

 

***Rental revenue***

 

Revenue from Cross Sound Cable in the US is derived from along term lease which is treated as an operating lease with contingent rentalpayments, depending on the availability of the transmission facility. Unearnedrental revenue reflects transmission availability billed but not yet provided.

 

Operating lease income (rental revenue) at PD Ports isaccounted for on a straight-line basis over the term of the relevant lease,with any rental increases recognised during the period to which they relate.Operating lease income is recognised on an accruals basis.

 

***Construction contracts***

 

Where the outcome of a construction contract can beestimated reliably, revenue and costs are recognised by reference to the stageof completion of the contract activity at the end of the reporting period,measured based on the proportion of contract costs incurred for work performedto date relative to the estimated total contract costs, except where this wouldnot be representative of the stage of completion.

 

Where the outcome of a construction contract cannot bereliably estimated, contract revenue is recognised to the extent of contractcosts incurred that is probable will be recovered. Contract costs arerecognised as expenses in the period in which they are incurred.

 

When it is probable that total contract costs will exceedtotal contract revenue, the expected loss is recognised as an expenseimmediately.

 

***Other revenue***

 

Contributions for subdivisions/uneconomic lines (notreceived in the form of a Government contribution) received towards the costsof reticulating new sub-divisions and contributions received in constructingnew lines are recognised as revenue.

 

***Other income***

 

Profit/loss on sale of goods and disposal of assets arerecognised when the Group has passed control of the goods or other assets tothe buyer.

 

**(z) Governmentgrants**

 

Grants from the government are recognised at their fairvalue where there is a reasonable assurance that the grant will be received andthe Group will comply with the conditions.

 

Government grants relating to costs are deferred andrecognised in the profit or loss over the period necessary to match them withthe costs that they are intended to compensate.

 

Government grants whose primary condition is that theGroup should purchase, construct, or otherwise acquire non-current assets arerecognised as deferred revenue in the statement of financial position andtransferred to profit or loss on a systematic and rational basis over theuseful lives of the related assets.

 

Other government grants are recognised as revenue overthe periods necessary to match them with the costs for which they are intendedto compensate, on a systematic basis.

 

**(aa) Income tax**

 

Income tax expense represents the sum of the taxcurrently payable and deferred tax.

 

***Current tax***

 

The tax currently payable is based on taxable profit forthe year. Taxable profit differs from profit as reported in the IncomeStatement because of items of income or expense that are taxable or deductiblein other years and items that are never taxable or deductible. The Group’sliability for current tax is calculated using tax rates that have been enactedor substantively enacted by the end of the reporting period.

 

***Deferred tax***

 

Deferred tax is recognised on temporary differencesbetween the carrying amounts of assets and liabilities in the financial statementsand the corresponding tax bases used in the computation of taxable profit.Deferred tax liabilities are generally recognised for all taxable temporarydifferences. Deferred tax assets are generally recognised for all deductibletemporary differences to the extent that it is probable that taxable profitswill be available against which those deductible temporary differences can beutilised. Such deferred tax assets and liabilities are not recognised if thetemporary difference arises from goodwill or from the initial recognition(other than in a business combination) of other assets and liabilities in atransaction that affects neither the taxable profit nor the accounting profit.

 

24

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

 

**(aa) Income tax(continued)**

 

***Deferred tax (continued)***

 

Deferred tax liabilities are recognised for taxabletemporary differences associated with investments in subsidiaries andassociates, and interests in joint ventures, except where the Group is able tocontrol the reversal of the temporary difference and it is probable that thetemporary differences will not reverse in the foreseeable future. Deferred taxassets arising from deductible temporary differences associated with suchinvestments and interests are only recognised to the extent that it is probablethat there will be sufficient taxable profits against which to utilise thebenefits of the temporary differences and they are expected to reverse in theforeseeable future.

 

The carrying amount of deferred tax assets is reviewed atthe end of the each reporting period and reduced to the extent that it is nolonger probable that sufficient taxable profits will be available to allow allor part of the tax asset to be recovered.

 

Deferred tax assets and liabilities are measured at thetax rates that are expected to apply in the period in which the liability issettled or the asset realised, based on tax rates (and tax laws) that have beenenacted or substantively enacted by the end of the reporting period. Themeasurement of deferred tax liabilities and assets reflects the taxconsequences that would follow from the manner in which the Group expects, atthe end of the reporting period, to recover or settle the carrying amount ofits assets and liabilities.

 

Deferred tax assets and liabilities are offset when thereis a legally enforceable right to set off current tax assets against currenttax liabilities and when they relate to income taxes levied by the sametaxation authority and the Group intends to settle its current tax assets andliabilities on a net basis.

 

***Current and deferred tax for the period***

 

Current and deferred tax is recognised as an expense orincome in profit or loss, except when they relate to items that are recognisedoutside profit or loss (whether in other comprehensive income or directly in equity),in which case the tax is also recognised outside profit or loss, or where theyarise from the initial accounting for a business combination. In the case of abusiness combination, the tax effect is included in the accounting for thebusiness combination.

 

**(ab) Goods andservices tax**

 

Revenues, expenses and assets are recognised net of theamount of goods and services tax (GST), except:

 

·             where the amount of GST incurred is not recoverablefrom the taxation authority, it is recognised as part of the cost ofacquisition of an asset or as part of an item of expense; or

 

·             for receivables and payables which are recognisedinclusive of GST.

 

The net amount of GST recoverable from, or payable to,the taxation authority is included as part of receivables or payables.

 

Cash flows are included in the Statement of Cash Flows ona gross basis. The GST component of cash flows arising from investing andfinancing activities which is recoverable from, or payable to, the taxationauthority is classified as operating cash flows.

 

25

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**2. ADOPTION OFNEW AND REVISED ACCOUNTING STANDARDS**

 

**(a) Standardsand Interpretations affecting amounts reported in the current period**

 

The following new and revised Standards andInterpretations have been adopted in the current period and have affected theamounts reported in these Financial Statements. Details of other Standards andInterpretations adopted in these Financial Statements but that have had noeffect on the amounts reported are set out in note 2(b).

 
| **Standard**                                                                                                                             | ** ** | **Impact**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AASB 101 Presentation of Financial Statements (as  revised in September 2007)                                                            |       | AASB 101 (September 2007) introduced terminology  changes (including revised titles for the Financial Statements) and changes  in the format and content of the Financial Statements.

 

This includes:

 

·      the presentation of all non-owner changes in equity  (comprehensive income) either in one Statement of Comprehensive Income or in  two statements (a separate Income Statement and a Statement of Comprehensive  Income).  Prime Infrastructure has  decided to adopt the latter.

 

·      Balance  Sheet has become the Statement of Financial Position; and

 

·      Cash flow  Statement has become the Statement of Cash Flows                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| AASB 8 Operating Segments (AASB 8)                                                                                                       |       | AASB 8 is a disclosure Standard that has resulted in  a re-designation of the Group’s reportable segments (refer note 37). The  disclosure made is a ‘management approach’ to segment reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| AASB 2007-10 Further Amendments to Australian  Accounting Standards arising from AASB 101                                                |       | This Amending Standard changes the term ‘General  Purpose Financial Report’ to ‘General Purpose Financial Statements’ and the  term ‘financial report’ to ‘Financial Statements’ to better align with IFRS  terminology.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| AASB 2009-2 Amendments to Australian Accounting  Standards — Improving Disclosures about Financial Instruments                      |       | This amends AASB7 Financial Instruments: Disclosures  to require enhanced disclosures about fair value measurements and liquidity  risk. The Group has elected not to provide comparative information for these  expanded disclosures in the current year in accordance with the transitional  reliefs offered in these amendments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Corporations Act — Corporations Amendment (Corporate  Reporting Reform) Act 2010 and Corporations Amendment Regulations 2010 (No.6) |       | Implements a number of financial reporting related  amendments to the *Corporations Act 2001*  and associated regulations including:

 

·      Parent  entity information — parent entity columns are no longer required in  consolidated Financial Statements, instead financial information of the  parent entity is disclosed by way or note in the annual Financial Statements.

 

·      IFRS declaration — companies,  registered schemes and disclosing entities making an explicit and unreserved  statement of compliance with IFRS must include reference to this statement in  their Directors’ Declaration.

 

·      Declaration of dividends —  dividends will be permitted to be paid where (a) assets exceed liabilities by  an amount sufficient to pay the dividend, (b) the payment is fair and  reasonable and (c) no material prejudice to the ability to pay creditors.

 

The  above items are effective from 29 June 2010. |

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**2. ADOPTION OFNEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)**

 

**(b) Standardsand Interpretations adopted with no effect on the Financial Statements**

 

The following new and revised Standards andInterpretations have also been adopted in these Financial Statements. Theiradoption has not had any significant impact on the amounts reported in theseFinancial Statements but may affect the accounting for future transactions orarrangements.

 
| **Standard**                                                                                                                                                                                               | ** ** | **Impact**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AASB 123 Borrowing Costs (as revised in 2007)                                                                                                                                                              |       | This Standard eliminates the option of expensing  borrowing costs related to qualifying assets, instead requiring  capitalisation. This has not impacted the Group, as the Group’s accounting  policy has been to capitalise all borrowing costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| AASB 3 Business Combinations (as revised in 2008)

 

AASB 127 Consolidated and Separate Financial  Statements (2008), AASB 2008-3 Amendments to Australian Accounting Standards  arising from AASB 3 |       | This standard:

 

·    allows  for the measurement of non-controlling interests (previously referred to as  minority interests) either at fair value or at the non-controlling interests’  share of the fair value of the identifiable net assets of the acquiree;

 

·    changes the recognition and  subsequent accounting requirements for contingent consideration;

 

·    requires the acquisition related  costs be accounted for separately from the business combination, generally  leading to those costs being recognised as an expense in the profit or loss                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Interpretation 18 Transfer of Assets from Customers                                                                                                                                                        |       | This Interpretation clarifies the accounting  treatment for agreements where an entity receives from a customer an item of  property, plant and equipment that the entity must then use either to connect  the customer to a network or to provide the customer with ongoing access to a  supply of goods or services.

 

The key requirements of the Interpretation include:

 

·    an asset is only recognised  where it meets the definition of an asset in the Framework;

 

·    transferred assets that meet the  definition of an asset are initially recognised at fair value; and

 

·    revenue arising from the  recognition of the transferred assets is recognised in accordance with AASB  118 Revenue.

 

This has not impacted the Group, as Prime  Infrastructure already recognises assets in accordance with this  Interpretation. |

 

27

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**2. ADOPTION OFNEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)**

 

**(c) Standardsand Interpretations in issue not yet adopted**

 
| **Standard**                                                                                                    | ** ** | **Impact**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | ** ** | **Effective for annual  reporting periods  beginning on or after** |
|-----------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------|
| AASB 2009-14 Amendments to Australian Interpretation  — Prepayments of a Minimum Funding Requirement       |       | This amendment applies when an entity is subject to  minimum funding requirements and makes an early payment of contributions to  cover those requirements, permitting the benefit of such an early payment to  be recognised as an asset.

 

This is not expected to impact the Group, as Prime  Infrastructure has previously recognised an asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       | 1 January 2011                                                                                   |
|                                                                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       |                                                                                             |
| Interpretation 19 Extinguishing Liabilities with  Equity Instruments                                            |       | This Interpretation requires the extinguishment of a  financial liability by the issue of equity instruments to be measured at fair  value with the difference between the fair value of the instrument and the  carrying value of the liability extinguished being recognised in profit or  loss.

 

This is not expected to impact the Group, as Prime  Infrastructure already accounts for the extinguishment of liabilities with  equity instruments in this manner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       | 1 July 2010                                                                                      |
|                                                                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       |                                                                                             |
| AASB 9 Financial Instruments, AASB 2009-11  Amendments to Australian Accounting Standards arising from AASB 9   |       | This Standard introduces new requirements for  classifying and measuring financial assets as follows:

 

·    debt  instruments meeting both a ‘business model’ test and ‘cash flow  characteristics’ test are measured at amortised cost (the use of fair value  is optional in some limited circumstances);

 

·    investments in equity  instruments can be designated as ‘fair value through other comprehensive  income’ with only dividends being recognised in profit or loss;

 

**·****   **all other instruments  (including all derivatives) are measured at fair value with changes  recognised in the profit or loss; and

 

·    the concept of ‘embedded  derivatives’ does not apply to financial assets within the scope of the  Standard and the entire instrument must be classified and measured in  accordance with the above guidelines. |       | 1 January 2013                                                                                   |
|                                                                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       |                                                                                             |
| AASB 2009-5 Further Amendments to Australian  Accounting Standards arising from the Annual Improvements Process |       | This introduces amendments into Accounting Standards  that are equivalent to those made by the International Accounting Standards  Board under its program of annual improvements to its Standards.  A number of the amendments are largely  technical, clarifying particular terms or eliminating unintended consequences.

 

Other changes are more substantial, such as the  current/non-current classification of convertible instruments, the  classification of expenditures on unrecognised assets in the Statement of  Cash Flows and the classification of leases of land and buildings                                                                                                                                                                                                                                                                                                                                                                                                     |       | 1 January 2010                                                                                   |

 

Other than as noted above, the adoption of the variousAustralian Accounting Standards and Interpretations in issue but not yeteffective will not impact the Group’s accounting policies. However, thepronouncements will result in changes to information currently disclosed in theFinancial Statements. The Group does not intend to adopt any of thesepronouncements before their effective date.

 

28

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**3. CRITICALACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY**

 

In applying the Group’s accounting policies, as describedin note 1, the Directors are required to make judgements, estimates andassumptions about the carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates and associated assumptionsare based on historical experience and other factors that are considered to berelevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed onan ongoing basis. Revisions to accounting estimates are recognised in theperiod in which the estimate is revised if the revision affects only thatperiod or in the period of the revision and future periods if the revisionaffects both current and future periods.

 

Significant judgements, estimates and assumptions made bythe Directors in the preparation of these Financial Statements are outlinedbelow.

 

**Impairment ofgoodwill and intangibles with indefinite lives**

 

Goodwill is assessed for impairment on an annual basis,or more often if indicators of potential impairment exist. Determining whethergoodwill and intangibles with indefinite lives are impaired requires anestimation of the value-in-use or fair value less costs to sell of thecash-generating units which have been allocated. The value-in-use calculationrequires the entity to estimate the future cash flows expected to arise fromthe cash-generating unit and a suitable discount rate in order to calculatepresent value.

 

The carrying amount of goodwill and intangibles withindefinite lives at the balance sheet date was $160.9 million (2009: $1,117.8million) after an impairment loss of $193.0 million (2009: $732.4 million) wasrecognised during the current Financial Year from continuing operations.Details of the impairment loss calculation and assumptions used in the estimateof recoverable amount are provided in notes 17 and 18.

 

**Intangibleassets with finite lives**

 

Useful lives of intangible assets with finite lives arereviewed annually. Any reassessment of useful lives in a particular year willaffect the amortisation expense (either increasing or decreasing) through tothe end of the reassessed useful life for both the current and future years.

 

The carrying amount of intangible assets with finitelives at the balance sheet date was $6.6 million (2009: $2,306.3 million) afteran impairment loss of $16.0 million (2009: $22.3 million) was recognised duringthe current Financial Year. Details of the assumptions used are provided innote 18.

 

**Fair values inbusiness combinations**

 

The Group accounts for business combinations using thepurchase method of accounting. This method requires the application of fairvalues for both the consideration given and the assets and liabilitiesacquired. The calculation of fair values is often predicated on estimates andjudgements including future cash flows, revenue streams and value-in-usecalculations (refer note 36 for details of business combinations). Thedetermination of the fair values may remain provisional for up to 12 monthsfrom the date of acquisition due to the time required to obtain independentvaluations of individual assets and to complete assessments of provisions.

 

**Classificationof assets and liabilities as held for sale**

 

The Group classifies assets and liabilities as held forsale when the carrying amount will be recovered through a sale transaction. Theassets and liabilities must be available for immediate sale and the Group mustbe committed to selling the asset either through the entering into acontractual sale agreement or the activation and commitment to a program tolocate a buyer and dispose of the assets and liabilities.

 

As part of the recapitalisation of Prime Infrastructurewhich was completed on 20 November 2009, Prime Infrastructure announced that itwould classify its interests in AET&D and Cross Sound Cable as held forsale. Prime Infrastructure has issued an option to the BEPPA holders to receiveany proceeds in relation to the disposal of the AET&D assets, whilst atwelve month option (with an option in favour of Brookfield for a further twoperiods of twelve months each) has been issued to Brookfield to acquire CrossSound Cable for nominal proceeds.

 

Prime Infrastructure has written down its investment inAET&D to nil value and this has resulted in an impairment charge of $662.6million being recognised in the current Financial Year. Further information isdisclosed in note 38.

 

**Recovery ofdeferred tax assets**

 

Deferred tax assets are recognised for deductibletemporary differences and carried forward tax losses as management considersthat it is probable that future taxable profits will be available to utilisethose temporary differences and tax losses. 

 

29

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**3. CRITICALACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)**

 

**Estimation ofuseful lives of assets of property, plant and equipment**

 

The estimation of the useful lives of property, plant andequipment has been based on historical experience as well as manufacturers’warranties (for plant and equipment) and lease terms (for leased equipment). Inaddition, the condition of assets is assessed throughout the year andconsidered against the remaining useful life. Adjustments to useful life aremade when necessary.

 

**Asset retirementobligations**

 

Provision is made for the anticipated costs ofenvironmental restoration within Tasmania Gas Pipeline and future restorationof the sea bed at Cross Sound Cable (both held for sale). The provisionincludes future cost estimates associated with the rectification andremediation work. These future costs are discounted to their present value andare disclosed in note 22 and 38.

 

**Allowance forimpairment loss on trade receivables**

 

Where receivables are outstanding beyond the normaltrading terms, the likelihood of recovery of these receivables is assessed bymanagement. Due to the large number of debtors, this assessment is based onsupportable past collection history and historical write-offs of bad debts. Theimpairment loss is disclosed in note 9.

 

**Defined benefitplans**

 

Various actuarial assumptions underpin the determinationof the Group’s pension obligations. A number of assumptions including but notlimited to wage escalation rates, inflation, interest rates, mortality ratesand investment returns are used by the actuaries. Details of the assumptionsused by the actuaries are disclosed in note 24.

 

**Discounting ofintercompany loans**

 

Prime Infrastructure has a number of loans withassociates which are currently non-interest bearing. In determining the presentvalue, a discount rate of between 5.86% and 6.94% has been used for a majorityof the intercompany loans.

 

**4. REVENUE**

 

An analysis of the Group’s revenue for the year from continuingoperations is as follows:

 
| ** **                                                       | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                       | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Continuing  operations:**                                      |       |                 |       |   |   |
| Revenue from rendering of  services                              |       | 387,598              |       | 416,292 |   |
| Revenue from rendering of  services — related parties       |       | 1,335                |       | — |   |
| Other revenue                                                    |       | 6,487                |       | 4,933 |   |
| **Interest  revenue:**                                           |       |                 |       |   |   |
| Bank deposits                                                    |       | 12,733               |       | 29,417 |   |
| Other related parties —  associates                         |       | 90,126               |       | 81,424 |   |
| Other                                                            |       | 295                  |       | 958 |   |
| Unwinding of unrealised  discount on receivables from associates |       | 657                  |       | — |   |
| ** **                                                       | ** ** | **103,811**          | ** ** | **111,799** | ** ** |
| ** **                                                       | ** ** | **499,231**          | ** ** | **533,024** | ** ** |

 

30

----

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**5. FINANCE COSTS**

 
| ** **                                                                                       | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                       | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Continuing  operations:**                                                                      |       |                 |       |   |   |
| **(a) FINANCE  COSTS**                                                                           |       |                 |       |   |   |
| Loss for the year has been  arrived at after charging the following finance costs:               |       |                 |       |   |   |
| Interest on loans                                                                                |       | 147,629              |       | 292,864 |   |
| Other interest expense                                                                           |       | 3,310                |       | 2,374 |   |
| Other finance costs                                                                              |       | 13,268               |       | 22,307 |   |
|                                                                                             | ** ** | **164,207**          | ** ** | **317,545** | ** ** |
| **(b) HEDGE  (GAIN)/EXPENSE**                                                                    |       |                 |       |   |   |
| (Gain)/loss on foreign  currency derivatives                                                     |       | (18,462              | )          | 4,247 |   |
| (Gain)/loss on interest  rate derivatives                                                        |       | (1,188               | )          | 73,320 |   |
| Fair value losses on  interest rate swaps designated as cash flow hedges transferred from equity |       | -                    |       | 35,327 |   |
|                                                                                             | ** ** | **(19,650**          | **)**      | **112,894** | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**6. LOSS FOR THEYEAR**

 
| ** **                                                                              | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                              | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **(a) GAINS  AND LOSSES**                                                          |       |                 |       |   |   |
| Loss for the year has been  arrived at after crediting/(charging) the following gains:  |       |                 |       |   |   |
| **Continuing  operations:**                                                             |       |                 |       |   |   |
| Gain on disposal of  property, plant and equipment                                      |       | 62                   |       | 72 |   |
| Contributions from  customers/developers                                                |       | 9,807                |       | 7,915 |   |
| Government grants                                                                       |       | 1,169                |       | 1,171 |   |
| Gain on conversion of  BEPPA to Prime Infrastructure Stapled securities(1)              |       | 392,519              |       | — |   |
| Other                                                                                   |       | 1,332                |       | 7,186 |   |
| ** **                                                                              | ** ** | **404,889**          | ** ** | **16,344** | ** ** |
| Loss for the year has been  arrived at after crediting/(charging) the following losses: |       |                 |       |   |   |
| **Continuing  operations:**                                                             |       |                 |       |   |   |
| Net foreign exchange  losses                                                            |       | (46,490              | )          | (28,289 | ) |
| Loss on disposal of  property, plant and equipment                                      |       | (123                 | )          | (53 | ) |
| ** **                                                                              | ** ** | **(46,613**          | **)**      | **(28,342** | **)** |
| **(b) OTHER  EXPENSES**                                                            |       |                 |       |   |   |
| **Continuing  operations:**                                                             |       |                 |       |   |   |
| Net bad and doubtful debts  arising from other entities                                 | ** ** | **647**              | ** ** | **(126** | **)** |
|                                                                                    |       |                 |       |   |   |
| Depreciation of  non-current assets (note 15)                                           |       | 75,915               |       | 71,090 |   |
| Amortisation of  non-current assets (note 18)                                           |       | 1,222                |       | 893 |   |
| Impairment of non-current  assets                                                       |       | 51,681               |       | 89,771 |   |
| ** **                                                                              | ** ** | **128,818**          | ** ** | **161,754** | ** ** |
|                                                                                    |       |                 |       |   |   |
| Impairment of intercompany  loans with associates                                       |       | 95,658               |       | — |   |
| ** **                                                                              |       |                 |       |   |   |
| **Operating  lease rental expense:**                                                    |       |                 |       |   |   |
| Minimum lease payments                                                                  |       | 1,394                |       | 1,683 |   |

 

----

(1)              The gain on conversion of BEPPA to Prime Infrastructure Stapled securitieswas due to the BEPPA securities being recorded at $677.4 million prior to theirconversion.  The fair value of theseliabilities upon conversion was $284.8 million resulting in a one-off gain of$392.5 million.

 

32

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**7. INCOME TAXES**

 
| ** **                                                                                         | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                         | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **(a) INCOME  TAX RECOGNISED IN PROFIT OR LOSS**                                              |       |                 |       |   |   |
| **Tax  (benefit)/expense comprises:**                                                              |       |                 |       |   |   |
| Current tax  (benefit)/expense                                                                     |       | (77,430              | )          | 4,902 |   |
| Adjustments recognised in  the current year in relation to the current tax of prior years          |       | 44,777               |       | (5,553 | ) |
| Deferred tax  expense/(benefit) relating to the origination and reversal of temporary  differences |       | 50,532               |       | (172,346 | ) |
| Adjustments to deferred  tax (benefit)/expense of prior years                                      |       | (11,582              | )          | 3,665 |   |
| **Total tax  expense/(benefit)**                                                                   | ** ** | **6,387**            | ** ** | **(169,332** | **)** |
| **Attributable  to:**                                                                              |       |                 |       |   |   |
| Continuing operations                                                                              |       | 941                  |       | (83,656 | ) |
| Discontinued operations                                                                            |       | 5,446                |       | (85,676 | ) |
| ** **                                                                                         | ** ** | **6,387**            | ** ** | **(169,332** | **)** |
| **Income  tax on pre-tax accounting profit reconciles to tax expense/(benefit) as  follows:**      |       |                 |       |   |   |
| Profit/(loss) from  continuing operations                                                          |       | 33,236               |       | (336,517 | ) |
| Loss from discontinued  operations                                                                 |       | (975,447             | )          | (809,945 | ) |
|                                                                                               | ** ** | **(942,211**         | **)**      | **(1,146,462** | **)** |
| Income tax benefit  calculated at 30%                                                              |       | (282,663             | )          | (343,939 | ) |
| Exempt distributions                                                                               |       | —               |       | (1,705 | ) |
| Income not assessable  (including trust income)                                                    |       | (10,199              | )          | (65,640 | ) |
| Differences in overseas  tax rates                                                                 |       | (19,808              | )          | 3,280 |   |
| Deferred tax assets not  recognised                                                                |       | 35,810               |       | 14,435 |   |
| Non-deductible expenditure                                                                         |       | 5,678                |       | 20,017 |   |
| Impairment loss                                                                                    |       | 206,377              |       | 141,407 |   |
| Unwinding of unrealised  discount on related party receivables/payables                            |       | (1,227               | )          | 60,786 |   |
| Equity accounted results                                                                           |       | 62,219               |       | (456 | ) |
| Other permanent  differences                                                                       |       | (22,995              | )          | 4,372 |   |
| ** **                                                                                         | ** ** | **(26,808**          | **)**      | **(167,443** | **)** |
| Under/(over) provision of  income tax in previous year                                             |       | 33,195               |       | (1,889 | ) |
| **Income  tax expense/(benefit) recognised in profit or loss**                                     | ** ** | **6,387**            | ** ** | **(169,332** | **)** |

 

The tax rate used in the above reconciliation is thecorporate tax rate of 30% payable by Australian corporate entities on taxableprofits under Australian tax law. There has been no change in the corporate taxrate when compared with the previous reporting period.

 

33

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**7. INCOME TAXES(CONTINUED)**

 
| ** **                                                                                           | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                           | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **(b) INCOME  TAX RECOGNISED DIRECTLY IN OTHER COMPREHENSIVE INCOME**                           |       |                 |       |   |   |
| **Deferred  tax:**                                                                                   |       |                 |       |   |   |
| **Arising  on income and expenses recognised in other comprehensive income:**                        |       |                 |       |   |   |
| Revaluation of financial  instruments treated as cash flow hedges                                    |       | 11,479               |       | 73,043 |   |
| Translation of foreign  operations                                                                   |       | (28,582              | )          | 47,610 |   |
| Other reserve                                                                                        |       | (2,325               | )          | — |   |
| **Total  income tax recognised directly in other comprehensive income**                              | ** ** | **(19,428**          | **)**      | **120,653** | ** ** |
| **(c) CURRENT  TAX ASSETS AND LIABILITIES**                                                     |       |                 |       |   |   |
| **Current  tax assets:**                                                                             |       |                 |       |   |   |
| **Tax  refund receivable**                                                                           | ** ** | **10**               | ** ** | **10,356** | ** ** |
| **Current  tax payable:**                                                                            |       |                 |       |   |   |
| **Income  tax payable attributable to:**                                                             |       |                 |       |   |   |
| Parent entity                                                                                        |       | —               |       | — |   |
| Entities in the  consolidated group                                                                  |       | (847                 | )          | (1,377 | ) |
| ** **                                                                                           | ** ** | **(847**             | **)**      | **(1,377** | **)** |
| ** **                                                                                           | ** ** | **(837**             | **)**      | **8,979** | ** ** |
| **(d) DEFERRED  TAX ASSETS**                                                                    |       |                 |       |   |   |
| **The  balance comprises deferred tax assets attributable to the following temporary  differences:** |       |                 |       |   |   |
| Property, plant and  equipment                                                                       |       | 27,749               |       | 153,623 |   |
| Deferred income                                                                                      |       | 48,535               |       | 13,295 |   |
| Receivables                                                                                          |       | 50,151               |       | 125,837 |   |
| Provisions                                                                                           |       | 2,630                |       | 18,957 |   |
| Accruals                                                                                             |       | 3,162                |       | 2,713 |   |
| Finance leases/novated  loans                                                                        |       | —               |       | 205,184 |   |
| Hedges                                                                                               |       | 31,419               |       | 70,873 |   |
| Other                                                                                                |       | 3,331                |       | 20,520 |   |
| **Total  deferred tax assets attributable to temporary differences**                                 | ** ** | **166,977**          | ** ** | **611,002** | ** ** |

 

34

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**7. INCOME TAXES(CONTINUED)**

 
| ** **                                                                                                                       | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                                       | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **(d) DEFERRED  TAX ASSETS (CONTINUED)**                                                                                    |       |                 |       |   |   |
| **Deferred  tax assets attributable to tax losses carried forward in the following  jurisdictions:**                             |       |                 |       |   |   |
| Australia                                                                                                                        |       | 78,301               |       | 83,573 |   |
| New Zealand                                                                                                                      |       | —               |       | 37,108 |   |
| United Kingdom                                                                                                                   |       | 1,230                |       | 3,915 |   |
| **Total  deferred tax assets attributable to tax losses**                                                                        | ** ** | **79,531**           | ** ** | **124,596** | ** ** |
| **Total  deferred tax assets attributable to withholding tax**                                                                   | ** ** | **2,570**            | ** ** | **—** | ** ** |
| **Total  deferred tax assets**                                                                                                   | ** ** | **249,078**          | ** ** | **735,598** | ** ** |
| **The  following movements in the balance of deferred tax assets were included in  the calculation of income tax expense:**      |       |                 |       |   |   |
| Opening balance of  deferred tax assets                                                                                          |       | 611,002              |       | 576,912 |   |
| Amounts booked to foreign  currency translation reserve                                                                          |       | —               |       | 24,726 |   |
| Revaluation of hedges                                                                                                            |       | 273                  |       | 21,480 |   |
| Equity raising costs and  other                                                                                                  |       | 2,389                |       | 2,557 |   |
| Acquisitions/disposals                                                                                                           |       | (327,055             | )          | (46,107 | ) |
| Less closing balance of  deferred tax assets attributable to temporary differences                                               |       | (166,977             | )          | (611,002 | ) |
| **Change in  deferred tax assets included in tax benefit**                                                                       | ** ** | **(119,632**         | **)**      | **(31,434** | **)** |
| ** **                                                                                                                       |       |                 |       |   |   |
| **(e) DEFERRED  TAX LIABILITIES**                                                                                           |       |                 |       |   |   |
| **The  balance comprises deferred tax liabilities attributable to the following  temporary differences:**                        |       |                 |       |   |   |
| Property plant and  equipment                                                                                                    |       | 31,349               |       | 707,065 |   |
| Intangibles                                                                                                                      |       | —               |       | 225,730 |   |
| Payables                                                                                                                         |       | 20,549               |       | 5,019 |   |
| Pensions                                                                                                                         |       | 9,275                |       | 7,585 |   |
| **Total  deferred tax assets attributable to temporary differences**                                                             | ** ** | **61,173**           | ** ** | **945,399** | ** ** |
| **The  following movements in the balance of deferred tax liabilities were included  in the calculation of income tax expense:** |       |                 |       |   |   |
| Opening balance of  deferred tax liabilities                                                                                     |       | 945,399              |       | 1,404,083 |   |
| Amounts booked to foreign  currency translation reserve                                                                          |       | (28,582              | )          | (22,883 | ) |
| Acquisitions/disposals                                                                                                           |       | (786,580             | )          | (252,894 | ) |
| Revaluation of hedges                                                                                                            |       | 11,617               |       | (52,154 | ) |
| Other                                                                                                                            |       | —               |       | 6,494 |   |
| Less closing balance of  deferred tax liabilities                                                                                |       | (61,173              | )          | (945,399 | ) |
| **Change in  deferred tax liabilities included in tax (expense)/benefit**                                                        | ** ** | **(80,681**          | **)**      | **137,247** | ** ** |

 

**RELEVANCE OF TAX CONSOLIDATION TO THE GROUP**

 

The Company and its wholly-owned Australian residententities have formed a tax-consolidated group with effect from 1 July 2002and are therefore taxed as a single entity from that date. The head entitywithin the tax-consolidated group is Prime Infrastructure Holdings Limited. Themembers of the tax consolidated group are identified at note 35.

 

35

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**7. INCOME TAXES(CONTINUED)**

 

**RELEVANCE OF TAX CONSOLIDATION TO THE GROUP (CONTINUED)**

 

Tax expense/benefit, deferred tax liabilities anddeferred tax assets arising from temporary differences of the members of thetax-consolidated group are recognised in the separate Financial Statements ofthe members of the tax-consolidated group using the ‘separate taxpayer withingroup’ approach by reference to the carrying amounts in the separate FinancialStatements of each entity and tax values applying under tax consolidation.Current tax liabilities and assets and deferred tax assets arising from unusedtax losses and relevant tax credits of the members of the tax-consolidatedgroup are recognised by the Company (as head entity in the tax-consolidatedgroup).

 

Due to the existence of a tax funding arrangement betweenthe entities in the tax-consolidated group, amounts are recognised as payableto or receivable by the Company and each member of the Group in relation to thetax contribution amounts paid or payable between the parent entity and othermembers of the tax-consolidated group in accordance with the arrangement.

 

There are three tax-consolidated groups within Australia.Tax expense/benefit, deferred tax assets and deferred tax liabilities fortemporary differences for members of the tax consolidated group are reflecteddifferently depending on whether the member is a controlled subsidiary, anassociate or part of a disposal group classified as held for sale.

 

**NATURE OF TAX FUNDING ARRANGEMENTS AND TAX SHARING AGREEMENTS**

 

Entities within the tax-consolidated groups have enteredinto a tax funding arrangement and a tax sharing agreement with the relevanthead entity. Under the terms of the tax funding arrangement, PrimeInfrastructure Holdings Limited and each of the relevant entities in itstax-consolidated group have agreed to pay a tax equivalent payment to or from thehead entity, based on the current tax liability or current tax asset of theentity. Such amounts are reflected in amounts receivable from or payable toother entities in the tax-consolidated group. Similar arrangements existbetween head entities and member entities of the other two tax-consolidatedgroups.

 

**8. REMUNERATIONOF AUDITORS**

 

During the year, the following fees were paid or payablefor services provided by the auditor of the parent entity, its relatedpractices and non-related audit firms.

 
| ** **                                                                                                        | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                        | ** ** | **2010  $**      | ** ** | **2009  $** | ** ** |
| **(a) AUDITOR  OF THE PARENT ENTITY — DELOITTE TOUCHE TOHMATSU**                                        |       |             |       |   |   |
| Audit or review of the  Financial Report                                                                          |       | 645,006          |       | 479,942 |   |
| Other assurance related  projects(1)                                                                              |       | 2,799,920        |       | — |   |
| ** **                                                                                                        | ** ** | **3,444,926**    | ** ** | **479,942** | ** ** |
| **(b) OTHER  AUDITORS**                                                                                      |       |             |       |   |   |
| Audit or review of the  Financial Report — International associates of Deloitte Touche Tohmatsu              |       | 1,905,247        |       | 3,519,619 |   |
| Non Deloitte Touche  Tohmatsu audit firms for the audit or review of the Financial Reports of the  Group entities |       | —           |       | 547,970 |   |
| ** **                                                                                                        | ** ** | **1,905,247**    | ** ** | **4,067,589** | ** ** |
| **(c) NON-AUDIT  SERVICES**                                                                                  |       |             |       |   |   |
| International associates  of Deloitte Touche Tohmatsu                                                             |       |             |       |   |   |
| Taxation services                                                                                                 |       | 293,048          |       | 720,059 |   |
| Assurance related                                                                                                 |       | 23,590           |       | 500,187 |   |
| Other                                                                                                             |       | —           |       | 98,287 |   |
| ** **                                                                                                        | ** ** | **316,638**      | ** ** | **1,318,533** | ** ** |

 

----

(1)The other assurance related projectspaid to Deloitte Touche Tohmatsu consist primarily of fees paid in relation tothe recapitalisation of Prime Infrastructure. Deloitte Touche Tohmatsu wereengaged as the Investigating Accountants and provided a review statement on theforecast information contained in the Prospectus.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**9. TRADE ANDOTHER RECEIVABLES**

 
| ** **                                                | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------------|------------|----------------------|------------|
| ** **                                                | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CURRENT**                                               |       |                 |       |   |   |
| Trade receivables(1)                                      |       | 43,479               |       | 134,924 |   |
| Impairment provision                                      |       | (1,344               | )          | (2,989 | ) |
| ** **                                                | ** ** | **42,135**           | ** ** | **131,935** | ** ** |
| GST and VAT receivables                                   |       | 1,765                |       | 4,566 |   |
| Non-interest bearing  receivable from other related party |       | —               |       | 5,749 |   |
|                                                      |       |                 |       |   |   |
| Interest receivable from  associates                      |       | 26,015               |       | 7,310 |   |
| Interest receivable —  other entities                |       | 1,479                |       | — |   |
| ** **                                                | ** ** | **27,494**           | ** ** | **7,310** | ** ** |
| Insurance claim receivable                                |       | 2,097                |       | 4,750 |   |
| Other                                                     |       | 8,639                |       | 18,681 |   |
| **NON-CURRENT**                                           |       |                 |       |   |   |
| Trade receivables                                         |       | 3,728                |       | 4,435 |   |
| Other receivables                                         |       | 1,189                |       | 1,691 |   |
| Insurance claim receivable                                |       | —               |       | 3,314 |   |
| ** **                                                | ** ** | **87,047**           | ** ** | **182,431** | ** ** |
| **Disclosed  in the Financial Statements as:**            |       |                 |       |   |   |
| Current trade and other  receivables                      |       | 82,130               |       | 172,991 |   |
| Non-current trade and other  receivables                  |       | 4,917                |       | 9,440 |   |
| ** **                                                | ** ** | **87,047**           | ** ** | **182,431** | ** ** |

 

----

(1)              The average credit period on sales of services is 30 to 45 days. Nointerest is charged on trade receivables. An allowance has been made forestimated irrecoverable amounts from the provision of services, determined byreference to past default experience.

 

Trade receivables disclosed above include amounts (seebelow for aged analysis) that are past due at the end of the reporting periodbut against which the Group has not recognised an allowance for doubtfulreceivables because there has not been a significant change in credit qualityand the amounts are still considered to be fully recoverable. The Group doesnot hold any collateral or other credit enhancements over these balances nordoes it have a legal right of offset against any amounts owed by the Group tothe counterparty.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**9. TRADE ANDOTHER RECEIVABLES (CONTINUED)**

 
| ** **                                         | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------|------------|----------------------|------------|
| ** **                                         | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Ageing of  past due but not impaired:**          |       |                 |       |   |   |
| Not past due                                       |       | 37,814               |       | 112,157 |   |
| Past due - 0 to 30 days                            |       | 4,331                |       | 16,573 |   |
| Past due - 30 to 60 days                           |       | 1,503                |       | 3,924 |   |
| Past due — 60 to 90 days                      |       | 1,036                |       | 2,200 |   |
| Past due — 90 to 120 days                     |       | 859                  |       | 1,230 |   |
| Past due — 120 plus days                      |       | 320                  |       | 286 |   |
| ** **                                         | ** ** | **45,863**           | ** ** | **136,370** | ** ** |
| **Movement  in the allowance for doubtful debts:** |       |                 |       |   |   |
| Balance at the beginning of  the year              |       | (2,989               | )          | (8,670 | ) |
| Impairment losses  recognised on receivables       |       | (767                 | )          | (875 | ) |
| Amounts written off as  uncollectible              |       | (115                 | )          | (1,382 | ) |
| Amounts recovered during  the year                 |       | 156                  |       | 486 |   |
| Impairment losses reversed                         |       | 60                   |       | 987 |   |
| Net difference due to foreign  exchange            |       | 580                  |       | (168 | ) |
| Derecognised on disposal  of subsidiary            |       | 1,661                |       | 163 |   |
| Transferred to held for  sale                      |       | 70                   |       | 6,470 |   |
| ** **                                         | ** ** | **(1,344**           | **)**      | **(2,989** | **)** |

 

In determining the recoverability of a trade receivable,the Group considers any change in the credit quality of the trade receivablefrom the date the credit was initially granted up to the end of the reportingdate. The concentration of risk to the Group is limited due to the customerbase being large, diverse and unrelated.

 
| ** **                                 | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------|------------|----------------------|------------|
| ** **                                 | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Ageing of  impaired trade receivables:** |       |                 |       |   |   |
| Not past due                               |       | —               |       | (96 | ) |
| Past due - 0 to 30 days                    |       | —               |       | (182 | ) |
| Past due - 30 to 60 days                   |       | —               |       | (119 | ) |
| Past due — 60 to 90 days              |       | —               |       | (152 | ) |
| Past due — 90 to 120 days             |       | (853                 | )          | (490 | ) |
| Past due — 120 plus days              |       | (491                 | )          | (1,950 | ) |
| ** **                                 | ** ** | **(1,344**           | **)**      | **(2,989** | **)** |

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**10. OTHERFINANCIAL ASSETS**

 
| ** **                                          | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------|------------|----------------------|------------|
| ** **                                          | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **INVESTMENTS CARRIED  AT COST**                    |       |                 |       |   |   |
| **Non-current:**                                    |       |                 |       |   |   |
| Other investments                                   | ** ** | **—**           | ** ** | **26** | ** ** |
| ** **                                          |       |                 |       |   |   |
| **DERIVATIVES**                                     |       |                 |       |   |   |
| **Current:**                                        |       |                 |       |   |   |
| Foreign currency swaps                              | ** ** | **4,171**            | ** ** | **4,053** | ** ** |
| ** **                                          |       |                 |       |   |   |
| **Non-current:**                                    |       |                 |       |   |   |
| Foreign currency swaps                              |       | 2,623                |       | 9,098 |   |
| Interest rate swaps                                 |       | —               |       | 1,465 |   |
| ** **                                          | ** ** | **6,794**            | ** ** | **14,616** | ** ** |
| **LOANS CARRIED  AT AMORTISED COST**                |       |                 |       |   |   |
| **Current:**                                        |       |                 |       |   |   |
| Non-interest bearing loan  with associate(1)        | ** ** | **34,829**           | ** ** | **—** | ** ** |
| ** **                                          |       |                 |       |   |   |
| **Non-current:**                                    |       |                 |       |   |   |
| Interest bearing loans  with associate(2)           |       | 919,300              |       | 695,123 |   |
| Provision for impairment  for loans with associates |       | (31,229              | )          | — |   |
| ** **                                          | ** ** | **888,071**          | ** ** | **695,123** | ** ** |
| Non-interest  bearing loan with associate(3)        |       | 11,771               | ** ** | **—** | ** ** |
|                                                |       |                 |       | ** ** | ** ** |
| Provision  for impairment for loan with associate   |       | (3,924               | )          | **—** | ** ** |
|                                                | ** ** | **7,847**            | ** ** | **—** | ** ** |
|                                                | ** ** | **895,918**          | ** ** | **695,123** | ** ** |
| **OTHER  FINANCIAL ASSETS**                         |       |                 |       |   |   |
| **Current:**                                        |       |                 |       |   |   |
| Deposit — Australian  Taxation Office(4)       |       | 28,030               |       | 60,616 |   |
| Other                                               |       | —               |       | 2,904 |   |
| ** **                                          | ** ** | **28,030**           | ** ** | **63,520** | ** ** |
| ** **                                          | ** ** | **965,571**          | ** ** | **773,285** | ** ** |
| **Disclosed  in the Financial Statements as:**      |       |                 |       |   |   |
| Other current financial  assets                     |       | 67,030               |       | 67,573 |   |
| Other non-current  financial assets                 |       | 898,541              |       | 705,712 |   |
| ** **                                          | ** ** | **965,571**          | ** ** | **773,285** | ** ** |

 

39

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Table of Contents

 

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**10. OTHER FINANCIALASSETS (CONTINUED)**

 

----

(1)     Currentnon-interest bearing loans with associates relate to loans with DBCT. Refernote 40 for further information in relation to loans with related parties.

(2)     Non-currentinterest bearing loans with associates consist of the following:

·    $516.3million (US $440.0 million) loan receivable from Myria Holdings Inc. whichPrime Infrastructure has a 33% equity interest.

·    $200.8million (NZ $247.1 million) loan receivable from Powerco New Zealand whichPrime Infrastructure has a 42% equity interest.

·    $108.6million loan receivable from DBCT which Prime Infrastructure has a 50.1%economic interest.

·    $93.7million (€65.4 million) loan receivable which has been impaired by $31.2million (€21.8 million) from Euroports Holdings S.á.r.l which PrimeInfrastructure has a 66.1% equity interest. Refer note 40 for furtherinformation in relation to loans with related parties.

(3)     Non-currentnon-interest bearing loans with associates relate to loans receivable fromEuroports Holdings S.á.r.l. The total receivable is $192.6 million (€134.4million) which has a present value of $11.8 million (€8.2 million). This loanhas been impaired by $3.9 million (€2.7 million). Refer note 40 for furtherinformation in relation to loans with related parties.

(4)     Cashon deposit with the Australian Taxation Office is interest bearing, and is inrelation to the dispute regarding the deductibility of certain payments made inrelation to the long-term lease of DBCT. For further information refer to note33.

 

**11. INVENTORIES**

 
| ** **   | ** ** | **Consolidated**     | ** ** |
|--------------|------------|----------------------|------------|
| ** **   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Current:** |       |                 |       |   |   |
| Consumables  | ** ** | **14,713**           | ** ** | **18,687** | ** ** |

 

40

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**12. OTHER ASSETS**

 
| ** **                                     | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------|------------|----------------------|------------|
| ** **                                     | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Current:**                                   |       |                 |       |   |   |
| Deposits                                       |       | 169                  |       | 13 |   |
| Prepayments                                    |       | 8,109                |       | 16,552 |   |
| Other                                          |       | 22                   |       | 25 |   |
| **Non-current:**                               |       |                 |       |   |   |
| Capitalised access undertaking  costs          |       | —               |       | 2,404 |   |
| Less: accumulated  amortisation                |       | —               |       | (2,184 | ) |
| ** **                                     | ** ** | **—**           | ** ** | **220** | ** ** |
| Capitalised due diligence  costs               |       | —               |       | 5,417 |   |
| Stamp duty costs paid(1)                       |       | 71,346               |       | — |   |
| Defined benefit asset                          |       | 5,542                |       | 37,486 |   |
| Asset retirement  obligation                   |       | —               |       | 19,920 |   |
| Prepayments                                    |       | —               |       | 561 |   |
| Other                                          |       | 256                  |       | 380 |   |
| ** **                                     | ** ** | **85,444**           | ** ** | **80,574** | ** ** |
| **Disclosed  in the Financial Statements as:** |       |                 |       |   |   |
| Other current assets                           |       | 8,300                |       | 16,590 |   |
| Other non-current assets                       |       | 77,144               |       | 63,984 |   |
| ** **                                     | ** ** | **85,444**           | ** ** | **80,574** | ** ** |

 

----

(1)     On 6January 2010, WestNet Rail Holdings No.1 Pty Limited, a wholly ownedsubsidiary of the Company received an assessment notice from the WesternAustralian Office of State Revenue in the amount of $71.3 million, being stampduty assessed in respect of the 2006 acquisition of the ARG Group by WestNet WARail Pty Limited. Prime Infrastructure believes the assessment is incorrect atlaw and intends to vigorously challenge it. Notwithstanding PrimeInfrastructure’s intention to object to the assessment, payment of $71.3million ($46.4 million being Prime Infrastructure’s share) was made on 5 February 2010in accordance with the assessment.

WestNet WA Rail Pty Limited, the immediate parent ofWestNet Rail Holdings No.1 Pty Limited, and also wholly-owned by the Company,exercised its contractual rights of indemnity against Queensland Rail asacquirer of the above rail ARG Group business in 2006 to recover approximately$24.9 million and to use that amount to partially fund the potential liabilityof WestNet Rail Holdings No.1 Pty Limited under the assessment. Accordingly, ifit is ultimately determined that WestNet Rail Holdings No.1 Pty Limited isliable for stamp duty, the net duty required to be funded by the Company wouldbe $46.4 million. This amount has been included as a contingent liability(refer note 33).

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**13. CASH HELD ONRESTRICTED DEPOSIT**

 
| ** **       | ** ** | **Consolidated**     | ** ** |
|------------------|------------|----------------------|------------|
| ** **       | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Non-current:** |       |                 |       |   |   |
| Cash at bank(1)  | ** ** | **29,853**           | ** ** | **104,316** | ** ** |

 

----

(1)     Cashheld on restricted deposit at bank is interest-bearing and comprises cashrestricted as a reserve for the servicing of debt under the Group’s financingagreements, capex reserves and cash relating to cash backed bank guarantees. Inthe prior year, cash held on restricted deposit also included restricteddeposits in relation to equity contributions for the Dampier to Bunbury NaturalGas Pipeline Investment and DBCT.

 

**14. INVESTMENTSIN ASSOCIATES**

 
| ** **                                                                            | ** ** | **Consolidated**     | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                            | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Non-current:**                                                                      |       |                 |       |   |   |
| Investments in associates                                                             |       | 397,602              |       | 650,196 |   |
| Investments in joint  venture entities                                                |       | 386                  |       | 313 |   |
| ** **                                                                            | ** ** | **397,988**          | ** ** | **650,509** | ** ** |
| **Reconciliation  of movement in investments accounted for using the equity method:** |       |                 |       |   |   |
| Balance at 1 July                                                                     |       | 650,509              |       | 778,042 |   |
| Share of (loss)/profit for  the year — continuing operations(6)                  |       | (185,055             | )          | 6,828 |   |
| Share of profit for the  year — discontinued operations                          |       | 10,388               |       | 4,383 |   |
| Share of reserves for the  year                                                       |       | (61,242              | )          | (9,603 | ) |
| ** **                                                                            | ** ** | **414,600**          | ** ** | **779,650** | ** ** |
| Dividends                                                                             |       | (26,483              | )          | (24,871 | ) |
| Additions(1),(2)                                                                      |       | 330,064              |       | 59,871 |   |
| Capital returns on equity  investments(3)                                             |       | (10,703              | )          | (44,560 | ) |
| Impairment(4)                                                                         |       | (74,763              | )          | (106,352 | ) |
| Transferred to held for  sale (note 38)(5)                                            |       | (260,000             | )          | (14,399 | ) |
| Net foreign exchange  differences                                                     |       | 25,273               |       | 1,170 |   |
| ** **                                                                            | ** ** | **397,988**          | ** ** | **650,509** | ** ** |

 

----

(1)     PrimeInfrastructure sold its 58% interest in Powerco New Zealand on 26 February 2009.Accordingly, Prime Infrastructure now equity accounts for its 42% interest.Further information is disclosed in note 38 to the Financial Statements.

(2)     Theadditions in the current Financial Year relate to DBCT and Euroports. In theprior year, the results from these assets were consolidated as they werecontrolled subsidiaries of Prime Infrastructure.

(3)     Capitalreturns on equity investments relate to Myria Holdings Inc.

(4)     Theimpairment charge of $74.8 million within equity accounted investments relatesto a write down in the Multinet Gas Holdings and Dampier to Bunbury Natural GasPipeline of $23.1 million, a write down in the investment in Myria HoldingsInc. of $36.2 million and a write down in the investment in Euroports of $15.5million.

(5)     PrimeInfrastructure has classified its investment in AET&D as held for sale asat 30 June 2010. Included within the portfolio of assets withinAET&D is the equity accounted investments in Multinet Gas Holdings andDampier to Bunbury Natural Gas Pipeline. Accordingly, these investments are nolonger included within investments in associates, but rather as a current assetwithin non-current assets classified as held for sale. In the prior year, theEuroports equity accounted investments was classified as held for sale.

(6)     Includedwithin share of (loss)/profit for the year — continuing operations, is thesettlement of the DBCT ATO dispute (refer note 40).  Also included within the share of(loss)/profit for the year — continuing operations is an impairment of $75.8million in relation to Myria Holdings Inc’s underlying investments.

 

42

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**14. INVESTMENTS IN ASSOCIATES(CONTINUED)**

 
| **Name of entity**                | ** ** | **Principal activity**          | ** ** | **Country of  incorporation** | ** ** | **Economic  interest  2010  %** | ** ** | **Economic  interest  2009  %** | ** ** |
|---------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Dalrymple Bay Coal  Terminal(1)             |       | Coal terminal                        |       | Australia                          |       | 50.1                            |       | 100                             |       |
| Powerco New Zealand  Holdings Limited       |       | Electricity and gas distribution     |       | New Zealand                        |       | 42                              |       | 42                              |       |
| ARG Risk Management  Limited                |       | Captive insurer                      |       | Australia                          |       | 50                              |       | 50                              |       |
| Euroports S.á.r.l(2)                   |       | Ports operator                       |       | Luxembourg                         |       | 66.1                            |       | 100                             |       |
| Multinet Gas Holdings(3)                    |       | Gas distribution                     |       | Australia                          |       | 20.1                            |       | 20.1                            |       |
| Dampier to Bunbury Natural  Gas Pipeline(3) |       | Gas transmission                     |       | Australia                          |       | 20                              |       | 20                              |       |
| Natural Gas Pipeline of  America            |       | Natural gas transmission and storage |       | USA                                |       | 26.4                            |       | 26.4                            |       |

 

----

(1)     Aspart of the recapitalisation completed on 20 November 2009, BrookfieldInfrastructure Australia Trust agreed to subscribe for Convertible Notes for$295.4 million and enter into a number of other agreements with PrimeInfrastructure which confer on Brookfield Infrastructure Australia Trust a49.9% economic interest in DBCT.  As aresult of this transaction, Prime Infrastructure no longer controls DBCT inaccordance with Accounting Standards and equity accounts its investment.

(2)     Thesale of 33.89% of Euroports was completed on 28 July 2009. This resultedin this investment being equity accounted as it was deemed that PrimeInfrastructure no longer had control over this business in accordance withAccounting Standards. In addition, Antin IP holds a convertible bond, which ifconverted, would convert into a further 5.97% of the equity in Europortsleaving Prime Infrastructure holding 60% interest. In the prior year, thisinvestment was classified as held for sale.

(3)     Theseinvestments are part of the AET&D group of assets. As at30 June 2010, these have been classified as held for sale.

 

43

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**14. INVESTMENTSIN ASSOCIATES (CONTINUED)**

 
| ** **                                                                 | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                 | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **SUMMARISED  FINANCIAL INFORMATION OF ASSOCIATE ENTITIES**                |       |                 |       |   |   |
| **Financial  position:**                                                   |       |                 |       |   |   |
| Total assets                                                               |       | 16,356,921           |       | 17,474,579 |   |
| Total liabilities                                                          |       | (15,331,876          | )          | (14,981,185 | ) |
| **Net  assets**                                                            | ** ** | **1,025,045**        | ** ** | **2,493,394** | ** ** |
| **Group’s  share of associates’ net assets**                     | ** ** | **397,980**          | ** ** | **650,196** | ** ** |
| **Financial  performance:**                                                |       |                 |       |   |   |
| Total revenue                                                              |       | 3,019,935            |       | 2,334,169 |   |
| Total (loss)/profit for  the year                                          |       | (388,564             | )          | 32,813 |   |
| **Group’s  share of associates’ (loss)/profit**                  | ** ** | **(174,741**         | **)**      | **11,405** | ** ** |
| **SUMMARISED  FINANCIAL INFORMATION OF JOINTLY CONTROLLED ENTITIES**       |       |                 |       |   |   |
| **Financial  position:**                                                   |       |                 |       |   |   |
| Current assets                                                             |       | 3,998                |       | 4,239 |   |
| Non-current assets                                                         |       | 53                   |       | 55 |   |
| ** **                                                                 | ** ** | **4,051**            | ** ** | **4,294** | ** ** |
| Current liabilities                                                        |       | (3,279               | )          | (3,667 | ) |
| Non-current liabilities                                                    |       | —               |       | (2 | ) |
| ** **                                                                 | ** ** | **(3,279**           | **)**      | **(3,669** | **)** |
| **Net  assets**                                                            | ** ** | **772**              | ** ** | **625** | ** ** |
| **Group’s  share of jointly controlled entities’ net assets**    | ** ** | **386**              | ** ** | **313** | ** ** |
| **Financial  performance:**                                                |       |                 |       |   |   |
| Income                                                                     |       | 173                  |       | 239 |   |
| Expenses                                                                   |       | (25                  | )          | (627 | ) |
| **Net  profit/(loss)**                                                     | ** ** | **148**              | ** ** | **(388** | **)** |
| **Group’s  share of jointly controlled entities’ profit/(loss)** | ** ** | **74**               | ** ** | **(194** | **)** |

 

**Dividendsreceived from associates and joint ventures**

 

During the year, the Group received dividends of $26.5million (2009: $24.9 million).

 

**Contingentliabilities and capital commitments**

 

The Group’s share of contingent liabilities of associatesand jointly controlled entities is disclosed in note 33.

 

The Group’s share of capital commitments and otherexpenditure commitments of associates and jointly controlled entities isdisclosed in note 32.

 

44

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NOTES TO THE FINANCIALSTATEMENTS

For the Financial Year ended30 June 2010

 

**15. PROPERTY, PLANT AND EQUIPMENT**

 
| **Consolidated**                                      | ** ** | **Land and  buildings  at cost  $’000** | ** ** | **Leasehold  improvements  at cost  $’000** | ** ** | **Network  systems  at cost  $’000** | ** ** | **Track lease  premium  at cost  $’000** | ** ** | **Plant and  equipment  at cost  $’000** | ** ** | **Work in  progress  at cost  $’000** | ** ** | **Total  $’000** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------|------------|
| **Gross  Carrying Amount:**                           |       |                                                   |       |                                                  |       |                                           |       |                                                    |       |                                                    |       |                                                 |       |                  |       |
| **Balance  at 1 July 2008**                      | ** ** | **696,636**                                            | ** ** | **844,433**                                           | ** ** | **2,263,573**                                  | ** ** | **198,355**                                             | ** ** | **1,927,039**                                           | ** ** | **157,569**                                          | ** ** | **6,087,605**         | ** ** |
| Additions                                             |       | 10,995                                                 |       | 139,155                                               |       | 60,605                                         |       | —                                                  |       | 78,498                                                  |       | 103,731                                              |       | 392,984               |       |
| Transfers                                             |       | 13,065                                                 |       | 3,722                                                 |       | 29,003                                         |       | —                                                  |       | 21,186                                                  |       | (66,976                                              | )          | —                |       |
| Disposals                                             |       | (12,800                                                | )          | (17                                                   | )          | (1,629,434                                     | )          | —                                                  |       | (25,239                                                 | )          | (75,735                                              | )          | (1,743,225            | )          |
| Acquisitions through  business combinations (note 36) |       | 57,133                                                 |       | —                                                |       | —                                         |       | —                                                  |       | 144,528                                                 |       | —                                               |       | 201,661               |       |
| Classified as held for  sale (note 38)                |       | (417,458                                               | )          | (6,988                                                | )          | —                                         |       | —                                                  |       | (323,634                                                | )          | (19,017                                              | )          | (767,097              | )          |
| Net foreign currency  exchange differences            |       | 24,959                                                 |       | (262                                                  | )          | (8,566                                         | )          | —                                                  |       | 39,252                                                  |       | (890                                                 | )          | 54,493                |       |
| Other                                                 |       | 564                                                    |       | —                                                |       | —                                         |       | —                                                  |       | 101                                                     |       | —                                               |       | 665                   |       |
| **Balance  at 30 June 2009**                     | ** ** | **373,094**                                            | ** ** | **980,043**                                           | ** ** | **715,181**                                    | ** ** | **198,355**                                             | ** ** | **1,861,731**                                           | ** ** | **98,682**                                           | ** ** | **4,227,086**         | ** ** |
| Additions                                             |       | 4,504                                                  |       | 1,235                                                 |       | 43,361                                         |       | —                                                  |       | 41,093                                                  |       | 83,549                                               |       | 173,742               |       |
| Transfers                                             |       | 180                                                    |       | 70,495                                                |       | 6,907                                          |       | —                                                  |       | 16,877                                                  |       | (94,459                                              | )          | —                |       |
| Disposals                                             |       | —                                                 |       | (195                                                  | )          | (865                                           | )          | —                                                  |       | (9,224                                                  | )          | —                                               |       | (10,284               | )          |
| Disposal through sale of  business                    |       | (247,077                                               | )          | (16,989                                               | )          | —                                         |       | —                                                  |       | (81,453                                                 | )          | (42,606                                              | )          | (388,125              | )          |
| Classified as held for  sale (note 38)                |       | (44,806                                                | )          | (13,348                                               | )          | —                                         |       | —                                                  |       | (1,759,208                                              | )          | (28,390                                              | )          | (1,845,752            | )          |
| Net foreign currency  exchange differences            |       | (41,999                                                | )          | (1,336                                                | )          | (70,841                                        | )          | —                                                  |       | (19,331                                                 | )          | (3,355                                               | )          | (136,862              | )          |
| Other                                                 |       | —                                                 |       | —                                                |       | —                                         |       | —                                                  |       | 6,733                                                   |       | —                                               |       | 6,733                 |       |
| **Balance  at 30 June 2010**                | ** ** | **43,896**                                             | ** ** | **1,019,905**                                         | ** ** | **693,743**                                    | ** ** | **198,355**                                             | ** ** | **57,218**                                              | ** ** | **13,421**                                           | ** ** | **2,026,538**         | ** ** |

 

45

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**15. PROPERTY,PLANT AND EQUIPMENT (CONTINUED)**

 
| **Consolidated**                                | ** ** | **Land and  buildings  at cost  $’000** | ** ** | **Leasehold  improvements  at cost  $’000** | ** ** | **Network  systems  at cost  $’000** | ** ** | **Track lease  premium  at cost  $’000** | ** ** | **Plant and  equipment  at cost  $’000** | ** ** | **Work in  progress  at cost  $’000** | ** ** | **Total  $’000** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------|------------|
| **Accumulated depreciation/amortisation:** | ** ** | ** **                                             | ** ** | ** **                                            | ** ** | ** **                                     | ** ** | ** **                                              | ** ** | ** **                                              | ** ** | ** **                                           | ** ** | ** **            | ** ** |
| **Balance  at 1 July 2008**                | ** ** | **31,484**                                             | ** ** | **66,837**                                            | ** ** | **234,409**                                    | ** ** | **9,310**                                               | ** ** | **107,968**                                             | ** ** | **—**                                           | ** ** | **450,008**           | ** ** |
| Transfers                                       |       | (7                                                     | )          | (289                                                  | )          | —                                         |       | —                                                  |       | 296                                                     |       | —                                               |       | —                |       |
| Classified as held for  sale (note 38)          |       | (28,725                                                | )          | (1,220                                                | )          | —                                         |       | —                                                  |       | (66,875                                                 | )          | —                                               |       | (96,820               | )          |
| Impairment losses charged  to profit            |       | —                                                 |       | —                                                |       | 33,986                                         |       | —                                                  |       | —                                                  |       | —                                               |       | 33,986                |       |
| Depreciation expense                            |       | 20,961                                                 |       | 37,367                                                |       | 43,689                                         |       | 4,476                                                   |       | 91,756                                                  |       | —                                               |       | 198,249               |       |
| Net foreign currency  exchange differences      |       | (235                                                   | )          | 9                                                     |       | (1,262                                         | )          | —                                                  |       | 966                                                     |       | —                                               |       | (522                  | )          |
| Other                                           |       | 1,633                                                  |       | —                                                |       | —                                         |       | —                                                  |       | (4,597                                                  | )          | —                                               |       | (2,964                | )          |
| **Balance  at 30 June 2009**               | ** ** | **23,732**                                             | ** ** | **102,690**                                           | ** ** | **99,638**                                     | ** ** | **13,786**                                              | ** ** | **110,707**                                             | ** ** | **—**                                           | ** ** | **350,553**           | ** ** |
| Disposals                                       |       | —                                                 |       | (172                                                  | )          | (849                                           | )          | —                                                  |       | (5,006                                                  | )          | —                                               |       | (6,027                | )          |
| Transfers                                       |       | 180                                                    |       | 190                                                   |       | 23                                             |       | —                                                  |       | (393                                                    | )          | —                                               |       | —                |       |
| Disposal through sale of  business              |       | (17,740                                                | )          | (852                                                  | )          | —                                         |       | —                                                  |       | (24,780                                                 | )          | —                                               |       | (43,372               | )          |
| Classified as held for  sale (note 38)          |       | (4,684                                                 | )          | (4,275                                                | )          | —                                         |       | —                                                  |       | (522,612                                                | )          | —                                               |       | (531,571              | )          |
| Impairment losses charged  to profit            |       | —                                                 |       | 688                                                   |       | —                                         |       | —                                                  |       | 429,846                                                 |       | —                                               |       | 430,534               |       |
| Depreciation expense                            |       | 3,185                                                  |       | 42,484                                                |       | 20,497                                         |       | 4,472                                                   |       | 29,345                                                  |       | —                                               |       | 99,983                |       |
| Net foreign currency  exchange differences      |       | (2,644                                                 | )          | (106                                                  | )          | (7,316                                         | )          | —                                                  |       | (4,950                                                  | )          | —                                               |       | (15,016               | )          |
| Other                                           |       | —                                                 |       | —                                                |       | —                                         |       | —                                                  |       | 6,737                                                   |       | —                                               |       | 6,737                 |       |
| **Balance  at 30 June 2010**          | ** ** | **2,029**                                              | ** ** | **140,647**                                           | ** ** | **111,993**                                    | ** ** | **18,258**                                              | ** ** | **18,894**                                              |       | —                                               | ** ** | **291,821**           | ** ** |
| **Net Book  Value as at 30 June 2009**     | ** ** | **349,362**                                            | ** ** | **877,353**                                           | ** ** | **615,543**                                    | ** ** | **184,569**                                             | ** ** | **1,751,024**                                           | ** ** | **98,682**                                           | ** ** | **3,876,533**         | ** ** |
| **Net Book  Value as at 30 June 2010**     | ** ** | **41,867**                                             | ** ** | **879,258**                                           | ** ** | **581,750**                                    | ** ** | **180,097**                                             | ** ** | **38,324**                                              | ** ** | **13,421**                                           | ** ** | **1,734,717**         | ** ** |

 

46

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**15. PROPERTY,PLANT AND EQUIPMENT (CONTINUED)**

 
| ** **                                                                                                                                              | ** ** | **Consolidated**     | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                                                              | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Aggregate  depreciation allocated, whether recognised as an expense or capitalised as  part of the carrying amount of other assets during the year:** |       |                 |       |   |   |
| Land and buildings                                                                                                                                      |       | 3,185                |       | 20,961 |   |
| Leasehold improvements                                                                                                                                  |       | 42,484               |       | 37,367 |   |
| Network systems                                                                                                                                         |       | 20,497               |       | 43,689 |   |
| Track lease premium                                                                                                                                     |       | 4,472                |       | 4,476 |   |
| Plant and equipment                                                                                                                                     |       | 29,345               |       | 91,756 |   |
| ** **                                                                                                                                              | ** ** | **99,983**           | ** ** | **198,249** | ** ** |

 

**16. INVESTMENTPROPERTY**

 
| ** **                              | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------|------------|----------------------|------------|
| ** **                              | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Balance at beginning of  Financial Year |       | 174,672              |       | 165,228 |   |
| Net gain from fair value  adjustments   |       | —               |       | 10,928 |   |
| Transferred to held for  sale (note 38) |       | —               |       | (93 | ) |
| Disposals (note 38)                     |       | (154,027             | )          | — |   |
| Net foreign exchange  differences       |       | (20,645              | )          | (1,391 | ) |
| **Balance  at end of Financial Year**   | ** ** | **—**           | ** ** | **174,672** | ** ** |

 

The Group’s investment property portfolio was held by PDPorts, which was sold on 20 November 2009. Previously, the valuation ofthe investment property at PD Ports was undertaken by an external firm ofchartered surveyors, Knight Frank, on an open market existing use basis.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**17. GOODWILL**

 
| ** **                                                               | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                               | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Gross  carrying amount:**                                              |       |                 |       |   |   |
| Balance at beginning of  Financial Year                                  |       | 726,979              |       | 1,369,777 |   |
| Amounts recognised as part  of a prior year business combination         |       | —               |       | 8,594 |   |
| Amounts recognised from  business combinations occurring during the year |       | —               |       | 39,442 |   |
| Derecognised on disposal  of subsidiary(1)                               |       | (148,049             | )          | (112,878 | ) |
| Transferred to held for  sale (note 38)(2)                               |       | (318,630             | )          | (607,141 | ) |
| Net foreign exchange  differences                                        |       | (43,622              | )          | 28,961 |   |
| Other movements                                                          |       | —               |       | 224 |   |
| **Balance  at end of Financial Year**                                    | ** ** | **216,678**          | ** ** | **726,979** | ** ** |
| **Accumulated  impairment losses:**                                      |       |                 |       |   |   |
| Balance at beginning of  Financial Year                                  |       | (348,416             | )          | — |   |
| Impairment losses for the  year                                          |       | (193,000             | )          | (525,549 | ) |
| Derecognised on disposal  of subsidiary(1)                               |       | 148,049              |       | — |   |
| Transferred to held for  sale (note 38)(2)                               |       | 318,630              |       | 177,133 |   |
| Net foreign exchange  differences                                        |       | 18,952               |       | — |   |
| **Balance  at end of Financial Year**                                    | ** ** | **(55,785**          | **)**      | **(348,416** | **)** |
| **Net book  value:**                                                     |       |                 |       |   |   |
| **At the  beginning of the Financial Year**                              | ** ** | **378,563**          | ** ** | **1,369,777** | ** ** |
| **At the  end of the Financial Year**                                    | ** ** | **160,893**          | ** ** | **378,563** | ** ** |

 

----

(1)     Thisamount relates to the sale of PD Ports on 20 November 2009 as part of therecapitalisation of Prime Infrastructure. The goodwill relating to the businesswas fully impaired at 30 June 2009.

(2)     Thisamount relates to the Australian Energy Transmission & Distributionbusiness which has been classified as held for sale as at30 June 2010.

 

**ALLOCATION OF GOODWILL**

 

Goodwill has been allocated for impairment testingpurposes to the following cash-generating units:

 

·    International Energy Group.

 

·    WestNet Rail.

 

·    Australian Energy Transmission & Distribution(classified as held for sale).

 

·    Euroports — disposed of 33.89% on 28 July 2009and no longer consolidated. Classified as held for sale as at 30 June 2009.

 

·    PD Ports — sold on 20 November 2009.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**17. GOODWILL(CONTINUED)**

 

The carrying amount of goodwill (other than goodwillclassified as held for sale) was allocated to the following cash-generatingunits.

 
| **Goodwill balance** | ** ** | **IEG  $’000** | ** ** | **WestNet  Rail  $’000** | ** ** | **AET&D  $’000** | ** ** | **Total  $’000** | ** ** |
|---------------------------|------------|---------------------|------------|-------------------------------|------------|---------------------------|------------|-----------------------|------------|
| 2010                      |       | 151,378             |       | 9,515                         |       | —                    |       | 160,893               |       |
| 2009                      |       | 176,048             |       | 9,515                         |       | 193,000                   |       | 378,563               |       |

 

**IMPAIRMENT TESTS OF GOODWILL**

 

Goodwill within the Prime Infrastructure Group relates toIEG, WestNet Rail and AET&D and the cash-generating units applicable withineach of these entities. Goodwill is reviewed annually for impairment or morefrequently if events or changes in circumstances indicate that the carryingvalue may be impaired.

 

As a result of the detailed assessment, an impairmentcharge of $193.0 million was recognised against goodwill (2009: $525.5million). The impairment charge of goodwill in the current year relates toAET&D and is included within discontinued operations, as the business isclassified as held for sale in accordance with AASB 5 ‘Non-current Assets Heldfor Sale and Discontinued Operations’.

 

**INTERNATIONAL ENERGY GROUP**

 

The recoverable amount of this cash-generating unit isdetermined based on a ‘value in use’ calculation which uses cash flowprojections based on financial budgets approved by management for the 2011 yearwith a forecast out to June 2050. The length of the forecast reflects thelong-life nature of IEG’s assets. A discount rate of between 7.41% and 8.47%has been used in the model depending on the jurisdiction (2009: 6.59% to7.82%). The movement in the goodwill balance in the current Financial Year isdue to foreign exchange translation.

 

A majority of the goodwill within IEG is attributable tothe UK businesses. Cash flow projections for assessing potential impairmenthave been based on forecast connections and inflation based on 2.5%. Cash flowprojections also include forecast maintenance capital expenditure.

 

No impairment charges have been recognised in relation toIEG in the current Financial Year.

 

**WESTNET RAIL**

 

The recoverable amount of this cash-generating unit isdetermined based on a ‘value in use’ calculation which uses cash flowprojections based on financial budgets approved by management for the 2011 yearwith long term projections assumed out to the end of the lease period (i.e.2049). The length of the projections reflects the long-life nature of WestNetRail’s assets. In the current Financial Year, a discount rate of 9.92% (2009:10.23%) has been used.

 

Cash flow projections during the budget period have beenbased on 2011 forecast volumes with appropriate growth assumptions beyond 2011.Inflation of 2.5% (2009: 2.50%) has been included in this analysis. The cashflow projections include forecast maintenance capital expenditure.

 

No impairment charges have been recognised in relation toWestNet Rail in the current Financial Year (2009: $50.9 million).

 

**AUSTRALIAN ENERGY TRANSMISSION & DEVELOPMENT**

 

The goodwill associated with the AET&Dcash-generating unit arose when the business was acquired by PrimeInfrastructure as part of the Alinta acquisition. As noted above, theinvestment in AET&D is currently classified as held for sale.

 

The recoverable amount of WA Gas Networks and TasmaniaGas Pipeline have been determined using ‘value in use’ calculations based onapproved 2011 financial year budgets and financial projections beyond thisdate. The WA Gas Networks’ projections extend to 2050 whilst the Tasmania GasPipeline projection extends to 2073. In the current Financial Year, a discountrate range of 9.04% to 9.83% (2009: 9.29% to 9.95%) has been used forimpairment purposes.

 

Cash flow projections for WA Gas Networks have beencalculated assuming a regulatory WACC and tariffs that will apply following the2010 Access Arrangement reset, updated estimates on new connections andconsumption volumes by tariff band and a revised asset management plan. Aninflation of rate of 2.5% (2009: 2.50%) has been used.

 

WestNet Energy, which is the asset management business,has been valued using a ‘fair value less cost to sell’ methodology consistentwith prior periods. In determining this fair value less cost to sell amount, anEBITDA multiple has been used.

 

AET&D also has equity accounted investments inMultinet Gas Networks and the Dampier Bunbury Natural Gas Pipeline. Theseinvestments are valued using fair value less costs to sell using a RegulatedAsset Base (RAB) multiple.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended 30 June 2010

 

**17. GOODWILL(CONTINUED)**

 

**AUSTRALIAN ENERGY TRANSMISSION & DEVELOPMENT(CONTINUED)**

 

In the current Financial Year, a total impairment chargeof $232.8 million (2009: $232.0 million) has been recognised in respect of theAET&D businesses. Of this amount, $193.0 million (2009: $125.6 million) hasbeen charged against goodwill, $23.1 million ($106.4 million) has been writtenoff the equity accounted investments, with the balance of $16.7 million (2009:$nil) being charged against other intangibles and property, plant andequipment. Key reasons for the impairment charges that have been recognisedinclude lower assumed growth forecasts across the Group as a result of thelocal and global financial conditions, increased operating costs and maintenancecosts in certain assets and EBITDA multiples for those assets that were valuedusing the fair value less costs to sell methodology. In addition, the AET&Dbusinesses are classified as held for sale as at 30 June 2010.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**18. OTHERINTANGIBLE ASSETS**

 
| ** **                                             | ** ** | **Conservancy  rights(1)  $’000** | ** ** | **Concession  arrangements(2)********$’000** | ** ** | **Permits(3)  $’000** | ** ** | **Software,  licenses  and other  $’000** | ** ** | **Easements  and  contracts(4),(5)  $’000** | ** ** | **$’000** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------|------------|---------------------------------------------------|------------|----------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------------|------------|----------------|------------|
| **Gross  carrying amount:**                            |       |                                   |       |                                              |       |                       |       |                                                |       |                                             |       |           |       |
| **Balance  at 1 July 2008**                       | ** ** | **955,626**                            | ** ** | **2,775,928**                                     | ** ** | **43,634**                 | ** ** | **58,051**                                          | ** ** | **93,855**                                       | ** ** | **3,927,094**  | ** ** |
| Additions                                              |       | —                                 |       | 272,771                                           |       | —                     |       | 15,552                                              |       | 4,734                                            |       | 293,057        |       |
| Acquisitions through a  business combination (note 36) |       | —                                 |       | 14,270                                            |       | —                     |       | —                                              |       | 14,409                                           |       | 28,679         |       |
| Disposals                                              |       | —                                 |       | —                                            |       | —                     |       | (15,566                                             | )          | (165                                             | )          | (15,731        | )          |
| Transferred to held for  sale (note 38)                |       | —                                 |       | (769,109                                          | )          | —                     |       | (14,889                                             | )          | (37,484                                          | )          | (821,482       | )          |
| Other                                                  |       | —                                 |       | (17,504                                           | )          | —                     |       | 154                                                 |       | —                                           |       | (17,350        | )          |
| Net foreign exchange  differences                      |       | (8,434                                 | )          | 43,306                                            |       | 8,122                      |       | 877                                                 |       | 1,853                                            |       | 45,724         |       |
| **Balance  at 30 June 2009**                      | ** ** | **947,192**                            | ** ** | **2,319,662**                                     | ** ** | **51,756**                 | ** ** | **44,179**                                          | ** ** | **77,202**                                       | ** ** | **3,439,991**  | ** ** |
| Additions                                              |       | —                                 |       | 33,031                                            |       | —                     |       | 1,230                                               |       | —                                           |       | 34,261         |       |
| Disposals                                              |       | (835,243                               | )          | (2,352,693                                        | )          | —                     |       | (5,495                                              | )          | —                                           |       | (3,193,431     | )          |
| Transferred to held for  sale (note 38)                |       | —                                 |       | —                                            |       | (49,272                    | )          | (25,677                                             | )          | (79,070                                          | )          | (154,019       | )          |
| Other                                                  |       | —                                 |       | —                                            |       | —                     |       | (4,844                                              | )          | —                                           |       | (4,844         | )          |
| Transfers                                              |       | —                                 |       | —                                            |       | —                     |       | —                                              |       | 1,868                                            |       | 1,868          |       |
| Net foreign exchange  differences                      |       | (111,949                               | )          | —                                            |       | (2,484                     | )          | (344                                                | )          | —                                           |       | (114,777       | )          |
| **Balance  at 30 June 2010**                 | ** ** | **—**                             | ** ** | **—**                                        | ** ** | **—**                 | ** ** | **9,049**                                           | ** ** | **—**                                       | ** ** | **9,049**      | ** ** |
| **Accumulated  amortisation and impairment:**          |       |                                   |       |                                              |       |                       |       |                                                |       |                                             |       |           |       |
| **Balance  at 1 July 2008**                       |       | —                                 | ** ** | **152,106**                                       | ** ** | **2,651**                  | ** ** | **14,133**                                          | ** ** | **5,122**                                        | ** ** | **174,012**    | ** ** |
| Amortisation expense(6)                                |       | —                                 |       | 53,093                                            |       | 1,481                      |       | 6,153                                               |       | 6,635                                            |       | 67,362         |       |
| Impairment expense(7)                                  |       | 206,878                                |       | 22,328                                            |       | —                     |       | —                                              |       | —                                           |       | 229,206        |       |
| Disposals                                              |       | —                                 |       | —                                            |       | —                     |       | (6,312                                              | )          | (41                                              | )          | (6,353         | )          |
| Transferred to held for  sale (note 38)                |       | —                                 |       | (66,446                                           | )          | —                     |       | (3,437                                              | )          | (6,558                                           | )          | (76,441        | )          |
| Other                                                  |       | —                                 |       | 5,043                                             |       | —                     |       | (77                                                 | )          | —                                           |       | 4,966          |       |
| Net foreign exchange  differences                      |       | 1,104                                  |       | 111                                               |       | 298                        |       | 91                                                  |       | 104                                              |       | 1,708          |       |
| **Balance  at 30 June 2009**                      | ** ** | **207,982**                            | ** ** | **166,235**                                       | ** ** | **4,430**                  | ** ** | **10,551**                                          | ** ** | **5,262**                                        | ** ** | **394,460**    | ** ** |
| Amortisation expense(6)                                |       | —                                 |       | 21,172                                            |       | 522                        |       | 3,542                                               |       | 1,182                                            |       | 26,418         |       |
| Impairment expense(7)                                  |       | —                                 |       | —                                            |       | —                     |       | —                                              |       | 16,000                                           |       | 16,000         |       |
| Disposals                                              |       | (183,401                               | )          | (187,407                                          | )          | —                     |       | (3,557                                              | )          | —                                           |       | (374,365       | )          |
| Transferred to held for  sale (note 38)                |       | —                                 |       | —                                            |       | (4,741                     | )          | (7,859                                              | )          | (22,410                                          | )          | (35,010        | )          |
| Transfers                                              |       | —                                 |       | —                                            |       | —                     |       | 34                                                  |       | (34                                              | )          | —         |       |
| Net foreign exchange  differences                      |       | (24,581                                | )          | —                                            |       | (211                       | )          | (227                                                | )          | —                                           |       | (25,019        | )          |
| **Balance  at 30 June 2010**                 | ** ** | **—**                             | ** ** | **—**                                        | ** ** | **—**                 | ** ** | **2,484**                                           | ** ** | **—**                                       | ** ** | **2,484**      | ** ** |
| **Net book  value:**                                   |       |                                   |       |                                              |       |                       |       |                                                |       |                                             |       |           |       |
| **As at 30  June 2009**                           | ** ** | **739,210**                            | ** ** | **2,153,427**                                     | ** ** | **47,326**                 | ** ** | **33,628**                                          | ** ** | **71,940**                                       | ** ** | **3,045,531**  | ** ** |
| **As at  30 June 2010**                      | ** ** | **—**                             | ** ** | **—**                                        | ** ** | **—**                 | ** ** | **6,565**                                           | ** ** | **—**                                       | ** ** | **6,565**      | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**18. OTHERINTANGIBLE ASSETS (CONTINUED)**

 

----

(1)     Theconservancy right was acquired as part of the acquisition of PD Ports plc in2006 and was recorded at its fair value. The conservancy asset recognised isnot amortised as it is a right in perpetuity with an indefinite life, but issubject to an annual impairment review.

In the prior Financial Year an impairmentcharge of $206.9 million was recognised. As part of the recapitalisation ofPrime Infrastructure that took place on 20 November 2009, PD Portswas sold for nominal proceeds. Refer note 38 for further information.

(2)     Concessionarrangements included the service concession arrangement at DBCT and keyconcession arrangements at various European ports. The ports’ concessions areusually awarded by Government authorities in that jurisdiction. Theseconcession arrangements allow Euroports to operate and generate revenue fromthe use of the port. The concession arrangements have an expiration of between2016 and 2059 and certain concessions have options to extend the arrangement.These arrangements are being amortised over their useful life, with the expenserecognised in the Income Statement. In the prior Financial Year, an impairmentcharge of $22.3 million was recorded against the European ports concessionarrangements.

In the current year, Prime Infrastructure hassold 33.9% of its investment in Euroports and has entered into arrangementsconcerning a 49.9% economic interest in DBCT. Accordingly, Prime Infrastructureno longer controls either of these assets and does not consolidate theirresults. Refer note 38 for further information.

(3)     Permitsinclude the separately identifiable asset acquired as part of the acquisitionof Cross Sound Cable in the US. The permit is amortised over the life of themain cable attached to the permit being 40 years, and has 34 years remaining.As part of the recapitalisation, Prime Infrastructure is carrying itsinvestment in Cross Sound Cable as held for sale. Refer note 38 for furtherinformation.

(4)     Easementrights relate to the intangible asset that allows the Tasmanian Gas Pipelinebusiness to access the land above the pipeline. As part of therecapitalisation, Prime Infrastructure is carrying its investment in TasmaniaGas Pipeline within AET&D as held for sale.

(5)     Contractsrelate to contracts with external customers that have been purchased as part ofa business combination. These are being amortised over the expected period ofbenefit from these contracts.

(6)     Amortisationexpense is recognised within depreciation, amortisation and impairment chargein the Income Statement.

(7)     Impairmentcharges are recognised within loss from discontinued operations in the IncomeStatement. This impairment charge relates to intangibles held within theAET&D group.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**19. TRADE AND OTHER PAYABLES**

 
| ** **                                                                    | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                    | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Current:**                                                                  |       |                 |       |   |   |
| Trade payables(1)                                                             |       | 74,536               |       | 165,421 |   |
| Distribution payable (note  30)                                               |       | 26,383               |       | — |   |
| Interest payable — other  parties                                        |       | 11,736               |       | 84,131 |   |
| Payable to other related  parties(2)                                          |       | 5,735                |       | 12,707 |   |
| Tax related amounts within  the tax-consolidated group (non-interest bearing) |       | 26,175               |       | — |   |
| GST and VAT payable                                                           |       | 4,190                |       | 11,200 |   |
| Other                                                                         |       | 11,340               |       | 58,730 |   |
| **Non-current:**                                                              |       |                 |       |   |   |
| Other                                                                         |       | —               |       | 3,290 |   |
| Payable to other related  parties                                             |       | 16,223               |       | — |   |
| ** **                                                                    | ** ** | **176,318**          | ** ** | **335,479** | ** ** |
| **Disclosed  in the Financial Statements as:**                                |       |                 |       |   |   |
| Current trade and other  payables                                             |       | 160,095              |       | 332,189 |   |
| Non-current trade and  other payables                                         |       | 16,223               |       | 3,290 |   |
| ** **                                                                    | ** ** | **176,318**          | ** ** | **335,479** | ** ** |

 

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(1)                                 The average credit period on purchases of goods and services is 30 days. Nointerest is incurred on trade creditors.

(2)                                 Further information relating to loans to related parties is set out in note40 to the Financial Statements.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**20. BORROWINGS**

 
| ** **                         | ** ** | **Consolidated**        | ** ** |
|------------------------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                         | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** |
| **Unsecured:**                     |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Bank overdrafts                    |       | —                  |       | — |   | — |   | 31 |   | — |   | 31 |   |
| Bank loans(1)                      |       | 619,494                 |       | — |   | 619,494 |   | 9,673 |   | 764,494 |   | 774,167 |   |
| Subordinated debt(2)               |       | —                  |       | — |   | — |   | — |   | 79,824 |   | 79,824 |   |
| Hybrid securities(3)               |       | 94,842                  |       | — |   | 94,842 |   | 93,938 |   | 677,431 |   | 771,369 |   |
| Guaranteed notes(4)                |       | —                  |       | — |   | — |   | — |   | 446,726 |   | 446,726 |   |
| ** **                         | ** ** | **714,336**             | ** ** | **—** | ** ** | **714,336** | ** ** | **103,642** | ** ** | **1,968,475** | ** ** | **2,072,117** | ** ** |
| **Secured:**                       |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Bank loans(1)                      |       | 7,314                   |       | 463,127 |   | 470,441 |   | 388,868 |   | 3,041,325 |   | 3,430,193 |   |
| Guaranteed notes(4)                |       | —                  |       | — |   | — |   | — |   | 880,000 |   | 880,000 |   |
| Secured bonds(5)                   |       | —                  |       | 119,516 |   | 119,516 |   | — |   | 119,368 |   | 119,368 |   |
| Securitised loan notes(6)          |       | —                  |       | — |   | — |   | — |   | 519,963 |   | 519,963 |   |
| Other                              |       | —                  |       | — |   | — |   | 462 |   | — |   | 462 |   |
| ** **                         | ** ** | **7,314**               | ** ** | **582,643** | ** ** | **589,957** | ** ** | **389,330** | ** ** | **4,560,656** | ** ** | **4,949,986** | ** ** |
| ** **                         | ** ** | **721,650**             | ** ** | **582,643** | ** ** | **1,304,293** | ** ** | **492,972** | ** ** | **6,529,131** | ** ** | **7,022,103** | ** ** |
| Finance leases (note 34)           |       | —                  |       | — |   | — |   | 788 |   | 4,144 |   | 4,932 |   |
| Less: capitalised  borrowing costs |       | —                  |       | (15,188 | ) | (15,188 | ) | — |   | (47,330 | ) | (47,330 | ) |
| ** **                         | ** ** | **721,650**             | ** ** | **567,455** | ** ** | **1,289,105** | ** ** | **493,760** | ** ** | **6,485,945** | ** ** | **6,979,705** | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**20. BORROWINGS (CONTINUED)**

 
| ** **                                                                | ** ** | **Consolidated**        | ** ** |
|---------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                                                                | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** |
| **1. BANK LOANS**                                                         |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| **Unsecured:**                                                            |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| WestNet Rail Group bank  loan facilities(1)                               |       | 619,494                 |       | — |   | 619,494 |   | 173 |   | 619,494 |   | 619,667 |   |
| WA Gas Networks &  WA Network Holdings club facilities(2)        |       | —                  |       | — |   | — |   | 9,500 |   | 145,000 |   | 154,500 |   |
| ** **                                                                | ** ** | **619,494**             | ** ** | **—** | ** ** | **619,494** | ** ** | **9,673** | ** ** | **764,494** | ** ** | **774,167** | ** ** |
| **Secured:**                                                              |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Prime Infrastructure revolving bank facility(3)                 |       | —                  |       | — |   | — |   | — |   | 839,694 |   | 839,694 |   |
| Prime Infrastructure  Networks   (New Zealand) revolving facility(3) |       | —                  |       | — |   | — |   | — |   | 100,579 |   | 100,579 |   |
| Prime Finance (UK)  revolving facility(3)                                 |       | —                  |       | — |   | — |   | 168,719 |   | — |   | 168,719 |   |
| DBCT bank debt  facilities(4)                                             |       | —                  |       | — |   | — |   | — |   | 809,900 |   | 809,900 |   |
| IEG bank facility(5)                                                      |       | 7,314                   |       | 463,127 |   | 470,441 |   | 14,477 |   | 536,122 |   | 550,599 |   |
| Cross Sound Cable bank  loan facility(6)                                  |       | —                  |       | — |   | — |   | 418 |   | 237,030 |   | 237,448 |   |
| PD Ports group bank loan  facilities(7)                                   |       | —                  |       | — |   | — |   | 205,254 |   | — |   | 205,254 |   |
| Prime AET&D No.2 Pty  Limited(8)                                      |       | —                  |       | — |   | — |   | — |   | 518,000 |   | 518,000 |   |
| ** **                                                                | ** ** | **7,314**               | ** ** | **463,127** | ** ** | **470,441** | ** ** | **388,868** | ** ** | **3,041,325** | ** ** | **3,430,193** | ** ** |
| ** **                                                                | ** ** | **626,808**             | ** ** | **463,127** | ** ** | **1,089,935** | ** ** | **398,541** | ** ** | **3,805,819** | ** ** | **4,204,360** | ** ** |

 

----

(1)         WestNetRail Group facilities comprise the following:

·    $550.0million term facility maturing in June 2011 that is fully drawn (2009:fully drawn).

·    $77.0million revolving facility maturing in June 2011 that is drawn to $69.5million (2009: $69.5 million).

The facilities are unsecured with an averageinterest rate including swaps as at 30 June 2010 of 6.59% (2009:6.49%). Subsequent to year end, WestNet Rail has refinanced with its existinglenders $619.0 million of facilities (out of January 2014) including therepayment of $165.0 million.

(2)         Asat 30 June 2009 WA Gas Networks had bank facilities drawn to $145.0million. These facilities were unsecured unsubordinated obligations subject tonegative pledge covenants. As at 30 June 2010, the AET&D group ofassets which includes WA Gas Networks is classified as held for sale.

(3)         ThePrime Infrastructure corporate bank debt facilities were repaid in full inNovember 2009 as part of the recapitalisation. As part of the recapitalisation,a 3 year $300.0 million corporate facility was established, which remainsundrawn at 30 June 2010. In the prior year, thePrime Infrastructure corporate bank debt facilities were drawn to $1,109.0million.  On 15 September 2010,Prime Infrastructure replaced its undrawn $300.0 million corporate facilitywith a new revolving corporate facility which matures in February 2013, tobe provided by an affiliate of Brookfield Infrastructure Partners.

(4)         Duringthe current Financial Year as part of the recapitalisation of PrimeInfrastructure, Prime Infrastructure entered into arrangements with BrookfieldInfrastructure Australia Trust, such that Prime Infrastructure no longercontrols DBCT. Accordingly, Prime Infrastructure accounts for its remaining50.1% economic interest in DBCT as an equity accounted investment and no longerconsolidates its share of DBCT’s borrowings.

DBCT bank facilities comprise the following:

·    $295.0million term facility maturing in December 2011. The facility was used tofund the Phase 1 expansion of the coal terminal and is guaranteed by FGIC UKLimited. As at 30 June 2009, the facility is drawn to $263.3 million.

·    $574.0million term facility. This facility was entered into in February 2008 tofund the Phase 2/3 expansion of the coal terminal. The facility has an averagematurity of February 2012. As at 30 June 2009, the facility is drawnto $538.0 million.

·    $40.0million term facility. This facility was entered into in October 2008 tofinance non-expansionary capex requirements in relation to the terminal. Thefacility matures in October 2011 and as at 30 June 2009 is drawn to$8.6 million.

These facilities have the benefit of the BBIDBCT Deed of Common Provisions and rank pari passu with all other seniorsecured debt of DBCT Finance Pty Limited. As at 30 June 2009, the averageinterest rate on the debt is 5.08%.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**20. BORROWINGS (CONTINUED)**

 

(5)         TheIEG bank debt facilities comprise the following:

·    Seniorfacilities totalling £237.2 million (2009: £240.6 million) and a £16.0 million(2009: £16.0 million) junior facility in relation to the IEG UK businessmaturing in January 2013. As at 30 June 2010, the juniorfacility is fully drawn ($28.2 million) with the senior facilities drawn to$330.2 million (£187.1 million) (2009: £172.9 million).

·    Bankfacilities totalling £63.5 million that are fully drawn (2009: £67.9 million)in relation to IEG’s Islands businesses with a maturity date of May 2016.

·    Asat 30 June 2009, a bank facility of £14.5 million in relation to the PowerOn Connections business. In the current Financial Year, the facility was repaidin full from proceeds from the recapitalisation of Prime Infrastructurethat was undertaken in November 2009.

(6)         Asat 30 June 2009 the Cross Sound Cable loan facility comprised amortisingterm facilities with an available limit of US$193.7 million, drawn to US$192.7million. The term facilities mature in February 2011 and are securedagainst the assets of the Cross Sound Cable group. As at30 June 2010, the Cross Sound Cable group of assets are classified asheld for sale.

(7)         Aspart of the recapitalisation of Prime Infrastructure in November 2009,the PD Ports group was sold to Brookfield. The PD Ports Group bank debtfacilities in the prior year comprised of the following:

·    $153.9million (£75.0 million) term facility maturing in October 2009.

·    $51.3million (£25.0 million) term facility maturing in October 2009.

The As at 30 June 2010, the AET&Dgroup of assets which includes the Prime AET&D No.2 Pty Limited facility isclassified as held for sale. The facility is currently fully drawn at $518.0million and is due to mature in July 2011.

(8)         Asat 30 June 2010, the AET&D group of assets which includes the PrimeAET&D No. 2 Pty Limited facility is classified as held for sale. Thefacility is currently fully drawn at $518.0 million.  Of this facility, $259.0 million is due tomature in January 2011 and the balance is due to mature in January 2012.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**20. BORROWINGS (CONTINUED)**

 
| ** **                                | ** ** | **Consolidated**        | ** ** |
|-------------------------------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                                | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** |
| **2.  SUBORDINATED DEBT**                 |       |                    |       |   | ** ** | ** ** |   |   |   |   |   |   |   |
| WA Network Holdings  subordinated debt(1) | ** ** | **—**              | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **79,824** | ** ** | **79,824** | ** ** |

 

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(1)         Asat 30 June 2010, the AET&D group of assets which includes WANetwork Holdings is classified as held for sale. Refer to note 38 for furtherinformation. As at 30 June 2009, WA Network Holdings had $79.8 million ofunsecured subordinated debt outstanding, maturing in July 2018. Theaverage interest rate on the debt at 30 June 2009 was 5.83%.

 
| ** **                                                   | ** ** | **Consolidated**        | ** ** |
|--------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                   | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                                                   | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** |
| **3. HYBRID  SECURITIES**                                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Prime Infrastructure  Networks  (New Zealand) SPARCS(1) |       | 94,842                  |       | — |   | 94,842 |   | 93,938 |   | — |   | 93,938 |   |
| BBI EPS(2)                                                   |       | —                  |       | — |   | — |   | — |   | 677,431 |   | 677,431 |   |
| ** **                                                   | ** ** | **94,842**              | ** ** | **—** | ** ** | **94,842** | ** ** | **93,938** | ** ** | **677,431** | ** ** | **771,369** | ** ** |

 

----

(1)         Prime InfrastructureNetworks (NZ) Subordinated Prime Adjusting Reset Convertible Securities(SPARCS) comprise a subordinated bond issued by Prime InfrastructureNetworks (NZ) Limited (PINNZ) which is convertible in certain circumstancesinto Stapled Securities of Prime Infrastructure. As at 30 June 2010,119,005,156 SPARCS were on issue at a face value of NZ$119.0 million (2009:119,041,816, face value NZ$119.0 million).

The terms of the SPARCS were reset on 17 November 2009.The new interest rate is 10% per annum until the new reset date being 17 November 2010.Thereafter, PINNZ may set reset dates at its absolute discretion. PINNZ maychange the interest rate on each reset date. SPARCS may be converted in certaincircumstances either at the request of a SPARCS holder or at the option ofPINNZ. In the event that SPARCS are to be converted, PINNZ shall determine, atits absolute discretion, whether the SPARCS are to be exchanged for StapledSecurities, redeemed for cash; or converted for a combination of StapledSecurities and cash. During the period to 30 June 2010, a total of36,660 SPARCS were converted into Prime Infrastructure Stapled Securities(2009: 27,162,293).

Prime Infrastructure Holdings Limited,Prime Infrastructure Trust and Prime Infrastructure Trust 2 haveprovided a subordinated undertaking to pay all amounts required by PINNZ underthe terms of issue of SPARCS to the extent such amounts are not paid by PINNZ.The SPARCS are subordinated debt obligations of PINNZ. In the event or windingup or liquidation, SPARCS are subordinated to, and rank behind the claims ofsenior creditors of PINNZ.

Subsequent to year end, Prime Infrastructureannounced that PINNZ had agreed to redeem all outstanding SPARCS on issue on 17November 2010.  Holders will receiveface value plus any accrued interest in cash for each of their SPARCS under theredemption.  Refer to note 40 for furtherinformation.

(2)         In August 2007,778,656,840 BBI EPS Exchangeable Preference Shares (BBI EPS) were issued byPrime AET&D Holdings No.1 Limited (formerly BBI EPS Limited) as part of theAlinta Share Scheme to acquire the Alinta businesses. During the currentFinancial Year as part of the recapitalisation of Prime Infrastructure theBBI EPS were converted into Prime Infrastructure Stapled Securities. Noexternal liability exists at 30 June 2010.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**20. BORROWINGS (CONTINUED)**

 
| ** **                                                | ** ** | **Consolidated**        | ** ** |
|-----------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                                                | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** |
| **4. GUARANTEED  NOTES**                                  |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| **Unsecured:**                                            |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Alinta Network Holdings  fixed and floating rate notes(1) |       | —                  |       | — |   | — |   | — |   | 466,726 |   | 466,726 |   |
| DBCT fixed and floating  rate notes(2)               |       | —                  |       | — |   | — |   | — |   | 880,000 |   | 880,000 |   |
| ** **                                                | ** ** | **—**              | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **1,326,726** | ** ** | **1,326,726** | ** ** |

 

----

(1)         Asat 30 June 2010, the AET&D group, which includes WA NetworkHoldings is classified as held for sale. In the prior year, WA Network Holdingshad the following guaranteed notes on issue:

·    $200.0million fixed rate notes at 5.75% that were maturing in September 2010.The carrying value of these fixed rate notes at 30 June 2010 was$196.7 million.

·    $250.0million floating rate notes at BBSW + 0.26% maturing in September 2012.These notes are unsecured, unsubordinated obligations of WA Network Holdingswith the interest and payment obligations guaranteed by Financial SecurityAssurance Pty Ltd. As at 30 June 2009, the average interest rate on thenotes including swaps is 5.69%.

(2)         Duringthe current Financial Year as part of the recapitalisation of Prime Infrastructure,Prime Infrastructure entered into arrangements with Brookfield InfrastructureAustralia Trust, such that Prime Infrastructure no longer controls DBCT.Accordingly, Prime Infrastructure accounts for its remaining 50.1%economic interest in DBCT as an equity accounted investment and no longerconsolidates its share of DBCT’s borrowings.

As at 30 June 2009, DBCT Finance PtyLimited had the following fixed and floating rate notes on issue:

·    $150.0million fixed rate notes at 6.25% maturing in June 2016.

·    $200.0million floating rate notes at BBSW + 0.25% maturing in June 2016.

·    $230.0million floating rate notes at BBSW + 0.30% maturing in June 2021.

·    $100.0million floating rate notes at BBSW + 0.37% maturing in June 2026.

The above fixed and floating rate notes areguaranteed by Syncora Guarantee Inc.

·    $200.0million floating rate notes at BBSW + 0.29% maturing in December 2022.These notes are guaranteed by FGIC UK Limited.

These fixed and floating rate notes are furthersecured over:

·    unitsand shares in DBCT Trust and DBCT Management Pty Limited (guarantors)

·    fixedand floating charge over all of the assets of the Issuer and Guarantors.

·    realproperty mortgages granted by the Guarantors.

These notes rank pari passu with all othersenior secured debt of DBCT Finance Pty Limited. As at 30 June 2009, theaverage interest rate on the notes including swaps is 6.73%.

 
| ** **             | ** ** | **Consolidated**        | ** ** |
|------------------------|------------|-------------------------|------------|
| ** **             | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **             | ** ** | **Current  $’000** | ** ** | **Non-current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-current  $’000** | ** ** | **Total  $’000** | ** ** |
| **5. SECURED  BONDS**  |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| PINNZ secured bonds(1) | ** ** | **—**              | ** ** | **119,516** | ** ** | **119,516** | ** ** | **—** | ** ** | **119,368** | ** ** | **119,368** | ** ** |

 

----

(1)         Prime InfrastructureNetwork (New Zealand) Limited has on issue $119.5 million (NZ$147.1 million) insecured bonds maturing in November 2012 (2009: $119.4 million — NZ$148.35million). The bonds rank pari passu to Prime Infrastructure’s other seniorsecured debt obligations and have the benefit of the Prime InfrastructureDeed of Common Provisions and Prime Infrastructure Security Trust Deed. Asat 30 June 2010, these bonds have a fixed coupon of 9.0% (2009:8.5%).

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**20. BORROWINGS (CONTINUED)**

 
| ** **                         | ** ** | **Consolidated**        | ** ** |
|------------------------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                         | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** | **Current  $’000** | ** ** | **Non-  current  $’000** | ** ** | **Total  $’000** | ** ** |
| **6. SECURITISED  LOAN NOTES**     |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| PD Ports securities loan  notes(1) | ** ** | **—**              | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **519,963** | ** ** | **519,963** | ** ** |

 

----

(1)   Aspart of the recapitalisation of Prime Infrastructure in November 2009,the PD Ports group was sold to Brookfield Infrastructure Limited Partnership.The PD Ports securitised loan notes in the prior year comprised of thefollowing:

·$297.6million (£145.0 million) “A” rated notes maturing March 2024 with a fixedcoupon of 7.13%; and

·$143.7million (£70.0 million) “BBB” rated notes maturing March 2028 with a fixedcoupon of 8.24%.

 

**21. OTHER FINANCIAL LIABILITIES**

 
| ** **                                     | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------|------------|----------------------|------------|
| ** **                                     | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **DERIVATIVES**                                |       |                 |       |   |   |
| **Current:**                                   |       |                 |       |   |   |
| Foreign currency swaps                         |       | 1,336                |       | 2,660 |   |
| Interest rate and  inflation swaps             |       | 23                   |       | 51,798 |   |
| **Non-current:**                               |       |                 |       |   |   |
| Foreign currency swaps                         |       | 2,642                |       | 6,365 |   |
| Interest rate and  inflation swaps             |       | 107,142              |       | 197,004 |   |
| ** **                                     | ** ** | **111,143**          | ** ** | **257,827** | ** ** |
| **OTHER  FINANCIAL LIABILITIES**               |       |                 |       |   |   |
| **Current:**                                   |       |                 |       |   |   |
| Loan — other(1)                           |       | —               |       | 60,859 |   |
| Other(2)                                       |       | 3,500                |       | 1,799 |   |
| **Non-current:**                               |       |                 |       |   |   |
| Other(2)                                       |       | 42,217               |       | 3,966 |   |
| ** **                                     | ** ** | **45,717**           | ** ** | **66,623** | ** ** |
| ** **                                     | ** ** | **156,860**          | ** ** | **324,450** | ** ** |
| **Disclosed  in the Financial Statements as:** |       |                 |       |   |   |
| Current other financial  liabilities           |       | 4,859                |       | 117,116 |   |
| Non-current other  financial liabilities       |       | 152,001              |       | 207,334 |   |
| ** **                                     | ** ** | **156,860**          | ** ** | **324,450** | ** ** |

 

----

(1)   Thisunsecured loan from an external party was repaid on 28 July 2009. As at 30June 2009, this loan incurred a rate of interest of 9.0%.

(2)  Otherfinancial liabilities relate to outstanding deferred settlement amounts owingto the previous minority interest holders in Euroports.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**22. PROVISIONS**

 
| ** **                                     | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------|------------|----------------------|------------|
| ** **                                     | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Current:**                                   |       |                 |       |   |   |
| Employee benefits                              |       | 4,791                |       | 13,585 |   |
| Other                                          |       | 1,399                |       | 2,664 |   |
| **Non-current:**                               |       |                 |       |   |   |
| Employee benefits                              |       | 4,315                |       | 16,763 |   |
| Asset retirement obligation                    |       | —               |       | 31,909 |   |
| Insurance claim provision                      |       | —               |       | 1,217 |   |
| Duty provision                                 |       | —               |       | 15,682 |   |
| Other provisions                               |       | —               |       | 1,942 |   |
| **Balance  at 30 June 2009**              | ** ** | **10,505**           | ** ** | **83,762** | ** ** |
| **Disclosed  in the Financial Statements as:** |       |                 |       |   |   |
| Current other financial  liabilities           |       | 6,190                |       | 16,249 |   |
| Non-current other  financial liabilities       |       | 4,315                |       | 67,513 |   |
| ** **                                     | ** ** | **10,505**           | ** ** | **83,762** | ** ** |

 
| ** **                                            | ** ** | **Asset  retirement  obligation(1)  $’000** | ** ** | **Insurance  provision  $’000** | ** ** | **Duty provision  $’000** | ** ** | **Other  provisions  $’000** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|-----------------------------------|------------|
| Balance at  1 July 2008                     |       | 29,422                                           |       | 1,093                                |       | 10,006                              |       | 8,449                             |       |
| Additional provisions  recognised                     |       | 206                                              |       | 141                                  |       | 5,676                               |       | 32,723                            |       |
| Liability acquired as part  of a business combination |       | 1,897                                            |       | —                               |       | —                              |       | 2,990                             |       |
| Payments made in respect  of provisions               |       | —                                           |       | —                               |       | —                              |       | (3,466                            | )          |
| Reductions arising from  remeasurement                |       | —                                           |       | —                               |       | —                              |       | (1,007                            | )          |
| Transferred to held for  sale(3)                      |       | —                                           |       | —                               |       | —                              |       | (33,609                           | )          |
| Exchange differences                                  |       | 384                                              |       | (17                                  | )          | —                              |       | (1,474                            | )          |
| **Balance  at 30 June 2009**                     | ** ** | **31,909**                                       | ** ** | **1,217**                            | ** ** | **15,682**                          | ** ** | **4,606**                         | ** ** |
| Additional provisions  recognised                     |       | 2,203                                            |       | —                               |       | —                              |       | 3,286                             |       |
| (Reductions)/increases  arising from remeasurement    |       | —                                           |       | —                               |       | (324                                | )          | 166                               |       |
| Payments made in respect  of provisions               |       | —                                           |       | —                               |       | —                              |       | (2,756                            | )          |
| Disposals in the current  Financial Year(2)           |       | —                                           |       | (1,073                               | )          | —                              |       | (1,712                            | )          |
| Transferred to held for  sale(3)                      |       | (33,987                                          | )          | —                               |       | (15,358                             | )          | (1,960                            | )          |
| Exchange differences                                  |       | (125                                             | )          | (144                                 | )          | —                              |       | (231                              | )          |
| **Balance  at 30 June 2010**                     | ** ** | **—**                                       | ** ** | **—**                           | ** ** | **—**                          | ** ** | **1,399**                         | ** ** |

 

----

(1)   Assetretirement obligations represent the present value of future estimated costs todecommission and restore the environment of certain assets. The present valueof the decommissioning costs has been determined using a risk-free discountrate. The assumed costs of decommissioning are based on current best estimatesand therefore uncertainty exists as to the actual costs to be incurred. Theasset retirement obligation relates to the AET&D and Cross Sound Cableentities and has been classified as held for sale as at 30 June 2010.

(2)  Disposalsin the current year relate to provisions that were previously recognised withinPD Ports which was sold on 20 November 2009. For further information referto note 38.

(3)   Theamounts that are transferred to held for sale represent provisions that areincluded within AET&D and Cross Sound Cable. For further information referto note 38.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**23. OTHER LIABILITIES**

 
| ** **                                     | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------|------------|----------------------|------------|
| ** **                                     | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Current:**                                   |       |                 |       |   |   |
| Deferred income(1)                             |       | 9,236                |       | 9,865 |   |
| Other(2)                                       |       | 24,852               |       | — |   |
| **Non-current:**                               |       |                 |       |   |   |
| Deferred income(1)                             |       | 152,947              |       | 204,623 |   |
| Other                                          |       | 623                  |       | 474 |   |
| ** **                                     | ** ** | **187,658**          | ** ** | **214,962** | ** ** |
| **Disclosed  in the Financial Statements as:** |       |                 |       |   |   |
| Current other financial  liabilities           |       | 34,088               |       | 9,865 |   |
| Non-current other  financial liabilities       |       | 153,570              |       | 205,097 |   |
| ** **                                     | ** ** | **187,658**          | ** ** | **214,962** | ** ** |

 

----

(1)   Deferredincome relates primarily to WestNet Rail and consists of cash contributionsfrom third parties to build or upgrade existing network capabilities.   The cash payment is recorded on receipt todeferred income and recognised as revenue over the life of the contracted trackaccess arrangement with the contributor.

(2)   Theother current liability of $24.9 million relates to Queensland Rail’scontribution to the $71.3 million total assessment for stamp duty from theWestern Australia Office of State Revenue in respect of the 2006 acquisition ofthe ARG Group by WestNet WA Rail Pty Limited. This was paid on 5 February 2010.For further information refer to notes 12 and 33.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**24. RETIREMENT BENEFIT PLANS**

 

The Group operates four defined benefit superannuationplans for qualifying employees within its subsidiary IEG. In the prior year, PDPorts also operated three defined benefit plans. However, PD Ports was disposedof on 20 November 2009. Two minor defined benefit plans were also operatedwithin Euroports, however, as disclosed in note 38, the partial disposal ofthis group has resulted in it being equity accounted. Under the plans, theemployees are entitled to retirement benefits varying between 0% and 67% offinal salary at retirement. No other post-retirement benefits are provided tothese employees.

 

The defined benefit superannuation plans are fundedplans. Superannuation plans compute their obligations in accordance withAccounting Standard AAS 25 ‘Financial Reporting by Superannuation Plans’ whichprescribes a different measurement basis to that applied in these FinancialStatements. The net surplus/ (deficit) determined in the plans’ most recentFinancial Statements are as follows:

 
| **Scheme**                 | ** ** | **Date of last  actuary report** | ** ** | **Assets as a  percentage of   liabilities** | ** ** | **Net surplus/  deficit** | ** ** | **Amount  $’000** | ** ** |
|----------------------------|------------|-------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------------|------------|------------------------|------------|
| International Energy Group |       | 1 Jan 2009                                      |       | 106                                                              | %          | Surplus                        |       | 385                    |       |
| Guernsey Gas Limited       |       | 1 July 2006                                |       | 166                                                              | %          | Surplus                        |       | 4,968                  |       |
| Jersey Gas Company Limited |       | 1 July 2009                           |       | 70                                                               | %          | Deficit                        |       | (3,138                 | )          |
| Manx Gas Limited           |       | 6 April 2007                               |       | 72                                                               | %          | Deficit                        |       | (2,247                 | )          |

 

The plan actuaries have recommended that additionalcontributions beyond the current contribution level be made to eliminate thedeficit over a 15 year period (Manx Gas) and a 10 year period (Jersey Gas).

 

Funding recommendations are made by the actuaries basedon their forecast of various matters, including future plan assets performance,interest rates and salary increases.

 

Additional contributions expected to be made in 2010 forthe International Energy Group have increased to 13.5% (2009: 9.3%) and theTrustees have agreed to this increase from 1 January 2010. The Jersey Gascontribution rate has increased to 15.5% (2009: 13.5%) plus $324,744 (₤184,000)per year $53,160 (2009: ₤25,900).

 

The principal assumptions used for the purposes ofactuarial valuations were as follows:

 
| ** **                                                                          | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
|-------------------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| Key assumptions used (expressed as weighted averages) |       |                 |       |                 |       |
| Discount rate(s)                                                                    |       | 5.50                 |       | 6.30                 |       |
| Expected return on plan  assets                                                     |       | 5.59                 |       | 6.30                 |       |
| Expected rate(s) of  salary increase                                           |       | 4.90                 |       | 4.30                 |       |

 

It should be noted that the prior year assumptionsincluded PD Ports.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**24. RETIREMENT BENEFIT PLANS (CONTINUED)**

 
| ** **                                                                                                                                                       | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                                                                       | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Amounts  recognised in profit or loss in respect of these defined benefit plans are as  follows:**                                                             |       |                 |       |   |   |
| Current service cost                                                                                                                                             |       | 2,773                |       | 6,375 |   |
| Interest cost                                                                                                                                                    |       | 2,242                |       | 16,561 |   |
| Expected return on plan  assets                                                                                                                                  |       | (1,868               | )          | (19,314 | ) |
| Actuarial (gains)/losses  recognised in the year                                                                                                                 |       | —               |       | (3,513 | ) |
| **Total  included in employee benefit expense   (continuing and discontinued operations)**                                                                       | ** ** | **3,147**            | ** ** | **109** | ** ** |
| **Actuarial  gains incurred during the year and recognised in the Income Statement**                                                                             | ** ** | **—**           | ** ** | **(3,513** | **)** |
| **The  amount included in the Statement of Financial Position arising from the Group’s  obligation in respect of its defined benefit plans is as follows:** |       |                 |       |   |   |
| Present value of funded  defined benefit obligations                                                                                                             |       | (37,534              | )          | (264,364 | ) |
| Fair value of plan assets                                                                                                                                        |       | 35,923               |       | 237,451 |   |
| ** **                                                                                                                                                       | ** ** | **(1,611**           | **)**      | **(26,913** | **)** |
| Present value of unfunded  defined benefit obligations                                                                                                           |       | —               |       | — |   |
| **Deficit**                                                                                                                                                      | ** ** | **(1,611**           | **)**      | **(26,913** | **)** |
| Net actuarial losses not  recognised                                                                                                                             |       | 3,960                |       | 61,471 |   |
| **Net asset  arising from defined benefit obligations**                                                                                                          | ** ** | **2,349**            | ** ** | **34,558** | ** ** |
| **Movements  in the present value of the defined benefit obligations in the current period  were as follows:**                                                   |       |                 |       |   |   |
| Opening defined benefit  obligations                                                                                                                             |       | (264,364             | )          | (260,851 | ) |
| Current service cost                                                                                                                                             |       | (2,773               | )          | (6,375 | ) |
| Interest cost                                                                                                                                                    |       | (2,242               | )          | (16,561 | ) |
| Contributions from plan  participants                                                                                                                            |       | (598                 | )          | (599 | ) |
| Actuarial gains                                                                                                                                                  |       | 303                  |       | 6,233 |   |
| Liabilities extinguished  on settlements                                                                                                                         |       | —               |       | 7 |   |
| Disposal of subsidiary(1)                                                                                                                                        |       | 196,505              |       | — |   |
| Exchange differences on  foreign plans                                                                                                                           |       | 32,014               |       | 2,393 |   |
| Benefits paid                                                                                                                                                    |       | 3,015                |       | 9,463 |   |
| Other                                                                                                                                                            |       | 606                  |       | 1,926 |   |
| **Closing  defined benefit obligation**                                                                                                                          | ** ** | **(37,534**          | **)**      | **(264,364** | **)** |

 

----

(1)   Thedisposal of subsidiary relates to PD Ports which was sold on 20 November 2009.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**24. RETIREMENT BENEFIT PLANS (CONTINUED)**

 

The expense for the year is included in the employeebenefits expense in the Statement of Comprehensive Income. Of the expense forthe year, $3.1 million (2009: $0.1 million) has been included in the IncomeStatement as employee benefit expense.

 
| ** **                                                                                     | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                     | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Movements  in the present value of the plan assets in the current period were as  follows:** |       |                 |       |   |   |
| Opening fair value of plan  assets                                                             |       | 237,451              |       | 266,997 |   |
| Expected return on plan  assets                                                                |       | 1,868                |       | 19,314 |   |
| Actuarial losses                                                                               |       | (4,990               | )          | (40,563 | ) |
| Exchange differences on  foreign plans                                                         |       | (29,023              | )          | (880 | ) |
| Contributions from the  employer                                                               |       | 1,805                |       | 1,901 |   |
| Contributions from plan  participants                                                          |       | 598                  |       | 2,097 |   |
| Benefits paid                                                                                  |       | (3,015               | )          | (9,102 | ) |
| Disposal of subsidiary                                                                         |       | (168,771             | )          | — |   |
| Other                                                                                          |       | —               |       | (2,313 | ) |
| **Closing  fair value of plan assets**                                                         | ** ** | **35,923**           | ** ** | **237,451** | ** ** |

 

The major categories of plan assets, and the expectedrate of return at the end of the reporting period for each category, are as follows:

 
| ** **                                                 | ** ** | **Expected return** | ** ** | **Fair value of plan assets** | ** ** |
|------------------------------------------------------------|------------|--------------------------|------------|---------------------------------------------------|------------|
| ** **                                                 | ** ** | **2010  %**              | ** ** | **2009  %**                                       | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Equity instruments                                         |       | —                   |       | 8.2                                               |       | — |   | 87,428 |   |
| Debt instruments                                           |       | —                   |       | 4.9                                               |       | — |   | 96,936 |   |
| Property                                                   |       | —                   |       | 6.7                                               |       | — |   | 19,335 |   |
| Other assets   (unitised with profits, policies and bonds) |       | 5.6                      |       | 5.6                                               |       | 35,923 |   | 33,752 |   |
| **Weighted  average expected return**                      | ** ** | **5.6**                  | ** ** | **6.3**                                           | ** ** | **35,923** | ** ** | **237,451** | ** ** |

 

The overall expected rate of return is a weighted averageof the expected returns of the various categories of plan assets held. Theassessment of the expected returns is based on historical return trends andanalysts’ predictions of the market for the asset in the next twelve months.

 

The actual return on plan assets was a loss of $3.1million (2009: $21.2 million loss).

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**24. RETIREMENT BENEFIT PLANS (CONTINUED)**

 

The history of experience adjustments is as follows:

 
| ** **                                                        | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2008  $’000** | ** ** | **2007  $’000** | ** ** |
| Fair plan of plan assets                                          |       | 35,923               |       | 237,451 |   | 266,997 |   | 321,329 |   |
| Present value of defined  benefit obligations                     |       | (37,534              | )          | (264,364 | ) | (260,851 | ) | (280,333 | ) |
|                                                              |       |                 |       |   |   |   |   |   |   |
| (Deficit)/surplus                                                 | ** ** | **(1,611**           | **)**      | **(26,913** | **)** | **6,146** | ** ** | **40,996** | ** ** |
| Experience adjustments on  plan liabilities — gains/(losses) |       | 303                  |       | 6,233 |   | (538 | ) | 21,018 |   |
| Experience adjustments on  plan assets — (losses)/gains      |       | (4,990               | )          | (40,563 | ) | (29,439 | ) | 9,921 |   |

 

**25. CAPITALISED BORROWINGS COSTS**

 
| ** **                                                   | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Borrowing costs  capitalised during the Financial Year(1)    | ** ** | **43**               | ** ** | **20,454** | ** ** |
| Weighted average  capitalisation on funds borrowed generally | ** ** | **2.34**             | **%**      | **5.58** | **%** |

 

----

(1)         Capitalisedborrowing costs were recognised by DBCT. During the current Financial Year aspart of the recapitalisation of Prime Infrastructure, Prime Infrastructureentered into arrangements with Brookfield Infrastructure Australia Trust, suchthat Prime Infrastructure no longer controls DBCT. Accordingly, Prime Infrastructureaccounts for its remaining 50.1% economic interest in DBCT as an equityaccounted investment and no longer consolidates its share of DBCT’s borrowings.Refer note 38 for further information.

 

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forthe Financial Year ended 30 June 2010

 

**26. ISSUED CAPITAL**

 
| ** **                                                                | ** ** | **Consolidated**     | ** ** |
|---------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| 351,776,795 fully paid  ordinary Stapled Securities (2009: 2,591,766,809) | ** ** | **4,332,865**        | ** ** | **2,811,318** | ** ** |

 
| ** **                                                                         | ** ** | **Consolidated 2010** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                         | ** ** | **Date**                   | ** ** | **Number  ‘000** | ** ** | **Issue price ($)  per Stapled  Security** | ** ** | **$’000** | ** ** |
| **Fully  paid ordinary Stapled Securities**                                        |       |                       |       |   |   |   |   |   |   |
| Balance at beginning of  Financial Year                                            |       |                       |       | 2,591,767 |   |   |   | 2,811,318 |   |
| Conversion of PINNZ SPARCS  to Prime Infrastructure Stapled Securities        |       | 17 Nov 2009                |       | 789 |   | 0.0371 |   | 29 |   |
| Equity issued as  consideration for transfer of BBI Exchangeable Preference Shares |       | 20 Nov 2009                |       | 841,790,304 |   | 0.0003 |   | 284,838 |   |
| Securities issued as part  of the recapitalisation of Prime Infrastructure         |       | 20 Nov 2009                |       | 4,433,014,153 |   | 0.0003 |   | 1,500,000 |   |
| Return of capital to  Stapled Securityholders                                      |       | 25 Nov 2009                |       |   |   |   |   | (103,671 | ) |
| Consolidation of Stapled  Securities (1:15,000)                                    |       | 25 Nov 2009                |       | (5,277,045,236 | ) |   |   | — |   |
| Security issue costs                                                               |       |                       |       |   |   |   |   | (109,207 | ) |
| March quarter  distribution                                                   |       | 30 Apr 2010                |       |   |   |   |   | (26,383 | ) |
| June quarter  distribution                                                    |       | 30 Jun 2010                |       |   |   |   |   | (26,383 | ) |
| Tax adjustment                                                                     |       | 30 Jun 2010                |       |   |   |   |   | 2,324 |   |
| **Balance  at end of Financial Year**                                              | ** ** | ** **                 | ** ** | **351,777** | ** ** | ** ** | ** ** | **4,332,865** | ** ** |

 
| ** **                                                                  | ** ** | **Consolidated 2009** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                  | ** ** | **Date**                   | ** ** | **Number  ‘000** | ** ** | **Issue price ($)  per Stapled  Security** | ** ** | **$ ‘000** | ** ** |
| **Fully  paid ordinary Stapled Securities**                                 |       |                       |       |   |   |   |   |   |   |
| Balance at beginning of  Financial Year                                     |       |                       |       | 2,375,741 |   |   |   | 2,790,483 |   |
| Conversion of PINNZ SPARCS  to Prime Infrastructure Stapled Securities |       | 18 May 2009           |       | 205,219 |   | 0.098 |   | 20,194 |   |
| Conversion of PINNZ SPARCS  to Prime Infrastructure Stapled Securities |       | 20 May 2009           |       | 10,807 |   | 0.098 |   | 1,063 |   |
| Equity component of PINNZ  SPARCS                                           |       |                       |       |   |   |   |   | (422 | ) |
| **Balance  at end of Financial Year**                                       |       |                       | ** ** | **2,591,767** | ** ** | ** ** | ** ** | **2,811,318** | ** ** |

 

Changes to the then Corporations Law abolished theauthorised capital and par value concept in relation to share capital from 1 July 1998.Therefore, the Group does not have a limited amount of authorised capital andissued shares do not have a par value.

 

**OrdinaryStapled Securities**

 

Ordinary Stapled Securities entitle the holder to vote,to participate in dividends/distributions, and the proceeds on winding up theGroup in proportion to the number of and amounts paid on the Stapled Securitiesheld.

 

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forthe Financial Year ended 30 June 2010

 

**27. RESERVES**

 
| ** **                            | ** ** | **Consolidated**     | ** ** |
|---------------------------------------|------------|----------------------|------------|
| ** **                            | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Foreign currency  translation reserve |       | (69,230              | )          | (82,112 | ) |
| Other reserve                         |       | 26,159               |       | 2,124 |   |
| General reserve                       |       | (27,774              | )          | — |   |
| Hedging reserve                       |       | (106,772             | )          | (77,622 | ) |
| ** **                            | ** ** | **(177,617**         | **)**      | **(157,610** | **)** |

 
| ** **                                                                        | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                        | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **FOREIGN  CURRENCY TRANSLATION RESERVE**                                         |       |                 |       |   |   |
| Balance at the beginning  of the Financial Year                                   |       | (82,112              | )          | (98,619 | ) |
| Gain recognised on  disposal of foreign subsidiary                                |       | (15,752              | )          | (10,192 | ) |
| Transferred to equity  relating to non-current assets classified as held for sale |       | 1,673                |       | (7,505 | ) |
| Translation of foreign  operations                                                |       | 26,024               |       | 34,204 |   |
| Share of reserves of  associates                                                  |       | 937                  |       | — |   |
| ** **                                                                        | ** ** | **(69,230**          | **)**      | **(82,112** | **)** |

 

Exchange differences relating to the translation from NewZealand dollars, Great British pounds, Euros and United States dollars beingthe functional currency of Prime Infrastructure’s foreign controlled entitiesin New Zealand, United Kingdom, Channel Islands (Guernsey & Jersey),Europe and United States into Australian dollars are brought to account byentries made directly to the foreign currency translation reserve.

 
| ** **                                      | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------|------------|----------------------|------------|
| ** **                                      | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **OTHER RESERVE**                               |       |                 |       |   |   |
| Balance at the beginning  of the Financial Year |       | 2,124                |       | 13,822 |   |
| Recognised in the current  financial year       |       | 24,035               |       | (11,698 | ) |
| ** **                                      | ** ** | **26,159**           | ** ** | **2,124** | ** ** |

 

Other reserve represents the amortisation to presentvalue of related party loans that are not currently interest bearing. Themajority of these loans have been discounted using a rate of between 5.86% and6.94%.

 

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forthe Financial Year ended 30 June 2010

 

**27. RESERVES (CONTINUED)**

 
| ** **                                                                        | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                        | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **GENERAL  RESERVE**                                                              |       |                 |       |   |   |
| Balance at the beginning  of the Financial Year                                   |       | —               |       | 220 |   |
| Recognised in the current  Financial Year                                         |       | (13,601              | )          | (701 | ) |
| Transferred to equity  relating to non-current assets classified as held for sale |       | —               |       | 481 |   |
| Share of reserves of  associate                                                   |       | (23,045              | )          | — |   |
| Gain recognised on  disposal of subsidiary                                        |       | 8,872                |       | — |   |
| ** **                                                                        | ** ** | **(27,774**          | **)**      | **—** | ** ** |

 

The general reserve includes $40.4 million whichrepresents Prime Infrastructure’s proportionate share of Euroports generalreserve as at 30 June 2010. This reserve relates primarily to theacquisition of minority interests in Euroports. In the prior year, theEuroports business was classified as held for sale. In addition, the generalreserve includes $12.6 million relating to the acquisition of minorityinterests in WestNet Rail that was completed in the current Financial Year.

 
| ** **                                                                        | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                        | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **HEDGING  RESERVE**                                                              |       |                 |       |   |   |
| Balance at the beginning  of the Financial Year                                   |       | (77,622              | )          | 70,213 |   |
| **(Loss)/gain  recognised:**                                                      |       |                 |       |   |   |
| Interest rate swaps                                                               |       | (23,033              | )          | (217,998 | ) |
| Share of reserves of  associates                                                  |       | (39,135              | )          | (9,603 | ) |
| (Loss)/gain recognised on  disposal of subsidiary                                 |       | (28,792              | )          | 15,403 |   |
| Deferred tax arising on  hedges                                                   |       | 9,938                |       | 73,043 |   |
| Transferred to equity relating  to non-current assets classified as held for sale |       | 23,901               |       | 38,875 |   |
| Transferred to profit or  loss                                                    |       | 27,971               |       | (47,555 | ) |
| ** **                                                                        | ** ** | **(106,772**         | **)**      | **(77,622** | **)** |

 

The hedging reserve represents hedging gains and lossesrecognised on the effective portion of cash flow hedges. The cumulative gain orloss on the hedge is recognised in profit or loss when the hedged transactionimpacts the profit or loss.

 

Gains and losses transferred from equity into profit orloss during the period are included in the following line items in the IncomeStatement:

 
| ** **            | ** ** | **Consolidated**     | ** ** |
|-----------------------|------------|----------------------|------------|
| ** **            | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Net hedge (loss)/gain | ** ** | **(27,971**          | **)**      | **47,555** | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**28. ACCUMULATED LOSSES**

 
| ** **                                             | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------|------------|----------------------|------------|
| ** **                                             | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Balance at the beginning  of the Financial Year        |       | (999,366             | )          | 13,926 |   |
| Net loss attributable to  members of the parent entity |       | (959,457             | )          | (953,899 | ) |
| Distribution provided for  or paid (note 30)           |       | —               |       | (59,393 | ) |
| **Balance  at the end of the Financial Year**          | ** ** | **(1,958,823**       | **)**      | **(999,366** | **)** |

 

**29. LOSS PER SECURITY**

 
| ** **                                                 | ** ** | **Consolidated**                   | ** ** |
|------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                 | ** ** | **2010  cents per  Security** | ** ** | **2009  cents per  Security  (restated)** | ** ** | **2009  cents per  Security (as  previously  reported)** | ** ** |
| **Basic and  diluted profit/(loss) per Stapled Security:** |       |                               |       |   |   |   |   |
| From continuing operations                                 |       | 15.0                               |       | (158,770.8 | ) | (9.5 | ) |
| From discontinued  operations                              |       | (463.3                             | )          | (437,135.5 | ) | (30.2 | ) |
| **Total  basic and diluted loss per Stapled Security**     | ** ** | **(448.3**                         | **)**      | **(595,906.3** | **)** | **(39.7** | **)** |

 

The prior year cents per Stapled Security has beenrestated for the impact of the consolidation of Stapled Securities as disclosedbelow.

 

The loss and weighted average number of ordinary securitiesused in the calculation of basic and diluted loss per security are as follows:

 
| ** **                                                                                 | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                 | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Loss attributable to  ordinary Stapled security holders                                    | ** ** | **(959,457**         | **)**      | **(953,899** | **)** |
| Profit/(loss) from  continuing operations attributable to ordinary Stapled Securityholders | ** ** | **32,094**           | ** ** | **(254,152** | **)** |

 
| ** **                                                                                                              | ** ** | **2010  No. ’000** | ** ** | **2009  No. ’000** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| Weighted average number of ordinary Stapled Securities  for the purposes of basic and diluted loss per Stapled Security |       | 214,025                      |       | 160                          |       |

 

The weighted average number of Securities has changedsignificantly from the prior year due to the consolidation of StapledSecurities that took place on 25 November 2009. This consolidation ofStapled Securities following the conversion of BBI Exchangeable PreferenceShares was on a 1:15,000 basis. The impact of the consolidation has beenfactored into the calculation of the weighted average number of ordinarySecurities as if the recapitalisation had taken place at the beginning of theyear.

 

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forthe Financial Year ended 30 June 2010

 

**29. LOSS PER SECURITY (CONTINUED)**

 

Loss used in the calculation of total basic and dilutedloss per Security and basic and diluted loss per Security from continuingoperations reconciles to net loss in the Income Statement as follows:

 
| ** **                                                                                                        | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                        | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Net loss attributable to  ordinary security holders                                                               |       | (959,457             | )          | (953,899 | ) |
| Loss used in the  calculation of basic and diluted Earnings per Security                                          |       | (959,457             | )          | (953,899 | ) |
| Adjustments to exclude  loss for the year from discontinued operations                                            |       | 991,552              |       | 699,747 |   |
| **Profit/(loss)  used in the calculation of basic and diluted Earnings Per Security from  continuing operations** | ** ** | **32,095**           | ** ** | **(254,152** | **)** |

 

The Group has on issue hybrid securities in the form ofSPARCS. These may be convertible to equity under specific circumstances. Theyhave not been included in the calculation of dilutive loss per security as theyhave an anti-dilutive impact.

 

**30. DISTRIBUTIONS**

 
| ** **                                                      | ** ** | **2010**                           | ** ** | **2009**       | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------|------------|----------------|------------|
| ** **                                                      | ** ** | **Cents per   Security** | ** ** | **$’000** | ** ** | **Cents per   Security** | ** ** | **$’000** | ** ** |
| **RECOGNISED  AMOUNTS PER FULLY PAID STAPLED SECURITY**         |       |                               |       |           |       |   |   |   |   |
| **Paid from  retained earnings:**                               |       |                               |       |           |       |   |   |   |   |
| Distribution paid 18  September 2008                       |       | —                             |       | —         |       | 2.50 |   | 59,393 |   |
| ** **                                                      | ** ** | ** **                         | ** ** | **—**     | ** ** | ** ** | ** ** | **59,393** | ** ** |
| **Paid from  contributed equity:**                              |       |                               |       |           |       |   |   |   |   |
| Capital Distribution paid  25 November 2009                |       | 4.00                               |       | 103,671        |       | — |   | — |   |
| March quarter  distribution paid 31 May 2010          |       | 7.50                               |       | 26,383         |       | — |   | — |   |
| June quarter  distribution declared 30 June 2010 |       | 7.50                               |       | 26,383         |       | — |   | — |   |
| ** **                                                      |       |                               | ** ** | **156,437**    | ** ** | ** ** | ** ** | **—** | ** ** |
| ** **                                                      |       |                               | ** ** | **156,437**    | ** ** | ** ** | ** ** | **59,393** | ** ** |

 

As part of the recapitalisation thatPrime Infrastructure undertook on 20 November 2009, a CapitalDistribution in an aggregate amount of $103.7 million ($0.04 per Security) wasmade to registered Securityholders as at the Capital Distribution record date(being 16 November 2009).

 

On 30 December 2009, Prime Infrastructureannounced that it expected to commence the payment of quarterly distributionsof approximately 7.5 cents per Stapled Security (i.e. annualised distributionsof 30 cents per Stapled Security) with the first such distribution to be madein respect of the quarter ending 31 March 2010. The first quarterdistribution was paid on 31 May 2010.

 

On 17 June 2010, Prime Infrastructure announceda record date of 30 June 2010 for the June quarter distributionwith an expected payment date on or about 31 August 2010. Thisdistribution has been recognised as a liability as at 30 June 2010(refer note 19).

 

On 23 August 2010, Prime Infrastructure announcedthat the Distribution in respect of the quarter ending 30 September 2010will be 7.5 cents per Stapled Security. The Record Date for this distributionwill be 30 September 2010 and the distribution will be paid on or about 30November 2010.

 

In the prior Financial Year, Prime Infrastructurepaid a final distribution of 2.50 cents per Stapled Security in September 2008.

 

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forthe Financial Year ended 30 June 2010

 

**31. PARENT ENTITY DISCLOSURES**

 
| ** **                                                                | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| **(a) FINANCIAL  POSITION**                                               |       |                 |       |                 |       |
| **Assets**                                                                |       |                 |       |                 |       |
| Current assets                                                            |       | 156,056              |       | 124,309              |       |
| Non-current assets                                                        |       | 1,972,918            |       | 2,461,596            |       |
| **Total  assets**                                                         | ** ** | **2,128,974**        | ** ** | **2,585,905**        | ** ** |
| **Liabilities**                                                           |       |                 |       |                 |       |
| Current liabilities                                                       |       | (225,635             | )          | (211,967             | )          |
| Non-current liabilities                                                   |       | (2,501,312           | )          | (2,145,708           | )          |
| **Total  liabilities**                                                    | ** ** | **(2,726,947**       | **)**      | **(2,357,675**       | **)**      |
| **Equity**                                                                |       |                 |       |                 |       |
| Issued capital                                                            |       | 163,401              |       | 44,051               |       |
| Other reserves                                                            |       | 1,341,576            |       | 1,108,757            |       |
| Retained earnings                                                         |       | (2,102,950           | )          | (924,578             | )          |
| **Total  equity**                                                         | ** ** | **(597,973**         | **)**      | **228,230**          | ** ** |
| **(b) FINANCIAL  PERFORMANCE**                                            |       |                 |       |                 |       |
| Loss for the year                                                         |       | (1,178,374           | )          | (904,638             | )          |
| ** **                                                                | ** ** | **(1,178,374**       | **)**      | **(904,638**         | **)**      |
| **(c) SHARE  CAPITAL**                                                    | ** ** | ** **           | ** ** | ** **           | ** ** |
| 351,776,795 fully paid  ordinary Stapled Securities (2009: 2,591,766,809) | ** ** | **163,401**          | ** ** | **44,051**           | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**31. PARENT ENTITY DISCLOSURES (CONTINUED)**

 
| ** **                                                                         | ** ** | **Company 2010** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **Date**              | ** ** | **Number  ’000** | ** ** | **Issue price ($)  per Stapled  Security** | ** ** | **$’000** | ** ** |
| **(c) SHARE  CAPITAL (CONTINUED)**                                                 |       |                  |       |   |   |   |   |   |   |
| **Fully  paid ordinary shares**                                                    |       |                  |       |   |   |   |   |   |   |
| Balance at beginning of  Financial Year                                            |       |                  |       | 2,591,767 |   |   |   | 44,051 |   |
| Conversion of PINNZ SPARCS  to Prime Infrastructure Stapled Securities        |       | 17 Nov 2009           |       | 789 |   | 0.0025 |   | 2 |   |
| Equity issued as  consideration for transfer of BBI Exchangeable Preference Shares |       | 20 Nov 2009           |       | 841,790,304 |   | 0.000024 |   | 19,939 |   |
| Securities issued as part  of the recapitalisation of Prime Infrastructure         |       | 20 Nov 2009           |       | 4,433,014,153 |   | 0.000024 |   | 105,000 |   |
| Consolidation of Stapled  Securities (1:15,000)                                    |       | 25 Nov 2009           |       | (5,277,045,236 | ) |   |   |   |   |
| Security issue costs                                                               |       |                  |       |   |   |   |   | (7,915 | ) |
| Tax adjustment                                                                     |       |                  |       |   |   |   |   | 2,324 |   |
| **Balance  at end of Financial Year**                                              | ** ** | ** **            | ** ** | **351,777** | ** ** | ** ** | ** ** | **163,401** | ** ** |

 
| ** **                                                                  | ** ** | **Company 2009** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                  | ** ** | **Date**              | ** ** | **Number  ’000** | ** ** | **Issue price ($)  per Stapled  Security** | ** ** | **$’000** | ** ** |
| **Fully  paid ordinary shares**                                             |       |                  |       |   |   |   |   |   |   |
| Balance at beginning of  Financial Year                                     |       |                  |       | 2,375,741 |   |   |   | 41,802 |   |
| Conversion of PINNZ SPARCS  to Prime Infrastructure Stapled Securities |       | 18 May 2009           |       | 205,219 |   | 0.010 |   | 2,136 |   |
| Conversion of PINNZ SPARCS  to Prime Infrastructure Stapled Securities |       | 20 May 2009           |       | 10,807 |   | 0.010 |   | 113 |   |
| **Balance  at end of Financial Year**                                       | ** ** | ** **            | ** ** | **2,591,767** | ** ** | ** ** | ** ** | **44,051** | ** ** |

 

**(d) GUARANTEES**

Refer to note 33 for guarantees that relate toPrime Infrastructure Holdings Limited, the parent entity.

 

**(e) CONTINGENT LIABILITIES**

Refer to note 33 for contingent liabilities that relateto Prime Infrastructure Holdings Limited, the parent entity.

 

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forthe Financial Year ended 30 June 2010

 

**32. COMMITMENTS FOR EXPENDITURE**

 
| ** **                                                     | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                     | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **(a) CAPITAL  EXPENDITURE COMMITMENTS**                       |       |                 |       |   |   |
| **Plant and  equipment**                                       |       |                 |       |   |   |
| Not longer than one year                                       |       | 884                  |       | 11,461 |   |
| Longer than one year and  not longer than five years           |       | —               |       | — |   |
| Longer than five years                                         |       | —               |       | — |   |
|                                                           | ** ** | **884**              | ** ** | **11,461** | ** ** |
| **Intangible assets**                                          |       |                 |       |   |   |
| Not longer than one year                                       |       | —               |       | 31,204 |   |
| Longer than one year and  not longer than five years           |       | —               |       | — |   |
| Longer than five years                                         |       | —               |       | — |   |
|                                                           | ** ** | **—**           | ** ** | **31,204** | ** ** |
| **Acquisition  of minority interests**                         |       |                 |       |   |   |
| Not longer than one year                                       |       | —               |       | 130,400 |   |
| Longer than one year and  not longer than five years           |       | —               |       | — |   |
| Longer than five years                                         |       | —               |       | — |   |
|                                                           | ** ** | **—**           | ** ** | **130,400** | ** ** |
| **Share of  associates’ capital expenditure commitments** |       |                 |       |   |   |
| Not longer than one year                                       |       | 25,473               |       | 88,451 |   |
| Longer than one year and  not longer than five years           |       | 1,405                |       | 39,900 |   |
| Longer than five years                                         |       | —               |       | — |   |
| ** **                                                     | ** ** | **26,878**           | ** ** | **128,351** | ** ** |
| **(b) OTHER  EXPENDITURE COMMITMENTS**                         |       |                 |       |   |   |
| **Network systems and information  technology**                |       |                 |       |   |   |
| Not longer than one year                                       |       | 14,834               |       | 18,381 |   |
| Longer than one year and  not longer than five years           |       | 67,058               |       | 22,200 |   |
| Longer than five years                                         |       | 11,693               |       | 8,809 |   |
| ** **                                                     | ** ** | **93,585**           | ** ** | **49,390** | ** ** |
| **Other  commitments — maintenance contracts**            |       |                 |       |   |   |
| Not longer than one year                                       |       | 2,122                |       | 374 |   |
| Longer than one year and  not longer than five years           |       | 6,672                |       | 703 |   |
| Longer than five years                                         |       | 3,273                |       | — |   |
| ** **                                                     | ** ** | **12,067**           | ** ** | **1,077** | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**32. COMMITMENTS FOR EXPENDITURE (CONTINUED)**

 
| ** **                                                                                            | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                            | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Management  charges payable under the Babcock & Brown Infrastructure Management  Agreement**(1) |       |                 |       |   |   |
| Not longer than one year                                                                              |       | —               |       | 7,900 |   |
| Longer than one year and  not longer than five years                                                  |       | —               |       | 31,600 |   |
| Longer than five years                                                                                |       | —               |       | 126,400 |   |
|                                                                                                  | ** ** | **—**           | ** ** | **165,900** | ** ** |
| **Share of associates’ other expenditure  commitments**                                          |       |                 |       |   |   |
| Not longer than one year                                                                              |       | 10,135               |       | 22,094 |   |
| Longer than one year and  not longer than five years                                                  |       | 983                  |       | 44,350 |   |
| Longer than five years                                                                                |       | —               |       | 26,157 |   |
|                                                                                                  | ** ** | **11,118**           | ** ** | **92,601** | ** ** |

 

----

(1)         Asat 30 June 2009, Prime Infrastructure was a managed fund of Babcock &Brown Infrastructure Limited. As announced on 26 August 2009,Prime Infrastructure agreed terms of separation with Babcock & Brownand the internalisation of its management. As a result of this internalisation,no future management charges are payable as at 30 June 2010.

 

**(c) LEASE COMMITMENTS**

Finance lease liabilities and non-cancellable operatinglease commitments are disclosed in note 34 to the Financial Statements.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**33. CONTINGENT LIABILITIES**

 
| ** **                                                           | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                           | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Contingent  liabilities:**                                         |       |                 |       |   |   |
| Responsible entity  incentive fee for the year ended 30 June 2005(1) |       | —               |       | 7,106 |   |
| Disputes with taxation  authorities(2)                               |       | —               |       | 145,300 |   |
| Dispute with the Office of  State Revenue(3)                         |       | 46,493               |       | — |   |
| Letters of credit(4)                                                 |       | —               |       | 13,552 |   |
| Bank and other  guarantees(5)                                        |       | 23,211               |       | 45,547 |   |
| Acquisition earn-outs(6)                                             |       | 4,926                |       | 8,694 |   |
| Claim by contractor(7)                                               |       | —               |       | 26,800 |   |
| Claim by Customs and  Excise(8)                                      |       | —               |       | 4,347 |   |
| Other                                                                |       | 185                  |       | — |   |
| **Contingent assets:**                                               |       |                 |       |   |   |
| Claim by contractor(7)                                               |       | —               |       | 26,800 |   |
| Acquisition earn-outs(6)                                             |       | 4,926                |       | 8,694 |   |
| Insurance/litigation  proceeds in respect of incident at DBCT(9)     |       | —               |       | 11,766 |   |
| Letters of credit(3)                                                 |       | —               |       | 823 |   |
| DBCT revenue(10)                                                     |       | 7,784                |       | 8,636 |   |
| Other                                                                |       | 282                  |       | 328 |   |

 

----

(1)         Previously,pursuant to the governing documents of the Group and the Management Agreements,Prime Infrastructure may have become liable for the payment of the thirdinstallment of the Responsible Entity Incentive Fee calculated for the yearended 2005. With the termination of the Management Agreement,Prime Infrastructure is no longer potentially liable to incur thisliability.

(2)         Prime Infrastructureoperates in many countries, each with separate taxation authorities anddiffering regulations which results in significant complexity.Prime Infrastructure is involved in discussions with taxation authorities innumerous jurisdictions at any given time. In the prior year, Prime Infrastructure was involved in a disputewith the Australian Taxation Office (ATO) and had recognised a contingentliability of $145.3 million. The dispute with the ATO involved the deductibilityof certain payments made in relation to the long term lease of DBCT.  On 20 August 2010, Prime Infrastructureand the ATO agreed to a settlement of the issues in dispute. This agreementresulted in the refund of $38.4 million of the deposit paid byPrime Infrastructure plus interest estimated at $4.6 million and the lossof $37.8 million of deferred tax assets for tax losses previously recognised,together with an agreed retrospective and prospective tax treatment of theitems that were in dispute. As a result of this settlement, the dispute is nolonger recognised as a contingent liability.

(3)         On 6January 2010, WestNet Rail Holdings Pty Limited, a wholly-owned subsidiary ofthe Company received an assessment notice from the Western Australian Office ofState Revenue in the amount of $71.3 million, being stamp duty assessed inrespect of the 2006 acquisition of the ARG Group by WestNet WA Rail PtyLimited. Prime Infrastructure believes the assessment is incorrect at lawand intends to vigorously challenge it. Notwithstanding Prime Infrastructure’sobjection to the assessment, payment of $46.4 million (being PrimeInfrastructure’s share) was made on 5 February 2010 in accordancewith the assessment.  WestNet WA Rail PtyLimited, the immediate parent of WestNet Rail Holdings No.1 Pty Limited, andalso wholly owned by the Company, exercised its contractual rights of indemnityagainst Queensland Rail as acquirer of the above rail ARG Group business in2006 to recover approximately $24.9 million and to use that amount to partiallyfund the potential liability of WestNet Rail Holdings No.1 Pty Limited underthe assessment. Accordingly, if it is ultimately determined that WestNet RailHoldings No.1 Pty Limited is liable for the stamp duty, the net duty requiredto be funded by the Company would be $46.4 million. This amount has beenincluded above as a contingent liability.

(4)         Asat 30 June 2010, no letters of credit were provided by entitieswithin the Group’s continuing operations (2009: $13.6 million). Cross SoundCable, a business held for sale by Prime has provided letters of credit of $7.0million as at 30 June 2010.  The Group has received letters of credit totaling $0.4 million (2009:$0.8 million).

(5)         Asat 30 June 2010, the Group, including its associates, had bank andcustoms guarantees outstanding to third parties totaling $23.2 million (2009:$45.5 million). These guarantees are supported by cash on deposit with banks.

(6)         Anacquisition earn-out is payable to the vendor of Rauma Stevedoring in thesituation where Euroports Finland receives a binding option right to operate ina proposed new container terminal in Europe for between 15 and 30 years. Theamount payable would be $7.5 million (2009: $8.7 million. The movement between2009 and 2010 is related to movements in foreign exchange) and would berecognised as an asset. Prime’s proportionate share of this is $4.9 million(2009: $5.7 million. The movement between 2009 and 2010 is related to movementsin foreign exchange).

(7)         Acontractor was engaged by DBCT Management Pty Limited to perform marine worksand mechanical, structural and electrical work for the offshore outloadingcomponent of the 7X Expansion Project at DBCT. The contractor claimedadditional amounts were owed under its contract, which was disputed by DBCTManagement Pty Limited. During the current Financial Year, a full and finalsettlement was agreed and therefore no contingent asset or liability exists at30 June 2010.

(8)         Aclaim was received by the Ministry of Finance/Regional Director of Customs andExcise (Antwerp, Belgium) against two subsidiaries of Euroports Belgium, beingWesterlund Distribution NV and Westerlund Corporation NV for allegedly failingto pay customs duties and excise due on goods in 2004. During the currentFinancial Year, a full and final settlement was agreed with the Customs andExcise and therefore no contingent liability exists at 30 June 2010.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**33. CONTINGENT LIABILITIES (CONTINUED)**

 

(9)         On15 February 2004, one of the dedicated reclaiming machines (RL1) at DBCTcollapsed due to failure of a weld. DBCT Management Pty Limited andPrime Infrastructure both had material damage and business interruptioninsurance in place. During the current Financial Year, this claim was fullysettled by the insurers and therefore no contingent asset exists at30 June 2010.

(10)  DBCTis entitled to commence earning revenue on its expansion of DBCT from the firstday of the month following commissioning of an expansion. DBCT is currentlyinvoicing its customers on the basis of an Annual Revenue Requirement (ARR)approved by the QCA based on forecast costs and forecast economic parameters.Once the total costs for each phase of the project have been finalised, whichbased on current estimates will exceed the approved forecast costs, these willbe submitted to the QCA which, if approved, would result in a catch up ofrevenue being due to DBCT. This revenue would be backdated to the first day ofthe month following commissioning. The amount due, should all costs beapproved, has been calculated as $15.5 million as at 30 June 2010.Prime Infrastructure has disclosed $7.8 million as a contingent asset asat 30 June 2010 being its 50.1% proportionate share.

(11)  TasGas Networks Pty Limited has entered into a Deed of Settlement with theTasmanian Government indemnifying the Government against any losses or damageson the constructed gas network for a period of 10 years. The extent to which anoutflow or cash will be required cannot be determined in relation to thisindemnity.

(12)  On31 August 2007, Prime Infrastructure was part of a consortium thatacquired the Alinta Limited business. As part of this transaction,Prime Infrastructure is party to the Amended Umbrella Agreement (amended30 August 2007) and Participation Deed. The interaction of these two agreementsis that Prime Infrastructure is responsible in its proportionatepercentage for any unallocated liabilities which do not relate specifically toa consortium business. Any known liabilities in relation to unallocatedliabilities have been recognised as at 30 June 2010.

(13)  Priorto Prime Infrastructure’s acquisition of certain Alinta Limited businesses in2007, Alinta Limited and Alinta 2000 Limited agreed to guarantee theobligations of various companies within the Alinta group. Following the Schemeof Arrangement under which a consortium including Prime Infrastructureacquired the Alinta businesses, Prime Infrastructure acquired theguaranteeing entities, while some of the subsidiaries being guaranteed wereacquired by Alinta Energy Limited (formerly Babcock & Brown Power).

Whilst Alinta Limited and Alinta 2000 Limitedare guaranteeing obligations of an Alinta Energy subsidiary, as part of theconsortium arrangements relating to the acquisition of Alinta Limited, AlintaEnergy has agreed to indemnify Prime Infrastructure against, among otherthings all losses sustained to the extent that such losses relate to AlintaEnergy’s assets. Accordingly, to the extent that Prime Infrastructuresustains any losses pursuant to the guarantee, Alinta Energy has agreed to indemnifyPrime Infrastructure for such loss.

(14)  Anassociate of Prime Infrastructure has established an environmentalprovision of $2.3 million at 30 June 2010 (30 June 2009: $1.1million) to address remediation issues with four projects. The associate issubject to a variety of federal, state and local laws that regulate permittedactivities relating to air and water quality, waste disposal and otherenvironmental matters. After consideration of provisions established,Prime Infrastructure believes that costs for environmental remediation andongoing compliance with these laws will not have a material adverse impact onthe Group.  

However, there can be no assurances that futureevents, such as changes in existing laws, new laws or the development of newfacts or conditions will not cause significant costs to be incurred.

(15)  TheGroup is defendant in various lawsuits arising from the day-to-day operationsof its businesses. Although no assurance can be given, the Directors believe,based on experience to date, that the ultimate resolution of such matters willnot have a material adverse impact on the Prime Infrastructure business,cash flows, financial position or results of operations.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**34. LEASES**

 

**DISCLOSURE FOR LESSEES**

 

**Financeleases**

 

***Leasing arrangements***

 

Finance leases relate to equipment and motor vehicleswith a lease term of between one and five years held by Euroports and PD Ports.The Group has options to purchase the equipment and motor vehicles for anominal amount at the conclusion of the lease agreements.

 
| ** **                                         | ** ** | **Minimum future lease payments** | ** ** | **Present value of minimum  future lease payments** | ** ** |
|----------------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                         | ** ** | **2010  $’000**                             | ** ** | **2009  $’000**                                                         | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Not later than one year                            |       | —                                           |       | 1,256                                                                        |       | — |   | 788 |   |
| Later than one year and  not later than five years |       | —                                           |       | 4,331                                                                        |       | — |   | 3,395 |   |
| Later than five years                              |       | —                                           |       | 1,217                                                                        |       | — |   | 749 |   |
| **Minimum  lease payments**(1)                     | ** ** | **—**                                       | ** ** | **6,804**                                                                    | ** ** | **—** | ** ** | **4,932** | ** ** |
| Less future finance  charges                       |       | —                                           |       | (1,872                                                                       | )          | — |   | — |   |
| **Present  value of minimum lease payments**       | ** ** | **—**                                       | ** ** | **4,932**                                                                    | ** ** | **—** | ** ** | **4,932** | ** ** |
| **Disclosed  in the Financial Statements as:**     |       |                                             |       |                                                                         |       |   |   |   |   |
| Current borrowings (note  20)                      |       |                                             |       |                                                                         |       | — |   | 788 |   |
| Non-current borrowings  (note 20)                  |       |                                             |       |                                                                         |       | — |   | 4,144 |   |
| ** **                                         | ** ** | ** **                                       | ** ** | ** **                                                                   | ** ** | **—** | ** ** | **4,932** | ** ** |

 

----

(1)         Minimumfuture lease payments include the aggregate of all lease payments and anyguaranteed residual.

 

**Operatingleases**

 

***Leasing arrangements***

 

Operating leases consist of rental of office space withvarying lease terms, motor vehicles and miscellaneous office equipment. Alloffice space rentals include market review clauses and options to renew. TheGroup does not have an option to purchase the leased assets at the expiry ofthe lease periods.

 
| ** **                                                 | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                 | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Non-cancellable  operating lease payments**              |       |                 |       |   |   |
| Not longer than one year                                   |       | 2,075                |       | 12,827 |   |
| Longer than one year and  not longer than five years       |       | 8,436                |       | 45,144 |   |
| Longer than five years                                     |       | 19,178               |       | 204,927 |   |
|                                                       | ** ** | **29,689**           | ** ** | **262,918** | ** ** |
| **Share of  associates’ operating lease commitments** |       |                 |       |   |   |
| **Non-cancellable  operating lease payments**              |       |                 |       |   |   |
| Not longer than one year                                   |       | 13,552               |       | 1,182 |   |
| Longer than one year and  not longer than five years       |       | 46,795               |       | 3,486 |   |
| Longer than five years                                     |       | 199,571              |       | 7,773 |   |
| ** **                                                 | ** ** | **259,918**          | ** ** | **12,441** | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**34. LEASES (CONTINUED)**

 

**DISCLOSURE FOR LESSEES (CONTINUED)**

 

**Operatingleases (continued)**

 

***Leasing arrangements (continued)***

 

In respect of non-cancellable operating leases, thefollowing liabilities have been recognised:

 
| ** **            | ** ** | **Consolidated**     | ** ** |
|-----------------------|------------|----------------------|------------|
| ** **            | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Lease  incentives** |       |                 |       |   |   |
| Current               |       | —               |       | 538 |   |
| Non-current           |       | 623                  |       | 3,290 |   |
|                  | ** ** | **623**              | ** ** | **3,828** | ** ** |

 

In the prior year, PD Ports which was sold in the currentFinancial Year had operating lease revenue relating to investment properties. Anumber of the rental contracts included options for renewal and market reviewclauses. The lesses do not have an option to purchase the properties at theexpiry of the lease periods.

 
| ** **                                                 | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                 | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Non-cancellable  operating lease receivables**           |       |                 |       |   |   |
| Not longer than one year                                   |       | —               |       | 14,682 |   |
| Longer than one year and  not longer than five years       |       | —               |       | 51,112 |   |
| Longer than five years                                     |       | —               |       | 273,081 |   |
|                                                       | ** ** | **—**           | ** ** | **338,875** | ** ** |
| **Share of  associates’ operating lease receivables** |       |                 |       |   |   |
| Not longer than one year                                   |       | 2,006                |       | — |   |
| Longer than one year and  not longer than five years       |       | 4,837                |       | — |   |
| Longer than five years                                     |       | 4,163                |       | — |   |
| ** **                                                 | ** ** | **11,006**           | ** ** | **—** | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**35. SUBSIDIARIES**

 
| ** **                                                                                                          | ** ** | ** **                         | ** ** | **Ownership interest** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                                                                        | ** ** | **Country of  incorporation** | ** ** | **2010  %**                 | ** ** | **2009  %** | ** ** |
| **Parent  entity:**                                                                                                 |       |                               |       |                        |       |   |   |
| Prime Infrastructure  Holdings Limited(10)   (formerly Babcock & Brown Infrastructure Limited)        |       | Australia                          |       |                        |       |   |   |
| **Subsidiaries:**                                                                                                   |       |                               |       |                        |       |   |   |
| Prime Infrastructure  Trust   (formerly Babcock & Brown Infrastructure Trust)                         |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Infrastructure  Trust 2 (formerly BBI SPARCS Trust)                                                      |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Infrastructure  Employment Pty Limited(10)                                                               |       | Australia                          |       | 100                         |       | 100 |   |
| Prime BFK Trust(1), (10)                                                                                            |       | Australia                          |       | 100                         |       | — |   |
| ARL2B Partnership(1),                                                                                               |       | Australia                          |       | 100                         |       | — |   |
| BBI Energy Trust                                                                                                    |       | Australia                          |       | 100                         |       | 100 |   |
| Prime NGPL Trust (formerly  BBI NGPL Trust)                                                                         |       | Australia                          |       | 100                         |       | 100 |   |
| Prime TC Holdings Pty  Limited   (formerly Pipecat Holdings Pty Limited) (10)                                       |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Infrastructure  Finance Pty Limited   (formerly BBI Finance Pty Limited) (10)                            |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Energy Partnership  Pty Limited   (formerly BBI Energy Partnership Pty Limited) (10)                          |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Energy (Redbank) Pty  Limited   (formerly BBI Energy (Redbank) Pty Limited) (10)                              |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Energy (Wind) Pty  Limited   (formerly BBI Energy (Wind) Pty Limited) (10)                                    |       | Australia                          |       | 100                         |       | 100 |   |
| Australian Company Number  108 247 123 Pty Limited(10)                                                              |       | Australia                          |       | 100                         |       | 100 |   |
| Australian Company Number  108 247 098 Pty Limited(10)                                                              |       | Australia                          |       | 100                         |       | 100 |   |
| DBCT Management Pty  Limited(2), (10)                                                                               |       | Australia                          |       | 100                         |       | 100 |   |
| DBCT Finance Pty  Limited(2), (10)                                                                                  |       | Australia                          |       | 100                         |       | 100 |   |
| DBCT Trust(2)                                                                                                       |       | Australia                          |       | 100                         |       | 100 |   |
| DBCT Investor Services Pty  Limited(2), (10)                                                                        |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Networks (Australia)  Pty Limited   (formerly BBI Networks (Australia) Pty Limited) (10)                      |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Networks (Australia)  No.2 Pty Limited   (formerly BBI Networks (Australia) No.2 Pty Limited) (10)            |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Infrastructure  Networks (New Zealand) Limited   (formerly BBI Networks (New Zealand) Limited)           |       | New Zealand                        |       | 100                         |       | 100 |   |
| Prime Infrastructure  Networks (New Zealand) No.2 Limited   (formerly BBI Networks (New Zealand) No.2 Limited) |       | New Zealand                        |       | 100                         |       | 100 |   |
| Prime Infrastructure  Networks (New Zealand) No.3 Limited   (formerly BBI Networks (New Zealand) No.3 Limited) |       | New Zealand                        |       | 100                         |       | 100 |   |
| Tas Gas Holdings Pty  Limited (formerly BBI PAG Pty Limited) (10)                                                   |       | Australia                          |       | 100                         |       | 100 |   |
| Prime TGN Pty Limited  (formerly BBI TGN Pty Limited) (10)                                                          |       | Australia                          |       | 100                         |       | 100 |   |
| BBI PES Pty Limited(10)                                                                                             |       | Australia                          |       | 100                         |       | 100 |   |
| Tas Gas Retail Pty  Limited(10)                                                                                     |       | Australia                          |       | 100                         |       | 100 |   |
| Tas Gas Networks Pty  Limited(10)                                                                                   |       | Australia                          |       | 100                         |       | 100 |   |
| Prime IEG Australia  Holdings Pty Limited   (formerly BBI IEG Australia Holdings Pty Limited) (10)                  |       | Australia                          |       | 100                         |       | 100 |   |
| Prime IEG Australia No.1  Pty Limited   (formerly BBI IEG Australia No.1 Pty Limited) (10)                          |       | Australia                          |       | 100                         |       | 100 |   |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**35. SUBSIDIARIES (CONTINUED)**

 
| ** **                                                                                 | ** ** | ** **                         | ** ** | **Ownership interest** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                                               | ** ** | **Country of  incorporation** | ** ** | **2010  %**                 | ** ** | **2009  %** | ** ** |
| Prime IEG Australia No.2  Pty Limited   (formerly BBI IEG Australia No.2 Pty Limited) (10) |       | Australia                          |       | 100                         |       | 100 |   |
| IEG Infrastructure Limited  (formerly BBI Networks (UK) No.1 Limited)                      |       | United Kingdom                     |       | 100                         |       | 100 |   |
| IEG Finance Limited  (formerly BBI Networks (UK) No.2 Limited)                             |       | United Kingdom                     |       | 100                         |       | 100 |   |
| IEG Guernsey Limited  (formerly BBI (Guernsey) Limited)                                    |       | Guernsey                           |       | 100                         |       | 100 |   |
| International Energy Group  Limited (formerly BBI (Channel Islands) Holdings Limited)      |       | Guernsey                           |       | 100                         |       | 100 |   |
| Channel Islands Gas Group  Limited                                                         |       | Guernsey                           |       | 100                         |       | 100 |   |
| Guernsey Gas Limited                                                                       |       | Guernsey                           |       | 100                         |       | 100 |   |
| Jersey Gas Company Limited                                                                 |       | Jersey                             |       | 100                         |       | 100 |   |
| Kosangas (Guernsey)  Limited                                                               |       | Guernsey                           |       | 100                         |       | 100 |   |
| Kosangas (Jersey) Limited                                                                  |       | Jersey                             |       | 100                         |       | 100 |   |
| Manx Gas Limited                                                                           |       | Isle of Man                        |       | 100                         |       | 100 |   |
| The Gas Supply Company  Limited                                                            |       | Guernsey                           |       | 100                         |       | 100 |   |
| The Gas Transportation  Company Limited                                                    |       | Guernsey                           |       | 100                         |       | 100 |   |
| GTC Pipelines Limited                                                                      |       | United Kingdom                     |       | 100                         |       | 100 |   |
| GTC Utility Construction  Limited                                                          |       | United Kingdom                     |       | 100                         |       | 100 |   |
| Utility Grid Installations  Limited                                                        |       | United Kingdom                     |       | 100                         |       | 100 |   |
| GPL Investments Limited                                                                    |       | United Kingdom                     |       | 100                         |       | 100 |   |
| The Electricity Network  Company Limited                                                   |       | United Kingdom                     |       | 100                         |       | 100 |   |
| Power On Connections  Limited                                                              |       | United Kingdom                     |       | 100                         |       | 100 |   |
| Power On Investments  Limited                                                              |       | United Kingdom                     |       | 100                         |       | 100 |   |
| Prime Port Holdings Pty  Limited   (formerly BBI Port Holdings Pty Limited) (10)           |       | Australia                          |       | 100                         |       | 100 |   |
| Prime Finance UK Limited  (formerly BBI Finance UK Limited)                                |       | United Kingdom                     |       | 100                         |       | 100 |   |
| BBI Port Acquisitions (UK) Limited(3)                                                      |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Ports Limited(3)                                                                        |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Ports Group Limited(3)                                                                  |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Portco Limited(3)                                                                       |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Teesport Limited(3)                                                                     |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Group Management  Limited(3)                                                            |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Port Services Limited(3)                                                                |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Logistics Limited(3)                                                                    |       | United Kingdom                     |       | —                      |       | 100 |   |
| Tees & Hartlepool  Pilotage Limited(3)                                            |       | United Kingdom                     |       | —                      |       | 100 |   |
| THPA Group Services  Limited(3)                                                            |       | United Kingdom                     |       | —                      |       | 100 |   |
| THPA Finance Limited(3)                                                                    |       | Cayman Islands                     |       | —                      |       | 100 |   |
| Ports Holdings Limited(3)                                                                  |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Ports Hull Limited(3)                                                                   |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Freight Management  Limited(3)                                                          |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Shipping &  Inspection Services Limited(3)                                     |       | United Kingdom                     |       | —                      |       | 100 |   |
| PD Ports Properties Limited(3)                                                             |       | United Kingdom                     |       | —                      |       | 100 |   |
| Prime CSC Holdings Pty  Limited   (formerly BBI CSC Holdings Pty Limited) (10)             |       | Australia                          |       | 100                         |       | 100 |   |
| CSCC US Holdings LLC  (formerly BBI US Holdings LLC)(4)                                    |       | United States of America           |       | 100                         |       | 100 |   |

 

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forthe Financial Year ended 30 June 2010

 

**35. SUBSIDIARIES (CONTINUED)**

 
| ** **                                                                                                                  | ** ** | ** **                               | ** ** | **Ownership interest** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                                                                                | ** ** | **Country of   incorporation** | ** ** | **2010  %**                 | ** ** | **2009  %** | ** ** |
| CSCC Holdings LLC  (formerly BBI CSC Holdings LLC)(4)                                                                       |       | United States of America                 |       | 100                         |       | 100 |   |
| CSCC LLC (formerly BBI CSC  LLC)(4)                                                                                         |       | United States of America                 |       | 100                         |       | 100 |   |
| CSC Operations LLC(4)                                                                                                       |       | United States of America                 |       | 100                         |       | 100 |   |
| Cross-Sound Cable Company  LLC(4)                                                                                           |       | United States of America                 |       | 100                         |       | 100 |   |
| Cross-Sound Cable Company  (New York) LLC(4)                                                                                |       | United States of America                 |       | 100                         |       | 100 |   |
| CSCC TBC Holdings LLC  (formerly BBI TBC Holdings LLC)(4)                                                                   |       | United States of America                 |       | 100                         |       | 100 |   |
| CSCC TBC LLC (formerly BBI  TBC LLC)(4)                                                                                     |       | United States of America                 |       | 100                         |       | 100 |   |
| TBC Operations LLC(4)                                                                                                       |       | United States of America                 |       | 100                         |       | 100 |   |
| Prime Rail Holdings Pty  Limited  (formerly BBI Rail Holdings Pty Limited) (10)                                             |       | Australia                                |       | 100                         |       | 100 |   |
| Babcock & Brown  WA Rail Trust(10)                                                                                 |       | Australia                                |       | 100                         |       | 96 |   |
| Prime WA Rail TC Pty  Limited   (formerly Babcock & Brown WA Rail Holdings Pty Limited)(5), (10)                   |       | Australia                                |       | 100                         |       | — |   |
| Prime MI TC Pty Limited(5)                                                                                                  |       | Australia                                |       | 100                         |       | — |   |
| MI Trust(6), (10)                                                                                                           |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet WA Rail Pty  Limited   (formerly Babcock & Brown WA Rail Pty Limited)(6)                                   |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet Rail Holdings No.1  Pty Limited(6), (10)                                                                            |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet Rail Holdings No.2  Pty Limited(6), (10)                                                                            |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet Rail Employment  Pty Limited(6), (10)                                                                               |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet Rail Pty  Limited(6), (10)                                                                                          |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet Rail NarrowGauge  Pty Limited(6), (10)                                                                              |       | Australia                                |       | 100                         |       | 96 |   |
| WestNet Rail StandardGauge  Pty Limited(6), (10)                                                                            |       | Australia                                |       | 100                         |       | 96 |   |
| Prime US Holdings Pty  Limited   (formerly BBI US Holdings Pty Limited) (10)                                                |       | Australia                                |       | 100                         |       | 100 |   |
| BBI US Holdings II  Corp.(7)                                                                                                |       | United States of America                 |       | —                      |       | 100 |   |
| Prime GP (Aust) Holdings I  Pty Limited   (formerly BBI GP (Aust) Holdings I Pty Limited) (10)                              |       | Australia                                |       | 100                         |       | 100 |   |
| Prime GP (Aust) Holdings  II Pty Limited   (formerly BBI GP (Aust) Holdings II Pty Limited) (10)                            |       | Australia                                |       | 100                         |       | 100 |   |
| Prime GP (Aust) Pty  Limited (formerly BBI GP (Aust) Pty Limited) (10)                                                      |       | Australia                                |       | 100                         |       | 100 |   |
| Prime US Investments Pty  Limited   (formerly BBI US Investments Pty Limited) (10)                                          |       | Australia                                |       | 100                         |       | 100 |   |
| ACN 134 741 567 Pty  Limited   (formerly Prime Infrastructure Holdings Pty Limited) (10)                               |       | Australia                                |       | 100                         |       | 100 |   |
| Prime Europe Holdings Pty  Limited   (formerly BBI Europe Holdings Pty Limited) (10)                                        |       | Australia                                |       | 100                         |       | 100 |   |
| Prime Infrastructure  Europe Holdings (Malta I) Limited   (formerly BBI Europe Holdings (Malta I) Limited)             |       | Malta                                    |       | 100                         |       | 100 |   |
| Prime Infrastructure  Europe Holdings (Malta II) Limited   (formerly BBI Europe Holdings (Malta II) Limited)           |       | Malta                                    |       | 100                         |       | 100 |   |
| Euroports Holdings  S.à.r.l(8)                                                                                         |       | Luxembourg                               |       | 66.1                        |       | 100 |   |
| Euroports Port Acquisitions Luxembourg S.à.r.l   (formerly BBI Port Acquisitions Luxembourg S.à.r.l)(8),(9)  |       | Luxembourg                               |       | 66.1                        |       | 51 |   |
| Euroports Benelux S.A.  (formerly Benelux Port Holdings S.A)(8),(9)                                                         |       | Luxembourg                               |       | 66.1                        |       | 75 |   |
| BBI Spain Port Holdings S.L(8)                                                                                              |       | Spain                                    |       | 66.1                        |       | 100 |   |
| Babcock & Brown  Warehouse Italy S.p.A(8)                                                                          |       | Italy                                    |       | 66.1                        |       | 100 |   |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**35. SUBSIDIARIES (CONTINUED)**

 
| ** **                                                                                   | ** ** | ** **                               | ** ** | **Ownership interest** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                                                 | ** ** | **Country of   incorporation** | ** ** | **2010  %**                 | ** ** | **2009  %** | ** ** |
| Euroports Containers  Meerhout NV   (formerly Water Container Transport NV)(8),(9)           |       | Belgium                                  |       | 66.1                        |       | 51 |   |
| Stecy NV(8),(9)                                                                              |       | Belgium                                  |       | 66.1                        |       | 51 |   |
| Euroports TPS Port Spain  S.L   (formerly BBIPAL TPS Port Spain S.L)(8),(9)                  |       | Spain                                    |       | 66.1                        |       | 51 |   |
| Wickla Management SA (Soparfi) Lux(8),(9)                                                    |       | Luxembourg                               |       | 66.1                        |       | 75 |   |
| Euroports Belgium NV  (formerly Manuport Group NV)(8),(9)                                    |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Manuport Logistics  NV(8),(9)                                                                |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Manuport Services  NV(8),(9)                                                                 |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Euroports Terminals Ghent  NV (formerly Manuport Gent NV)(8),(9)                             |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Euroports Storage Antwerp  NV   (formerly Manuport Storage Antwerpen) NV(8),(9)              |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Euroports Containers 524  NV   (formerly Manuport Container Terminal NV)(8),(9)              |       | Belgium                                  |       | 60                          |       | 68.1 |   |
| CTB Magemon(8),(9)                                                                           |       | Belgium                                  |       | 49.5                        |       | 56.3 |   |
| BBI Italian Port Holdings  S.r.l(8)                                                          |       | Italy                                    |       | 66.1                        |       | 100 |   |
| Estate S.p.A (formerly TRI  (Estate) S.p.A)(8)                                               |       | Italy                                    |       | 52.7                        |       | 79.9 |   |
| Terminal Rinfuse Italia  S.p.A(8)                                                            |       | Italy                                    |       | 52.7                        |       | 79.9 |   |
| Terminal Rinfuse Marghera  S.p.A(8)                                                          |       | Italy                                    |       | 52.7                        |       | 79.9 |   |
| Euroports Finland Oy                                                                         |       | Finland                                  |       | 66.1                        |       | 100 |   |
| Oy Rauma Stevedoring  Limited(8)                                                             |       | Finland                                  |       | 66.1                        |       | 100 |   |
| Oy Botnia Shipping Ab(8)                                                                     |       | Finland                                  |       | 66.1                        |       | 100 |   |
| Oy Timberpak Ab(8)                                                                           |       | Finland                                  |       | 50                          |       | 75 |   |
| SHRU Holdings  GmbH & Co KG(8)                                                      |       | Germany                                  |       | 33                          |       | 50 |   |
| SHRU Holdings Verwaltungs  GmbH(8)                                                           |       | Germany                                  |       | 33                          |       | 50 |   |
| BPH Westerlund Holdings  NV(8),(9)                                                           |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Westerlund Group NV(8),(9)                                                                   |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Euroports Terminals  Leftbank NV   (formerly Westerlund Corporation NV)(8),(9)               |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Westerlund Distribution  NV(8),(9)                                                           |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Westerlund Bulk Terminals  NV(8),(9)                                                         |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Westerlund Stevedoring  NV(8),(9)                                                            |       | Belgium                                  |       | 66.1                        |       | 75 |   |
| Finnwest NV(5),(8)                                                                           |       | Belgium                                  |       | 66.1                        |       | — |   |
| Euroports France SAS  (formerly Westerlund France SAS)(8),(9)                                |       | France                                   |       | 66.1                        |       | 75 |   |
| Euroports Terminaux France  SAS   (formerly Westerlund Terminal France SAS)(8),(9)      |       | France                                   |       | 66.1                        |       | 75 |   |
| Changsu Westerlund  Warehousing Co, Ltd(8),(9)                                               |       | China                                    |       | 50                          |       | 56.3 |   |
| Prime AET&D Holdings  No.1 Pty Limited (formerly BBI EPS Limited)                        |       | Australia                                |       | 100                         |       | 100 |   |
| Prime AET&D Holdings  No.2 Pty Limited   (formerly BBI EPS Cat Pty Limited)              |       | Australia                                |       | 100                         |       | 100 |   |
| Prime AET&D Holdings  No.3 Pty Limited   (formerly BBI Pipe Cat Pty Limited)(4)          |       | Australia                                |       | 100                         |       | 100 |   |
| Prime AET&D Holdings  No.4 Pty Limited   (formerly BB Space Cat Holdings Pty Limited)(4) |       | Australia                                |       | 100                         |       | 100 |   |
| Prime WestNet Holdings Pty  Limited   (formerly ES & L Pty Limited)(4)              |       | Australia                                |       | 100                         |       | 100 |   |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**35. SUBSIDIARIES (CONTINUED)**

 
| ** **                                                              | ** ** | ** **                         | ** ** | **Ownership interest** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                            | ** ** | **Country of  incorporation** | ** ** | **2010  %**                 | ** ** | **2009  %** | ** ** |
| WestNet WA Infrastructure  Holdings Limited(4)                          |       | Australia                          |       | 100                         |       | 100 |   |
| WestNet Infrastructure  Group Limited(4)                                |       | Australia                          |       | 100                         |       | 100 |   |
| Tasmanian Gas Pipeline Pty  Limited   (formerly BBI TGP Pty Limited)(4) |       | Australia                          |       | 100                         |       | 100 |   |
| WestNet Energy Pty  Limited(4)                                          |       | Australia                          |       | 100                         |       | 100 |   |
| WNG Finance Pty Limited  (formerly Alinta Finance Pty Limited)(4)       |       | Australia                          |       | 100                         |       | 100 |   |
| Alinta DBNGP Pty  Limited(4)                                            |       | Australia                          |       | 100                         |       | 100 |   |
| WA Network Holdings Pty  Limited(4)                                     |       | Australia                          |       | 74.1                        |       | 74.1 |   |
| WA Gas Networks Pty  Limited(4)                                         |       | Australia                          |       | 74.1                        |       | 74.1 |   |
| ANetworks Pty Limited(4)                                                |       | Australia                          |       | 100                         |       | 100 |   |
| WestNet Energy Services  Pty Limited(4)                                 |       | Australia                          |       | 100                         |       | 100 |   |
| WestNet Energy AET&D  Holdings No.1 Pty Limited(4)                  |       | Australia                          |       | 100                         |       | 100 |   |
| WestNet Energy AET&D  Holdings No.2 Pty Limited(4)                  |       | Australia                          |       | 100                         |       | 100 |   |

 

----

(1)          Thisentity was established during the current Financial Year.

(2)          Aspart of the recapitalisation of Prime Infrastructure that was completed on20 November 2009, Prime Infrastructure no longer controls DBCT andaccounts for its 50.1% economic interest as an equity accounted investment.

(3)          Prime Infrastructuresold its investment in the PD Ports’ group of companies on 20 November 2009.

(4)          Aspart of the recapitalisation of Prime Infrastructure that was completed on20 November 2009, the AET&D group and Cross Sound Cable wereclassified as held for sale.

(5)          Thiscompany was acquired during the Financial Year.

(6)          Aspart of the recapitalisation of Prime Infrastructure that was undertakenin November 2009, Prime Infrastructure Rail Holdings acquired theremaining 4% of the WestNet Rail group.

(7)          Thiscompany was wound up on 19 April 2010.

(8)          Asdisclosed in note 38, on 28 July 2009 Prime Infrastructure had agreedrevised terms to the Share Subscription Agreement which resulted in the partialdisposal of its investment in Euroports. As a result of the ShareholdersAgreement in place, Prime Infrastructure no longer has control of theEuroports group and therefore equity accounts its investment in Euroports.

(9)          Duringthe year the minority interests in this company were acquired.

(10)    Thesecompanies are members of the Prime Infrastructure Holdings Limitedtax-consolidated group.  PrimeInfrastructure Holdings Limited is the head entity in the tax-consolidatedgroup.

 

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forthe Financial Year ended 30 June 2010

 

**36. ACQUISITION OF BUSINESSES**

 
| **Name of businesses acquired**                 | ** ** | **Principal  activity**                                  | ** ** | **Date of  acquisition** | ** ** | **Proportion of  shares  acquired (%)** | ** ** | **Cost of  acquisition  $’000** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------|------------|-------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| **2010:**                                                      |       |                                                     |       |                          |       |                                              |       |                                      |       |
| Nil                                                            |       |                                                     |       |                          |       |                                              |       |                                      |       |
| **2009:**                                                      |       |                                                     |       |                          |       |                                              |       |                                      |       |
| CTB Magemon(1)                                                 |       | Port and logistic operations                             |       | 30 June 2008             |       | 100                                               |       | 1,420                                     |       |
| Alinta 2000 Limited(1)                                         |       | Gas distribution, asset operation and asset  maintenance |       | 31 August 2007           |       | 100                                               |       | (835                                      | )          |
| Oy Rauma Stevedoring  Limited & Botnia Shipping Ab(1) |       | Port operations                                          |       | 11 October 2007          |       | 100                                               |       | (270                                      | )          |
| SHRU GmbH(1)                                                   |       | Port operations                                          |       | 22 November 2007         |       | 50                                                |       | (386                                      | )          |
| Westerlund Group NV(1)                                         |       | Port operations                                          |       | 20 December 2007         |       | 100                                               |       | 1,939                                     |       |
| Other miscellaneous  acquisitions                              |       | Various                                                  |       | Various                       |       | Various                                           |       | 1,727                                     |       |
| ** **                                                     |       |                                                     |       |                          | ** ** | ** **                                        | ** ** | **3,595**                                 | ** ** |

 

----

(1)   Adjustmentto purchase price provisionally recorded in 2008.

 

**EUROPORTS ACQUISITION**

 

During the Financial Year ended 30 June 2008, Prime Infrastructureundertook a number of acquisitions in the European port sector. In accordancewith AASB 3 ‘Business Combinations’, the acquisitions were only accounted forprovisionally at 30 June 2008 and additional costs were incurred andvarious fair value adjustments were recognised in 2009. This resulted in adecrease in goodwill of $49.1 million.

 

**ALINTA 2000 LIMITED ACQUISITION**

 

On 31 August 2007, Prime Infrastructure, throughPrime WestNet Holdings Pty Limited (formerly ES&L Pty Limited), acquiredfive businesses that were previously owned by Alinta. These businessesincluded:

 

·    Western Australia operations and maintenance business(100%)

 

·    Tasmanian Gas Pipeline (100%)

 

·    WA Gas Networks (74.1%)

 

·    Dampier to Bunbury Natural Gas Pipeline (up to 20%)

 

·    Multinet Gas Network (20.1%)

 

In accordance with AASB 3 ‘Business Combinations’, theacquisition was only accounted for provisionally at 30 June 2008 andadditional costs have been incurred and various fair value adjustments havebeen recognised in 2009. This has resulted in an increase in goodwill of $56.3million.

 

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NOTESTO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**37. SEGMENT INFORMATION**

 

The Group has adopted ‘AASB 8 Operating Segments’ and ‘AASB2007-3 Amendments to Australian Accounting Standards arising from AASB 8’ witheffect from 1 July 2009. AASB 8 requires operating segments to beidentified on the basis of internal reports about components of the Group thatare regularly reviewed by the Executive Management and the Board of Directorsin order to allocate resources to the segment and to assess its performance. Incontrast, the predecessor Standard (AASB 114 Segment Reporting) required anentity to identify two sets of segments (business and geographical). As aresult, following the adoption of AASB 8, the identification of the Group’sreportable segments has changed.

 

In prior years, segment information reported externallywas based on Transport Infrastructure and Energy, Transmission &Distribution. However, information reported by Prime Infrastructure’s ExecutiveManagement to Prime Infrastructure’s Board of Directors and internally, for thepurposes of resource allocation and assessment of performance, is morespecifically focused on the individual assets within the following sectors:

 

·    Utilities — businesses which earn a regulated returnon a regulated or notionally stipulated asset base;

 

·    Fee for Service — businesses which have open accesssystems, which can be regulated via the imposition of price ceilings andfloors, or are unregulated; and

 

·    Corporate and assets held for sale.

 

Prime Infrastructure’s assets are categorised as follows:

 
| **Utilities**      | ** ** | **Fee for Service** | ** ** | **Corporate and held for sale** |
|--------------------|------------|-------------------------------|------------|-----------------------------------------------------|
| **Asset**          | ** ** | **Currency**                  | ** ** | **Asset**                                           | ** ** | **Currency** | ** ** | **Asset** | ** ** | **Currency** |
| DBCT(1)            |       | AUD                           |       | WestNet Rail                                        |   | AUD |   | Corporate |   | AUD |
| Powerco            |       | NZD                           |       | Euroports(1)                                        |   | EUR |   | AET&D(2) |   | AUD |
| IEG Connections(3) |       | GBP                           |       | NGPL                                                |   | USD |   | Cross Sound Cable(2) |   | USD |
|               |       |                          |       | IEG Distribution(3)                                 |   | GBP |   | PD Ports (disposed 20 November 2009) |   | GBP |
|               |       |                          |       | Tas Gas Networks                                    |   | AUD |   | Gascan (disposed 18 May 2009) |   | EUR |

 

----

(1)   On20 November 2009, arrangements were entered into whereby Brookfield InfrastructureAustralia Trust obtained an economic interest of 49.9% in DBCT.Prime Infrastructure also disposed of 33.89% of the economic interest inEuroports on 28 July 2009. As Prime Infrastructure no longer controlsthese assets they are equity accounted. The results of these assets have beenincluded within discontinued operations up until the point their respectivetransactions occurred.

(2)   TheAustralian Energy Transmission & Distribution and Cross Sound Cablebusinesses were classified as held for sale from 20 November 2009.

(3)   IEG’soperations comprise both a Utility component, being its gas and electricitydistribution business located in the United Kingdom, and Fee for Servicecomponent, comprising the Channel Islands distribution business and Power OnConnections business.

 

Information regarding these segments is presented in thefollowing tables. For Prime Infrastructure’s equity accounted investments,amounts reported represent Prime Infrastructure’s proportionate interest. Theamounts reported will not necessarily be the same reported as measured inaccordance with Accounting Standards.

 

Amounts reported for the prior year have been restated toconform to the requirements of AASB 8. The accounting policies of the newreportable segments are the same as the Group’s accounting policies.

 

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forthe Financial Year ended 30 June 2010

 

**37. SEGMENT INFORMATION (CONTINUED)**

 

The following is an analysis of the Group’s proportionalrevenue by reportable operating segment:

 
| ** **                                                   | ** ** | **Prime’s  Interest** | ** ** | **2010  FC’000** | ** ** | **2010  $’000** | ** ** | **2009  FC’000** | ** ** | **2009  $’000** | ** ** |
|--------------------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|----------------------|------------|-----------------------|------------|----------------------|------------|
| **Revenue —  Utilities**                                |       |                       |       |                  |       |                 |       |                  |       |                 |       |
| Dalrymple Bay Coal  Terminal(1),(3)                          |       | 50.1                       | %          | 248,398               |       | 248,398              |       | 265,236               |       | 265,236              |       |
| Powerco(3)                                                   |       | 42                         | %          | 152,291               |       | 121,480              |       | 294,157               |       | 244,695              |       |
| IEG Connections                                              |       | 100                        | %          | 33,493                |       | 59,969               |       | 29,629                |       | 64,208               |       |
| **Total  Revenue - Utilities**                               | ** ** | ** **                 | ** ** | ** **            | ** ** | **429,847**          | ** ** | ** **            | ** ** | **574,139**          | ** ** |
| **Revenue —  Fee for Service**                          |       |                       |       |                  |       |                 |       |                  |       |                 |       |
| WestNet Rail                                                 |       | 100                        | %          | 223,083               |       | 223,083              |       | 210,685               |       | 210,685              |       |
| Euroports(2), (3)                                            |       | 66.1                       | %          | 342,407               |       | 540,611              |       | 401,759               |       | 743,768              |       |
| Natural Gas Pipeline  Company of America(3)                  |       | 26.4                       | %          | 217,557               |       | 246,625              |       | 243,937               |       | 326,250              |       |
| IEG Distribution                                             |       | 100                        | %          | 60,802                |       | 107,023              |       | 64,230                |       | 139,338              |       |
| Tas Gas Networks                                             |       | 100                        | %          | 22,607                |       | 22,607               |       | 18,724                |       | 18,724               |       |
| **Total  Revenue — Fee for Service**                    | ** ** | ** **                 | ** ** | ** **            | ** ** | **1,139,949**        | ** ** | ** **            | ** ** | **1,438,765**        | ** ** |
| **Revenue —  Corporate and assets held for sale**       |       |                       |       |                  |       |                 |       |                  |       |                 |       |
| Australian Energy,  Transmission & Distribution     |       | 100                        | %          | 220,962               |       | 220,962              |       | 273,665               |       | 273,665              |       |
| Cross Sound Cable                                            |       | 100                        | %          | 22,531                |       | 25,564               |       | 22,215                |       | 30,259               |       |
| PD Ports(4)                                                  |       | —                     |       | 49,360                |       | 93,606               |       | 121,567               |       | 264,090              |       |
| Gascan(5)                                                    |       | —                     |       | —                |       | —               |       | 13,062                |       | 28,925               |       |
| Corporate and  eliminations(6),(7)                           |       | 100                        | %          | (5,029                | )          | (5,029               | )          | 2,360                 |       | 2,360                |       |
| **Total  Revenue — Corporate and assets held for sale** | ** ** | ** **                 | ** ** | ** **            | ** ** | **335,103**          | ** ** | ** **            | ** ** | **599,299**          | ** ** |
| **Total  reportable segment revenue**                        | ** ** | ** **                 | ** ** | ** **            | ** ** | **1,904,899**        | ** ** | ** **            | ** ** | **2,612,203**        | ** ** |
| Add: investment revenue                                      |       |                       |       |                  |       | 103,811              |       |                  |       | 111,800              |       |
| Less: revenue of  non-controlled assets                      |       |                       |       |                  |       | (940,594             | )          |                  |       | (152,157             | )          |
| Less: revenue of  discontinued operations                    |       |                       |       |                  |       | (541,248             | )          |                  |       | (1,989,435           | )          |
| Less: items classified as  other income                      |       |                       |       |                  |       | (27,637              | )          |                  |       | (49,387              | )          |
| **Revenue  from continuing operations**                      | ** ** | ** **                 | ** ** | ** **            | ** ** | **499,231**          | ** ** | ** **            | ** ** | **533,024**          | ** ** |

 

----

(1)   PrimeInfrastructure’s economic interest reduced from 100% to 50.1% on 20 November 2009.

(2)   PrimeInfrastructure’s equity interest declined from 100% to 66.1% on 28 July 2009.

(3)   Therevenue and EBITDA shown for these assets represents Prime’s proportionateshare of revenue and EBITDA for the year ended 30 June 2010. WhilstPrime Infrastructure equity accounts these businesses, the ExecutiveManagement and Board of Directors monitor the performance of these assets basedon Prime Infrastructure’s proportionate share of reported results.  In the current year, the results forEuroports represent 100% of its results up to 28 July 2009, after whichdate Prime Infrastructure sold 33.9% of its investment.  In the prior year, the results disclosed forPowerco represent 100% of its results upto 28 February 2009 from whichdate Prime disposed of 58% of its equity interest.

(4)   PDPorts was sold on 20 November 2009.

(5)   Gascanwas sold on 18 May 2009.

(6)   Includedwithin Corporate is a non-cash gain of $392.5 million relating to theconversion of BBI Exchangeable Preference Shares into Prime InfrastructureStapled Securities, which occurred on 20 November 2009.

(7)   Consistsof unallocated revenue and eliminations of inter-segment revenue.

 

The Group’s measure of profit or loss of its reportableoperating segments is its proportionate interest of their EBITDA. The followingis an analysis of Prime’s proportionate interest in EBITDA by reportableoperating segment for the years 2010 and 2009:

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended 30 June 2010

 

**37. SEGMENT INFORMATION (CONTINUED)**

 
| ** **                                                                           | ** ** | **Prime’s  Interest** | ** ** | **2010  FC’000** | ** ** | **2010  $’000** | ** ** | **2009  FC’000** | ** ** | **2009  $’000** | ** ** |
|--------------------------------------------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|----------------------|------------|-----------------------|------------|----------------------|------------|
| **EBITDA —  Utilities**                                                         |       |                       |       |                  |       |                 |       |                  |       |                 |       |
| Dalrymple Bay Coal  Terminal(1)                                                      |       | 50.1                       | %          | 154,249               |       | 154,249              |       | 153,696               |       | 153,696              |       |
| Powerco                                                                              |       | 42                         | %          | 90,612                |       | 72,314               |       | 176,676               |       | 147,400              |       |
| IEG Connections                                                                      |       | 100                        | %          | 24,325                |       | 43,554               |       | 20,677                |       | 44,808               |       |
| **Total  EBITDA — Utilities**                                                   |       |                       |       |                  | ** ** | **270,117**          | ** ** | ** **            | ** ** | **345,904**          | ** ** |
| **EBITDA —  Fee for Service**                                                   |       |                       |       |                  |       |                 |       |                  |       |                 |       |
| WestNet Rail                                                                         |       | 100                        | %          | 109,777               |       | 109,777              |       | 103,631               |       | 103,631              |       |
| Euroports(2)                                                                         |       | 66.1                       | %          | 50,397                |       | 80,222               |       | 50,928                |       | 94,210               |       |
| Natural Gas Pipeline  Company of America                                             |       | 26.4                       | %          | 161,468               |       | 183,078              |       | 179,224               |       | 239,705              |       |
| IEG Distribution                                                                     |       | 100                        | %          | 11,456                |       | 19,518               |       | 13,170                |       | 28,352               |       |
| TasGas Networks                                                                      |       | 100                        | %          | 6,624                 |       | 6,624                |       | 2,975                 |       | 2,975                |       |
| **Total  EBITDA — Fee for Service**                                             |       |                       |       |                  | ** ** | **399,219**          | ** ** | ** **            | ** ** | **468,873**          | ** ** |
| **EBITDA —  Corporate and assets held for sale**                                |       |                       |       |                  |       |                 |       |                  |       |                 |       |
| Australian Energy,  Transmission & Distribution                             |       | 100                        | %          | 114,637               |       | 114,637              |       | 74,173                |       | 74,173               |       |
| Cross Sound Cable                                                                    |       | 100                        | %          | 16,094                |       | 18,276               |       | 15,918                |       | 21,570               |       |
| PD Ports(3)                                                                          |       | —                     |       | 16,451                |       | 31,072               |       | 32,606                |       | 71,403               |       |
| Gascan(4)                                                                            |       | —                     |       | —                |       | —               |       | 6,032                 |       | 13,159               |       |
| Corporate                                                                            |       | 100                        | %          | (43,564               | )          | (43,564              | )          | (29,468               | )          | (29,468              | )          |
| **Total  EBITDA — Corporate and assets held for sale**                          |       |                       |       |                  | ** ** | **120,421**          |       |                  | ** ** | **150,837**          | ** ** |
| **Total  reportable segment EBITDA**                                                 |       |                       | ** ** | ** **            | ** ** | **789,757**          |       |                  | ** ** | **965,614**          | ** ** |
| Less: EBITDA of  non-controlled assets                                               |       |                       |       |                  |       | (559,007             | )          |                  |       | (231,765             | )          |
| Less: net finance expense                                                            |       |                       |       |                  |       | (225,668             | )          |                  |       | (569,889             | )          |
| Less: depreciation,  amortisation and impairment expenses                            |       |                       |       |                  |       | (842,115             | )          |                  |       | (1,161,426           | )          |
| Less: net hedge expense                                                              |       |                       |       |                  |       | (38,588              | )          |                  |       | (227,033             | )          |
| Less: net foreign exchange  loss                                                     |       |                       |       |                  |       | (44,259              | )          |                  |       | (27,224              | )          |
| Add: items not included in  EBITDA(6)                                                |       |                       |       |                  |       | 286,883              |       |                  |       | 2,281                |       |
| Add: net (loss)/gain on  disposal of operations and investments                      |       |                       |       |                  |       | (309,214             | )          |                  |       | 102,990              |       |
| **Loss  before income tax from continuing and discontinued operations for the year** |       |                       | ** ** | ** **            | ** ** | **(942,211**         | **)**      |                  | ** ** | **(1,146,452**       | **)**      |
| Income tax  (expense)/benefit from continuing and discontinued operations            |       |                       | ** ** | ** **            |       | (6,386               | )          | ** **            |       | 169,322              |       |
| **Loss for  the year**                                                               |       |                       | ** ** | ** **            | ** ** | **(948,597**         | **)**      | ** **            | ** ** | **(977,130**         | **)**      |

 

----

(1)   PrimeInfrastructure’s economic interest reduced from 100% to 50.1% on 20 November 2009.

(2)   PrimeInfrastructure’s equity interest declined from 100% to 66.1% on 28 July 2009.

(3)   PDPorts was disposed on 20 November 2009.

(4)   Gascanwas disposed on 18 May 2009.

(5)   Itemsnot included in EBITDA predominantly relates to the gain of $392.5 millionrecognised on conversion of BBI Exchangeable Preference Shares intoPrime Infrastructure Stapled Securities, offset by impairments of relatedparty loans of $95.7 million.

 

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forthe Financial Year ended 30 June 2010

 

**37. SEGMENT INFORMATION (CONTINUED)**

 

**SEGMENT ASSETS AND LIABILITIES**

 

For the purpose of monitoring segment performance andallocating resources between segments, Prime Infrastructure’s ExecutiveManagement and Board of Directors monitor the assets and liabilities of theGroup, including investments accounted for using the equity method,attributable to each segment.

 

For the purpose of monitoring segment performance byPrime Infrastructure’s Executive Management and Board of Directors, allliabilities apart from current and deferred tax liabilities and intercompanyloans are allocated to reportable segments.

 

Other includes the assets and liabilities held bycorporate entities within the Prime Infrastructure group.

 

The following is an analysis of the Group’s assets andliabilities by reportable operating segment for the years under review:

 
| ** **                                     | ** ** | ** **                 | ** ** | **Assets**           | ** ** | **Liabilities**      | ** ** |
|------------------------------------------------|------------|----------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                     | ** ** | **Prime’s  Interest** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Utilities**                                  |       |                       |       |                 |       |                 |       |   |   |   |   |
| Dalrymple Bay Coal  Terminal(1),(2)            |       | 50.1                       | %          | 110,448              |       | 2,544,731            |       | — |   | 1,983,804 |   |
| Powerco(2)                                     |       | 42                         | %          | 30,653               |       | 33,457               |       | — |   | — |   |
| IEG Connections                                |       | 100                        | %          | 476,335              |       | 507,784              |       | 407,973 |   | 397,080 |   |
| **Fee for  Service**                           |       |                       |       |                 |       |                 |       |   |   |   |   |
| WestNet Rail                                   |       | 100                        | %          | 1,266,606            |       | 1,255,368            |       | 797,744 |   | 878,383 |   |
| Euroports(1),(2)                               |       | 66.1                       | %          | 30,846               |       | 2,310,034            |       | — |   | 1,898,174 |   |
| Natural Gas Pipeline  Company of America(2)    |       | 26.4                       | %          | 225,655              |       | 348,739              |       | — |   | — |   |
| IEG Distribution                               |       | 100                        | %          | 275,860              |       | 300,260              |       | 234,974 |   | 277,751 |   |
| TasGas Networks                                |       | 100                        | %          | 211,259              |       | 207,161              |       | 43,811 |   | 50,558 |   |
| **Corporate  and assets held for sale**        |       |                       |       |                 |       |                 |       |   |   |   |   |
| Held for sale assets(3)                        |       | 100                        | %          | 1,913,118            |       | 2,569,341            |       | 1,958,130 |   | 1,921,297 |   |
| PD Ports(4)                                    |       | —                     |       | —               |       | 1,423,697            |       | — |   | 1,135,506 |   |
| Corporate and other(5)                         |       | 100                        | %          | 1,534,969            |       | 1,012,090            |       | 397,964 |   | 2,249,736 |   |
| **Consolidated  total assets and liabilities** |       |                       | ** ** | **6,075,749**        | ** ** | **12,512,662**       | ** ** | **3,840,596** | ** ** | **10,792,289** | ** ** |

 

----

(1)   DBCTand Euroports were wholly-owned subsidiaries at 30 June 2009 and weretherefore consolidated in the assets and liabilities of the Group.

(2)   Representscarrying value of Prime Infrastructure’s equity accounted investment.

(3)   RepresentsCross Sound Cable and AET&D, which are held for sale as at30 June 2010.

(4)   PDPorts was disposed of on 20 November 2009.

(5)   Unallocatedassets and liabilities include the assets and liabilities of the corporateentities such as cash at bank, intercompany loans with associates and taxbalances.

 

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forthe Financial Year ended 30 June 2010

 

**37. SEGMENT INFORMATION (CONTINUED)**

** **

**GEOGRAPHICAL INFORMATION**

 

The Group operates in four principal geographical areas —Australia, North America, Europe and New Zealand. The Group’s EBITDA (PrimeInfrastructure’s proportionate share) before corporate expenses and totalassets (on a statutory basis) are detailed below:

 
| ** **    | ** ** | **Revenue  (Proportional** | ** ** | **EBITDA  (Proportional)** | ** ** | **Total assets  (Statutory)** | ** ** |
|---------------|------------|----------------------------|------------|----------------------------|------------|------------------------------------|------------|
| ** **    | ** ** | **2010  $’000**       | ** ** | **2009  $’000**       | ** ** | **2010  $’000**               | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Australia     |       | 710,021                    |       | 770,670                    |       | 341,723                            |       | 305,007 |   | 4,777,622 |   | 6,113,372 |   |
| North America |       | 272,189                    |       | 356,509                    |       | 201,354                            |       | 261,275 |   | 484,433 |   | 1,176,035 |   |
| Europe        |       | 801,209                    |       | 1,240,329                  |       | 174,366                            |       | 251,932 |   | 783,041 |   | 4,790,058 |   |
| New Zealand   |       | 121,480                    |       | 244,695                    |       | 72,314                             |       | 147,400 |   | 30,653 |   | 433,197 |   |
| **Total**     | ** ** | **1,904,899**              | ** ** | **2,612,203**              | ** ** | **789,757**                        | ** ** | **965,614** | ** ** | **6,075,749** | ** ** | **12,512,662** | ** ** |

 

**38. DISCONTINUED OPERATIONS**

 

**EUROPORTS GROUP**

 

On 28 July 2009, Prime Infrastructure announcedthat it had agreed revised terms to the Share Subscription Agreement pursuantto which a consortium of investors consisting of Antin Infrastructure Partners(Antin IP) and Arcus European Infrastructure Fund I (Arcus) agreed to invest inEuroports Holdings S.á.r.l (Euroports).

 

The agreed price under the Amended Share SubscriptionAgreement for the 40% interest was €141.5 million ($243.3 million). The agreedprice included equity contribution, interest-bearing loans and non-share equityinterests (debt). Furthermore, included within the 33.89% interest acquired todate is a convertible bond held by Antin IP (€8.05m), which if converted, wouldresult in additional equity of 5.97% being issued. As at 30 June 2010and to the date of this report, the bond had not been converted.

 

The amended Share Subscription Agreement includes a shareequalisation process in years 2012 and 2013 based on the performance ofEuroports through that time. Depending on Euroports performance, the aggregateequity owned by Antin IP and Arcus will be adjusted from the potential up-front40% (including conversion of the convertible bond) holdings to an amendedholding of between 34% and 65% (to be held between Antin IP and Arcus on thesame proportional basis as the up-front holding assuming Antin IP converts itsconvertible bond into equity).

 

The net proceeds received from the share subscriptionagreement were used to repay $60.2 million of financial liabilities (€35.0m). Aloss of $82.6 million was recognised on this disposal.   An impairment of $111.1 million wasrecognised on the anticipated outcome in respect of the Share EqualisationAdjustment mechanism.

 

In addition, the Euroports group was classified as heldfor sale in the comparative Financial Year.

 

**DALRYMPLE BAY COAL TERMINAL**

 

As part of the recapitalisation of Prime Infrastructurewhich was completed on 20 November 2009, Prime Infrastructure Trust issuedConvertible Notes to Brookfield Infrastructure Australia Trust for $295.4million and entered into a number of agreements which conferred a 49.9%economic interest in DBCT to Brookfield Infrastructure Australia Trust.

 

Under the Convertible Note arrangements entered into withBrookfield Infrastructure Australia Trust, Prime Infrastructure remainedresponsible for the outcome of the subsequently settled tax dispute with theATO regarding payments made at DBCT. This dispute was resolved subsequent to year end (refer note 33 and41).  An immaterial amount is expected tobe paid to Brookfield Infrastructure Australia Trust once cash has beenreceived from the ATO. Prime Infrastructure is also responsible for taxes,duties or other government imposed levies arising from Brookfield or itsassignees electing to convert under the terms of the Convertible Notes, intoshares and units in the relevant DBCT entities, and for other consent relatedcosts (with the latter capped at $17.6 million).

 

In accordance with Accounting Standards,Prime Infrastructure is deemed to have joint control of Dalrymple Bay CoalTerminal, and therefore equity accounts its investment from the date at whichcontrol was lost (20 November 2009). The net proceeds of $295.4 millionreceived from this transaction were used to repay Corporate debt within theGroup. The transaction resulted in a gain of $20.5 million being recognisedwhich is included within discontinued operations.

 

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forthe Financial Year ended 30 June 2010

 

**38. DISCONTINUED OPERATIONS (CONTINUED)**

 

**PD PORTS**

 

As part of the recapitalisation ofPrime Infrastructure which was completed on 20 November 2009,Brookfield acquired 100% of Prime Infrastructure’s interests in PD Ports fornominal proceeds. As part of this transaction, Brookfield repaid the £100.0million ($181.0 million) in term and acquisition facilities within PD Ports andthe termination costs of associated swaps. This transaction resulted inPrime Infrastructure recognising a loss of $247.2 million which isincluded within discontinued operations.

 

**HELD FOR SALE ASSETS: AUSTRALIAN ENERGY TRANSMISSION &DISTRIBUTION GROUP AND CROSS SOUND CABLE**

 

As part of the recapitalisation ofPrime Infrastructure which was completed on 20 November 2009,Prime Infrastructure announced that it would classify its interests inAET&D and Cross Sound Cable as held for sale. Prime Infrastructure andBrookfield Asset Management will both use reasonable endeavours to effect asale of the assets as soon as practicable. Prime Infrastructure has issuedan option to the former BEPPA holders to receive any proceeds in relation tothe disposal of the AET&D assets, whilst a twelve month option (with anoption in favour of Brookfield for a further two periods of twelve months each)has been issued to Brookfield to acquire Cross Sound Cable.

 

Prime Infrastructure has written down its investmentin AET&D to nil value and this has resulted in an impairment of $662.6million being recognised in the current financial year.  This has been disclosed within discontinuedoperations.

 

**2009:**

 

**PowercoNew Zealand**

 

On 26 February 2009, Prime Infrastructure sold58% of its Powerco New Zealand operations to Queensland Investment Corporation.The net equity realised for the 58% equity interest amounted to NZ$421.2million. The transaction excluded Powerco Tasmania (Tas Gas group), whichremained within the Prime Infrastructure group. The net proceeds receivedfrom the sale were applied to reduce Prime Infrastructure corporate debtas well as fund the acquisition of a further stake in WestNet Rail and repaythe associated mezzanine debt commitments. A profit of NZ$143.3 million ($123.7million) was recognised on the disposal. Prime Infrastructure accounts forits remaining 42% investment in Powerco New Zealand as an equity accountedinvestment (refer note 14).

 

**Disposalof Gascan business**

 

On 18 May 2009, International Energy Group, awholly-owned subsidiary of Prime Infrastructure completed a Sale andPurchase Agreement for the sale of its wholly-owned subsidiary GasesCombustiveis S.A. The net proceeds from the disposal amounted to £40.1 million($83.0 million) and were used to pay down asset level debt within IEG. A lossof $20.6 million was recognised on this disposal.

 

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forthe Financial Year ended 30 June 2010

 

**38. DISCONTINUED OPERATIONS (CONTINUED)**

 
| ** **                                                                                               | ** ** | **Consolidated**     | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                               | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **Profit  from discontinued operations:**                                                                |       |                 |       |   |   |
| Revenue                                                                                                  |       | 544,927              |       | 2,005,282 |   |
| Other income                                                                                             |       | 15,561               |       | 74,670 |   |
| **Total  income**                                                                                        | ** ** | **560,578**          | ** ** | **2,079,952** | ** ** |
| Share of profits from  associates and jointly controlled entities accounted for using the equity  method |       | 10,388               |       | 4,383 |   |
| Employee benefit expense                                                                                 |       | (79,444              | )          | (312,489 | ) |
| Transmission and direct  costs                                                                           |       | (152,292             | )          | (805,141 | ) |
| Depreciation, amortisation  and impairment expense                                                       |       | (713,297             | )          | (999,672 | ) |
| Finance costs                                                                                            |       | (168,950             | )          | (379,985 | ) |
| Net hedge loss                                                                                           |       | (58,238              | )          | (114,137 | ) |
| Operating and management  charges                                                                        |       | (64,743              | )          | (339,740 | ) |
| Other expenses                                                                                           |       | (235                 | )          | (46,159 | ) |
| **Total  expense**                                                                                       | ** ** | **(1,226,811**       | **)**      | **(2,992,940** | **)** |
| **Loss  before income tax expense**                                                                      | ** ** | **(666,233**         | **)**      | **(912,988** | **)** |
| Attributable income tax  (expense)/benefit (note 7)                                                      |       | (5,446               | )          | 85,676 |   |
| **Loss  after income tax**                                                                               | ** ** | **(671,679**         | **)**      | **(827,312** | **)** |
| Loss on disposal of  business (note 41(c))                                                               |       | (329,831             | )          | (20,649 | ) |
| Profit on disposal of  business (note 41(c))                                                             |       | 20,618               |       | 123,692 |   |
| **Loss from  discontinued operations**                                                                   | ** ** | **(980,892**         | **)**      | **(724,269** | **)** |
| **Cash  flows from discontinued operations:**                                                            |       |                 |       |   |   |
| Net cash flows from  operating activities                                                                |       | 81,785               |       | 298,281 |   |
| Net cash flows from  investing activities                                                                |       | (203,612             | )          | (529,501 | ) |
| Net cash flows from  financing activities                                                                |       | 23,941               |       | 249,178 |   |
| **Net cash  flows**                                                                                      | ** ** | **(97,886**          | **)**      | **17,958** | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**38. DISCONTINUED OPERATIONS (CONTINUED)**

 

The major classes of assets and liabilities comprisingthe businesses classified as held for sale are AET&D and Cross Sound Cable(30 June 2010) and Euroports (30 June 2009) are as follows:

 
| ** **                                                   | ** ** | **Consolidated**     | ** ** |
|--------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                   | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CURRENT ASSETS**                                           |       |                 |       |   |   |
| Cash and cash equivalents  (note 41(a))                      |       | 96,100               |       | 86,192 |   |
| Trade and other  receivables                                 |       | 38,663               |       | 161,326 |   |
| Other financial assets                                       |       | 4,960                |       | 2,052 |   |
| Inventories                                                  |       | 1,040                |       | 1,946 |   |
| Current tax receivables                                      |       | 12,061               |       | 1,219 |   |
| Other current assets                                         |       | 5,867                |       | 39,451 |   |
| **Total**                                                    | ** ** | **158,691**          | ** ** | **292,186** | ** ** |
| **NON-CURRENT  ASSETS**                                      |       |                 |       |   |   |
| Trade and other  receivables                                 |       | —               |       | 2,555 |   |
| Other financial assets                                       |       | —               |       | 3,165 |   |
| Cash held on restricted  deposit                             |       | 1,028                |       | 22,535 |   |
| Investments accounted for  using the equity method (note 14) |       | 260,000              |       | 14,399 |   |
| Property, plant and  equipment (note 15)                     |       | 1,314,181            |       | 670,277 |   |
| Investment property (note  16)                               |       | —               |       | 93 |   |
| Goodwill (note 17)                                           |       | —               |       | 430,008 |   |
| Other intangible assets  (note 18)                           |       | 119,009              |       | 745,041 |   |
| Deferred tax assets                                          |       | 39,001               |       | 41,785 |   |
| Other non-current assets                                     |       | 21,208               |       | 1,690 |   |
| **Total**                                                    | ** ** | **1,754,427**        | ** ** | **1,931,548** | ** ** |
| **Total  assets classified as held for sale**                | ** ** | **1,913,118**        | ** ** | **2,223,734** | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**38. DISCONTINUED OPERATIONS (CONTINUED)**

 
| ** **                                                  | ** ** | **Consolidated**     | ** ** |
|-------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                  | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CURRENT  LIABILITIES**                                    |       |                 |       |   |   |
| Trade and other payables                                    |       | (70,788              | )          | (164,946 | ) |
| Borrowings                                                  |       | (745,656             | )          | (374,361 | ) |
| Other financial  liabilities                                |       | (55,698              | )          | (9,986 | ) |
| Current tax payable                                         |       | —               |       | (6,159 | ) |
| Provisions                                                  |       | (14,860              | )          | (62,421 | ) |
| Other current liabilities                                   |       | (928                 | )          | (42,052 | ) |
| **Total**                                                   | ** ** | **(887,930**         | **)**      | **(659,925** | **)** |
| **NON-CURRENT  LIABILITIES**                                |       |                 |       |   |   |
| Trade and other payables                                    |       | (2,813               | )          | (779 | ) |
| Borrowings                                                  |       | (703,879             | )          | (775,723 | ) |
| Other financial  liabilities                                |       | (22,751              | )          | (56,491 | ) |
| Deferred tax liability                                      |       | (280,958             | )          | (368,416 | ) |
| Provisions                                                  |       | (52,410              | )          | (7,487 | ) |
| Other non-current  liabilities                              |       | (7,389               | )          | (38,334 | ) |
| **Total**                                                   | ** ** | **(1,070,200**       | **)**      | **(1,247,230** | **)** |
| **Total  liabilities associated with assets held for sale** | ** ** | **(1,958,130**       | **)**      | **(1,907,155** | **)** |
| **Net  (liabilities)/assets classified as held for sale**   | ** ** | **(45,012**          | **)**      | **316,579** | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**39.********KEYMANAGEMENT PERSONNEL (KMP) REMUNERATION**

** **

**(a) KEY MANAGEMENT PERSONNEL (KMP) REMUNERATION(EXCLUDING DIRECTORS)**

 

The aggregate compensation of the KMP (excludingDirectors) of the Group is set out below:

 
| ** **                      | ** ** | **Consolidated** | ** ** |
|---------------------------------|------------|------------------|------------|
| ** **                      | ** ** | **2010  $**      | ** ** | **2009  $** | ** ** |
| Short-term employment  benefits |       | 5,987,349        |       | 3,729,728 |   |
| Post-employment benefits        |       | 72,305           |       | 251,486 |   |
| Share-based payments            |       | 474,733          |       | (689,613 | ) |
| ** **                      | ** ** | **6,534,387**    | ** ** | **3,291,601** | ** ** |

 

Certain KMP (excluding Independent Directors) were notpaid directly by the Group during the Financial Year. These KMP wereremunerated by the Babcock & Brown Infrastructure Management PtyLimited (the Manager) up to 31 October 2009. Upon separation from Babcock &Brown, all KMP were employed directly by Prime Infrastructure. The share basedpayments are negative in the prior year as a result of Babcock & BrownLimited entering administration. Accordingly, these share based payments willnot be exercised and the value ascribed to these has been reversed.

 

**(b) REMUNERATION OF DIRECTORS**

 

The aggregate compensation to the Directors of the Groupis set out below:

 
| ** **                      | ** ** | **Consolidated** | ** ** |
|---------------------------------|------------|------------------|------------|
| ** **                      | ** ** | **2010  $**      | ** ** | **2009  $** | ** ** |
| Short-term employment  benefits |       | 532,113          |       | 441,308 |   |
| Post-employment benefits        |       | 44,021           |       | 85,857 |   |
| Share-based payments            |       | —           |       | — |   |
| ** **                      | ** ** | **576,134**      | ** ** | **527,165** | ** ** |

 

Mr Green and Mr Hofbauer resigned on 15 September 2008and 12 November 2008 respectively in the prior year. No amounts were paiddirectly to these Directors as it was included within the management fee paidto Babcock & Brown.

 

**(c) REMUNERATION OF KMP AND DIRECTORS**

 

The aggregate compensation to the KMP and Directors ofthe Group is set out below:

 
| ** **                      | ** ** | **Consolidated** | ** ** |
|---------------------------------|------------|------------------|------------|
| ** **                      | ** ** | **2010  $**      | ** ** | **2009  $** | ** ** |
| Short-term employment  benefits |       | 6,519,462        |       | 4,171,036 |   |
| Post-employment benefits        |       | 116,326          |       | 337,343 |   |
| Share-based payments            |       | 474,733          |       | (689,613 | ) |
| ** **                      | ** ** | **7,110,521**    | ** ** | **3,818,766** | ** ** |

 

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forthe Financial Year ended 30 June 2010

 

**39.********KEYMANAGEMENT PERSONNEL (KMP) REMUNERATION (CONTINUED)**

** **

**(d) KMP EQUITY HOLDINGS**

 

**Fully paidordinary Stapled Securities of Prime Infrastructure Holdings Limited**

 
| **2010**        | ** ** | **Balance at  1 July 2009  No.** | ** ** | **Granted as  remuneration  No.** | ** ** | **Received on  exercise of  options  No.** | ** ** | **Net other  change  No.** | ** ** | **Balance at  30 June 2010  No.** | ** ** | **Balance held  nominally  No.** | ** ** |
|-----------------|------------|-------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------|------------|---------------------------------------|------------|
| Mr J W Kendrew  |       | 137,230                                         |       | —                                 |       | —                                               |       | (132,751                        | )          | 4,479                                            |       | —                                |       |
| Mr B W Kingston |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr J M Sellar   |       | 4,066                                           |       | —                                 |       | —                                               |       | (4,066                          | )          | —                                           |       | —                                |       |
| Mr M T Cummings |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr R C Smith    |       | 91,553                                          |       | —                                 |       | —                                               |       | (91,548                         | )          | 5                                                |       | —                                |       |
| Mr M J Ryan     |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |

 
| **2009**               | ** ** | **Balance at  1 July 2008  No.** | ** ** | **Granted as  remuneration  No.** | ** ** | **Received on  exercise of  options  No.** | ** ** | **Net other  change  No.** | ** ** | **Balance at  30 June 2009  No.** | ** ** | **Balance held  nominally  No.** | ** ** |
|------------------------|------------|-------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------|------------|---------------------------------------|------------|
| Mr J W Kendrew         |       | 137,230                                         |       | —                                 |       | —                                               |       | —                          |       | 137,230                                          |       | —                                |       |
| Mr J M Sellar          |       | 574,298                                         |       | —                                 |       | —                                               |       | (570,232                        | )          | 4,066                                            |       | —                                |       |
| Mr M T Cummings        |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr R C Smith(3)        |       | —                                          |       | —                                 |       | —                                               |       | 91,553                          |       | 91,553                                           |       | —                                |       |
| Mr J M Cleland(1),(3)  |       | 423,311                                         |       | —                                 |       | —                                               |       | 400,000                         |       | 823,311                                          |       | —                                |       |
| Mr D J Robinson(2),(3) |       | 22,859                                          |       | —                                 |       | —                                               |       | 40,000                          |       | 62,859                                           |       | —                                |       |
| Mr M J Ryan            |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |

 

----

(1)   Thiswas the number of fully paid Stapled Securities held by Mr Cleland as at 18 February 2009,which was the date that he no longer acted as Chief Operating Officer —Transport.

(2)   Thiswas the number of fully paid Stapled Securities held by Mr Robinson as at 24 November 2008,which was the date that he no longer acted as Chief Operating Officer —Transport Europe.

(3)   Thenumber of fully paid Stapled Securities held by these KMP is only disclosed forthose periods whereby they were considered to be KMP in accordance withAccounting Standards.

 

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NOTESTO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**39.********KEYMANAGEMENT PERSONNEL (KMP) REMUNERATION (CONTINUED)**

** **

**(d) KMP EQUITY HOLDINGS (CONTINUED)**

 

**BBIExchangeable Preference Shares (BBI EPS)**

 

As part of the recapitalisation ofPrime Infrastructure that was completed in November 2009, the BBIExchange Preference Shares were converted into Prime InfrastructureStapled Securities and the outstanding accrued and deferred dividends were paidout to EPS holders. Accordingly, these hybrid securities are no longeroutstanding as at 30 June 2010.

 
| **2009**               | ** ** | **Balance at  1 July 2008  No.** | ** ** | **Granted as  remuneration  No.** | ** ** | **Received on  exercise of  options  No.** | ** ** | **Net other  change  No.** | ** ** | **Balance at  30 June 2009  No.** | ** ** | **Balance held  nominally  No.** | ** ** |
|------------------------|------------|-------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------|------------|---------------------------------------|------------|
| Mr J W Kendrew         |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr J M Sellar          |       | 109,072                                         |       | —                                 |       | —                                               |       | (109,072                        | )          | —                                           |       | —                                |       |
| Mr M T Cummings        |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr R C Smith(3)        |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr J M Cleland(1),(3)  |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr D J Robinson(2),(3) |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr M J Ryan            |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |

 

----

(1)   Thiswas the number of BBI EPS held by Mr Cleland as at 18 February 2009, whichwas the date that he no longer acted as Chief Operating Officer — Transport.

(2)   Thiswas the number of BBI EPS held by Mr Robinson as at 24 November 2008,which was the date that he no longer acted as Chief Operating Officer —Transport Europe.

(3)   Thenumber of BBI EPS held by these KMP is only disclosed for those periods wherebythey were considered to be KMP in accordance with Accounting Standards.

 

**Fully paidPINNZ SPARCS**

 
| **2010**        | ** ** | **Balance at  1 July 2009  No.** | ** ** | **Granted as  remuneration  No.** | ** ** | **Received on  exercise of  options  No.** | ** ** | **Net other  change  No.** | ** ** | **Balance at  30 June 2010  No.** | ** ** | **Balance held  nominally  No.** | ** ** |
|-----------------|------------|-------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------|------------|---------------------------------------|------------|
| Mr J W Kendrew  |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr B W Kingston |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr J M Sellar   |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr M T Cummings |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr R C Smith    |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr M J Ryan     |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |

 
| **2009**               | ** ** | **Balance at  1 July 2008  No.** | ** ** | **Granted as  remuneration  No.** | ** ** | **Received on  exercise of  options  No.** | ** ** | **Net other  change  No.** | ** ** | **Balance at  30 June 2009  No.** | ** ** | **Balance held  nominally  No.** | ** ** |
|------------------------|------------|-------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------|------------|---------------------------------------|------------|
| Mr J W Kendrew         |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr J M Sellar          |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr M T Cummings        |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr R C Smith(3)        |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr J M Cleland(1),(3)  |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr D J Robinson(2),(3) |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |
| Mr M J Ryan            |       | —                                          |       | —                                 |       | —                                               |       | —                          |       | —                                           |       | —                                |       |

 

----

(1)   Thiswas the number of fully paid PINNZ SPARCS held by Mr Cleland as at 18 February 2009,which was the date that he no longer acted as Chief Operating Officer —Transport.

(2)   Thiswas the number of fully paid PINNZ SPARCS held by Mr Robinson as at 24 November 2008,which was the date that he no longer acted as Chief Operating Officer — TransportEurope.

(3)   Thenumber of fully paid PINNZ SPARCS held by these KMP is only disclosed for thoseperiods whereby they were considered to be KMP in accordance with AccountingStandards.

 

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NOTESTO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**40. RELATED PARTY DISCLOSURES**

 

**(a)  EQUITY INTERESTS IN RELATED PARTIES**

 

**Equityinterests in subsidiaries**

 

Details of the percentage of ordinary shares held insubsidiaries are disclosed in note 35 to the Financial Statements.

 

**Equityinterests in associates and joint ventures**

 

In the current Financial Year Prime Infrastructuresold 33.89% of its investment in Euroports and entered into arrangementsregarding a 49.9% economic interest in Dalrymple Bay Coal Terminal. In theprior year Prime Infrastructure sold 58% of its Powerco New Zealandoperations. Further information in relation to equity interests in associatesand joint ventures is disclosed in note 14 to the Financial Statements.

 

**(b) TRANSACTIONS WITH OTHER RELATED PARTIES**

 

Other related parties include:

 

·    the parent entity

 

·    entities with significant influence over PrimeInfrastructure

 

·    associates

 

·    joint ventures in which the entity is a venturer

 

·    subsidiaries

 

·    other related parties.

 

Amounts receivable from and payable to related partiesare disclosed in notes 9, 10, and 19 to the Financial Statements. All loansadvanced to and payable to related parties are unsecured. Interest is chargedon certain loans at a variable rate based on the BBSW plus a margin. During thecurrent year, Prime Infrastructure Holdings Limited (the Company) receivedinterest of $132,588,611 (2009: $153,466,000) from its intercompany loans withits wholly owned subsidiaries.

 

An impairment charge on intercompany loans fromwholly-owned subsidiaries of $1,032,082 (2009: 611,311,943) was recognised inthe current Financial Year. This impairment charge eliminates fully onconsolidation. An impairment charge on loans to an associate of $95,657,953million has been recognised in the current Financial Year (2009: nil). In theprior year an impairment on investment in subsidiaries of $354,961,010 wasrecognised.

 

Transactions and balances between the Company and itssubsidiaries were eliminated in full in the preparation of consolidatedFinancial Statements of the Group.

 

**Transactionsinvolving the parent entity:**

 

As at 30 June 2010, Prime InfrastructureHoldings Limited has recognised a net payable of $179,395,689 (2009:$165,311,714) from the members of the tax-consolidated group for the transferof current and prior year tax losses.

 

**Transactionsinvolving other related parties:**

 

During the current Financial Year Prime Infrastructurecancelled the management agreement with its former external manager, Babcock &Brown Infrastructure Management Pty Limited (a subsidiary of Babcock &Brown). As a result, Babcock & Brown Limited and its subsidiaries wereno longer considered to be a related party from 20 November 2009.

 

The key components of the management agreement prior tocancellation included:

 

·    no Incentive Fee was payable until the earlier ofsustained trading at $1.00 per Stapled Security, with such value being adjustedwhere further Prime Infrastructure securities are issued or three yearsfrom the date of change. If the return for a relevant period is less than thebenchmark return, the deficit is carried forward for three years.

 

·    the Base Fee was restructured and had two components:

 

·    the Responsible Entity Fee, being a fee for theservices of the Responsible Entity, was set at $1.0 million per annum indexedfor CPI from 1 July 2008.

 

·    the Manager Base Fee, being the remainder of the BaseFee.

 

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NOTESTO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**40. RELATED PARTY DISCLOSURES (CONTINUED)**

** **

**(b) TRANSACTIONS WITH OTHER RELATED PARTIES (CONTINUED)**

 

**Transactionsinvolving other related parties (continued):**

 

The Responsible Entity Fee and Manager Base Fee make upthe Total Base Fee, which is calculated in accordance with the followingformula:

 

·    0.1% for the first $400.0 million of marketcapitalisation;

 

·    1.0% of market capitalisation between $400.0 millionand $2.0 billion; and

 

·    0.75% of market capitalisation above $2.0 billion.

 

The Total Base Fee for the 2009 Financial Year and 2010Financial Year (until cancellation) was calculated as set out above.

 

As part of the separation from Babcock & Brown,Prime Infrastructure Trust paid a fee of $5.28 million for a subsidiary ofBabcock & Brown to remain as the Trustee of the Trust for a period ofup to 31 August 2012. This arrangement was subsequently cancelled on 19 November 2010.

 

During the year, the following amounts were paid/payableto Babcock & Brown Limited (or a related entity of Babcock &Brown). All amounts were based on commercial terms.

 
| ** **                                                                                                                    | ** ** | **2010  $** | ** ** | **2009  $** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
| **Paid/payable  by the Prime Infrastructure Group:**                                                                     |       |        |       |        |       |
| Base fee including present  value of fee for providing services to the Responsible Entity to  Prime Infrastructure Trust |       | 5,777,340   |       | 994,544     |       |
| Management service fee                                                                                                        |       | 4,146,215   |       | 15,809,729  |       |
| Financial advisory fee in  connection with the disposal of assets                                                             |       | —      |       | 9,112,501   |       |
| Financial advisory fee in  connection with refinancing activities                                                             |       | —      |       | 846,342     |       |
| Reimbursement of costs in  connection with the disposal of assets(1)                                                          |       | —      |       | 4,248,285   |       |
| Reimbursement of costs in  connection with the acquisition of assets(1)                                                       |       | —      |       | 2,042,186   |       |
| Reimbursement of costs in  connection with failed bids(1)                                                                     |       | —      |       | 632,430     |       |
| Accounting services paid  by Cross Sound Cable                                                                                |       | —      |       | 221,947     |       |
| Reimbursement of operating  costs                                                                                             |       | 3,879,828   |       | —      |       |
| Purchase of assets                                                                                                            |       | 92,500      |       | —      |       |

 

----

(1)   Theseamounts relate to the reimbursement of costs incurred by Babcock &Brown in relation to acquisitions, disposals or refinancing activitiesperformed on behalf of Prime Infrastructure. These expenses are charged toPrime Infrastructure at cost.

 

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NOTESTO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**40. RELATED PARTY DISCLOSURES (CONTINUED)**

** **

**(b) TRANSACTIONS WITH OTHER RELATED PARTIES (CONTINUED)**

 

**Transactionsinvolving other related parties (continued):**

 

During the year, the following transactions were madewith associates. All amounts were based on commercial terms.

 
| ** **                                                                  | ** ** | **2010  $** | ** ** | **2009  $** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
| **Received/receivable  from associates:**                                   |       |        |       |        |       |
| Interest received from  associates(1)                                       |       | 90,125,600  |       | 81,423,606  |       |
| Unwinding of unrealised  discount on loans to associates                    |       | 657,055     |       | —      |       |
| Dividends received from  associates                                         |       | 26,482,612  |       | 23,518,550  |       |
| Return of capital from  associates(2)                                       |       | 10,703,440  |       | 44,014,000  |       |
| Revenue recognised in  relation to contractual capital projects             |       | 31,207,589  |       | 45,426,574  |       |
| Maintenance revenue  recognised in relation to contractual maintenance work |       | —      |       | 35,771,000  |       |
| Service fees charged to  associate entities(3)                              |       | 1,568,011   |       | —      |       |
| Fees received in relation  to employee secondment to associate              |       | 123,862     |       | —      |       |
| Fees received for services  provided to subsidiary of associate             |       | 40,193      |       | —      |       |
| **Paid/payable  to associates:**                                            |       |        |       |        |       |
| Transaction facilitation  fee(4)                                            |       | 18,500,000  |       | —      |       |
| Asset management service  fees paid to associates(5)                        |       | 4,248,948   |       | —      |       |
| Director fees paid to  Brookfield                                           |       | 257,526     |       |        |       |
| Reimbursement of costs  payable to associates                               |       | 1,575       |       | —      |       |

 

----

(1)   Interestreceived from associates represents interest Prime Infrastructure receivedon its loans to DBCT Management, Myria Holdings Inc, Euroports S.á.r.l andPowerco New Zealand Holdings Limited. In the prior year, interest fromassociates only related to interest on loans with Myria Holdings Inc andPowerco New Zealand Holdings Limited.

(2)   Duringthe current and prior year, Prime Infrastructure received funds from MyriaHoldings Inc. in the form of a return of capital.

(3)   Prime Infrastructurecontinues to provide certain management services to Dalrymple Bay Coal Terminalbased on an arms length basis.

(4)   Asdisclosed in the Product Disclosure Statement of the Prime Infrastructurerecapitalisation, Prime Infrastructure agreed to pay Brookfield atransaction facilitation fee inclusive of out of pocket expenses and othercosts up to a maximum of $18,500,000 on the successful recapitalisation.

(5)   Asdisclosed in the Product Disclosure Statement of the Prime Infrastructurerecapitalisation, Brookfield provides certain asset management services to theAET&D businesses and Cross Sound Cable. These services include providingstrategic advice, overseeing the sales process, supervising operations, makingrecommendations regarding financing, prepare operational plans.

The asset management agreements have a term of3 years, but will terminate early should the associated sale options expire andmay be extended by the mutual agreement of Prime Infrastructure andBrookfield.

In relation to AET&D, Brookfield isentitled to a fee of $5.0 million per annum asset management fee, payablequarterly in advance and a transaction fee payable at the time of sale of anypart of the AET&D business to a third party, equal to 1% of the enterprisevalue of that part of the business, payable out of the proceeds of any suchsale.

In relation to Cross Sound Cable, Brookfield isentitled to a base asset management fee equal to the distributable cashgenerated by the Cross Sound Cable operations during the applicable month andthe transaction fee will be equal to 1% of the aggregate enterprise value ofCross Sound Cable based on its sale price.

 

As part of the successful recapitalisation of PrimeInfrastructure, Brookfield Infrastructure Australia Trust agreed to subscribefor convertible notes for $295.4 million and enter into a number of otherarrangements with Prime Infrastructure which confer on BrookfieldInfrastructure Australia Trust a 49.9% economic interest in Dalrymple Bay CoalTerminal. In addition, Brookfield acquired all of Prime Infrastructure’sinterests in PD Ports for nominal proceeds.

 

**(c) PARENT ENTITY**

 

The parent entity in the Group isPrime Infrastructure Holdings Limited.

 

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NOTESTO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**41. SUBSEQUENT EVENTS**

** **

**New coalexport terminal:**

 

On 12 July 2010, Prime Infrastructure announced thatDBCT Management Pty Limited, an entity that the Group has a 50.1% economicinterest in, had been appointed by the Queensland Government owned NorthQueensland Bulk Ports (NQBP) as one of two preferred proponents for thedevelopment of new coal export terminal facilities at Dudgeon Point in the Portof Hay Point, Queensland.

 

**Settlementof NGPL rate case:**

 

On 30 July 2010, Prime Infrastructure announced thatthe pending Natural Gas Pipeline of America (NGPL) Summary of Stipulation andAgreement (Settlement) had been approved and became binding by FERC. FERCdetermined that the proposed Settlement was fair and reasonable and in thepublic interest, and accordingly, approved the Settlement under itsregulations.

 

This Settlement includes a staged implementation ofreductions in service charges commencing from 1 July 2010 with the firstfull year impact occurring in the 2012 Calendar year and sets out rate andtariff moratoriums to 1 April 2016. This provides greater certainty overNGPL’s operating cash flows for the next six years.

 

Whilst the Settlement is now final and binding, there isa 30 day period in which persons may seek to object to the Settlement.

 

Prime Infrastructure ultimately has a 26.4% equityinterest in NGPL.

 

**Settlement with the Australian Taxation Office:**

 

On 23 August 2010 Prime Infrastructure announced ithad settled its dispute with the ATO regarding the deductibility of certainpayments relating to DBCT.  Thesettlement relates to payments agreed in 2001 to be made over the term of theinitial lease of DBCT (2002 to 2051).  In2007 Prime Infrastructure entered into an arrangement with the ATO under whichit paid 50% of the disputed amount of primary tax and interest.  These payments totalled $60.6 million.

 

Under the agreed settlement, Prime Infrastructure will:

 

·      receiveapproximately $43.0 million in cash back from the ATO;

 

·      recognisea reduction in deferred tax assets relating to carried forward tax losses ofapproximately $38.0 million; and

 

·      recognisean immaterial reduction in potential future deductions for the payments to bemade over the remaining initial lease term at DBCT.

 

The settlement agreement resolves all matters in disputebetween Prime Infrastructure and the ATO in relation to DBCT.

 

**SPARCS Redemption:**

 

On 23 August 2010, Prime Infrastructure’s whollyowned subsidiary, Prime Infrastructure Networks (New Zealand) Limited (PINNZ),agreed to redeem all outstanding Prime Infrastructure NZ SPARCS (SPARCS) underclause 9.1(a) of the SPARCS Trust Deed on 17 November 2010, which isthe next Reset Date (as that term is defined in the Trust Deed.) Holders ofSPARCS will receive face value plus any accrued interest in cash for each oftheir SPARCS under the redemption.

 

**Distributions:**

 

On 23 August 2010, Prime Infrastructure announcedthat the Distribution in respect of the quarter ending 30 September 2010will be 7.5 cents per Stapled Security. The Record Date for this distributionwill be 30 September 2010 and the distribution will be paid on or about 30November 2010.

 

Prime Infrastructure also announced, subject to certainconditions, including regulatory and other approvals, to make an in-speciedistribution of shares in Prime AET&D Holdings No. 1 Pty Limited,formerly known as BBI EPS Limited (AET&D Holdings) to the PrimeInfrastructure Securityholders.   PrimeInfrastructure Securityholders received one non-voting share in AET&DHoldings No 1 Pty Limited from Prime Infrastructure Holdings Limited for eachPrime Infrastructure Holdings Limited share held on the record date.

 

The record date for the in-specie distribution was 19 October 2010and the distribution took place on 22 October 2010.

 

The in-specie distribution was effected to reinforce thequarantined nature of AET&D and to simplify Prime Infrastructure’scorporate structure. The shares of AET&D Holdings have no value to whoeverholds them, whether it is Prime Infrastructure or its Securityholders.

 

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** **

NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended 30 June 2010

** **

**41. SUBSEQUENT EVENTS (CONTINUED)**

** **

**Merger with Brookfield Infrastructure:**

 

On 23 August 2010, Prime Infrastructure andBrookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN) announced thatthey have entered into a definitive merger agreement to create a leading globalinfrastructure company, in a transaction with an estimated value ofapproximately $1.6 billion. Under the terms of the transaction, PrimeInfrastructure security holders will receive 0.24 Brookfield Infrastructureunits (BIP Units) for each Prime Infrastructure Stapled Security held.  The transaction will be conducted by way of ascheme of arrangement and a concurrent takeover bid, both of which are subjectto various regulatory approvals and conditions. The transaction, if successful, is expected to complete in December 2010.

 

On 19 October 2010, Prime Infrastructure announcedthat Securityholders will receive an additional cash payment of $0.20 perStapled Security in connection with the proposed merger transaction.  The cash payment is in addition to the 0.24BIP units for each Prime Infrastructure Stapled Security held.

 

On 4 November 2010, theMerger was formally approved by the Prime Infrastructure Securityholders.

 

On 17 November 2010, PrimeInfrastructure announced that the Supreme Court of New South Wales had approvedthe scheme pf arrangement.  BIP alsoannounced that it intends to withdraw the takeover bid it had made for PrimeInfrastructure Stapled Securities as set out in the Bidders Statement dated 27 September 2010.

 

**Refinance of Corporate Facility:**

 

On 15 September 2010, Prime Infrastructure replacedits undrawn $300.0 million corporate facility with a new revolving corporatefacility which matures in February 2013, to be provided by an affiliate ofBrookfield Infrastructure Partners.  Theterms of this new corporate facility are substantially the same as the previousfacility.   The replacement facilityprovided Prime Infrastructure with greater funding options and flexibility thanthe previous corporate facility and is not conditional on the proposed mergerwith Brookfield Infrastructure Partners proceeding.

 

**DBCT Access Undertaking approval and credit ratingsconfirmation:**

 

On 29 October 2010, Prime Infrastructure announcedthat the Queensland Competition Authority (QCA) has advised that it hasapproved the 2010 draft access undertaking for coal handling services at theDalrymple Bay Coal Terminal (DBCT) and published a final Weighted Average Cost ofCapital (WACC) of 9.86%, which will apply for the next regulatory period. Theincrease in the nominal WACC reflects changes in the risk free rate andapplicable debt margin since the existing WACC was approved in 2004. The finaldecision by the QCA concludes the regulatory reset process for DBCT and the newarrangements will take effect from 1 January 2011.

 

In addition, Standard & Poor’s confirmed DBCTFinance Pty Limited’s credit rating of ‘BBB+’. The outlook remains stable.

 

**42. NOTES TO THE STATEMENT OF CASH FLOWS**

 

**(a) RECONCILIATION OF CASH AND CASH EQUIVALENTS**

 

For the purposes of the Statement of Cash Flows, cash andcash equivalents includes cash on hand and in banks and investments in moneymarket instruments, net of outstanding bank overdrafts. Cash and cashequivalents at the end of the Financial Year as shown in the Statement of CashFlows is reconciled to the related items in the Statement of Financial Positionas follows:

 
| ** **                                | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
|-------------------------------------------|------------|----------------------|------------|----------------------|------------|
| Cash and cash equivalents                 |       | 430,752              |       | 257,873              |       |
| Bank overdraft                            |       | —               |       | (31                  | )          |
| Cash included as held for  sale (note 38) |       | 96,100               |       | 86,192               |       |
| ** **                                | ** ** | **526,852**          | ** ** | **344,034**          | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**42. NOTES TO THESTATEMENT OF CASH FLOWS (CONTINUED)**

 

**(b) BUSINESSES ACQUIRED**

 
| ** **                                          | ** ** | **Consolidated**     | ** ** |
|-----------------------------------------------------|------------|----------------------|------------|
| ** **                                          | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CONSIDERATION**                                   |       |                 |       |   |   |
| Purchase consideration                              |       | —               |       | 3,595 |   |
| **FAIR  VALUE OF NET ASSETS ACQUIRED**              |       |                 |       |   |   |
| **Current  assets:**                                |       |                 |       |   |   |
| Cash                                                |       | —               |       | 26,691 |   |
| Receivables                                         |       | —               |       | (31,381 | ) |
| Inventories                                         |       | —               |       | 7 |   |
| Other                                               |       | —               |       | 2,873 |   |
| **Non-current  assets:**                            |       |                 |       |   |   |
| Property, plant and  equipment                      |       | —               |       | 201,661 |   |
| Intangibles and other  assets                       |       | —               |       | 44,407 |   |
| **Total  assets acquired**                          | ** ** | **—**           | ** ** | **244,258** | ** ** |
| **Current  liabilities:**                           |       |                 |       |   |   |
| Payables                                            |       | —               |       | 24,296 |   |
| **Non-current  liabilities:**                       |       |                 |       |   |   |
| Interest bearing  liabilities and other liabilities |       | —               |       | 239,573 |   |
| **Total  liabilities acquired**                     | ** ** | **—**           | ** ** | **263,869** | ** ** |
| **Net  assets acquired**                            | ** ** | **—**           | ** ** | **(19,611** | **)** |
| Minority interests  acquired                        |       | —               |       | 14,612 |   |
| ** **                                          | ** ** | **—**           | ** ** | **(4,999** | **)** |
| Goodwill on acquisition  capitalised                |       | —               |       | 8,594 |   |
| ** **                                          | ** ** | **—**           | ** ** | **3,595** | ** ** |
| **Net cash  outflow on acquisition:**               |       |                 |       |   |   |
| Total purchase  consideration                       |       | —               |       | 3,595 |   |
| Less cash and cash  equivalent balances acquired    |       | —               |       | (315 | ) |
| Earn-outs/deferred  settlements paid                |       | —               |       | 101,832 |   |
| Purchase of minority  interest in WestNet Rail      |       | —               |       | 80,308 |   |
| ** **                                          | ** ** | **—**           | ** ** | **185,420** | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**42. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)**

 

**(c) BUSINESSES DISPOSED**

 
| ** **                                           | ** ** | **Consolidated**     | ** ** |
|------------------------------------------------------|------------|----------------------|------------|
| ** **                                           | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **CONSIDERATION**                                    |       |                 |       |   |   |
| Cash and cash equivalents                            |       | 295,400              |       | 423,737 |   |
| Loans from associates                                |       | —               |       | 143,325 |   |
| Equity accounted  investment                         |       | —               |       | 12,947 |   |
| ** **                                           | ** ** | **295,400**          | ** ** | **580,009** | ** ** |
| **Net  assets disposed**                             | ** ** | **(729,096**         | **)**      | **(481,275** | **)** |
| Transfer of reserves                                 |       | 79,319               |       | 4,309 |   |
| Minority interests                                   |       | 45,164               |       | — |   |
| (Loss)/gain on disposal  (note 38)                   | ** ** | **(309,213**         | **)**      | **103,043** | ** ** |
| **Net Cash  inflow on disposal of subsidiary:**      | ** ** | ** **           | ** ** | ** ** | ** ** |
| Consideration received in  cash and cash equivalents |       | 295,400              |       | 423,737 |   |
| Less cash and cash  equivalents disposed of          |       | (166,029             | )          | (7,855 | ) |
| ** **                                           | ** ** | **129,371**          | ** ** | **415,882** | ** ** |

 

**(d) NON-CASH FINANCING AND INVESTING ACTIVITIES**

 

During the current Financial Year, 778,656,840 BEPPA witha face value of $1.00 each were converted into 841,790,304 Prime InfrastructureStapled Securities. In addition, 36,660 SPARCS with a face value of NZ$1.00each were converted into 789 Prime Infrastructure Stapled Securities.

 

During the prior year ended 30 June 2009, 27,162,293SPARCS with a face value of NZ$1.00 each were converted into 216.0 millionPrime Infrastructure Stapled Securities.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**42. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)**

 

**(e) FINANCING FACILITIES**

 
| ** **                                         | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
|----------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| **FINANCING  FACILITIES AVAILABLE TO THE GROUP**   |       |                 |       |                 |       |
| Bank  loans and commercial paper/standby facility: |       |                 |       |                 |       |
| - amount used                                      |       | 1,304,293            |       | 4,204,360            |       |
| - amount unused                                    |       | 395,957              |       | 964,286              |       |
| ** **                                         | ** ** | **1,700,250**        | ** ** | **5,168,646**        | ** ** |

 

The financing facilities available to the Groupdisclosed above only relate to the continuing operations of the Group.

 

**(f) CASH BALANCES NOT AVAILABLE FOR USE**

 

As disclosed in note 13 to the Financial Statements, therestricted cash can only be used as a reserve for servicing the debt undercertain financing arrangements. These restricted cash balances have not beenincluded in the year end cash balances for the purposes of the Statement ofCash Flows. In addition, cash of $38.3 million (2009: $41.1 million) isattributable to the consortium that acquired the Alinta assets. Prime AET&DHoldings No.1 Pty Limited is entitled to 17.5% of this cash balance. Thebalance of this amount has been recorded as a liability within discontinuedoperations.

 

**(g) RECONCILIATION OF LOSS FOR THE YEAR TO NET CASHFLOWS FROM OPERATING ACTIVITIES**

 
| ** **                                                                                              | ** ** | **Consolidated**     | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                              | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Loss for the year                                                                                       |       | (948,597             | )          | (977,130 | ) |
| Loss on sale or disposal  of non-current assets                                                         |       | 1,962                |       | 3,718 |   |
| Gain on revaluation of  investment property                                                             |       | —               |       | (10,928 | ) |
| Loss/(gain) on disposal of  businesses/investments                                                      |       | 309,214              |       | (103,043 | ) |
| Movement in fair value  through profit or loss on derivatives                                           |       | (19,303              | )          | 227,033 |   |
| Share of jointly  controlled venture entities’ loss/(profit) after tax                             |       | 174,667              |       | (11,211 | ) |
| Depreciation, amortisation  and impairment of non-current assets                                        |       | 936,846              |       | 1,161,426 |   |
| Amortisation of  capitalised borrowing costs                                                            |       | 17,639               |       | 26,749 |   |
| Foreign exchange loss                                                                                   |       | 67,750               |       | 24,849 |   |
| Unwinding of unrealised  discount on intercompany payables                                              |       | (123                 | )          | 1,019 |   |
| Gain on conversion of  BEPPA to Prime Infrastructure Staples Securities                                 |       | (392,519             | )          | — |   |
| Other adjustments                                                                                       |       | (51,619              | )          | (90,659 | ) |
| Movement in tax balances                                                                                |       | 2,723                |       | (254,776 | ) |
| **CHANGES  IN NET ASSETS AND LIABILITIES, NET OF EFFECTS FROM ACQUISITION AND DISPOSAL  OF BUSINESSES** |       |                 |       |   |   |
| **(Increase)/decrease  in assets:**                                                                     |       |                 |       |   |   |
| Current receivables                                                                                     |       | (20,854              | )          | 95,258 |   |
| Current inventories                                                                                     |       | 1,708                |       | 1,266 |   |
| Other                                                                                                   |       | (1,012               | )          | (14,534 | ) |
| **Increase/(decrease)  in liabilities:**                                                                |       |                 |       |   |   |
| Current payables                                                                                        |       | (34,132              | )          | 34,094 |   |
| Current provisions                                                                                      |       | (1,198               | )          | 20,322 |   |
| Other liabilities and  deferred income                                                                  |       | (83,658              | )          | 98,341 |   |
| **Net cash  (used in)/provided by operating activities**                                                | ** ** | **(40,506**          | **)**      | **231,794** | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS**

 

**(a) FINANCIAL RISK MANAGEMENT**

 

The operations of Prime Infrastructure expose it toa number of financial risks, including:

 

·             capital risk

 

·             liquidity risk

 

·             interest rate risk

 

·             foreign currency risk; and

 

·             credit risk.

 

The Board of Prime Infrastructure recognises thatrisk management is an integral part of good management practice. Riskmanagement is integrated into Prime Infrastructure’s philosophy, practices,business plans and forecasts with a culture of compliance being promoted withinthe Group.

 

Prime Infrastructure’s internal treasury functionprovides services and advice to the corporate head office and also to PrimeInfrastructure’s subsidiaries and associates across a broad range of treasuryactivities that assist with the management of the financial risks relating tothe operations of the Group.

 

The treasury function is governed by a Treasury Policy asapproved by the Board. The Treasury Management Committee is a committeeappointed by the Board made up of key members of Prime Infrastructure’smanagement team who perform a monitoring, review and approval role, and reportto the Board on a regular basis.

 

The Group seeks to minimise the risks associated withforeign currency exchange rates and interest rates primarily through the use ofderivative financial instruments to hedge these risk exposures. The use offinancial derivatives is governed by Prime Infrastructure’s Treasury Policy.This policy provides written principles on the use of financial derivatives.Prime Infrastructure does not enter into or trade financial instruments,including derivative financial instruments, for speculative purposes.

 

There has been no material change to the Group’s exposureto market risks or the manner in which it manages and measures the risk.

 

**(b) CAPITAL RISK MANAGEMENT**

 

The Group manages its capital to ensure that entities inthe Group will be able to continue as a going concern while maximising thereturn to stakeholders through the optimisation of the debt and equity balance.The Group’s overall strategy remains unchanged from 2009.

 

The capital structure of the group consists of debt,which includes the borrowings disclosed in note 20, offset by cash and cashequivalents and equity attributable to equity holders of the parent, comprisingissued capital and accumulated losses as disclosed in notes 26 and 28respectively.

 

The Group operates globally, through subsidiary companiesand associates established in the markets in which the Group trades.

 

Operating cash flows are used to maintain the assets, aswell as to make the routine outflows of tax, distributions and meet interestrequirements. The Group manages its debt exposure by ensuring a diversity offunding sources as well as spreading the maturity profile to minimise refinancerisk. This includes borrowing in the currency where the asset operates wherepossible, which acts as a natural hedge.

 

The Board, along with senior management reviews thecapital structure and as part of this review considers the cost of capital andthe risk associated with each class of capital. The Group manages its overallcapital structure through the payment of distributions, the issue of newsecurities, the issue of new debt or the redemption of existing debt.

 

Subsequent to the recapitalisation transaction undertakenin 2009, the Group has recommenced paying distributions. Refer to note 30 forfurther information.

 

**Loancovenants**

 

As disclosed within borrowings (note 20),Prime Infrastructure has various loan facilities in place. Most of thesefacilities have applicable loan covenants attached to these. These aregenerally in the form of interest cover ratios and gearing ratios.

 

Prime Infrastructure does not have any marketcapitalisation covenants attached to any of its borrowings.

 

During the year ended 30 June 2010 and 2009,there were no breaches of any loan covenants within the Group.

 

**(c) LIQUIDITY RISK MANAGEMENT**

 

The main objective of liquidity risk management is toensure that Prime Infrastructure has sufficient funds available to meetits financial obligations, working capital and potential investment expenditurerequirements in a timely manner. It is also associated with planning forunforeseen events which may curtail operating cash flows and cause pressure onthe Group’s liquidity.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

 

**(c) LIQUIDITY RISK MANAGEMENT (CONTINUED)**

 

Prime Infrastructure manages liquidity risk bymaintaining adequate cash reserves and committed credit lines in addition tocontinuously monitoring forecast and actual cash flows and matching thematurity profiles of financial assets and liabilities. Refer to note 42(e) forundrawn facilities that are available to the group as at the reporting date tofurther reduce liquidity risk.

 

**Liquidityand interest risk tables**

 

The following table details the Group’s remainingcontractual maturity for its financial liabilities. The tables have been drawnup based on the undiscounted cash flows of financial liabilities based on theearliest date on which the Group can be required to pay. The table includesboth interest and principal cash flows.

 
| **Consolidated — 2010**                   | ** ** | **Weighted  average  effective  interest rate  %** | ** ** | **Less than  6 months  $’000** | ** ** | **6-12  months  $’000** | ** ** | **1-2 years  $’000** | ** ** | **2-5 years  $’000** | ** ** | **5+ years  $’000** | ** ** | **Total  contractual  cash flows  $’000** | ** ** | **Carrying  amount assets  $’000** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------|------------|------------------------------|------------|--------------------------------|------------|--------------------------------|------------|-------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------|------------|
| **Non-derivative  financial liabilities:**               |       |                                                    |       |                                          |       |                         |       |                           |       |                           |       |                          | ** ** | ** **                                          |       |                                         |       |
| Trade and other payables                                 |       | —                                                  |       | 133,869                                       |       | —                       |       | —                         |       | 41                             |       | 26,185                        | ** ** | **160,095**                                         |       | 160,095                                      |       |
| Non-interest bearing  liabilities                        |       | —                                                  |       | —                                        |       | —                       |       | —                         |       | —                         |       | —                        | ** ** | **—**                                          |       | —                                       |       |
| Interest-bearing  liabilities                            |       | 4.32                                                    |       | 25,884                                        |       | 643,956                      |       | 24,258                         |       | 165,626                        |       | 408,054                       | ** ** | **1,267,778**                                       |       | 1,209,451                                    |       |
| Finance lease liabilities                                |       | —                                                  |       | —                                        |       | —                       |       | —                         |       | —                         |       | —                        | ** ** | **—**                                          |       | —                                       |       |
| Other financial  liabilities                             |       | 10.00                                                   |       | 100,398                                       |       | —                       |       | —                         |       | —                         |       | —                        | ** ** | **100,398**                                         |       | 96,689                                       |       |
|                                                     |       |                                                    | ** ** | **260,151**                                   | ** ** | **643,956**                  | ** ** | **24,258**                     | ** ** | **165,667**                    | ** ** | **434,239**                   | ** ** | **1,528,271**                                       | ** ** | **1,466,235**                                | ** ** |
| **Derivative  (assets)/liabilities:**                    |       |                                                    |       |                                          |       |                         |       |                           |       |                           |       |                          | ** ** | ** **                                          |       |                                         |       |
| Net settled interest rate  swaps                         |       | —                                                  |       | 10,290                                        |       | 10,090                       |       | 17,547                         |       | 29,630                         |       | 11,753                        | ** ** | **79,310**                                          |       | 107,165                                      |       |
| Net settled foreign  currency exchange forward contracts |       | —                                                  |       | 1,425                                         |       | 664                          |       | (1,315                         | )          | 374                            |       | —                        | ** ** | **1,148**                                           |       | (2,816                                       | )          |

 
| **Consolidated — 2009**                   | ** ** | **Weighted  average  effective  interest rate  %** | ** ** | **Less than  6 months  $’000** | ** ** | **6-12  months  $’000** | ** ** | **1-2 years  $’000** | ** ** | **2-5 years  $’000** | ** ** | **5+ years  $’000** | ** ** | **Total  contractual  cash flows  $’000** | ** ** | **Carrying  amount  assets  $’000** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------|------------|------------------------------|------------|--------------------------------|------------|--------------------------------|------------|-------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------|------------|
| **Non-derivative  financial liabilities:**               |       |                                                    |       |                                          |       |                         |       |                           |       |                           |       |                          | ** ** | ** **                                          |       |                                     |       |
| Trade and other payables                                 |       | —                                                  |       | 236,589                                       |       | 269                          |       | 506                            |       | 1,518                          |       | 1,266                         | ** ** | **240,148**                                         |       | 240,148                                  |       |
| Non-interest bearing  liabilities                        |       | —                                                  |       | —                                        |       | —                       |       | —                         |       | —                         |       | —                        | ** ** | **—**                                          |       | —                                   |       |
| Interest-bearing  liabilities                            |       | 5.18                                                    |       | 367,726                                       |       | 307,252                      |       | 2,424,934                      |       | 2,029,469                      |       | 2,289,544                     | ** ** | **7,418,925**                                       |       | 6,344,672                                |       |
| Finance lease liabilities                                |       | 9.50                                                    |       | 628                                           |       | 628                          |       | 1,256                          |       | 3,075                          |       | 1,217                         | ** ** | **6,804**                                           |       | 4,932                                    |       |
| Other financial  liabilities                             |       | 8.62                                                    |       | 63,029                                        |       | 308                          |       | 616                            |       | 3,903                          |       | —                        | ** ** | **67,856**                                          |       | 66,623                                   |       |
| ** **                                               | ** ** | ** **                                              | ** ** | **667,972**                                   | ** ** | **308,457**                  | ** ** | **2,427,312**                  | ** ** | **2,037,965**                  | ** ** | **2,292,027**                 | ** ** | **7,733,733**                                       | ** ** | **6,656,375**                            | ** ** |
| **Derivative  (assets)/liabilities:**                    |       |                                                    |       |                                          |       |                         |       |                           |       |                           |       |                          | ** ** | ** **                                          |       |                                     |       |
| Net settled interest rate  swaps                         |       | —                                                  |       | 85,198                                        |       | 55,342                       |       | 62,040                         |       | 59,229                         |       | 26,151                        | ** ** | **287,960**                                         |       | 247,337                                  |       |
| Net settled foreign  currency exchange forward contracts |       | —                                                  |       | 1,869                                         |       | 298                          |       | 2,015                          |       | 228                            |       | —                        | ** ** | **4,410**                                           |       | 4,126                                    |       |
| ** **                                               | ** ** | ** **                                              | ** ** | **87,067**                                    | ** ** | **55,640**                   | ** ** | **64,055**                     | ** ** | **59,457**                     | ** ** | **26,151**                    | ** ** | **292,370**                                         | ** ** | **251,463**                              | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

** **

**(d) INTEREST RATE RISK MANAGEMENT**

 

Prime Infrastructure’s primary objectives of interestrate risk management are to ensure that:

 

·             the Group is not exposed to interest rate movementsthat could adversely impact on its ability to meet financial obligations;

 

·             earnings and distributions are not adversely affected;

 

·             volatility of debt servicing costs is managed withinacceptable parameters; and

 

·             all borrowing covenants under the terms of the variousborrowing facilities, including interest cover ratios, are complied with.

 

Having regard to the above constraints and target, PrimeInfrastructure’s objective in managing interest rate risk is to minimiseinterest expense whilst ensuring that an appropriate level of flexibilityexists to accommodate potential changes in funding requirements, ownership ofassets and also movements in market interest rates.

 

To achieve this, in general terms, Prime Infrastructure’sfunding mix comprises both fixed and floating rate debt. Fixed rate debt isachieved either through fixed rate debt funding or through the use of financialderivate instruments. In addition, where possible, interest rate risk isminimised by matching the terms of the interest rate swap contracts hedging theborrowings which fund the underlying investments to the regulatory regime forthose investments, thus providing natural hedges.

 

The Group’s exposure to interest rates on financialliabilities is detailed in the liquidity risk management section of this note.

 

**Interestrate sensitivity analysis**

 

The sensitivity analysis below have been determined basedon the exposure to interest rates for both derivative and non-derivativeinstruments at the reporting date and the stipulated change taking place at thebeginning of the Financial Year and held constant throughout the reportingperiod. A 100 basis point increase or decrease is used when reporting interestrate risk internally to KMP and represents management’s assessment of thepotential change in interest rates. A parallel shift in the yield curves by 100basis points higher or lower at reporting date, would have the following impactassuming all other variables were held constant:

 
| ** **        | ** ** | **2010**                              | ** ** | **2009**                              | ** ** |
|-------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| **Consolidated**  | ** ** | **100 bp  increase  $’000** | ** ** | **100 bp  decrease  $’000** | ** ** | **100 bp  increase  $’000** | ** ** | **100 bp  decrease(1)  $’000** | ** ** |
| Net profit/(loss) |       | —                                |       | —                                |       | (755 | ) | 26,828 |   |
| Other equity      |       | 42,318                                |       | (45,837                               | )          | 95,673 |   | (49,817 | ) |

 

----

(1)          Inthe prior Financial Year, US Dollar, Euro and Great British pound are based ona 25 point basis downward shift to ensure the rates do not go below zero.

 

The Group’s sensitivity to interest rates has decreasedduring the year due to the recapitalisation of Prime Infrastructure andthe subsequent repayment of a significant amount of debt. In addition, the 100%sale of PD Ports and partial disposals of Euroports and DBCT has also reducedthe Group’s sensitivity to interest rates. Prime Infrastructure now equityaccounts its investment in Euroports and DBCT.

 

**Interestrate swap contracts**

 

Under interest rate swap contracts, the Group agrees toexchange the difference between fixed and floating rate interest amountscalculated on agreed notional principal amounts. Such contracts enable theGroup to mitigate the risk of changing interest rates on the fair value ofissued fixed rate debt held and the cash flow exposures on the issued variablerate debt held. The fair value of interest rate swaps at the reporting date isdetermined by discounting the future cash flows using the applicable benchmarkcurve at reporting date, and is disclosed below. The average interest rate isbased on the outstanding balances at the end of the Financial Year.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

** **

**(d) INTEREST RATE RISK MANAGEMENT (CONTINUED)**

** **

**Interestrate swap contracts (continued)**

 

The following tables detail the notional principalamounts and remaining terms of interest rate swap contracts of the Groupoutstanding as at reporting date:

 
| ** **                                                   | ** ** | **Average contracted  fixed interest rate** | ** ** | **Notional principal amount** | ** ** | **Fair value**  | ** ** |
|--------------------------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------|------------|----------------------|------------|
| **Outstanding floating  for fixed contracts** | ** ** | **2010  %**                                                | ** ** | **2009  %**                             | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Less than 1 year                                             |       | 6.61                                                       |       | 6.53                                    |       | 100,000              |       | 1,992,000 |   | (29 | ) | (37,772 | ) |
| 1 to 2 years                                                 |       | —                                                     |       | 6.50                                    |       | —               |       | 1,163,837 |   | — |   | (51,283 | ) |
| 2 to 5 years                                                 |       | 6.23                                                       |       | 6.36                                    |       | 150,000              |       | 1,431,739 |   | (5,284 | ) | (38,429 | ) |
| 5 years plus                                                 |       | 5.40                                                       |       | 4.30                                    |       | 402,726              |       | 1,426,685 |   | (67,175 | ) | (116,100 | ) |
| ** **                                                   | ** ** | ** **                                                 | ** ** | ** **                              | ** ** | **652,726**          | ** ** | **6,014,261** | ** ** | **(72,488** | **)** | **(243,584** | **)** |

 

Interest rate swap contracts exchanging floating rateinterest amount for fixed rate interest amounts are designated as cash flowhedges where possible in order to reduce the Group’s cash flow exposureresulting from variable interest rates on borrowings. The settlement datescoincide with the dates on which the interest is payable on the underlying debtwhere possible, and the amount accumulated in equity is reclassified to profitor loss over the period that the floating rate interest payments on debt affectprofit or loss.

 

Certain interest rate contracts do not qualify for hedgeaccounting and are not able to be treated as cashflow hedges.

 
| ** **                                                   | ** ** | **Average contracted  fixed interest rate** | ** ** | **Notional principal amount** | ** ** | **Fair value**  | ** ** |
|--------------------------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------|------------|----------------------|------------|
| **Outstanding fixed  for floating contracts** | ** ** | **2010  %**                                                | ** ** | **2009  %**                             | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Less than 1 year                                             |       | —                                                     |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 1 to 2 years                                                 |       | —                                                     |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 2 to 5 years                                                 |       | —                                                     |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 5 years plus                                                 |       | —                                                     |       | 6.25                                    |       | —               |       | 150,000 |   | — |   | 1,708 |   |
| ** **                                                   | ** ** | ** **                                                 | ** ** | ** **                              | ** ** | **—**           | ** ** | **150,000** | ** ** | **—** | ** ** | **1,708** | ** ** |

 

**InflationSwap Contracts**

 

A subsidiary of Prime Infrastructure has enteredinto a number of inflation swaps. The purpose of these derivatives is to hedgethe proportion of the pre-finance cash flows deemed to be index linked. Thesederivatives do not qualify for hedge accounting and are not able to be treatedas cashflow hedges.

 
| ** **                             | ** ** | **Average contracted  inflation rate indexation** | ** ** | **Notional principal amount** | ** ** | **Fair value**  | ** ** |
|----------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------------|------------|----------------------|------------|
| **Inflation swap contracts** | ** ** | **2010  %**                                                      | ** ** | **2009  %**                             | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Less than 1 year                       |       | —                                                           |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 1 to 2 years                           |       | —                                                           |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 2 to 5 years                           |       | 3.32                                                             |       | 3.23                                    |       | 128,397              |       | 149,323 |   | (34,695 | ) | (21,013 | ) |
| 5 years plus                           |       | —                                                           |       | —                                  |       | —               |       | — |   | — |   | — |   |
| ** **                             | ** ** | ** **                                                       | ** ** | ** **                              | ** ** | **128,297**          | ** ** | **149,323** | ** ** | **(34,695** | **)** | **(21,013** | **)** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

** **

**(d) INTEREST RATE RISK MANAGEMENT (CONTINUED)**

 

**Interestrate swaptions**

 

No swaptions were sold during the current year. Duringthe prior year, a subsidiary of Prime Infrastructure sold a number ofswaptions.

 
| ** **                            | ** ** | **Average contracted  interest rate indexation** | ** ** | **Notional principal amount** | ** ** | **Fair value**  | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------|------------|----------------------|------------|
| **Interest rate swaptions** | ** ** | **2010  %**                                                     | ** ** | **2009  %**                             | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| Less than 1 year                      |       | —                                                          |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 1 to 2 years                          |       | —                                                          |       | —                                  |       | —               |       | — |   | — |   | — |   |
| 2 to 5 years                          |       | —                                                          |       | —                                  |       | —               |       | — |   | — |   | (2,904 | ) |
| 5 years plus                          |       | —                                                          |       | 4.45                                    |       | —               |       | 120,163 |   | — |   | — |   |
| ** **                            | ** ** | ** **                                                      | ** ** | ** **                              | ** ** | **—**           | ** ** | **120,163** | ** ** | **—** | ** ** | **(2,904** | **)** |

 

**(e) FOREIGN CURRENCY RISK MANAGEMENT**

 

Prime Infrastructure has exposure to foreigncurrency risk in respect of currency transactions, the value of the Group’sassets and cash flows, capital expenditure and other expenses. PrimeInfrastructure’s approach to foreign currency risk management is:

 

·             to hedge to reduce uncertainty by establishingappropriate outcomes in domestic currency reporting terms of significanttransactional exposures; and

 

·             to manage translation risk at the Group level byhaving debt denominated in the currency of the related asset where possible.

 

Prime Infrastructure has investments in businessesin a number of international locations and is therefore exposed to foreigncurrency risk on the distributable cash flows from those businesses. The riskis that the distributable cash flows, which are denominated in the underlyingcurrency of the investments, will lose value relative to the Australian dollar,resulting in less Australian dollars available to pay distributions toSecurityholders. This risk is managed through entering forward exchangecontracts to convert expected distributions to Australian dollars. Under theTreasury Policy, Prime Infrastructure is to maintain hedging in relationto subsidiary distributions (within a minimum and maximum hedging band) for aperiod of up to 5 years on a rolling basis.

 

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NOTES TO THE FINANCIAL STATEMENTS

for the Financial Year ended30 June 2010

 

**43. FINANCIALINSTRUMENTS (CONTINUED)**

** **

**(e) FOREIGN CURRENCY RISK MANAGEMENT (CONTINUED)**

 

The tables below set out the Group’s currency exposure at30 June 2010 and 30 June 2009:

 
| **Consolidated — 2010**  | ** ** | **Australian  dollar  A$’000** | ** ** | **British  pound  A’$000** | ** ** | **Euro  A$’000** | ** ** | **NZ dollar  A$’000** | ** ** | **US dollar  A$’000** | ** ** | **Total  A$’000** | ** ** |
|-----------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|-----------------------|------------|---------------------------------|------------|---------------------------------|------------|------------------------|------------|
| **Current  financial assets:**          |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Cash and cash equivalents               |       | 403,332                             |       | 27,369                          |       | 2                     |       | 22                              |       | 27                              |       | 430,752                |       |
| Trade and other receivables             |       | 36,807                              |       | 19,168                          |       | —                |       | 4,052                           |       | 22,103                          |       | 82,130                 |       |
| Other financial assets                  |       | 67,030                              |       | —                          |       | —                |       | —                          |       | —                          |       | 67,030                 |       |
| ** **                              | ** ** | **507,169**                         | ** ** | **46,537**                      | ** ** | **2**                 | ** ** | **4,074**                       | ** ** | **22,130**                      | ** ** | **579,912**            | ** ** |
| **Non-current  financial assets:**      |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Cash held on restricted  deposit        |       | 7,199                               |       | 22,654                          |       | —                |       | —                          |       | —                          |       | 29,853                 |       |
| Trade and other  receivables            |       | —                              |       | 4,917                           |       | —                |       | —                          |       | —                          |       | 4,917                  |       |
| Other financial assets                  |       | 76,084                              |       | —                          |       | 105,457               |       | 200,750                         |       | 516,250                         |       | 898,541                |       |
| ** **                              | ** ** | **83,283**                          | ** ** | **27,571**                      | ** ** | **105,457**           | ** ** | **200,750**                     | ** ** | **516,250**                     | ** ** | **933,311**            | ** ** |
| **Current  financial liabilities:**     |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Trade and other payables                |       | 100,114                             |       | 57,873                          |       | —                |       | 2,108                           |       | —                          |       | 160,095                |       |
| Borrowings                              |       | 617,647                             |       | 7,314                           |       | —                |       | 96,689                          |       | —                          |       | 721,650                |       |
| Other financial  liabilities            |       | 4,859                               |       | —                          |       | —                |       | —                          |       | —                          |       | 4,859                  |       |
| ** **                              | ** ** | **722,620**                         | ** ** | **65,187**                      | ** ** | **—**            | ** ** | **98,797**                      | ** ** | **—**                      | ** ** | **886,604**            | ** ** |
| **Non-current  financial liabilities:** |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Trade and other payables                |       | 16,223                              |       | —                          |       | —                |       | —                          |       | —                          |       | 16,223                 |       |
| Borrowings                              |       | —                              |       | 451,255                         |       | —                |       | 116,200                         |       | —                          |       | 567,455                |       |
| Other financial  liabilities            |       | 14,972                              |       | 96,192                          |       | 40,837                |       | —                          |       | —                          |       | 152,001                |       |
| ** **                              | ** ** | **31,195**                          | ** ** | **547,447**                     | ** ** | **40,837**            | ** ** | **116,200**                     | ** ** | **—**                      | ** ** | **735,679**            | ** ** |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

 

**(e) FOREIGN CURRENCY RISK MANAGEMENT (CONTINUED)**

 
| **Consolidated — 2009**  | ** ** | **Australian  dollar  A$’000** | ** ** | **British  pound  A’$000** | ** ** | **Euro  A$’000** | ** ** | **NZ dollar  A$’000** | ** ** | **US dollar  A$’000** | ** ** | **Total  A$’000** | ** ** |
|-----------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|-----------------------|------------|---------------------------------|------------|---------------------------------|------------|------------------------|------------|
| **Current  financial assets:**          |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Cash and cash equivalents               |       | 194,747                             |       | 48,995                          |       | 596                   |       | 821                             |       | 12,714                          |       | 257,873                |       |
| Trade and other  receivables            |       | 83,184                              |       | 49,026                          |       | —                |       | 9,102                           |       | 31,679                          |       | 172,991                |       |
| Other financial assets                  |       | 64,670                              |       | —                          |       | —                |       | —                          |       | 2,903                           |       | 67,573                 |       |
| ** **                              | ** ** | **342,601**                         | ** ** | **98,021**                      | ** ** | **596**               | ** ** | **9,923**                       | ** ** | **47,296**                      | ** ** | **498,437**            | ** ** |
| **Non-current  financial assets:**      |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Cash held on restricted  deposit        |       | 75,297                              |       | 23,745                          |       | —                |       | 101                             |       | 5,172                           |       | 104,315                |       |
| Trade and other  receivables            |       | 2,097                               |       | 7,343                           |       | —                |       | —                          |       | —                          |       | 9,440                  |       |
| Other financial assets                  |       | 10,557                              |       | 33                              |       | —                |       | 152,850                         |       | 542,273                         |       | 705,713                |       |
| ** **                              | ** ** | **87,951**                          | ** ** | **31,121**                      | ** ** | **—**            | ** ** | **152,951**                     | ** ** | **547,445**                     | ** ** | **819,468**            | ** ** |
| **Current  financial liabilities:**     |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Trade and other payables                |       | 199,893                             |       | 119,356                         |       | —                |       | 2,237                           |       | 10,703                          |       | 332,189                |       |
| Borrowings                              |       | 7,826                               |       | 389,731                         |       | —                |       | 95,785                          |       | 418                             |       | 493,760                |       |
| Other financial  liabilities            |       | 36,835                              |       | 17,624                          |       | 60,859                |       | —                          |       | 1,798                           |       | 117,116                |       |
| ** **                              | ** ** | **244,554**                         | ** ** | **526,711**                     | ** ** | **60,859**            | ** ** | **98,022**                      | ** ** | **12,919**                      | ** ** | **943,065**            | ** ** |
| **Non-current  financial liabilities:** |       |                                |       |                            |       |                  |       |                            |       |                            |       |                   |       |
| Trade and other payables                |       | 3,290                               |       | —                          |       | —                |       | —                          |       | —                          |       | 3,290                  |       |
| Borrowings                              |       | 3,812,497                           |       | 1,048,455                       |       | —                |       | 218,328                         |       | 1,406,665                       |       | 6,485,945              |       |
| Other financial  liabilities            |       | 120,297                             |       | 41,200                          |       | —                |       | 4,732                           |       | 41,105                          |       | 207,334                |       |
| ** **                              | ** ** | **3,936,084**                       | ** ** | **1,089,655**                   | ** ** | **—**            | ** ** | **223,060**                     | ** ** | **1,447,770**                   | ** ** | **6,696,569**          | ** ** |

 

The following tables detail the Group’s sensitivity toa 10% increase and decrease in the Australian dollar against the relevantforeign currencies, with all other variables held constant as at reporting date.10% is the sensitivity rate used when reporting foreign currency riskinternally and represents management’s assessment of the possible change inforeign exchange rates. The sensitivity analysis is performed asfollows:

 

·             outstanding foreign currency denominated monetaryitems (excluding foreign exchange derivative contracts) are adjusted at theperiod end for a 10% change in foreign currency rates at which they aretranslated; and

 

·             foreign currency derivative contracts aremeasured as the change in fair value of the derivative as a result of a10% change in the spot currency rate.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

 

**(e) FOREIGN CURRENCY RISK MANAGEMENT (CONTINUED)**

 
| ** **                             | ** ** | **Impact on income  statement  +/- 10%** | ** ** | **Impact on equity  +/- 10%** | ** ** |
|----------------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------|------------|
| **Consolidated — 2010** | ** ** | **+ 10%  $’000**                              | ** ** | **- 10%  $’000**                   | ** ** | **+ 10%  $’000** | ** ** | **- 10%  $’000** | ** ** |
| AUD/GBP                                |       | 1,025                                                   |       | (1,261                                       | )          | (2,025 | ) | 2,474 |   |
| AUD/EUR                                |       | (5,875                                                  | )          | 7,180                                        |       | (2,804 | ) | 3,427 |   |
| AUD/USD                                |       | (33,844                                                 | )          | 41,148                                       |       | (20,514 | ) | 25,073 |   |
| AUD/NZD                                |       | (17,722                                                 | )          | 21,659                                       |       | (2,787 | ) | 3,406 |   |

 
| ** **                             | ** ** | **Impact on income  statement  +/- 10%** | ** ** | **Impact on equity  +/- 10%** | ** ** |
|----------------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------|------------|
| **Consolidated — 2009** | ** ** | **+ 10%  $’000**                              | ** ** | **- 10%  $’000**                   | ** ** | **+ 10%  $’000** | ** ** | **- 10%  $’000** | ** ** |
| AUD/GBP                                |       | 6,232                                                   |       | (7,699                                       | )          | 135,401 |   | (165,490 | ) |
| AUD/EUR                                |       | 22,957                                                  |       | (28,234                                      | )          | — |   | — |   |
| AUD/USD                                |       | 15,751                                                  |       | (19,382                                      | )          | 22,912 |   | (28,003 | ) |
| AUD/NZD                                |       | 245                                                     |       | (301                                         | )          | 14,441 |   | (17,650 | ) |

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

** **

**(e) FOREIGN CURRENCY RISK MANAGEMENT (CONTINUED)**

 

**Foreignforward exchange contracts**

 

The following table details the forward foreign currencycontracts outstanding at the end of the reporting period.

 
| ** **           | ** ** | **Average  exchange rate** | ** ** | **Foreign currency** | ** ** | **Contract value** | ** ** | **Fair value**   | ** ** |
|----------------------|------------|---------------------------------|------------|---------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **           | ** ** | **2010**                        | ** ** | **2009**                  | ** ** | **2010  FC’000**   | ** ** | **2009  FC’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** | **2010  $’000** | ** ** | **2009  $’000** | ** ** |
| **SELL NZ  DOLLARS** |       |                            |       |                      |       |                    |       |                  |       |   |   |   |   |   |   |   |   |
| Less than 3 months   |       | $                               | 1.2911     |                      | —     |                    | 2,800      |                  | —     |   | 2,169 |   | — |   | 116 |   | — |   |
| 3 to 6 months        |       | $                               | 1.2589     |                      | $          | 1.0806                  |       | 2,000                 |       | 800 |   | 1,589 |   | 740 |   | (44 | ) | 94 |   |
| 6 to 12 months       |       | $                               | 1.2576     |                      | $          | 1.0806                  |       | 5,000                 |       | 800 |   | 3,976 |   | 734 |   | (116 | ) | 86 |   |
| 1 year to 2 years    |       | —                          |       | $                         | 1.0856     |                    | —     |                  | 2,722      |   | — |   | 2,507 |   | — |   | 295 |   |
| **SELL GB POUNDS**   |       |                            |       |                      |       |                    |       |                  |       |   |   |   |   |   |   |   |   |
| 3 to 6 months        |       | £                          | 0.4244     |                      | £     | 0.3972                  |       | 3,500                 |       | 4,450 |   | 8,247 |   | 11,203 |   | 1,919 |   | 1,916 |   |
| 6 to 12 months       |       | £                          | 0.4206     |                      | £     | 0.4061                  |       | 2,500                 |       | 4,500 |   | 5,944 |   | 11,082 |   | 1,296 |   | 1,560 |   |
| 1 year to 2 years    |       | —                          |       | £                    | 0.4105     |                    | —     |                  | 15,130     |   | — |   | 36,856 |   | — |   | 4,159 |   |
| 2 years to 3 years   |       | —                          |       | £                    | 0.3992     |                    | —     |                  | 5,000      |   | — |   | 12,523 |   | — |   | 1,295 |   |
| 3 years to 4 years   |       | —                          |       | £                    | 0.3991     |                    | —     |                  | 5,000      |   | — |   | 12,528 |   | — |   | 975 |   |
| **SELL US  DOLLARS** |       |                            |       |                      |       |                    |       |                  |       |   |   |   |   |   |   |   |   |
| Less than 3 months   |       | $                               | 0.8494     |                      | $          | 0.8475                  |       | 7,920                 |       | 2,500 |   | 9,324 |   | 2,950 |   | (85 | ) | (146 | ) |
| 3 to 6 months        |       | $                               | 0.8412     |                      | $          | 0.8381                  |       | 7,920                 |       | 6,500 |   | 9,416 |   | 7,756 |   | (92 | ) | (343 | ) |
| 6 to 12 months       |       | $                               | 0.8252     |                      | $          | 0.8253                  |       | 22,500                |       | 16,000 |   | 27,265 |   | 19,386 |   | (158 | ) | (738 | ) |
| 1 year to 2 years    |       | $                               | 0.8082     |                      | $          | 0.8013                  |       | 37,790                |       | 23,000 |   | 46,759 |   | 28,702 |   | (682 | ) | (895 | ) |
| 2 years to 3 years   |       | $                               | 0.7558     |                      | $          | 0.7766                  |       | 31,232                |       | 22,000 |   | 41,322 |   | 28,327 |   | 663 |   | (789 | ) |
| 3 years to 4 years   |       | —                          |       | $                         | 0.6507     |                    | —     |                  | 10,000     |   | — |   | 15,368 |   | — |   | 1,379 |   |
| **SELL EUROS**       |       |                            |       |                      |       |                    |       |                  |       |   |   |   |   |   |   |   |   |
| Less than 3 months   |       | —                          |       | €                    | 0.5609     |                    | —     |                  | 9,575      |   | — |   | 17,072 |   | — |   | (231 | ) |
| 3 to 6 months        |       | —                          |       | €                    | 0.5915     |                    | —     |                  | 8,019      |   | — |   | 13,558 |   | — |   | (303 | ) |
| 6 to 12 months       |       | —                          |       | €                    | 0.5741     |                    | —     |                  | 15,233     |   | — |   | 26,532 |   | — |   | (501 | ) |
| 1 year to 2 years    |       | —                          |       | €                    | 0.5615     |                    | —     |                  | 32,068     |   | — |   | 57,109 |   | — |   | (1,031 | ) |
| 2 years to 3 years   |       | —                          |       | €                    | 0.5459     |                    | —     |                  | 26,415     |   | — |   | 48,384 |   | — |   | (1,123 | ) |
| 3 years to 4 years   |       | —                          |       | €                    | 0.5314     |                    | —     |                  | 22,949     |   | — |   | 43,182 |   | — |   | (1,533 | ) |
| ** **           | ** ** | ** **                      | ** ** | ** **                | ** ** | ** **              | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | **2,817** | ** ** | **4,126** | ** ** |

 

The table above provides summary quantitative data aboutexposure to foreign exchange risks at the end of the reporting period thatPrime Infrastructure provides internally to KMP.

 

The Group does not adopt hedge accounting in relation toforeign currency derivatives, and accordingly, the adjustments to the fairvalue are recognised in profit or loss.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

 

**(f) CREDIT RISK MANAGEMENT**

 

Credit risk refers to the risk that counterparty willdefault on its contractual obligations resulting in financial loss to PrimeInfrastructure. The Group only undertakes transactions with credit worthycustomers and conducts active ongoing credit evaluation on the financialcondition of customers and other trade receivables in order to minimise creditrisk.

 

Trade receivables consist of a large number of customers,spread across two distinct asset classes (transport and energy transmission& distribution) and within those asset classes, exposure to a number ofdiverse industries and geographical areas.

 

From a treasury perspective, counterparty credit risk ismanaged through the establishment of authorised counterparty credit limitswhich ensures Prime Infrastructure only deals with credit worthycounterparties and that counterparty concentration is addressed and the risk ofloss is mitigated. Credit limits are sufficiently low to restrictPrime Infrastructure from having credit exposures concentrated with asingle counterparty but rather encourages spreading such risks among severalparties. The limits are set at levels reflecting Prime Infrastructure’s scaleof activity and also allow it to manage treasury business competitively.

 

Prime Infrastructure does not have any significantcredit risk exposure to any single counterparty or any group of counterpartieshaving similar characteristics. The credit risk on liquid funds and derivativefinancial instruments is limited because the counterparties are banks with highcredit ratings assigned by international credit-rating agencies.

 

**(g) FAIR VALUE OF FINANCIAL INSTRUMENTS**

 

The fair value of financial assets and financialliabilities with standard terms and conditions and traded on active liquidmarkets are determined with reference to quoted market prices:

 

·             the fair value of other financial assets and financialliabilities (excluding derivative instruments) are determined in accordancewith generally accepted pricing models based on discounted cash flow analysis;and

 

·             the fair value of derivative instruments arecalculated using quoted prices. Where such prices are not available, use ismade of discounted cash flow analysis using the applicable yield curve derivedfrom quoted interest rates for the duration of the instruments for non-optionalderivatives, and option pricing models for optional derivatives. The fair valueof forward exchange contracts is determined using quoted forward exchangemarket rates and yield curves derived from quoted interest rates matchingmaturities of the contract.

 

Except as detailed in the following tables, the Directorsconsider that the carrying amounts of financial assets and financialliabilities recorded at amortised cost in the financial statements of the Groupapproximates their fair values.

 
| ** **                                | ** ** | **Consolidated**                 | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|
| ** **                                | ** ** | **2010**                         | ** ** | **2009** | ** ** |
| ** **                                | ** ** | **Carrying  amount  $’000** | ** ** | **Fair value  $’000** | ** ** | **Carrying  amount  $’000** | ** ** | **Fair value  $’000** | ** ** |
| **Financial  liabilities**                |       |                             |       |   |   |   |   |   |   |
| PINNZ SPARCS                              |       | 94,842                           |       | 94,765 |   | 93,938 |   | 53,986 |   |
| PINNZ secured bonds                       |       | 119,516                          |       | 114,066 |   | 119,368 |   | 51,149 |   |
| DBCT fixed rate guaranteed  notes(1)      |       | —                           |       | — |   | 150,000 |   | 131,438 |   |
| PD Ports securitised loan  notes(2)       |       | —                           |       | — |   | 519,963 |   | 239,113 |   |
| WA Network Holdings fixed  rate notes(3)  |       | —                           |       | — |   | 196,720 |   | 197,260 |   |
| WA Network Holdings  subordinated debt(3) |       | —                           |       | — |   | 79,824 |   | 57,624 |   |
| BBI Exchangeable  Preference Shares(4)    |       | —                           |       | — |   | 677,431 |   | 80,202 |   |

 

----

(1)          Aspart of the recapitalisation of Prime Infrastructure, the Group no longercontrols DBCT. Prime Infrastructure accounts for its remaining 50.1%economic interest in DBCT as an equity accounted investment and therefore nolonger consolidates its share of DBCT’s borrowings. Refer to note 38 forfurther information.

(2)          Duringthe current Financial Year, Prime Infrastructure disposed of its 100%investment in PD Ports. Refer to note 38 for further information.

(3)          Aspart of the recapitalisation of Prime Infrastructure, the WA Network HoldingsPty Limited, which is part of the AET&D group, was classified as held forsale. Accordingly, the liabilities are not disclosed in the fair value tables disclosedabove. Refer to note 38 for further information.

(4)          Aspart of the recapitalisation of Prime Infrastructure, the BBI ExchangeablePreference Shares were converted into ordinary Prime InfrastructureStapled Securities. Refer to note 20 for further information.

 

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NOTES TO THE FINANCIAL STATEMENTS

forthe Financial Year ended 30 June 2010

 

**43. FINANCIAL INSTRUMENTS (CONTINUED)**

 

**(g) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)**

 

**Fair valuehierarchy**

 

The table below analyses financial instruments carried atfair value, by valuation method. The different levels have been defined asfollows:

 

·             Level 1: quoted prices (unadjusted) in active marketsfor identical assets or liabilities.

 

·             Level 2: inputs other than quoted prices includedwithin Level 1 that are observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices).

 

·             Level 3: inputs for the assets or liability that arenot based on observable market data (unobservable inputs).

 
| **Consolidated — 2010** | ** ** | **Level 1********$,000** | ** ** | **Level 2********$’000** | ** ** | **Level 3********$’000** | ** ** | **Total********$’000** | ** ** |
|----------------------------------------|------------|-------------------------------|------------|------------------------------------|------------|------------------------------------|------------|-----------------------------|------------|
| Derivative financial  assets           |       | —                        |       | 6,794                              |       | —                             | ** ** | **6,794**                   | ** ** |
| Derivative financial  liabilities      |       | —                        |       | (111,143                           | )          | —                             | ** ** | **(111,143**                | **)**      |

 

There were no transfers between levels during the yearended 30 June 2010.

 

**44. ADDITIONAL COMPANY INFORMATION**

 

Prime Infrastructure is a listed StapledSecurity. The Company and the Trusts were incorporated in Australia and areoperating in Australia, New Zealand, Europe and the United States of America.

 
| **Registered office**                                                              | ** ** | **Principal place of business**                                                    |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|
| Level 26

135 King Street

Sydney, New South Wales 2000

Telephone: (02) 9692 2800 |       | Level 26

135 King Street

Sydney, New South Wales 2000

Telephone: (02) 9692 2800 |

 

The entity’s principal activities are the acquisition,management and operation of essential infrastructure services in two distinctasset classes: Fee for Service and Utilities with geographic coverage on aglobal basis within OECD countries.

 

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|        |                  | Deloitte Touche Tohmatsu     |
|--------|-----------------------|------------------------------|
|   | A.B.N. 74 490 121 060 |
|   |                  |
|   | Grosvenor Place       |
|   |                  | 225 George Street            |
|   |                  | Sydney NSW 2000              |
|   |                  | PO Box N250 Grosvenor  Place |
|   |                  | Sydney NSW 1220 Australia    |
|   |                  |                         |
|   |                  | DX 10307SSE                  |
|   |                  | Tel: +61 (0) 2 9322 7000     |
|   |                  | Fax: +61 (0) 2 9322 7001     |
|   |                  | www.deloitte.com.au          |

 

**Independent Auditor’s Report to the Board of**

**Directors and Stockholders of Prime Infrastructure**

**Holdings Limited**

 

We have audited the accompanyingStatement of Financial Position of Prime Infrastructure Holdings Limited andsubsidiaries (the “Company”) as of June 30, 2010 and June 30, 2009,and the related Income Statement, Statement of Comprehensive Income, Statementof Changes in Equity, and Statement of Cash Flows for the year ended June 30,2010 and June 30, 2009. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.

 

We conducted our audits inaccordance with auditing standards generally accepted in the United States of America.Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes consideration of internal control overfinancial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basisfor our opinion.

 

In our opinion, suchfinancial statements present fairly, in all material respects, the financialposition of the Company as at June 30, 2010 and June 30, 2009, andthe results of its operations and its cash flows for the years ended June 30,2010 and June 30, 2009 in conformity with International FinancialReporting Standards as issued by the International Accounting Standards Board. 

 
|                               |   |
|-------------------------------|--------|
|                          |   |
| **DELOITTE  TOUCHE TOHMATSU** |   |
|                          |   |
| November 18, 2010        |   |

 

Liabilitylimited by a scheme approved under Professional Standards Legislation.

 

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**ITEM 19. EXHIBITS**

 
| **Number** | ** ** | **Description of Exhibits**                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1*       |       | Certificate  of registration of Brookfield Infrastructure Partners L.P., registered  as of May 29, 2007—incorporated by reference to Exhibit 1.1  to our Partnership’s Registration Statement on Form 20-F filed  July 31, 2007. (With regard to applicable cross-references in this  report, our Partnership’s registration statement was filed with the SEC under  File No. 1-33632).                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 1.2*       |       | Amended  and Restated Limited Partnership Agreement of Brookfield Infrastructure  Partners L.P., dated December 4, 2007—incorporated by reference to  Exhibit 1.2 to our Partnership’s Registration Statement on  Form 20-F/A filed December 13, 2007.                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 2.1*       |       | Equity  Commitment, dated December 4, 2007, by and among Brookfield Asset  Management Inc., Brookfield Infrastructure Partners L.P. and  Brookfield Infrastructure L.P.—incorporated by reference to  Exhibit 2.1 to our Partnership’s Registration Statement on  Form 20-F/A filed December 13, 2007.                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.1*       |       | Second  Amended and Restated Limited Partnership Agreement for Brookfield  Infrastructure L.P., dated December 4, 2007—incorporated by  reference to Exhibit 4.1 to our Partnership’s Registration  Statement on Form 20-F/A filed December 18, 2007.                                                                                                                                                                                        |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.2*       |       | Master  Services Agreement, dated December 4, 2007, by and among Brookfield  Asset Management Inc., Brookfield Infrastructure Partners L.P.,  Brookfield Infrastructure L.P., Brookfield Infrastructure Holdings  (Canada) Inc. and Brookfield Asset Management Barbados Inc. and  others—incorporated by reference to Exhibit 4.2 to our  Partnership’s Registration Statement on Form 20-F/A filed  December 13, 2007. |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.3*       |       | Relationship  Agreement, dated December 4, 2007, by and among Brookfield  Infrastructure Partners L.P., Brookfield Infrastructure Group Inc.,  Brookfield Infrastructure L.P., Brookfield Infrastructure Group  Corporation and Brookfield Asset Management Inc. and others—incorporated  by reference to Exhibit 4.3 to our Partnership’s Registration  Statement on Form 20-F/A filed December 13, 2007.                    |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.4*       |       | Registration  Rights Agreement, dated December 4, 2007, between Brookfield  Infrastructure Partners L.P. and Brookfield Asset Management Inc.—incorporated  by reference to Exhibit 4.4 to our Partnership’s Registration  Statement on Form 20-F/A filed December 13, 2007.                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.5*       |       | Trademark  Sublicense Agreement, effective as of May 21, 2007, between Brookfield                                                                                                                                                                                                                                                                                                                                                                                               |

 

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|   |   | Infrastructure  Partners L.P. and Brookfield Global Asset Management Inc.—incorporated  by reference to Exhibit 4.5 to our Partnership’s Registration  Statement on Form 20-F/A filed December 13, 2007.                                                                                                                                                                         |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.6*   |   | Trademark  Sublicense Agreement, effective as of August 17, 2007, between  Brookfield Infrastructure L.P. and Brookfield Global Asset  Management Inc.—incorporated by reference to Exhibit 4.8  to our Partnership’s Registration Statement on Form 20-F/A filed  December 13, 2007.                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.7*   |   | Securities  Purchase Agreement, dated November 19, 2007, between Brookfield Asset  Management Inc. and Brookfield Infrastructure Holdings  (Canada) Inc.—incorporated by reference to Exhibit 4.9 to our  Partnership’s Registration Statement on Form 20-F/A filed  December 13, 2007.                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.8*   |   | Amendment  to Second Amended and Restated Limited Partnership Agreement of Brookfield  Infrastructure L.P. dated June 13, 2008 by Brookfield  Infrastructure General Partner Limited—incorporated by reference to  Exhibit 4.17 to our Partnership’s Annual Report on Form 20-F  filed June 30, 2008.                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.9*   |   | Amendment  to Amended and Restated Limited Partnership Agreement, dated June 13,  2008 by Brookfield Infrastructure Partners L.P.—incorporated by  reference to Exhibit 4.18 to our Partnership’s Annual Report on  Form 20-F filed June 30, 2008.                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.10*  |   | Amended  and Restated Credit Agreement, dated June 16, 2009, between Brookfield  Infrastructure L.P. and Citibank, N.A., Credit Suisse, Toronto Branch,  HSBC Bank Canada, HSBC Bank U.S.A., N.A., Toronto Branch, Royal Bank of  Canada and The Royal Bank of Scotland plc.—incorporated by reference to  Exhibit 4.10 to our Partnership’s Form 6-K dated June 17,  2009. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.11*  |   | Implementation  Agreement, dated October 8, 2009, between Prime Infrastructure,  Brookfield Infrastructure L.P. and Brookfield Asset  Management Inc.—incorporated by reference to Exhibit 10.1  to our Partnership’s Report of Foreign Private Issuer on Form 6-k  filed October 22, 2009.                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.12*  |   | Amended  and Restated Allocation Agreement, dated October 20, 2009 between  Brookfield Asset Management Inc., Brookfield Infrastructure L.P.  and BIP Bermuda Holdings I Limited—incorporated by reference to  Exhibit 10.2 to our Partnership’s Report of Foreign Private Issuer  on Form 6-k filed October 22, 2009.                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.13*  |   | Amendment  dated November 16, 2009 to the Amended and Restated Limited Partnership  Agreement dated as of December 4, 2007, as amended as of June 13,  2008 of Brookfield Infrastructure Partners L.P.—incorporated by  reference to Exhibit 99.1 to our Partnership’s Report of Foreign  Private Issuer on Form 6-k filed March 10, 2010.                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 12.1   |   | Certification  of Samuel Pollock, Chief Executive Officer, Brookfield Infrastructure Group  Corporation, pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 12.2   |   | Certification  of John Stinebaugh, Chief Financial Officer, Brookfield Infrastructure Group  Corporation, pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 13.1   |   | Certification  of Samuel Pollock, Chief Executive Officer, Brookfield Infrastructure Group  Corporation, pursuant to 18 U.S.C. Section 1350, as adopted to  Section 906 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 13.2   |   | Certification  of John Stinebaugh, Chief Financial Officer, Brookfield Infrastructure Group  Corporation, pursuant to 18 U.S.C. Section 1350, as adopted to  Section 906 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                               |

 

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| 15.1*  |   | Consent  of Deloitte & Touche LLP relating to the incorporation of the  following into the Annual Report on Form 20-F filed with the Securities  and Exchange Commission on June 1, 2010: the financial statements of  Brookfield Infrastructure Partners L.P., the consolidated and combined  financial statements of Brookfield Infrastructure L.P., the balance sheet  of Brookfield Infrastructure Partners Limited, the consolidated financial  statements of Island Timberlands Limited Partnership and the combined  financial statements of Brookfield Global Timber Fund. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 15.2*  |   | Consent  of Deloitte & Touche LLP relating to the incorporation of the  consolidated financial statements of Longview Timber Holdings, Corp.  into the Annual Report on Form 20-F filed with the Securities and  Exchange Commission on June 1, 2010.                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 15.3*  |   | Consent  of Ernst & Young Ltda. relating to the incorporation of the  consolidated financial statements and schedules of ETC Holdings Ltd. into the  Annual Report on Form 20-F filed with the Securities and Exchange  Commission on June 1, 2010.                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 15.4   |   | Consent  of Deloitte Touche Tohmatsu relating to the incorporation of the consolidated  financial statements and schedules of Prime Infrastructure Holdings Limited  into the Annual Report on Form 20-F filed with the Securities and  Exchange Commission on June 1, 2010.                                                                                                                                                                                                                                                                                                                          |

 

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*  Incorporated by reference to our Annual Reporton Form 20-F filed with the Securities and Exchange Commission on June 1,2010.

 

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**SIGNATURE**

 

Theregistrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20-F/A on its behalf.

 

 
| ** **                           | **BROOKFIELD  INFRASTRUCTURE PARTNERS L.P., by its** |
|--------------------------------------|------------------------------------------------------|
| ** **                           | **general  partner, BROOKFIELD INFRASTRUCTURE**      |
|                                 | **PARTNERS  LIMITED**                                |
|                                 |                                                 |
|                                 |                                                 |
|                                 |                                                 | By: | /s/  Alex Erskine |
|                                 |                                                 |   | Name:  Alex Erskine |
|                                 |                                                 |   | Title:  Director |
|                                 |                                                 |   |   |
|                                 |                                                 |   |   |
| Dated:   November 23, 2010 |                                                 |   |   |

 

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